REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL ORIGINAL JURISDICTION

WRIT PETITION (CIVIL) NO. 423 OF 2010

Centre for Public Interest Litigation and others …Petitioners

versus

Union of India and others …Respondents

With

WRIT PETITION (CIVIL) NO. 10 OF 2011

Dr. Subramanian Swamy …Petitioner

versus

Union of India and others …Respondents

J U D G M E N T

G.S. Singhvi, J.

1. The important questions which arise for consideration in these petitions,  

one of which has been filed by Centre for Public Interest Litigation, a registered  

Society formed by Shri  V.M. Tarkunde (former  Judge of  the Bombay High  

Court) for taking up causes of public interest and conducting public interest  

litigation in an organised manner, Lok Satta, a registered Society dedicated to

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political governance, reforms and fight against corruption, Telecom Watchdog  

and  Common  Cause,  both  Non-Governmental  Organisations  registered  as  

Societies for taking up issues of public importance and national interest, Sarva  

Shri J.M. Lingdoh, T.S. Krishnamurthi and N. Gopalasamy, all former Chief  

Election Commissioners, P. Shanker, former Central Vigilance Commissioner,  

Julio F. Ribero, former member of the Indian Police Service, who served as  

Director General of Police, Gujarat, Punjab and C.R.P.F. and Commissioner of  

Police,  Mumbai,  P.G.  Thakurta,  an  eminent  Senior  Journalist  and  visiting  

faculty member of various institutions including IIMs, IIT, FTII, IIFT, Delhi  

University,  Jawaharlal  Nehru University  and Jamia  Milia  Islamia  University  

and Admiral R.H. Tahiliyani, former Chief of Naval Staff, former Governor and  

former Chairman of Transparency International India and the other has been  

filed by Dr. Subramanian Swami, a political and social activist, are:

(i) Whether  the  Government  has  the  right  to  alienate,  transfer  or  

distribute natural resources/national assets otherwise than by following a  

fair  and  transparent  method  consistent  with  the  fundamentals  of  the  

equality clause enshrined in the Constitution?

(ii) Whether the recommendations made by the Telecom Regulatory  

Authority  of  India  (TRAI)  on  28.8.2007  for  grant  of  Unified  Access

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Service Licence (for short ‘UAS Licence’) with 2G spectrum in 800, 900  

and 1800 MHz at the price fixed in 2001, which were approved by the  

Department of Telecommunications (DoT), were contrary to the decision  

taken by the Council of Ministers on 31.10.2003?

(iii) Whether the exercise undertaken by the DoT from September 2007  

to March 2008 for grant of UAS Licences to the private respondents in  

terms  of  the  recommendations  made  by  TRAI  is  vitiated  due  to  

arbitrariness and malafides and is contrary to public interest?

(iv) Whether the policy of first-come-first-served followed by the DoT  

for grant  of  licences is  ultra vires the provisions of  Article  14 of the  

Constitution and whether the said policy was arbitrarily changed by the  

Minister  of  Communications  and Information  Technology  (hereinafter  

referred to as ‘the Minister of C&IT’), without consulting TRAI, with a  

view to favour some of the applicants?

(v) Whether  the  licences  granted  to  ineligible  applicants  and  those  

who failed to fulfil the terms and conditions of the licence are liable to be  

quashed?

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2. For detailed examination of the issues raised by the petitioners, it will be  

useful to briefly notice the history of the growth of telecommunications in the  

country and the reforms introduced 1984 onwards.

3. In 1839, the first telegraph link was experimented between Calcutta and  

Diamond Harbour covering 21 miles.  In 1851, the telegraph line was opened  

for traffic, mostly for the official work of the East India Company. In course of  

time,  telegraphy  service  was  made  available  for  public  traffic.   The  Indian  

Telegraph  Act  was  enacted  in  1885.   It  gave  the  exclusive  privilege  of  

establishing,  maintaining  and  working  of  “telegraphs”  to  the  Central  

Government.  It  also  empowered  the  Government  to  grant  licences  on  such  

conditions and in consideration of such payments as it thought fit, to any person  

to establish, maintain or work a telegraph in any part of India.

4. After independence, Government of India took complete control of the telecom  

sector and brought it under the Post & Telegraph Department. One major step taken for  

improving telecommunication services in the country was the establishment of a modern  

telecommunication manufacturing facility at Bangalore under the Public Sector, in the  

name of “Indian Telephone Industries Ltd.” The reforms in the telecommunication sector  

started in 1984 when the Centre for Development of Telematics (C-DoT) was set up for  

developing indigenous technologies and permissions were given to the private sector to

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manufacture  subscriber-equipment.   In  1986,  Mahanagar  Telephone  Nigam  Ltd.,  

(MTNL) and Videsh Sanchar Nigam Ltd., (VSNL) were set up.   

5. The New Economic Policy of India was announced on 24.7.1991. It was  

aimed at meeting India’s competitiveness in the global market; rapid  

growth  of  exports,  attracting  foreign  direct  investment;  and  

stimulating domestic investments. With a view to achieve standards  

comparable to international facilities, the sub-sector of Value Added  

Services was opened up to private investment in July 1992 for the  

following  services:  (a)  Electronic  Mail;  (b)  Voice  Mail;  (c)  Data  

Services; (d) Audio Text Services; (e) Video Text Services; (f) Video  

Conferencing; (g) Radio Paging; and (h) Cellular Mobile Telephone.

In  respect  of  services  (a)  to  (f),  the  companies  registered  in  

India  were  permitted  to  operate  under  a  licence  on  non-exclusive  

basis. For services covered by (g) and (h) mentioned above, keeping  

in view the constraints on the number of  companies that could be  

allowed to operate, a policy of selection through a system of tendering  

was followed for grant of licences.

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National Telecom Policy 1994

6. National Telecom Policy 1994 (NTP 1994) was announced on 13.5.1994.  

This was the first major step towards deregulation, liberalization and private  

sector participation. The objectives of the policy were:

(i) affording  telecommunication  for  all  and  ensuring  the  

availability of telephone on demand;

(ii) providing certain basic  telecom services at  affordable  and

reasonable prices to all people and covering all villages;

(iii) giving  world  standard  telecom  services;  addressing

consumer  complaints,  dispute  resolution  and  public

interface  to  receive  special  attention  and  providing  widest

permissible  range  of  services  to  meet  the  customers’

demand and at the same time at a reasonable price;

(iv) creating  a  major  manufacturing  base  and major  export  of

telecom  equipment  having  regard  to  country’s  size  and

development; and

(v) protecting  the  defence  and  security  interest  of  the

country.

7. In  furtherance  of  NTP  1994,  licences  were  granted  to  eight  Cellular  

Mobile  Telephone  Service  (CMTS)  operators,  two  in  each  of  the  four  

metropolitan  cities  of  Delhi,  Mumbai  (Bombay),  Kolkata  (Calcutta)  and

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Chennai (Madras). In the second phase, in December 1995, after following a  

competitive  bidding  process,  14  CMTS  licences  were  awarded  in  18  state  

circles,  6 Basic  Telephone Services (BTS) licences were awarded in 6 state  

circles  and  paging  licences  were  awarded  in  27  cities  and  18  state  circles.  

However,  this did not  yield the intended results  apparently because revenue  

realised by the cellular and basic operators was less than the projections and the  

operators were unable to arrange finances for their projects.

New Telecom Policy 1999   8. On  the  directions  of  the  Prime  Minister,  a  high  level  Group  on  

Telecommunications  (GoT)  was  constituted  on  20.11.1998  to  review  the  

existing telecom policy and suggest further reforms.  On the basis of the report  

of the GoT, a draft New Telecom Policy 1999 (NTP 1999) was formulated.  

After its approval by the Cabinet,  NTP 1999 was announced to be effective  

from 1.4.1999.  NTP 1999 had the following objectives:

(i) to  make  available  affordable  and  effective  communications  for

the  citizens,  considering  access  to  telecommunications  as  utmost

important  for  achievement  of  the  country’s  social  and  economic

goals;

(ii) to  provide  universal  service  to  all  uncovered  areas  including  the

rural  areas  and  also  provide  high  level  services  capable  of

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meeting  the  needs  of  the  country’s  economy  by  striking  a

balance between the two;

(iii) to  encourage  development  of  telecommunication  in  remote,

hilly and tribal areas of the country;

(iv) to  create  a  modern  and  efficient  telecommunications

infrastructure  taking  into  account  the  convergence  of  IT,  media,

telecom  and  consumer  electronics  which  will  in  turn  propel

India to become an IT superpower;.

(v) to  convert  PCOs  wherever  justified  into  Public  Teleinfo  centres

having  multimedia  capability  such  as  Integrated  Services

Digital  Network  (ISDN)  services,  remote  database  access,

government and community information systems, etc.;

(vi) to  transform,  in  a  time  bound  manner,  the  telecommunications

sector  in  both  urban  and  rural  areas  into  a  greater  competitive

environment  providing  equal  opportunities  and  level  playing

field for all players;

(vii) to  strengthen  research  and  development  efforts  in  the  country

and  provide  an  impetus  to  build  world  class  manufacturing

capabilities;

(viii) to  achieve  efficiency  and  transparency  in  spectrum

management;

(ix) to protect defence and security interests of the country;  

and

(x) to  enable  Indian  Telecom  Companies  to  become  truly  global

players.

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9. NTP 1999 categorized 8 services in the telecom sector, namely; (i)  

Cellular  Mobile  Service  Providers  (CMSPs),  Fixed  Service  Providers  

(FSPs)  and  Cable  Service  Providers,  collectively  referred  as  ‘Access  

Providers’; (ii) Radio Paging Service Providers; (iii) Public Mobile Radio  

Trunking Service Providers; (iv) National Long Distance Operators; (v)  

International  Long  Distance  Operators;  (vi)  Other  Service  Providers,  

(vii)  Global  Mobile  Personal  Communication  by  Satellite  (GMPCS)  

Service Providers; (viii) V-SAT based Service Providers. NTP 1999 dealt  

with,  and provided the framework for,  all  these categories  of  telecom  

service providers.   

10. The policy on spectrum management as enumerated in NTP 1999  

was as under:

(i) Proliferation  of  new  technologies  and  the  growing  demand  for

telecommunication  services  has  led  to  manifold  increase  in

demand  for  spectrum  and  consequently  it  is  essential  that  the

spectrum  is  utilized  efficiently,  economically,  rationally  and

optimally.

(ii) There  is  a  need  for  a  transparent  process  of  allocation  of

frequency spectrum for use by a service provider and making it

available to various users under specific conditions.

