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REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.1563 OF 2007

CELLULAR OPERATORS ASSOCIATION  

OF INDIA & ORS.      … APPELLANTS

VERSUS

TELECOM REGULATORY AUTHORITY  

OF INDIA & ORS.      … RESPONDENTS

J U D G M E N T  

SUDHANSU JYOTI MUKHOPADHAYA, J.

This appeal has been preferred by the appellants against the  

order  dated  22nd December,  2006  passed  by  the  Telecom  Disputes  

Settlement & Appellate Tribunal, New Delhi (hereinafter referred to  

as the ‘Tribunal’) in Appeal No.2 of 2006 (with M.A. No.58 of 2006).  

By the impugned order, the Tribunal while dismissing the appeal  

disposed of the M.A.No.58 of 2006 with certain observations.

2. The factual matrix of the case is as follows:

Appellant Nos.2 to 10 are private GSM cellular operators and  

the first appellant is their Association. They have been issued  

licences by the Central Government, Department of Telecommunication  

(hereinafter  referred  to  as  ‘DoT’)  under  Section  4  of  Indian  

Telegraph  Act,  1885  to  establish,  maintain  and  operate  cellular  

mobile  telephone  services/unified  access  services  in  their  

respective  service  areas.  The  first  respondent  is  Regulatory  

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Authority  established  under  Section  3  of  the  Telecom  Regulatory  

Authority  of  India  Act,  1997  (hereinafter  referred  to  as  ‘TRAI  

Act’).

3. The first respondent-Authority issued a directive dated 27th  

February, 2006 wherein appellants - private mobile service providers  

in the four States of Maharashtra, West Bengal, Tamil Nadu and Uttar  

Pradesh were directed to discontinue differential tariffs levied in  

the aforesaid four States for calls terminating in the network of  

Bharat  Sanchar  Nigam  Limited  (hereinafter  referred  to  as  

‘BSNL’)/Mahanagar Telephone Nigam Limited (hereinafter referred to  

as ‘MTNL’) as compared to calls terminating in the network of other  

private operators in another citing it to be discriminatory and  

inconsistent with the amended licence condition notified by the DoT  

on 20th May, 2005. The appellants complied with the directive dated  

27th February, 2006 and submitted compliance report to the Authority.

4. Subsequently,  by  its  directive  dated  22nd March,  2007,  the  first  respondent-Authority,  inter  alia,  directed  the  appellants-

service providers to assess the total excess amount charged from the  

subscribers; keep the entire amount in a separate Bank Account and  

intimate the Authority the names of the Banks in which such amount  

has been kept. After receipt of such notice dated 22nd March, 2007  

the  appellants  preferred  an  appeal  under  Section  14  read  with  

Section 14A of the TRAI Act challenging the direction dated 27th  

February,  2006.  The  challenge  was  made  on  the  ground  that  the  

direction  was  discriminatory  and  inconsistent  with  the  amended  

licence conditions notified by the DoT on 20th May, 2005.  The main  plea raised by the appellants justifying the differential half of  

calls from private operator to another private operator vis-à-vis  

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calls  from  private  operator  to  BSNL  network  was  that  direct  

connectivity could be achieved between networks of private operators  

but it could not be achieved between private operators and BSNL  

network.  

5. Initially, BSNL/MTNL was not party to the said appeal.  The  Tribunal having noticed that the appeal pertains to the differential  

tariff of calls from private operator to another private operator  

vis-à-vis  calls  made  from  private  operator  to  BSNL/MTNL  network  

directed  the  appellants  to  implead  the  BSNL/MTNL  as  respondent.  

After hearing the parties, the Tribunal passed the impugned order  

dated 22nd December, 2006 dismissing the appeal and disposing of the  

M.A.No. 58 of 2006 with the observations and directions as quoted  

above.

6. In appreciation of the case, it is relevant to notice the  following facts:

For  grant  of  licences,  India  was  divided  into  four  metro  

service areas of Delhi, Mumbai, Kolkata and Chennai and various  

telecom circles which were roughly contiguous to the State of India.  