(iii) With  the  proliferation  of  new  technologies  it  is  essential  to

revise  the  National  Frequency  Allocation  Plan  (NFAP)  in  its

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entirety  so  that  it  becomes  the  basis  for  development,

manufacturing  and  spectrum  utilization  activities  in  the  country

amongst  all  users.  NFAP  was  under  review  and  the  revised

NFAP  was  to  be  made  public  by  the  end  of  1999  detailing

information  regarding  allocation  of  frequency  bands  for  various

services, without including security information.

(iv) NFAP  would  be  reviewed  no  later  than  every  two  years  and

would  be  in  line  with  radio  regulations  of  the  International

Telecommunication Union (ITU).

(v) Adequate  spectrum  is  to  be  made  available  to  meet  the  growing

need  of  telecommunication  services.  Efforts  would  be  made  for

relocating  frequency  bands  assigned  earlier  to  defence  and

others.  Compensation  for  relocation  may  be  provided  out  of

spectrum fee and revenue share.

(vi) There  is  a  need  to  review  the  spectrum  allocation  in  a  planned

manner so that required frequency bands are available to the service

providers.

(vii) There  is  a  need  to  have  a  transparent  process  of  allocation  of

frequency  spectrum  which  is  effective  and  efficient  and  the

same would be further examined in the light of  ITU guidelines.

In this regard the following course of action shall be adopted viz.:

(a)spectrum usage fee shall be charged;

(b)an  Inter-Ministerial  Group  to  be  called  Wireless  Planning  

Coordination Committee, as a part of the Ministry of Communications  

for  periodical  review of  spectrum availability  and  broad  allocation  

policy, should be set up; and

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(c)massive computerization in WPC Wing would be started in the next  

three months so as to achieve the objective of making all operations  

completely computerized by the end of the year 2000. (emphasis supplied)

Establishment  of  the  Telecommunication  Commission  (for  short,  ‘the  Telecom Commission’) and the Telecom Regulatory Authority of India.

11. On 11.4.1989, the Council of Ministers passed a resolution and decided  

to establish the Telecom Commission. The relevant portions of that resolution  

are extracted below:

“CABINET SECRETARIAT

New Delhi the 11th April, 1989

RESOLUTION

CONSTITUTION OF TELECOM COMMISSION

No.  15/1/2/87-Cab.  1.  Telecommunication  service  is  an  essential infrastructure for national development.  It has impact on  social  and  economic  activities.   Besides,  business,  industry  and  administration  depends  heavily  on  information  and  telecom for  productivity,  efficiency  and  their  day-to-day  operations.   Its  development, therefore, is vital for nation building.

In  order  to  promote  rapid  development  in  all  aspects  of  telecommunications  including  technology,  production  and  services, the Government of India consider it necessary to set up an  organisation, which will have responsibility in the entire field of  telecommunications.

After careful consideration, the Government of India have  decided to establish a Telecommunication Commission with full  executive  and  financial  powers  modelled  on  the  lines  of  the  Atomic Energy Commission. 2. Constitution of the Commission

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(a) The  Commission  will  consist  of  full  time  and  part  time  Members;

(b) The Secretary to the Government of India in the Department of  Telecommunications  shall  be  the  ex-officio  Chairman  of  the  Commission;

(c) The full time Members of the Commission shall be ex-officio  Secretary  to  the  Government  of  India  in  the  Department  of  Telecommunications.  One of these Members shall be Member  for Finance; and

(d) The Secretary and the full time Members of the Commission  shall be drawn from the best persons available, including from  within the Department of Telecommunications.

3. Functions

The Telecom Commission shall be responsible :

(a) For  formulating  the  policy  of  the  Department  of  Telecommunications for approval of the Government;

(b) For  preparing  the  budget  for  the  Department  of  Telecommunications for each financial year and getting it  approved by the Government; and

(c) Implementation of the Government’s policy in all matters  concerning telecommunication.

4. Within  the  limits  of  the  budget  provision,  approval  by  the  Parliament,  the Commission shall  have the powers of  the  Government of India, both administrative and financial, for  carrying  out  the  work  of  the  Department  of  Telecommunications.

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5. Chairman

(a) The  Chairman,  in  his  capacity  as  Secretary  to  the  Government  of  India  in  the  Department  of  Telecommunications,  shall  be  responsible  under  the  Minister of Communications for arriving at decisions on  technical questions and advising Government on policy  and  allied  matters  of  telecommunication.   All  recommendations of the Commission on policy and allied  matters shall be put to the Minister of Communications  through the Chairman.

(b) In case of any difference of opinion in the meetings of  the Commission, the decision of the Chairman shall be  final, but in financial matters, Member (Finance) of the  Commission will have access to Finance Minister.

(c) The  Chairman  may  authorise  any  Member  of  the  Commission  to  exercise  on his  behalf,  subject  to  such  general or special orders as he may issue from time to  time, such of his powers and responsibilities as he may  decide.

6. Member Finance

The  Member  of  Finance  shall  exercise  powers  of  the  Government  of  India  in  financial  matters  concerning  the  Department  of  Telecommunications  except  in  so  far  as  such  powers  have  been,  or  may  in  future  be  conferred  on  or  delegated to the Department.

7. The Commission shall have power to frame its own rules and  procedures.  The Commission shall meet at such time and  places as fixed by the Chairman.

8. The Telecom Commission shall take over all legal and statutory  authority vested with the Telecom Board.”

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12. The Rules of Business for the Telecom Commission were also framed in  

1989.  In terms of para 2 of the Rules of Business read with item 1 of Annexure  

‘A’  appended  thereto,  all  important  matters  of  policy  relating  to  

Telecommunications  are  required  to  be  brought  before  the  Telecom  

Commission.  

13. In 1997, Parliament enacted the Telecom Regulatory Authority of India  

Act, 1997 (for short, ‘the 1997 Act’) to provide for the establishment of TRAI.  

By Act No.2 of 2000, the 1997 Act was amended and provision was made for  

establishment  of  the  Telecom  Disputes  Settlement  and  Appellate  Tribunal  

(TDSAT).  Sections 11 and 13, which have bearing on the decision of these  

petitions read as under:

“11. Functions of Authority. - (1) Notwithstanding anything contained  in the Indian Telegraph Act, 1885 (13 of 1885), the functions of the  Authority shall be to-  

(a) to make recommendations, either suo motu or on a request from the  licensor, on the following matters, namely:-

(i) need and timing for introduction of new service provider;  (ii) terms and conditions of licence to a service provider;  (iii) revocation  of  licence  for  non-  compliance  of  terms  and  

conditions of licence; (iv) measures to facilitate competition and promote efficiency in the  

operation  of  telecommunication  services  so  as  to  facilitate  growth in such services;

(v) technological  improvements  in  the  services  provided  by  the  service providers;

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(vi) type of  equipment  to be used  after  inspection of equipment  used in the network;

(vii) measures  for  the  development  of  telecommunication  technology and any other matter relatable to telecommunication  industry in general;

(viii) efficient management of available spectrum;

(b)   discharge the following functions, namely:-

(i) ensure compliance of terms and conditions of licence; (ii) (ii)notwithstanding anything contained in the terms and  

conditions  of  the  licence  granted  before  the  commencement of the Telecom Regulatory Authority of  India  (Amendment)  Act,  2000,  fix  the  terms  and  conditions  of  inter-connectivity  between  the  service  providers;

(iii) ensure  technical  compatibility  and  effective  inter- connection between different service providers;

(iv) regulate  arrangement  amongst  service  providers  of  sharing  their  revenue  derived  from  providing  telecommunication services;

(v) lay-down  the  standards  of  quality  of  service  to  be  provided by the service providers and ensure the quality  of  service  and  conduct  the  periodical  survey  of  such  service provided by the service providers so as to protect  interest of the consumers of telecommunication service;

(vi) lay-down and ensure the time period for providing local  and long distance circuits of telecommunication between  different service providers;

(vii) maintain  register  of  interconnect  agreements  and of  all  such other matters as may be provided in the regulations;

(viii) keep  register  maintained  under  clause  (vii)  open  for  inspection to any member of public on payment of such  fee and compliance of such other requirement as may be  provided in the regulations;

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(ix) ensure  effective  compliance  of  universal  service  obligations;

(c) levy fees and other charges at such rates and in respect of  such services as may be determined by regulations;

(d) perform such other functions including such administrative  and  financial  functions  as  may  be  entrusted  to  it  by  the  Central Government or as may be necessary to carry out the  provisions of this Act:

Provided  that  the  recommendations  of  the  Authority  specified  in  clause (a) of this sub-section shall  not be binding upon the Central  Government:

Provided  further  that  the  Central  Government  shall  seek  the  recommendations of the Authority in respect of matters  specified in  sub-clauses (i) and (ii) of clause (a) of this sub-section in respect of  new licence to be issued to a service provider and the Authority shall  forward its recommendations within a period of sixty days from the  date on which that Government sought the recommendations:

Provided also that the Authority may request the Central Government  to furnish such information or documents as may be necessary for the  purpose of making recommendations under sub-clauses (i) and (ii) of  clause (a) of this subsection and that Government shall supply such  information  within  a  period  of  seven  days  from  receipt  of  such  request:

Provided also that the Central Government may issue a licence to a  service  provider  if  no  recommendations  are  received  from  the  Authority within the period specified in the second proviso or within  such  period as  may  be  mutually  agreed upon between  the  Central  Government and the Authority:

Provided also that if the Central Government having considered that  recommendation of the Authority, comes to a prima facie conclusion  that such recommendation cannot be accepted or needs modifications,  it  shall,  refer  the  recommendation  back  to  the  Authority  for  its

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Telegraph Authority.  On a reference made by the Ministry of Communications  

and Information Technology on four issues including the issues of appropriate  

level of entry fee, basis of selection of new operators and entry of 4th cellular  

operator,  TRAI  made  its  recommendations,  which  were  communicated  to  

Secretary, DoT vide D.O. No. 250-14/2000-Fin (DF) (Vol. II) dated 23.6.2000.  

Paragraphs 4.1 to 4.3, 4.5 to 4.6 and 4.11 to 4.15 of that letter are extracted  

below:

“4.  For  the  purposes  of  clarity  each  issue  on  which  TRAI’s  recommendation has been sought has been stated separately and  recommendations have been given therefor.

4.1(A) Appropriate level of entry fee, basis for selection of new  operators and entry of fourth operator The  issues  under  this  head  can  be  broken  under  three  main  subheads. These are : (i) Level of entry fee; (ii) Basis for selection of new operation; (iii) Entry of the fourth operator. We take these issues sequentially.

4.2(1) Level of Entry Fee:-

New  operators  are  to  be  licensed  in  the  following  vacant  circles/slots:

(a)Jammu & Kashmir - Andamans & Nicobar Islands; (b) Assam and West Bengal; (c) DOT/MTNL as the third operator. (d)Fourth operator in circles where migration has been permitted.

4.3 DOT/MTNL wherever they come in as the third operator as  also the fourth operator to be introduced will be required to pay as  licence  fee  the  same  percentage  share  of  their  revenue  as

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recommended  by  TRAI for  the  existing  CMSPs who are  being  allowed to migrate to revenue sharing arrangement in accordance  with NTP 99. The fourth operator will also pay an entry fee which  will be fixed through a process of bidding.

4.5 (ii) Selection of new operators:

The TRAI recommends that all new operators barring DOT/MTNL  be selected through a competitive process. This is recommended to  be a multi  stage bidding process preceded by a pre-qualification  round.

4.6 Pre-qualification

Prospective operators would be required to meet  pre-determined  criteria in order to qualify to bid for the licence. Pre-qualifications  will mainly be on the following grounds :-

- Financial strength and experience as Telecom Service Provider - Minimum roll out obligation - Technical Plan - Business Plan - Payment terms and other commercial conditions

It  is  recommended  that  prospective  bidders  who  meet  the  pre- determined threshold as set out in the pre-qualification criteria be  short-listed  for  bidding  for  entry  fee  in  the  next  stage.  No  weightages need be attached to the pre-qualification criteria. The  criteria for pre-qualification could be developed on the following  lines:-

4.11 The Structure of the Bidding Process Selection from amongst  all  those who pass the pre-qualification  round will be by a process of bidding. The bids will be carefully  structured  so  as  to  guard  against  the  possible  misuses  of  the  process such as preemptive over-bidding or cartelisation. For this  purpose,  a  bid  structure  involving  “Multi  Stage  Informed  Ascending  Bids”  is  recommended.  It  is  also  recommended  that  such bids be invited for the entry fee for selection of operations  and issuing licenses to them. Although, as recommended earlier in

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the case of NLDO, TRAI is primarily of the opinion that because  of  its  greater  relevance,  direct  impact  on  operations  and  being  equitable, revenue sharing is a better basis on which to invite bids  for  licenses,  in  the  case  of  CMSPs  this  choice  is  not  available  except  in  two  vacant  circles/slots.  The  34  incumbent  operators  have already been given licenses through a process of bidding and  it would not be correct to subject them to yet another process of  bidding, this time concerning revenue sharing. They have already  been asked to pay as license fee, albeit on a provisional basis a  fixed  amount  of  the  revenue  share  viz.  15%.  It  is,  therefore,  recommended that a fixed percentage of revenue share be paid by  all operators as the license fee and this percentage be the same for  all the operators barring the exceptions specifically mentioned in  the paragraph 5.9 below.

4.12 While, the detailed bid structure can be prepared at the time  bids are being called and assistance/advise of experts may be taken  in  doing  so,  based  on  the  experience  of  such  successful  bids  elsewhere,  the  basic  outlines  of  the  proposed  structure  can  be  given. Bids can be invited for more than one licence at a time. The  total number of rounds in which the bids will be finalised will be  pre-determined  and  all  bidders  should  be  eligible  to  bid  for  all  licenses  on  offer  in  each  of  the  rounds.  The  licensor,  may,  however, if it so desires, stipulate beforehand the total number of  licences that can be finally allotted to a single bidder. The TRAI’s  recommendation in this regard is that the number of licences that  can go to a single bidder need not be restricted. This will favour  the  serious  and  techno-financially  strong  bidders  and  will  help  keep the bids at operationally feasible optimal levels.

4.13 After  each  stage  of  bidding,  bids  received  will  be  made  public and all bidders (those lower than the highest bidder as well  as the highest bidder) will be permitted to raise their bids in the  subsequent  rounds  of  bidding.  The  process  will  be  deemed  complete only on the completion of the pre-determined number of  bid rounds at the end of which the highest bidder for each licence  will  have  the  claim  to  the  license  in  question.  Licences  will  become effective on payment of the amount of the winning bid for  the entry fee within a period specified in the tender document.

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4.14 The same process of bidding will  also enable selection of operators where two slots in the same circle are vacant viz. J & K  and  Andaman  and  Nicobar  where  no  operators  exist.  In  these  circles, two bidders may be selected and it is recommended in this  regard that while the second highest bidder in these circles may be  considered for the second slot available, he need not be asked to  match the bid of the highest bidder. It may be provided though that  if the difference between the first and the second highest bids is  substantial, say more than 25 %, fresh bids for the second slot will  be invited. Such an arrangement while being equitable will act as a  good incentive for attracting bids for these circles which have not  proved to be attractive in the past.

(III). Entry of the Fourth Operator: 4.15 DOT/MTNL, the incumbent in basic services, are to enter the  field of cellular mobile services as the third operator in terms of  NTP 99 with the existing availability of spectrum. TRAI, however,  has no information about the availability of spectrum either for the  third or the fourth operator. The financial analysis conducted by  the TRAI for the purpose of studying the revenue share which the  operators can part with as licence fee assumes entry of the third  operator in the sixth year of licence i.e. in the current year and of  another i.e. the fourth operator two years later in accordance with  NTP 99. The analysis reveals that even if the business in each of  these  metropolitan  areas  and  circles  is  required  to  produce  a  reasonable IRR say 16-18 % and a decent return on the capital say  around 20%, it would still enable the operators to share upto about  25% of  the  Gross  (adjusted)  revenue  as  the  licence  fee.  In  the  circumstances,  it  would be reasonable  to assume that  on purely  economic grounds, in most circles there is even at present, a fair  case for the entry of the fourth operator. In this context, however,  more  than  the  market,  the  determining  factor  has  to  be  the  availability of a spectrum and its optimal utilisation. Moreover, it  is also a matter for careful consideration that even when additional  spectrum is released, whether it should be utilised to augment the  number  of  service  providers  or  for  improving  the  quality  and  coverage of the already available services. In the GSM 900 band  the maximum frequency spectrum made available to the operators  in a large number of countries is a pair of 12.5 MHz. Against this  in India the circle operators have been given a pair of less than 5

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MHz and the metro operators of less than 7 MHz. It is learnt that in  a number of metros and circles, no further expansion of services is  possible  unless  additional  spectrum  is  made  available  to  the  existing operators. Paucity of frequency spectrum is also adversely  affecting the quality of service in a number of service areas. In the  circumstances  a  fair  balance  between  the  two  objectives  of  increasing competition on the one hand and improving the quality,  coverage and price-efficiency of the service on the other will have  to  be  struck  so  that  the  larger  objective  of  providing  quality  services at affordable prices is not jeopardised. A sub-optimal cost  structure  and  quality  of  service  may  finally  turn  out  to  be  detrimental to the growth of tele-density notwithstanding a higher  number of service providers.  Similar views were expressed also  by the BICP in their report on Cellular Mobile Services (para 20  page-V) of the report).  Accordingly, TRAI is of the opinion that a  view can be taken in this matter  only after  getting a full  report  from the DOT on the quantum of spectrum being made available  for the CMSPs, existing as well as the proposed new entrants and  its location i.e. whether it is going to be in the 900 MHz or in 1800  MHz bands.”

(underlining is ours)

15. On  5.1.2001,  the  Government  of  India  issued  guidelines  for  issue  of  

licence for CMTS.   These guidelines envisaged a detailed bidding process for  

selection of the new service providers.   

16. On 27.10.2003, TRAI made recommendations under Section 11(1)(a)(i),  

(ii),  (iv)  and  (vii)  of  the  1997 Act  on  Unified  Licensing.  TRAI referred  to  

international  practices,  NTP  1994  and  NTP  1999  and  growth  of  telephone  

density - national objective and priority. Para 7.2 of those recommendations  

read as under:

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“7.2 The Guidelines would be notified by the licensor based on  TRAI recommendations to include nominal  entry fee, USO, etc.  The  charges  for  spectrum  shall  be  determined  separately.  The  operator  shall  be  required  to  approach  the  licensor  mainly  for  spectrum allocation. Since, spectrum is a scarce resource, it needs  to be regulated separately. Spectrum should be distributed using  such  a  mechanism  that  it  is  allocated  optimally  to  the  most  efficient user.”

17. Paragraphs 7.15 to 7.19 of the 2003 recommendations contained various  

alternatives for deciding the benchmark for the entry fee for Unified Access  

Licensing  Regime.   In  paragraph  7.30,  TRAI  laid  emphasis  on  efficient  

utilization of spectrum by all service providers and indicated that it would make  

further recommendations on efficient utilization of spectrum, spectrum pricing,  

availability and spectrum allocation procedure shortly, and the DoT may like to  

issue spectrum related guidelines based on its recommendations.

18. In the meanwhile,  a Group of Ministers was constituted on 10.9.2003  

with the approval of the Prime Minister to consider the following matters:

i) To recommend how to ensure release of adequate spectrum needed for  the growth of the telecom sector;

ii) To  recommend  measures  for  ensuring  adequate  resources  for  the  realization of the NTP targets of rural telephony;

iii) To resolve issues relating to the enactment of the Convergence Bill;

iv) To chart the course to a Universal Licence;

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v) To review adequacy of steps and enforcing limited mobility  within  the SDCA for WLL(M) services of basic operators, and recommend  the future course of action;

vi) To  appraise  FDI  limits  in  the  telecom  sector  and  give  recommendations thereon;

vii) To identify issues relating to mergers and acquisitions in the telecom  sector and recommend the way forward; and

viii) To  consider  issues  relating  to  imposition  of  trade  tax  on  telecom  services by the State Governments.

19. After considering the entire matter, the Group of Ministers made detailed  

recommendations on 30.10.2003, the relevant portions of which are extracted  

below:

“2.1 1  st   Term of Reference  : to recommend how to ensure release of  adequate spectrum needed for the growth of the telecom sector.

2.1.1 The GOM was informed  that  the  availability  of  adequate  spectrum in appropriate frequency bands, i.e. 1800 MHz in a  timely manner is crucial, for the growth of mobile telephone  services.   The  growth  of  mobile  services  and  resultant  spectrum needs are mainly in metro, major and main cities  having population above 1 million.  However, the frequency  bands  of  1800  MHz  are  extensively  used  by  Defence  services,  thus  severely  limiting  their  availability  for  the  mobile telecom operators.