In the first phase, licences were granted for the four metro service  

areas in 1994 and thereafter in the Circles/States in 1995 defining  

the geographical limits within which the licensee may operate and  

offer the services. For Mumbai, Chennai, Kolkata and Delhi, in the  

aforesaid manner, separate licences were issued by the DoT. Separate  

and distinct licences were issued for the States of Maharashtra,  

Tamil Nadu and West Bengal excluding the three metropolitan cities  

of Mumbai, Chennai and Kolkata respectively for which licences were  

given to MTNL. As far as State of Uttar Pradesh is concerned, it was  

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divided into two Telecom circles, i.e., U.P. (East) and U.P.(West)  

with separate licences for U.P.(East) and U.P.(West).

7. The first respondent-Authority has laid down Inter Connection  Usage Charges (hereinafter referred to as ‘IUC’) with respect to the  

changing for the use of network elements of other operators which  

include  termination charges,  carriage charges  and access  deficit  

charge for use of network elements of other operators. These charges  

for inter-circle calls are different from those for intra-circle  

calls.  On 20th May,  2005, the  Government of  India notified  that  

inter-service  area  connectivity  between  access  providers  within  

Mumbai Metro and Maharasthra Telecom Circle, Chennai Metro and Tamil  

Nadu Telecom Circle, Kolkata Metro and West Bengal Telecom Circle  

and  U.P.(East)  and  U.P.(West)  Telecom  Circle  service  areas  

respectively,  is  permitted  subject  to  condition  that  the  access  

provider will operate within the existing licensed service area and  

shall  not  be  permitted  to  create  infrastructure  outside  their  

licensed  service  area  for  the  purpose  of  inter-service  area  

connectivity. It was further provided that the access provider may  

take leased lines for such connectivity. With the above arrangement,  

calls within a State in the above mentioned four states would be  

treated as intra-service area calls for the purposes of routing as  

well as ADC.

8. The final result of the above said notification was that the  metros were merged with the respective State circles and the calls  

from metros to the remaining areas of the respective States and in  

case of U.P.(East) and U.P.(West) circles from one to the other,  

were to be treated as intra-circle calls.  

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9. The appellants were charging higher tariff for calls made from  appellant’s network in the metros to the BSNL and MTNL networks in  

the  remaining  areas  of  the  State  compared  to  calls  made  from  

appellant’s network in the metros to another appellant’s network in  

the remaining areas of the State. For example, a subscriber on a  

private operator’s network calling from Mumbai to another private  

operator’s subscriber at Nasik was being charged at low rate as  

compared to a call made by the same subscriber from the same place  

to BSNL subscriber at the other place. In this background, the first  

respondent by Circular dated 27th February, 2006 observed that this  

differential  tariff was  discriminatory and  inconsistent with  the  

amended licence condition notified by the DoT on 20th May, 2005 and,  

therefore, directed the appellants to immediately discontinue such  

differential tariff and asked for compliance of the same within 15  

days.

10. As noticed above, the first respondent-authority vide Circular  dated  No.101-15/2005-MN  dated  27th February,  2006  observed  that  

differential  tariff was  discriminatory and  inconsistent with  the  

amended licence conditions notified by the DoT on 20th May, 2005 and,  

therefore, directed the appellants to immediately discontinue such  

differential tariff and ask for compliance within 15 days.

11. The  aforesaid  direction  was  challenged  by  the  appellants  before the Tribunal with a prayer to set aside the directions issued  

by  the  Circular  No.101-15/2005-MN  dated  27th February,  2006.  The  

appellants also sought for an interim relief granting ex-parte stay  

of operation of the said circular.  

12. The  Tribunal  having  not  granted  any  interim  relief,  the  appellants moved before the High Court in a Writ Petition, being  

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W.P.(C) No.5428 of 2006. The High Court observed that no punitive or  

coercive action shall be taken by the first respondent Authority at  

least till the next date of hearing before the Tribunal and disposed  

of the writ petition. The Tribunal by the impugned order dated 22nd  

December, 2006 held as follows:

“26. Having  gone  through  the  documents  produced by both the parties and having heard  arguments  we  are  of  the  view  that  the  appellants  did  not  make  adequate  effort  to  provide  direct  connectivity  between  the  appellants’  MSCs  and  the  BSNL/MTNL’s  MSCs  which would have brought tariffs at part for  calls made within the appellants’ network. We  are also left with the impression that DoT and  BSNL  could  have  taken  a  more  pro-active  approach to ensure that the requisite leased  lines  and  Ps  of  I  were  made  available  for  establishing  direct  connectivity  in  a  time  bound manner which would have helped achieving  the transition sought to be brought about by  the DoT notification of 20-5-2005 in a more  smooth manner. Be that as it may, we do not  agree  with  the  argument  put  forth  by  the  appellants about the protection to them for  charging  higher  tariff  under  the  clause  of  forbearance. The clause of non-discrimination  is very clear and self-explanatory which has  been defied by the appellants. We do not find  any  merit  in  the  appeal  and  the  same  is  dismissed.  M.A. No.  58 of  2006 also  stands  disposed.”

13. Learned  counsel  appearing  on  behalf  of  the  appellants  submitted  that  the  differential  tariffs  are  because  of  the  

difference  in  the  cost  elements  involved  in  the  two  natures  of  

calls. Insofar as calls terminating in the network of BSNL/MTNL are  

concerned, as direct connectivity had not been established between  

the appellant’s network and BSNL/MTNL network, the appellants were  

obliged to pay carriage charges to BSNL and MTNL (respondent nos. 2  

and 3) for calls terminating on their networks. But in case of a  

call  terminating  in  the  network  of  the  private  operator  these  

charges  were  not  applicable  as  direct  connectivity  had  been  

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established  between  the  private  operators.  Therefore,  the  cost  

elements  involved  in  the  two  calls  were  different  leading  to  a  

difference in tariffs charged by the service provider for such calls  

from its subscribers. The above position is explained with the help  

of a Diagram to show that in the case of a call from a metro like  

Mumbai to another place like Pune, the call between two subscribes  

of private networks is connected directly, which in the case of a  

call to BSNL subscriber is treated as a STD call as it is first  

connected to Nagpur and then to Pune, which is the routing plan for  

STD calls. According to appellants, in STD arrangement, BSNL as the  

National Long Distance Operator was able to recover carriage charges  

which were as high as Rs.1.10 per minute, which charges would no  

longer be payable once direct connectivity was established.

14. Thus  the  reason  for  the  differential  tariffs  as  per  the  appellant was that the call between subscribers of private operators  

was routed directly and costed as a local call while the call to a  

BSNL/MTNL subscriber was routed through another place and costed as  

an STD call.

15. It  was  further  contended  that  the  aforesaid  position  had  continued  right  from  July,  2005  in  the  knowledge  of  the  first  

respondent and now in sudden turn around, the first respondent chose  

to disregard the compulsions under which the private operators were  

constrained to offer differential tariffs and directed the private  

operators to discontinue the differential tariff. Its net effect was  

to  force  the  operators  to  increase  their  tariffs  for  calls  

terminating  on  the  network  of  other  private  operator  or  

alternatively reduce the tariff for calls to BSNL/MTNL subscribers  

and  pay  the  difference  from  their  own  pocket.  Either  of  these  

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alternatives  would  be  against  the  fundamental  duties  and  

responsibilities  of  the  first  respondent  under  the  Act  and  the  

impugned action was not only against the public interest but would  

also have put the private operators in a highly disadvantageous  

position.  

16. Learned counsel for the appellant further submitted that the  Tribunal erred in law in not appreciating that simply prescribing  

differential tariff does not violate the mandate of Article 14 of  

the Constitution or result in discrimination; the same class has to  

be determined in accordance with the similarity of features of its  

constituents. According to the appellants, the costs involved in the  

nature of the two calls are different and, therefore, though the  

subscribers belong to the appellants, they form a distinct class  

when they make a call to the BSNL Cell one number. It is also  

submitted that the Tribunal failed to notice that the DoT decision  

of 20th May, 2005 explicitly stated that the tariffs which were under  

forbearance would continue to be regulated by market forces.