2.1.2  In the above context, GoM recommended the following:

(1) Adequate spectrum be made available for the unimpeded  growth of telecom services, modalities for which will be  jointly worked out by Wireless Planning & Coordination  (WPC)  Wing  of  Department  of  Telecom and  Defence  services.   The  Ministry  of  Defence  would  coordinate  release  additional  spectrum  in  a  number  of  cities  for  which requirements have been projected within a month.

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(2) The  Ministry  of  Finance  will  provide  necessary  budgetary  support  to  Ministry  of  Defence  for  modernization  of  their  existing  equipment  to  facilitate  release  of  required  spectrum.   The  actual  fund  requirements  including  its  phasing  will  be  worked out  between the Ministry of Defence Ministry of Finance and  the Department of Telecom in a time bound manner.

(3) The Department of Telecom and Ministry of Finance  would discuss and finalise spectrum pricing formula  which  will  include  incentive  for  efficient  use  of  spectrum  as  well  as  disincentive  for  sub-optimal  usages

(4) The allotment of additional spectrum be transparent  fair  and  equitable,  avoiding  monopolistic  situation  regarding spectrum allotment usage

(5) The long term 15-20 years, spectrum requirements along  with  time  frames  would  also  be  worked  out  by  Department of Telecom.

(6) As per  the directions  of  GoM, a  Task Force has  been  constituted under the chairmanship of Wireless Adviser  to  the  Govt.  of  India  with  representatives  from  Department  of  Telecom,  Ministry  of  Defence  and  Ministry of Finance.  The terms of reference of the Task  Force and the progress of its  work so far  are given in  Annexures II & III.(Page 17-18).

2.4 4  th   Term of Reference  :- To chart the course to a Universal  Licence:

2.4.1 The GoM took note of the exercise that had already been  indicated by Telecom Regulatory Authority of India (TRAI),  in  regard  to  Unified  Licensing  Regime  in  the  Telecom  Sector Chairman, TRAI and Chairman HDFC were specially  invited made presentations before the GoM.

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2.4.2 TRAI submitted its recommendations to the Government on  this matter on 27.10.2003.  TRAI has recommended that the  present system of licensing in the Telecom Sector should be  replaced  by  Unified  Licensing/Automatic  Authorization  Regime.   The  Unified  Licensing/Automatic  Authorization  Regime has  been recommended to be  achieved in  a  two- stage process with the Unified Access Regime for basic and  cellular  services  in  the  first  phase  to  be  implemented  immediately.   This  is  to  be  followed  by  a  process  of  consultation to define the guidelines and rules for achieving  a fully Unified Licensing/Authorization Regime.  TRAI has  recommended that it will enter into a consultation process so  that the replacement of the existing licensing regime by a  Unified  Licensing Regime gets  initiated within 6 months.  Broad rationale key recommendations and some key policy  issues that have been addressed by TRAI are listed in the  Annexure IV(pages 19-21).

2.4.3 The salient  points of TRAI recommendations in regard to  the Unified  Access  Licensing (basic  and cellular  mobile),  are as under:

(i) Unification of licenses to be done in two stages

(a) Unified  access  regime  for  basic  and  cellular  services  in  the  first  phase  immediately

(b) Unified  authorization  regime  encompassing  all  telecom services  in  the  second phase.

(ii) Fee  paid  by  fourth  cellular  operator  to  be  benchmark for migration of basic players to the  new access regime.

(iii) Cellular  operators  not  to  pay  any  entry  fee  for  migration to the unified access regime while basic  operators  to  pay  the  differences  between  fourth

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cellular  operators  licence  fee  and  the  BSO  fee  already paid by them

(iv) Reliance Infocom required to pay Rs. 1096 crores  for  migration  in  addition  to  penalty  of  Rs.  485  crores for offering cellular type services.

(v) Process  of  migration  to  the  new  regime  to  be  voluntary.

(vi) The  existing  BSOs  after  migration  to  Unified  Access Licensing Regime may offer full mobility  however  WLL(M)  operators  after  migration  will  be  required  to  offer  limited  mobility  service  to  such customers who so desire.

(vii) No additional fee to be paid for any of the circles  where there is no fourth cellular operator.

2.4.4 Enhancing the scope of current Telecom Policy (NTF-99) to  provide  category  of  Unified  License  and  Unified  Access  Service License

NTP-99 recognises access service providers as a distinct class.  For  the purpose of licensing,  this has been sub-divided into cellular  fixed  and  cable  service  providers.   NTP-99  also  states  that  convergence of both markets and technologies is a reality that is  forcing realignment of the industry.  This convergence now allows  operators to use their facilities to deliver some services reserved  for  other  operators  necessitating  a  re-look  at  NTP-94  policy  framework.

For bringing into effect the regime of Unified Access Service for  basic  and  cellular  service  licenses  and  Unified  Licensing  comprising all telecom services, it would be necessary to enhance  the  scope  of  NTP-99  to  include  these  as  distinct  categories  of  licenses as pet of NTP-99.

2.4.5 TRAI recommendations on entry fee of WLL(M) based on  TDSAT judgement:

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TRAI  has  also  submitted  its  recommendations  in  regard  to  additional  entry  fee  payable  by  basic  service  operators  for  providing WLL(M) services on which Government had sought its  recommendations based on the judgment of TDSAT dated 8/8/03  in the WLL(M) case.  TRAI has given detailed reasoning on this  matter and has recommended additional entry fee for such of the  Basic  Service  Operators  who  provide  WLL(M)  service.   The  salient features are in Annexure-V (page 22).

2.4.6 Based  on  the  above  the  GoM  has  recommended  the  following course of action

(i) The scope of NTP-99 may be enhanced to provide  for licensing of Unified Access Service for basic  and cellular license services and Unified Licensing  comprising  all  telecom services.   Department  of  Telecommunications  may  be  authorized  to  issue  necessary addendum to NTP-99 to this effect.

(ii)  The  recommendations  of  TRAI  with  regard  to  implementation  of  the  Unified  Access  Licensing  Regime  for  basic  and  cellular  services  may  be  accepted.

DoT  may  be  authorized  to  finalise  the  details  of  implementation  with  the  approval  of  the  Minister  of  Communication  &  IT  in  this  regard  including  the  calculation of the entry fee depending upon the date of  payment  based on the principles given by TRAI in its  recommendations.

(iii) The recommendations  of  TRAI in this  regard to  the course of action to be adopted subsequently in  regard to the implementation of the fully Unified  License Authorisation Regime may be approved.

DoT  may  be  authorized  to  finalise  the  details  of  implementation  with  the  approval  of  the  Minister  of

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Communications & IT on receipt of recommendations of  TRAI in this behalf.

(iv) The  recommendations  of  TRAI  in  regard  to  additional  entry  fee  payable  by  basic  service  operators for providing WLL(M) service on which  Government sought its recommendations based on  the  judgment  of  TDSAT  dated  8.8.2003  in  the  WLL(M) case may be accepted.

(v)  While there appears to be no case for giving  any compensation package to them, because of the  perception  that  the  finances  of  the  cellular  operators  are  strained  and  because  of  the  effect  these may have on financial institutions.  Finance  Ministry  would  address  the  difficulties  of  the  cellular  operators,  if  any,  separately  and  appropriately.

(vi) If  new  services  are  introduced  as  a  result  of  technological  advancements  which  require  additional spectrum over and above the spectrum  already  allotted/contracted  allocation  of  such  spectrum  will  be  considered  on  payment  of  additional fee or charges, these will be determined  as per guidelines to be evolved in consultation with  TRAI.”

(emphasis supplied)

20. The recommendations of the Group of Ministers were accepted by the  

Council of Ministers on 31.10.2003.   

21. Thereafter, DoT issued Office Memorandum dated 11.11.2003 and made  

some additions to NTP 1999.  The same day, DoT issued new guidelines for  

UAS Licences.  Two salient features of these guidelines were that the existing

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operators would have an option to continue under the existing licensing regime  

or to migrate to new UAS Licence and the licence fee,  service area, rollout  

obligations and performance bank guarantee under UAS Licence was to be the  

same as the 4th CMTS.  

22. Vide letter  dated 14.11.2003, the Chairman,  TRAI, on his  own, made  

recommendation  regarding  entry  fee  to  be  charged  from  the  new  UAS  

Licensees. On 24.11.2003, the Minister of C&IT accepted the recommendation  

that  entry  fee  for  new UAS Licensees  will  be  the  entry  fee  of  4th cellular  

operator and where there is no 4th cellular operator, it will be the entry fee fixed  

by the Government for the basic operator.  A decision was also taken by him in  

F. No.20-231/2003-BS-III (LOIs for UASL) at 4/N that,

“As regards the point raised about the grant of new licences on  first-come-first-served basis, the announced guidelines have made  it open for new licences to be issued on continuous basis at any  time.   However,  the  spectrum  is  to  be  allotted  subject  to  availability.   This  in  effect  would  imply  that  an  applicant  who  comes first will be granted the spectrum first so it will result in  grant of licence on first-come-first-served basis.”

Although,  in  terms  of  the  decision  taken  by  the  Minister  of  C&IT,  the  

applications for grant of UAS Licence could be made on continuous basis and  

were required to be processed within 30 days, some applications were made in  

2004 and 2006 and the same were kept pending.

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23. On 13.5.2005, TRAI  made  comprehensive  recommendations  on  various  

issues  relating  to  spectrum  policy,  i.e.,  efficient  utilisation  of  spectrum,  

spectrum allocation,  spectrum pricing,  spectrum charging and allocation for  

other terrestrial wireless links. These recommendations were not placed before  

the Telecom Commission. Though, the then Secretary, DoT submitted the file  

to the then Minister of C&IT on 16.8.2005 for information with a note that he  

will go through the recommendations and put up the file to the Minister for  

policy decision, the file was returned on 12.9.2006, i.e., after one year and no  

further action appears to have been taken.

24. In the meanwhile, on 23.2.2006, the Prime Minister approved constitution  

of a Group of Ministers, consisting of the Ministers of Defence, Home Affairs,  

Finance,  Parliamentary  Affairs,  Information and Broadcasting  and C&IT,  to  

look into issues relating to vacation of spectrum. Deputy Chairman, Planning  

Commission  was  special  invitee.  The  Terms  of  Reference  of  the  Group  of  

Ministers, among other things, included suggesting a Spectrum Pricing Policy  

and examining the possibility of creation of a spectrum relocation fund. After  

five days, the Minister C&IT wrote letter dated 28.2.2006 to the Prime Minister  

that  the  Terms  of  Reference  of  the  GoM were  much  wider  than  what  was

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discussed in his meeting with the Prime Minister. He appears to have protested  

that the Terms of Reference would impinge upon the work of his Ministry and  

requested that the Terms of Reference be modified in accordance with the draft  

enclosed with the letter. Interestingly, the Minister’s draft did not include the  

important issue relating to Spectrum Pricing. Thereafter, vide letter 7.12.2006,  

the  Cabinet  Secretary  conveyed  the  Prime  Minister’s  approval  to  the  

modification of the Terms of Reference. The revised Terms of Reference did  

not include the issue relating to Spectrum Pricing.  

25.  On  14.12.2005,  the  DoT  issued  revised  guidelines  for  UAS  Licence.  

Paragraph 11 of the new guidelines reads as under:

“The licences shall be issued without any restriction on the number  of  entrants  for  provision of  unified access services in a  Service  Area.”

In terms of paragraph 14 of the guidelines, the licensee was required to pay  

annual licence fee at 10/8/6% of Adjusted Gross Revenue (AGR) for category  

A/B/C  service  areas,  respectively  excluding  spectrum charges.  This  was  in  

addition to the non-refundable entry fee. In terms of paragraph 19 the licensee  

was required to pay spectrum charges in addition to the licence fee on revenue  

share basis.  However, while calculating AGR for limited purpose of levying  

spectrum charges, revenue from wireless subscribers was not to be taken into  

account.

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26. After  one  year  and  about  six  months,  the  DoT  vide  its  letter  dated  

13.4.2007, requested TRAI to furnish its recommendations under Section 11(1)

(a) of the 1997 Act on the issues of limiting the number of access providers in  

each service area and review of the terms and conditions in the access provider  

licence mentioned in the letter.  Paragraph 2 of that letter is extracted below:

“2. Fast changes are happening in the Telecommunication sector. In  order  to  ensure  that  the  policies  keep  pace  with  the  changes/developments  in  the  Telecommunication  sector,  the  government  is  contemplating  to  review  the  following  terms  and  conditions in the Access provider (CMTS/UAS/Basic) license

i. Substantial equity holding by a company / legal person in more than one licensee company in the same service area (clause 1.4  of UASL agreement).

ii. Transfer of licences (clause 6 of the UASL) iii. Guidelines  dated  21.02.2004  on  Mergers  and  Acquisitions.  

TRAI in its recommendations dated 30.1.2004 had opined that  the guidelines may be reviewed after one year.

iv. Permit  service  providers  to,  offer  access  services  using  combination of technologies (CDMA, GSM and/or any other)  under the same license.

v. Roll-out obligations (Clause 34 of UASL). vi. Requirement to publish printed telephone directory.”

27. In  furtherance  of  the  aforesaid  communication,  TRAI  made  

recommendations  dated  28.8.2007.  The  main  emphasis  of  these  

recommendations was the principles of fair competition, no restriction on the  

number  of  access  service  providers  in  any  service  area,  need  for  spectrum  

management, measures to increase spectrum efficiency, allocation of spectrum

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and compliance of roll out obligations by the service providers.  It was also  

recommended that in future all spectrum excluding the spectrum in 800, 900  

and 1800 MHz bands in 2G services should be auctioned.  In paragraphs 2.33,  

2.39, 2.41, 2.54 and 2.63, TRAI repeatedly mentioned about scarce availability  

of  spectrum.  Paragraphs  2.37,  2.40,  2.69  and  2.73  to  2.79  of  the  TRAI’s  

recommendations dated 28.8.2007 are extracted below:

“2.37 Accordingly,  the  Authority  recommends  that  no  cap  be  placed  on  the  number  of  access  service  providers  in  any  service area.

2.40 The  present  spectrum  allocation  criteria,  pricing  methodology  and  the  management  system  suffer  from  a  number  of  deficiencies  and  therefore  the  Authority  recommends that this whole issue is not to be dealt with in  piecemeal  but  should  be  taken  up  as  a  long  term policy  issue.  There is an urgent need to address the issues linked  with spectrum efficiency and its management.

2.69 The  Entry  fee  for  acquiring  a  UASL license  enables  the  licensee to become eligible for spectrum allocation in certain  specified bands without any additional fee for acquisition of  spectrum which means that allocation of spectrum follows  the  grant  of  license  subject  however  to  availability  of  spectrum. There is only one direct cost to the operator for  spectrum i.e. spectrum charge in the form of royalty.  

2.73 The allocation of spectrum is after the payment of entry  fee  and  grant  of  license.  The  entry  fee  as  it  exists  today  is,  in  fact,  a  result  of  the  price  discovered  through a markets based mechanism applicable for the  grant of license to the 4th cellular operator. In today’s  dynamism  and  unprecedented  growth  of  telecom  sector,  the entry fee determined then is also not the  realistic price for obtaining a license. Perhaps, it needs

35

to be reassessed through a market mechanism. On the  other hand spectrum usage charge is in the form of a  royalty which is linked to the revenue earned by the  operators and to that extent it captures the economic  value of the spectrum that is used. Some stakeholders  have  viewed  the  charges/fee  as  a  hybrid  model  of  extracting economic rent  for  the acquisition and also  meet the criterion of efficiency in the utilization of this  scarce resource.  The Authority in the context of 800,  900  and  1800  MHz  is  conscious  of  the  legacy  i.e.  prevailing practice and the overriding consideration of  level playing field. Though the dual charge in present  form does not reflect the present value of spectrum it  needed to be continued for treating already specified  bands for 2G services i.e. 800, 900 and 1800 MHz. It is  in  this  background  that  the  Authority  is  not  recommending  the  standard  options  pricing  of  spectrum,  however,  it  has  elsewhere  in  the  recommendation  made  a  strong  case  for  adopting  auction  procedure  in  the  allocation  of  all  other  spectrum bands except 800, 900 and 1800 MHz.

2.74 Some of  the existing service providers have already  been allocated spectrum beyond 6.2 MHz in GSM and  5 MHz in CDMA as specified in the license agreements  without charging any extra one time spectrum charges.  The maximum spectrum allocated to a service provider  is 10 MHz so far. However, the spectrum usage charge  is  being  increased  with  increased  allocation  of  spectrum. The details are available at Table 8.

2.75 The Authority has noted that the allocation beyond 6 2  MHz  for  GSM  and  5  MHz  for  CDMA  at  enhanced  spectrum  usage  charge  has  already  been  implemented. Different licensees are at different levels  of  operations  in  terms  of  the  quantum of  spectrum.  Imposition of additional acquisition fee for the quantum  beyond these thresholds may not be legally feasible in  view of  the fact  that  higher  levels of  usage charges  have been agreed to and are being collected by the

36

Government. Further, the Authority is conscious of the  fact that further penetration of wireless services is to  happen  in  semi-urban  and  rural  areas  where  affordability of services to the common man is the key  to further expansion.

2.76 However, the Authority is of the view that the approach  needs to be different for allocating and pricing spectrum  beyond 10 MHz in these bands i.e. 800, 900 and 1800  MHz. In this matter, the Authority is guided by the need to  ensure sustainable competition in the market keeping in  view  the  fact  that  there  are  new  entrants  whose  subscriber  acquisition  costs  will  be  far  higher  than  the  incumbent wireless operators. Further, the technological  progress  enables  the  operators  to  adopt  a  number  of  technological solutions towards improving the efficiency of  the  radio  spectrum  assigned  to  them.  A  cost-  benefit  analysis of allocating additional spectrum beyond 10 MHz  to existing wireless operators and the cost of deploying  additional CAPEX towards technical improvements in the  networks would show that there is either a need to place  a cap on the maximum allocable spectrum at 10 MHz or  to  impose  framework  of  pricing  through  additional  acquisition fee beyond 10 MHz.   The Authority feels it  appropriate  to  go  in  for  additional  acquisition  fee  of  spectrum  instead  of  placing  a  cap  on  the  amount  of  spectrum that can be allocated to any wireless operator.  In any case, the Authority is recommending a far stricter  norm  of  subscriber  base  for  allocation  of  additional  spectrum beyond  the  initial  allotment  of  spectrum.  The  additional  acquisition  fee  beyond  10  MHz  could  be  decided  either  administratively  or  through  an  auction  method  from  amongst  the  eligible  wireless  service  providers. In this matter, the Authority has taken note of  submissions of a number of stakeholders who have cited  evidences  of  the  fulfillment  of  the  quality  of  service  benchmarks of the existing wireless operators at 10 MHz  and even below in almost all the licensed service areas.  Such  an  approach  would  also  be  consistent  with  the  Recommendation  of  the  Authority  in  keeping  the  door

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open for new entrant without putting a limit on the number  of access service providers.  

2.77 The Authority in its recommendation on “Allocation and  pricing  of  spectrum  for  3G  and  broadband  wireless  access services” had recommended certain reserve price  for  5  MHz of  spectrum in  different  service  areas.  The  recommended price are as below:

Service Areas Price  (Rs.in  million)  for  2X5  MHz

Mumbai, Delhi and Category A 800

Chennai, Kolkatta and Category B    400

Category C 150

The  Authority  recommends  that  any  licensee  who  seeks  to  get  additional spectrum beyond 10 MHz in the existing 2G bands i.e.  800,900  and  1800  MHz  after  reaching  the  specified  subscriber  numbers shall have to pay a onetime spectrum charge at the above  mentioned rate on prorata basis for allotment of each MHz or part  thereof of  spectrum beyond 10 MHz.  For one MHz allotment  in  Mumbai, Delhi and Category A service areas, the service provider  will have to pay Rs. 160 million as one time spectrum acquisition  charge.

2.78 As  far  as  a  new  entrant  is  concerned,  the  question  arises  whether  there  is  any  need  for  change  in  the  pricing  methodology for allocation of spectrum in the 800, 900 and  1800 MHz bands.  Keeping in view the objective of growth,  affordability, penetration of wireless services in semi-urban  and rural areas, the Authority is not in favour of changing the spectrum fee regime for a new entrant. Opportunity for equal  competition has always been one of the prime principles of  the  Authority  in  suggesting  a  regulatory  framework  in  telecom services. Any differential treatment to a new entrant  vis-a-vis  incumbents  in  the  wireless  sector  will  go  against the  principle  of  level  playing  field.  This  is  specific  and  restricted to 2G bands only i.e. 800, 900 and 1800 MHz. This  approach  assumes  more  significance  particularly  in  the

38

context where subscriber acquisition cost for a new entrant is  likely  to  be  much  higher  than  for  the  incumbent  wireless  operators.