17. Learned  counsel  appearing  on  behalf  of  first  respondent  submitted that it was the duty of the appellants to arrange the  

leased  lines  for  establishing  direct  connectivity  with  the  BSNL  

network  as  they  had  done  to  connect  each  other’s  network.  The  

appellants no where pleaded that the second respondent denied the  

provision of Points of Interconnect (hereinafter referred to as ‘Ps  

of I’) and the only pleading was with respect to non-grant of leased  

lines by BSNL. In fact, the appellants never approached the BSNL for  

provision of Ps of I.

18. It was brought to the notice of the Court that immediately on  issue of letter by the DoT when the metro circles were merged with  

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the respective state circles, BSNL had issued a Circular on 24th May,  

2005  asking  the  appellants  to  sign  addenda  to  the  existing  

interconnect agreements for provision of Ps of I. However, no effort  

was made by the appellants to this effect. In another case before  

the Tribunal, respondent No.2 had stated on affidavit that wherever  

the payments have been made, the Ps of I were being provided within  

90 days. In these four service areas, no demand was ever placed on  

BSNL.

19. Similar was the stand taken by the appellants and respondents  before the Tribunal. The Tribunal observed that some demands for Ps  

of I/E-1 connectivity were placed by the appellants on BSNL but as  

late  as  in  December  2005,  January  2006  and  February  2006.  The  

Tribunal held that there was no reason that in case infrastructure  

for  direct  connectivity  could  be  created  for  connecting  amongst  

themselves the networks of the appellants, the same could not be  

done for connecting the MSCs of appellants’ networks to those of  

BSNL/MTNL networks in the four service areas in question.  

The Tribunal rightly held that the appellant could have made  

use of the similar leased lines as they had between their networks  

and asked for Ps of I from the BSNL for the MSCs located in these  

four service areas which was not done. No effort was made by the  

appellants to create this direct connectivity and they took recourse  

to the easier way of handing the traffic to the BSNL as National  

Long Distance Operator and continued charging the consumers higher  

tariffs.  

20.  The  respondent  has  prescribed  the  tariffs  for  various  calls/telecom services under the Telecommunication Tariff Order 1999  

as amended from time to time. As a general condition clause 6 of the  

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Tariff  Order  prescribes  that  no  service  provider  shall,  in  any  

manner, discriminate between subscribers of the same class and such  

classification shall not be arbitrary. Further, clause 2(k) of the  

Tariff  Order  defines  “Non-discrimination”  to  mean  that  service  

provider  shall  not,  in  the  matter  of  application  of  tariffs,  

discriminate  between  subscribes  of  the  same  class  and  such  

classification of subscribes shall not be arbitrary. Clause 2(k) and  

Clause 6 of the Tariff Order are reproduced herein under:

“2(k) Non-discrimination  means  that  service  provider  shall  not  in  the  matter  of  application  of  tariffs,  discriminate  between  subscribers  of  the  same  class  and  such  classification  of  subscribers  shall  not  be  arbitrary. Clause 6. Non-discrimination: No  service  provider  shall,  in  any  manner,  discriminate  between subscribers of the same class and such  classification shall not be arbitrary.”

In terms of the above Tariff Order, the first respondent in  

September 2002, introduced forbearance in prescribing tariffs as far  

as Cellular calls are concerned and in taking this decision the  

first respondent took note of the emerging market scenario and came  

to the conclusion that a stage had been reached, when market forces  

could effectively regulate the cellular tariff.

21. The  question  whether  the  non-discrimination  clause  is  applicable  to  the  class  of  subscribers  making  call  to  another  

private network from a private network as compared to the class  

making call from a private network to BSNL/MTNL network was raised  

by both the parties. The appellants’ contention was that they were  

two different classes since the routing of the call was different  

and  BSNL  was  charging  higher  amount  for  the  latter  category  of  

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calls. In reply to the same, it has been rightly contended on behalf  

of the respondents that the same subscriber or two subscribers from  

the same house making calls from the same network to another private  

network or to BSNL network located at the same destination form the  

same class. The interpretation of the respondents being more logical  

was also accepted by the Tribunal. For the said reason the Tribunal  

rightly held that the action of appellants amount to discrimination  

between the same class of subscribers which is against the basic  

definition laid down in Clause 2(k) of the Tariff Order.  

22. On 20th May, 2005, the Government of India announced that inter  service  area  connectivity  between  Access  Providers  within  four  

States – Mumbai Metro & Maharashtra Telecom Circle, Chennai Metro &  

Tamil  Nadu  Telecom  Circle,  Kolkata  Metro  &  West  Bengal  Telecom  

Circle and U.P. (East) & U.P.(West) Telecom Circle Service areas is  

permitted subject to the condition that the Access provider will  

operate within their existing licensed service area and shall not be  

permitted to create infrastructure outside their licensed service  

area for the purpose of inter-service area connectivity. The access  

providers may take lease lines for such connectivity. This inter-

service area connectivity shall be only for terminating traffic.  

Relevant extracts from Clause 5.2 and 6.0 of the Circular dated 24th  

May, 2005 are reproduced hereunder:

“5.2. The  traffic  organized  by  mobile  subscribers belonging to one service area but  located in another service area within same  state shall be treated as home network traffic  instead  of  national  roaming  traffic.  This  principle  shall  be  applicable  for  both  charging  at  POI  as  well  as  traffic  certificates for ADC billing. Further, since  the traffic between two service areas within  same state shall be treated as intra-service  area  traffic,  therefore,  such  traffic  shall  not be handed over by NLDOs to BSNL.

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6.0. The  access  service  providers  of  these  four states shall be permitted to seek POIs  with  BSNL  switches  in  the  complete  state  irrespective of their service areas in which  they  can  provide  their  services.  Concerned  access provider shall have to sign separate  Addenda  to  existing  Interconnect  Agreements  with BSNL for establishing these new POIs with  BSNL. Till the time these Addendas are signed  and  new  POIs  established  the  existing  arrangements shall continue including handover  of such calls to BSNL through NLDOs treating  the traffic as inter circle and charging IUC  accordingly. All the traffic within a state  (in  these  four  States  only  and  in  case  of  State  of  UP  it  also  includes  State  of  Uttaranchal) shall be treated as intra circle  traffic  and  IUC  charged  accordingly  at  POI  (except  the traffic  handed over  at POIs  of  NLDOs) as well as for the purpose of traffic  certificates for ADC billing. These new POIs,  as  above,  shall  be  commissioned  after  concerned access providers sign these Addendas  to their existing Interconnect Agreement with  BSNL. These instructions are to be implemented  w.e.f. 0000 hours of 25th May, 2005.”

The  net  effect  of  the  aforesaid  Circular  was  that  the  

appellants were to sign the Addenda agreements with BSNL and then  

apply for new Ps of I and till such time that the new Ps of I are  

established the existing arrangements were to continue.

23. We  have  noticed  that  the  appellants  took  advantage  of  the  aforesaid provision. But they did not apply before the BSNL/MTNL to  

apply new Ps of I and treating the tariff as inter service charges  

differently from same sets of consumers. The access providers have  

option to continue with the existing inter-connected routing of the  

class of service areas but that cannot be a ground to discriminate,  

in  any  manner,  between  the  subscribers  of  the  same  class.  The  

Tribunal  rightly  held  that  the  appellants  -  service  providers  

discriminated between subscribers of the same class; one on the  

ground that the call ends with the private parties and another on  

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the ground that the call ends with BSNL/MTNL.  The classification of  

the subscribers into two categories on the basis of calls made by  

them  from  private  network  to  another  private  network  and  from  

private network to BSNL/MTNL network is arbitrary as it fails to  

satisfy the twin test for reasonable classification laid down by  

this Court in State of West Bengal v. Anwar Ali Sarkar & Anr. AIR  

1952 SC 75. Therefore, the Tribunal rightly dismissed the appeal.

24. We find no merit in this appeal, it is accordingly dismissed.  No costs.

…………………………………………….J.               (SUDHANSU JYOTI MUKHOPADHAYA)

…………………………………………….J.               (PRAFULLA C. PANT)

NEW DELHI;

JANUARY 30, 2015.

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