2.79 In the case  of  spectrum in bands other  than 800,  900 and  1800  MHz  i.e.  bands  that  are  yet  to  be  allocated,  the  Authority examined various possible approaches for pricing  and has come to the conclusion that it would be appropriate  in future for a market  based price discovery systems.    In  response to the consultation paper, a number of stakeholders  have  also  strongly  recommended  that  the  allocation  of  spectrum should be immediately de-linked from the license  and the future allocation   should be based   on   auction.  The  Authority  in  its recommendation on “Allocation and  pricing of spectrum for 3G and broadband  wireless  access  services”   has   also   favored   auction  methodology  for  allocation  of  spectrum  for  3G  and  BWA  services.  It  is  therefore recommended that in future all spectrum excluding  the spectrum in 800, 900 and 1800 bands should be auctioned  so as to ensure efficient utilization of this scarce resource.     In    the 2G bands (800 MHz/900 MHz/1800 MHz), the allocation  through auction may not be possible as the service providers  were allocated spectrum at different times of their license and  the amount of spectrum with them varies from 2X4.4 MHz to  2X10 MHz for  GSM technology  and  2X2.5  MHz to  2X5  MHz in CDMA technology. Therefore, to decide the cut off  after  which the spectrum is  auctioned will  be difficult  and  might raise the issue of level playing field.”

(underlining is ours)

28. The aforesaid  recommendations  of  TRAI were  first  considered  by  an  

Internal Committee of the DoT constituted vide letter dated 21.9.2007 under the  

Chairmanship of Member, Telecommunication.  The report of the Committee  

was placed before the Telecom Commission on 10.10.2007. However, the four

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non-permanent  members,  i.e.,  Finance  Secretary;  Secretary,  Department  of  

Industrial  Policy  and  Promotion;  Secretary,  Department  of  Information  

Technology and Secretary, Planning Commission were not even informed about  

the meeting.  In this meeting of the Telecom Commission, which was attended  

by the  officials  of  the DoT only,  the  report  of  the  Internal  Committee  was  

approved. On 17.10.2007, the Minister of C&IT accepted the recommendations  

of the Telecom Commission and thereby approved the recommendations made  

by  TRAI.   However,  neither  the  Internal  Committee  of  the  DoT  and  the  

Telecom Commission nor the Minister of C&IT took any action in terms of  

paragraph 2.40 of  the  recommendations  wherein it  was  emphasised  that  the  

existing spectrum allocation criteria, pricing methodology and the management  

system suffer  from a number  of deficiencies  and the whole issue should be  

addressed  keeping  in  view  issues  linked  with  spectrum  efficiency  and  its  

management. The DoT also did not get in touch with the Ministry of Finance to  

discuss  and  finalise  the  spectrum  pricing  formula  which  had  to  include  

incentive for efficient use of spectrum as well as disincentive for sub-optimal  

usage in terms of the Cabinet decision of 2003.  

29. In the meanwhile, on 24.9.2007, Shri A.K. Srivastava, DDG (AS), DoT  

prepared a note mentioning therein that as on that date, 167 applications had  

been received from 12 companies for 22 service areas and opined that it may be

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difficult to handle such a large number of applications at any point of time.  He  

suggested that 10.10.2007 may be announced as the cut-off date for receipt of  

new UAS Licence applications.  Shri A. Raja who was, at the relevant time,  

Minister of C&IT did not agree with the suggestion and ordered that 1.10.2007  

be fixed as the cut-off date for receipt of applications for new UAS Licence.  

Accordingly, press note dated 24.9.2007 was issued by the DoT stating that no  

new application for UAS Licence will be accepted after 1.10.2007.   

30. It  is  borne  out  from  the  record  that  Vodafone  Essar  Spacetel  Ltd.  

(respondent No.12) had made an application for UAS Licence in 2004 and 3  

others,  namely,  Idea Cellular  Ltd.  (respondent  No.8),  Tata  Teleservices  Ltd.  

(respondent No.9) and M/s. Aircel Ltd. (respondent No.11) had made similar  

applications in 2006. However, the same were not disposed of by the DoT and  

they were included in the figure of 167.  Between 24.9.2007 and 1.10.2007,  

over  300  applications  were  received  for  grant  of  UAS  Licences.  Member  

(Technology), Telecom Commission and Ex-officio Secretary to Government  

of  India  sent  a  letter  dated  26.10.2007  to  Secretary,  Department  of  Legal  

Affairs,  Ministry  of  Law  and  Justice  seeking  the  opinion  of  the  Attorney  

General of India/Solicitor General of India on the issue of the mechanism to  

deal with what he termed as an unprecedented situation created due to receipt of  

large number of applications for grant of UAS Licence.  The statement of case

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accompanying the letter  of  Member  (Technology)  contained as  many  as  14  

paragraphs. Paragraph 11 outlined the following four alternatives:  

(I)  The  applications  may  be  processed  on  first-come-first-served  basis  in  

chronological  order  of  receipt  of  applications  in  each  service  area  as  per  

existing  procedure.  LoI  may  be  issued  simultaneously  to  applicants  (the  

numbers  will  vary based on availability  of  spectrum to be ascertained from  

WPC  Wing)  who  fulfil  the  eligibility  conditions  of  the  existing  UASL  

Guidelines and are senior most  in the queue. The time limit  for compliance  

should  be  7  days  as  per  the  existing  provision  of  LoI  and  15  days  for  

submission  of  PBG,  FBG,  entry  fee,  etc.  as  per  the  existing  procedure.  

However, those who fulfil the conditions of LoI within stipulated time, their  

seniority of license/spectrum will be on the basis of their application date. The  

compliance  of  eligibility  conditions  as  on  the  date  of  issue  of  LoI  may  be  

accepted.  No relaxation of  this time limit  will  be given and LoI shall  stand  

terminated after the stipulated time period (however, the applicant may have the  

right  to  apply  for  new  UAS  Licence  again  as  and  when  the  window  for  

submission of new UAS Licence is opened again). Subsequent applications may  

be considered for issue of LoI if the spectrum is available.

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(II) LoIs to all those who applied by 25.9.2007 (date on which the cut-off date  

for receipt of applications were made public through press) may be issued in  

each service area as it  is  expected that only serious players will  deposit  the  

entry  fee  and  seniority  for  license/spectrum  be  based  on  (i)  the  date  of  

application or (ii) the date/time of fulfilment of all LoI conditions.

(III) DoT may issue LoIs to all eligible applications simultaneously received up  

to  cut-off  date.  Since  LoIs  will  clearly  stipulate  that  spectrum allocation  is  

subject to availability and is not guaranteed, the LoI holders are supposed to  

pay the entry fee if  their  business  case  permits  them top wait  for  spectrum  

allocation subject to availability an initial roll out using wire line technology.

(IV) Any other better approach which may be legally tenable and sustainable  

for issue of new licences.

Paragraph 13 of the statement of case is extracted below:

“Issue  of  LoIs  to  M/s.  TATA  and  others  for  usage  of  Dual  Technology  spectrum based  on  their  applications  received  after  18.10.2007. Whether  

(i) To treat their request prior to existing applicants  

or

(ii)To treat their request after processing all 575 applications.”

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31. The Law Secretary placed the papers before the Minister  of  Law and  

Justice on 1.11.2007, who recorded the following note:

“I agree.  In view of the importance of the case and various options  indicated in the statement of the case, it is necessary that whole  issue is first considered by an empowered Group of Ministers and  in that process legal opinion of Attorney General can be obtained.”

32. When the note of the Law Minister was placed before the Minister of  

C&IT, he recorded the following note on 2.11.2007 – “Discuss please”.  On the  

same day, i.e., 2.11.2007 the Minister of C&IT did two things. He approved the  

note prepared by Director (AS-1) containing the following issues:

(i) Issuing of LoIs to new applicants as per the existing policy,

(ii) Number of LoIs to be issued in each circle,

(iii) Approval of draft LoI,

(iv) Considering application of TATAs for dual technology after the  decision of TDSAT on dual technology, and

(v) Authorising Shri R.K. Gupta, ADG (AS-1) for signing the LoIs on  behalf of President of India.

33. While approving the note, the Minister of C&IT on his own recorded the  

following – “LoI may be issued to the applicants received upto 25th Sept. 2007”.  

Simultaneously,  he  sent  D.O.  No.20/100/2007-AS.I  dated  2.11.2007  to  the  

Prime  Minister  and  criticised  the  suggestion  made  by  the  Law Minister  by  

describing it as totally out of context.  He also gave an indication of what was to

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come in the future by mentioning that the DoT has decided to continue with the  

existing policy of first-come-first-served for processing of applications received  

up to 25.9.2007 and the procedure for processing the remaining applications  

will be decided at a later date, if any spectrum is left available after processing  

the applications received up to 25.9.2007.  Paragraphs 3 and 4 of the letter of  

the Minister of C&IT are extracted below:

“3. The Department  wanted to examine the possibility  of any  other procedure in addition to the current procedure of allotment of  Licences  to  process  the  huge  number  of  applications.  A  few  alternative  procedures  as  debated  in  the  Department  and  also  opined by few legal experts were suggested by the Department of  Telecom  to  Ministry  of  Law  &  Justice  to  examine  its  legal  tenability to avoid future legal complications, if any. Ministry of  Law and Justice, instead of examining the legal tenability of these  alternative  procedures,  suggested  referring  the  matter  to  empowered Group of Ministers. Since, generally new major policy  decisions of a; Department or inter-departmental issues are referred  to  GOM,  and,  needless  to  say  that  the  present  issue  relates  to  procedures,  the  suggestion  of  Law  Ministry  is  totally  out  of  context.

4. Now,  the  Department  has  decided  to  continue  with  the  existing  policy  (first-come-first-served)  for  processing  of  applications  received  up  to  25th September  2007,  i.  e.  the  date  when the news-item on announcement of cut-off date appeared in  the  newspapers.  The  procedure  for  processing  the  remaining  applications will be decided at a later date, if any spectrum is left  available  after  processing  the  applications  received  up  to  25th  September 2007.

4. As  the  Department  is  not  deviating  from  the  existing  procedure, I hope this will satisfy the Industry.”

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34. In the meanwhile, the Prime Minister who had received representations  

from telecom sector companies and had read reports appearing in a section of  

media sent letter dated 2.11.2007 to the Minister of C&IT and suggested that a  

fair and transparent method should be adopted for grant of fresh licences.  That  

letter reads as under:

“Prime Minister New Delhi  

2 November, 2007 Dear Shri Raja,  

A number of issues relating to allocation of spectrum have  been raised by telecom sector companies as well as in sections of  the media. Broadly, the issues relate to enhancement of subscriber  linked spectrum allocation criteria, permission to CDMA service  providers to also provide services on the GSM standard and be  eligible for spectrum in the GSM service band, and the processing  of  a  large  number  of  applications  received  for  fresh  licenses  against the backdrop of inadequate spectrum to cater to overall  demand. Besides these, there are some other issues recommended  by  TRAI  that  require  early  decision.  The  key  issues  are  summarized in the annexed note.

I would request you to give urgent consideration to the  issues  being  raised  with  a  view  to  ensuring  fairness  and  transparency and let me know of the position before you take  any further action in this regard.

With regards, Yours sincerely,

Sd/- (Manmohan Singh)

Shri A. Raja Minister of Communications and IT

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New Delhi.

Annexure

1. Enhancement  of  subscriber  linked  spectrum  allocation  criteria

In August 2007, the TRAI has recommended interim enhancement  of subscriber linked spectrum allocation criteria. Service providers  have  objected  to  these  recommendations,  alleging  errors  in  estimation / assumptions as well as due procedure not having been  followed by the TRAI while arriving at the recommendations.

2. Permission  to  CDMA  service  providers  to  also  provide  services on the GSM standard and be eligible for spectrum  in the GSM service band

Based on media reports, it is understood that the DoT has allowed  ‘cross  technology’  provision  of  services  by  CDMA  service  providers and three such companies have already paid the license  fee. With the deposit of the fee, they would be eligible for GSM  spectrum, for  which old incumbent  operators have been waiting  since  last  several  years.  The  Cellular  Operators  Association  of  India (COAI), being the association of GSM service providers, has  represented against this. It is understood that the COAI has also  approached the TDSAT against this.

3. Processing of  a large number  of  applications received for  fresh licenses against the backdrop of inadequate spectrum  to cater to overall demand

The  DoT  has  received  a  large  number  of  applications  for  new  licenses in various telecom circles.  Since spectrum is very limited,  even in the next several years all these licensees may never be able  to get spectrum.  The Telecom Policy that had been approved by  the  Union Cabinet  in  1999 specifically  stated  that  new licenses  would be given subject to availability of spectrum.

4. In order that spectrum use efficiency gets directly linked  with  correct  pricing  of  spectrum,  consider  (i)

47

introduction  of  a  transparent  methodology  of  auction,  wherever  legally  and  technically  feasible,  and  (ii)  revision of entry fee, which is currently benchmarked on  old spectrum auction figures

5. Early decision on issues like rural telephony, infrastructure  sharing, 3G, Broadband, Number Portability and Broadband  Wireless  Access,  on  which  the  TRAI  has  already  given  recommendations.”

(emphasis supplied)

35. The Minister of C&IT did not bother to consider the suggestion made by  

the Prime Minister, which was consistent with the Constitutional principle of  

equality, that keeping in view the inadequate availability of spectrum, fairness  

and transparency should be maintained in the allocation of spectrum, and within  

few hours of the receipt of the letter from the Prime Minister, he sent a reply  

wherein he brushed aside the suggestion made by the Prime Minister by saying  

that  it  will  be unfair,  discriminatory,  arbitrary and capricious to auction the  

spectrum to new applicants as it will not give them a level playing field.  The  

relevant portions of paragraph 3 of the Minister’s letter are extracted below:

“3. Processing of  a large number  of  applications received for  fresh licenses against the backdrop of inadequate spectrum  to cater to overall demand

The issue of auction of spectrum was considered by the TRAI and  the  Telecom  Commission  and  was  not  recommended  as  the  existing licence holders who are already having spectrum upto 10  MHz per Circle have got it without any spectrum charge.  It will be  unfair,  discriminatory,  arbitrary  and  capricious  to  auction  the

48

spectrum to new applicants as it will not give them level playing  field.

I  would like to bring it  to your notice that  DoT has earmarked  totally 800 MHz in 900 MHz and 1800 MHz bands for 2G mobile  services. Out of this, so for a maximum of about 35 to 40 MHz per  Circle has been allotted to different operators and being used by  them. The remaining 60 to 65 MHz, including spectrum likely to  be vacated by Defence Services, is still available for 2G services.

Therefore, there is enough scope for allotment of spectrum to few  new  operators  even  after  meeting  the  requirements  of  existing  operators and licensees. An increase in number of operators will  certainly bring real competition which will lead to better services  and increased teledensity at lower tariff. Waiting for spectrum for  long after getting licence is not unknown to the Industry and even  at  present  Aircel,  Vodafone,  Idea  and  Dishnet  are  waiting  for  initial spectrum in some Circles since December 2006.”

36. On  20.11.2007,  the  Secretary,  DoT  had  made  a  presentation  on  the  

spectrum policy to the Cabinet Secretary.  The Finance Secretary, who appears  

to have witnessed the presentation,  dispatched letter dated 22.11.2007 to the  

Secretary, DoT and expressed his doubt as to how the rate of Rs.1600 crores  

determined in 2001, could be applied without any indexation for a licence to be  

given in 2007.  He also emphasized that in view of the financial implications,  

the  Ministry  of  Finance  should  have  been  consulted  before  the  matter  was  

finalised  at  the  level  of  the  DoT.  Secretary,  DoT  promptly  replied  to  the  

Finance Secretary by sending letter dated 29.11.2007 in which he mentioned  

that as per the Cabinet decision dated 31.10.2003, the DoT had been authorised

49

to finalise the details of implementation of the recommendations of TRAI and  

in its recommendations dated 28.8.2007, TRAI had not suggested any change in  

the entry fee/licence fee.

37. In the context of letter dated 22.11.2007 sent by the Finance Secretary,  

Member (Finance), DoT submitted note dated 30.11.2007 suggesting that the  

issue of revision of rates should be examined in depth before any final decision  

is taken in the matter.  When the note was placed before the Minister of C&IT,  

he observed that the matter of entry fee has been deliberated in the department  

several times in light of various guidelines and the TRAI recommendations and  

accordingly  decision  was  taken  not  to  revise  the  entry  fee  and  that  the  

Secretary, DoT had also replied to the Finance Secretary’s letter on the above  

lines.

38. Although,  the record produced before this  Court  does not  show as to  

when  the  policy  of  first-come-first-served  was  distorted  by  the  Minister  of  

C&IT, in an apparent bid to show that he had secured the Prime Minister’s  

approval to this act of his, the Minister C&IT sent letter dated 26.12.2007 to the  

Prime Minister, paragraphs 1 and 2 of which are extracted below:

“1. Issue  of  Letter  of  Intent  (LOI): DOT follows a  policy  of  First-cum-First Served for granting LOI to the applicants for UAS  licence,  which  means,  an  application  received  first will be processed first and if found eligible will be granted LOI.

50

2. Issue of Licence: The First-cum-First Served policy is also  applicable for grant of licence on compliance of LOI conditions.  Therefore, any applicant who complies with the conditions of LOI  first will be granted UAS licence first. This issue never arose in the  past as at one point of time only one application was processed and  LOI  was  granted  and  enough  time  was  given  to  him  for  compliance of conditions of LOI. However, since the Government  has adopted a policy of “No Cap” on number of UAS Licence, a  large number of LOI’s are proposed to be issued simultaneously.  In these circumstances, an applicant who fulfils the conditions of  LOI first will be granted licence first, although several applicants  will be issued LOI simultaneously. The same has been concurred  by the Solicitor General of India during the discussions.”

(underlining is ours)

39. After 12 days, DDG (AS), DoT prepared a note incorporating therein the  

changed first-come-first-served policy to which reference had been made by the  

Minister of C&IT in letter dated 26.12.2007 sent to the Prime Minister. On the  

same day the Minister of C&IT approved the change.

40. The meeting of the full Telecom Commission, which was scheduled to be  

held on 9.1.2008 to consider two important issues i.e., performance of telecom  

sector and pricing of spectrum was postponed to 15.1.2008.

41. On 10.1.2008 i.e., after three days of postponement of the meeting of the  

Telecom  Commission,  a  press  release  was  issued  by  the  DoT  under  the  

signature of Shri A.K. Srivastava, DDG (AS), DoT.  The same reads as under:

51

“In  the  light  of  Unified  Access  Services  Licence  (UASL)  guidelines  issued  on  14th December  2005  by  the  department  regarding number of Licenses in a Service Area, a reference was  made  to  TRAI  on  13-4-2007.  The  TRAI  on  28-08-2007  recommended  that  No  cap  be  placed  on  the  number  of  access  service providers  in  any service area.  The government  accepted  this  recommendation  of  TRAI.  Hon’ble  Prime  Minister  also  emphasized  on  increased  competition  while  inaugurating  India  Telecom 2007. Accordingly, DOT has decided to issue LOI to all  the eligible applicants on the date of application who applied up-to  25-09-2007.

UAS license authorises licencee to rollout telecom access services  using  any  digital  technology  which  includes  wire-line  and/or  wireless  (GSM and/or  CDMA) services.  They  can also  provide  Internet  Telephony,  Internet  Services  and  Broadband  services.  UAS licence in broader terms is an umbrella licence and does not  automatically authorize UAS licensees usage of spectrum to rollout  Mobile (GSM and/or CDMA) services. For this, UAS licencee has  to obtain another licence, i.e. Wireless Operating Licence which is  granted on first-come-first-served basis  subject  to availability of  spectrum in particular service area.

DOT has been implementing a policy of First-cum-First Served for  grant of UAS licences under which initially an application which is  received first will be processed first and thereafter if found eligible  will  be  granted  LOI  and  then  who  so  ever  complied  with  the  conditions of LOI first will be granted UAS licence.  

-------------- Department of Telecom

(AS Cell) 10-01-2008”

(underlining is ours)

42. On  the  same  day,  another  press  release  was  issued  asking  all  the  

applicants to assemble at the departmental headquarters within 45 minutes to  

collect the response(s) of the DoT.  They were also asked to submit compliance

52

of the terms of LoIs within the prescribed period.  The second press release is  

also reproduced below:

“Department of Telecommunications

Press Release

Date : 10  th   January 2008   

Sub : UASL applicants to depute their authorised representative to  collect responses of DOT on 10.1.2008.

The applicant companies who have submitted applications to  DOT for  grant  of  UAS licences  in  various  service  areas  on or  before  25.9.2007  are  requested  to  depute  their  Authorised  signatory/Company  Secretary/  authorised  representative  with  authority letter to collect response(s) of DOT. They are requested  to  bring  the  company’s  rubber  stamp  for  receiving  these  documents to collect letters from DOT in response to their UASL  applications.  Only  one  representative  of  the  Company/group  Company  will  be  allowed.  Similarly,  the  companies  who  have  applied for usage of dual technology spectrum are also requested to  collect the DOT’s response.  

All  above  are  requested  to  assemble at 3:30 pm on 10.1.2008 at Committee Room, 2nd Floor,  Sanchar Bhawan, New Delhi. The companies which fail to report  before  4:30  P.M.  on  10.1.2008,  the  responses  of  DOT will  be  dispatched by post.

All eligible LOI holders for UASL  may submit compliance to DOT to the terms of LOIs within the  prescribed period during the office hours i.e.  9:00 A.M. to 5:30  P.M. on working days.

File No.20-100/2007-AS-I

 Dated 10.1.2008

53

(A.K. Srivastava) DDG(AS)

Dept. of Telecom

DDG(C&A): The above Press Release may kindly be uploaded on  DOT website immediately.”  

43. All the applicants including those who were not even eligible for UAS  

Licence collected their LoIs on 10.1.2008.  The acceptance of 120 applications  

and compliance with the terms and conditions of the LoIs for 78 applications  

was also received on the same day.

44. Soon after obtaining the LoIs, 3 of the successful applicants offloaded  

their stakes for thousands of crores in the name of infusing equity, their details  

are as under:

(i) Swan Telecom Capital Pvt. Ltd. (now known as Etisalat DB Telecom  

Pvt. Ltd.) which was incorporated on 13.7.2006 and got UAS Licence  

by  paying  licence  fee  of  Rs.  1537  crores  transferred  its  45%  

(approximate) equity in favour of Etisalat Mauritius Limited, a wholly  

owned  subsidiary  of  Emirates  Telecommunications  Corporation  of  

UAE for over Rs.3,544 crores.

(ii) Unitech which had obtained licence for Rs.1651 crores transferred its  

stake 60% equity in favour of Telenor Asia Pte. Ltd., a part of Telenor

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Group  (Norway)  in  the  name  of  issue  of  fresh  equity  shares  for  

Rs.6120 crores between March, 2009 and February, 2010.

(iii) Tata  Tele  Services  transferred  27.31% of  equity  worth  Rs.  12,924  

crores in favour of NTT DOCOMO.

(iv) Tata Tele Services (Maharashtra) transferred 20.25% of equity worth  

Rs. 949 crores in favour of NTT DOCOMO.

45. S. Tel Ltd., who had applied for grant of licence pursuant to press note  

dated 24.9.2007, but was ousted from the zone of consideration because of the  

cut-off date fixed by the Minister of C&IT, filed Writ Petition No.636 of 2008  

in  the  Delhi  High  Court  with  the  prayer  that  the  first  press  release  dated  

10.1.2008 may be quashed. After hearing the parties, the learned Single Judge  

vide his order dated 1.7.2009 declared that the cut-off date, i.e., 25.9.2007 was  

totally arbitrary and directed the respondents in the writ petition to consider the  

offer made by the writ petitioner to pay Rs.17.752 crores towards additional  

revenue  share  over  and above  the  applicable  spectrum revenue share.   The  

observations made by the learned Single Judge on the justification of fixing  

25.9.2007 as the cut-off date read as under:

“Thus  on  the  one  hand  the  respondent  has  accepted  the  recommendation  of  the  TRAI  in  the  impugned  press  note,  but  acted contrary thereto by amending the cut-off date and thus placed  a  cap  on  the  number  of  service  providers.  The  stand  taken  by  respondent and the justification sought to be given for fixing a cut- off  date  retrospectively  is  on  account  of  large  volume  of

55

applications, is without any force in view of the fact that neither  any justification was rendered during the course of argument, nor  any justification has been rendered in the counter affidavit  as to  what is the effect of receipt of large number of applications in view  of the fact that a recommendation of the TRAI suggests no cap on  the number of access service providers in any service area. This  recommendation  was  duly  accepted  and  published  in  the  newspaper.  Further  as  per  the  counter  affidavit  232  UASL  applications  were  received  till  25.9.2007  from  22  companies.  Assuming there was increase in the volume of applications,  the  respondent has failed to answer the crucial question as to what was  the  rationale  and basis  for  fixing 25.9.2007 as  the cut-off  date.  Even  otherwise,  admittedly  232  applications  were  made  by  25.9.2007  and  between  25.9.2007  and  1.10.2007  only  76  were  applications  were  received.  It  was  only  on  1.10.2007  that  267  applications were made. Thus on 28.09.2007 it cannot be said that  large  number  of  applications  were  received.  Thus  taking  into  consideration  the  opinion of  the  expert  body,  which as  per  the  press note of the respondent itself was accepted by the respondent,  certainly the respondent cannot be allowed to change the rules of  the game after the game had begun, to put it in the words of the  Apex Court especially when the respondent has failed to give any  plausible justification or the rationale for fixing the cut-off date by  merely a week.  Taking into consideration that on 13.4.2007 the  Government  of  India  had  recommended  TRAI  to  furnish  its  recommendation in terms of 11 (e) of the TRAI Act, 1997 on the  issue as to whether a limit should be put on the number of access  service providers in each service area. The TRAI having given its  recommendations on 28.8.2007 which were duly accepted by the  Government,  the  respondent  cannot  be  allowed  to  arbitrarily  change  the  cut-off  date  and  that  too  without  any  justifiable  reasons.”  

46. The letters  patent  appeal  filed against  the order  of  the learned Single  

Judge was dismissed by the Division Bench of the High Court vide judgment  

dated 24.11.2009, paragraphs 13 and 14 whereof are reproduced below:

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“13. We are unable to agree with the submission of the learned  Attorney General that the parameters that would apply to revising a  cut-off date that has been earlier fixed prior to the receipt of the  applications would be no different from fixing a cut-off date in the  first  place.  While  the  decision  in  D.S.  Nakara  which  has  subsequently been distinguished in N. Subbarayudu is about fixing  a cut-off date which might be an exercise in the discretion of the  Appellant, those decisions are not helpful in deciding the revision  of a cut-off date after applications have been received in terms of  the  previous  cut-off  date,  is  amenable  to  judicial  review  on  administrative and constitutional law parameters.   We are of the  view that the two situations cannot be equated. The Government  would have to justify its decision to revise a cut-off date already  fixed, after applications have been received from persons acting on  the basis of the earlier cut-off date. It would be for the court to be  satisfied when a challenge is made,  that the decision to revise a  cut-off date after receiving applications on the basis of the cut-off  date earlier fixed was based on some rational basis and was not  intended to benefit a few applicants while discriminating against  the rest.  In the present  case,  for  the reasons pointed out  by the  learned Single  Judge,  with which we concur,  the Appellant  has  been unable to show that its decision to revise the cut-off date after  receiving the application of the Respondent was based on some  rational  criteria.  It  is  vulnerable  to  being  labelled  arbitrary  and  irrational.

14.  We  are  not  able  to  appreciate,  in  the  instant  case,  the  submission  of  the  learned  Attorney  General  that  the  mere  advancing of the cut-off date would not tantamount to changing the  rules  after  the  game  has  begun.  In  a  sense  it  does.  It  makes  ineligible for consideration the applicants who had applied, after  25th September 2007 but on or before 1st October 2007. Further this  ineligibility is announced after the applications have been made. In  other words, while at the time of making the application there was  no such ineligibility, it is introduced later and that too for a select  category of applicants. This cannot but be a change in the rule after  the game has begun. We do not think that the decisions relied upon  by the learned Attorney General contemplate such a situation. On  the other hand the decisions in Monarch Infrastructure (P) Ltd. and  K. Manjushree fully support the Respondent’s case for invalidation

57

of the Appellant’s impugned decision revise the cut-off date from  1st October 2007 to 25th September 2007, long after receiving the  application from the Respondent.”

47. The Union of India challenged the judgment of the Division Bench in  

SLP(C) No.33406/2009.   During the pendency of  the special  leave petition,  

some compromise appears to have been reached between the writ petitioner and  

the authorities and, therefore, an additional affidavit was filed along with agreed  

minutes of order before this Court on 12.3.2010.  In view of this development,  

the Court disposed of the appeal arising out of the special leave petition but  

specifically approved the findings recorded by the High Court with regard to  

the cut-off date by making the following observations:

“Taking the additional affidavit and the suggestions made by the  learned Attorney General, this appeal is disposed of as requiring no  further adjudication.

However, we make it clear that the findings recorded by the High  Court  with regard to the cut  off  date  is  not  interfered with and  disturbed by this Court in the present case.”

GROUNDS OF CHALLENGE

48. The petitioners have questioned the grant of UAS Licences to the private  

respondents  by  contending  that  the  procedure  adopted  by  the  DoT  was  

arbitrary, illegal and in complete  violation of Article 14 of the Constitution.  

They have relied upon the order passed by the learned Single Judge of the Delhi

58

High Court as also the judgment of the Division Bench, which was approved by  

this Court and pleaded that once the Court has held that the cut-off date, i.e.,  

25.9.2007  fixed  for  consideration  of  the  applications  was  arbitrary  and  

unconstitutional,  the entire procedure adopted by the DoT for grant of UAS  

Licences with the approval of the Minister of C&IT is liable to be declared  

illegal  and  quashed.  Another  plea  taken  by  the  petitioners  is  that  the  DoT  

violated the recommendations made by TRAI that there should be no cap on the  

number  of  Access  Service  Providers  in  any  service  area  and  this  was  in  

complete  violation  of  Section 11(1)  of  the 1997 Act.   The  petitioners  have  

relied  upon  the  report  of  the  Comptroller  and  Auditor  General  (CAG)  and  

pleaded that the consideration of large number of ineligible applicants and grant  

of LoIs and licenses to them is  ex facie illegal and arbitrary.  The petitioners  

have  also  pleaded  that  the  entire  method  adopted  by  the  DoT for  grant  of  

licence is  flawed because  the recommendations  made by TRAI for  grant  of  

licences  at  the  entry  fee  determined  in  2001  was  wholly  arbitrary,  

unconstitutional  and  contrary  to  public  interest.  Yet  another  plea  of  the  

petitioners  is  that  while  deciding to  grant  licences,  which are  bundled  with  

spectrum,  at  the price  fixed in  2001 the  DoT did not  bother  to  consult  the  

Finance Ministry and, thereby, violated the mandate of the decision taken by  

the Council of Ministers in 2003. The petitioners have also pleaded that the

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policy  of  first-come-first-served  is  by  itself  violative  of  Article  14  of  the  

Constitution and in any case distortion thereof by the Minister of C&IT and the  

consequential grant of licences is liable to be annulled. Another ground taken  

by the petitioners is that even though a number of licensees failed to fulfil the  

roll out obligations and violated conditions of the licence, the Government of  

India did not take any action to cancel the licences.  

COUNTER AFFIDAVITS OF THE RESPONDENTS

49. Most of the respondents have filed separate but similar counter affidavits  

in both the petitions. The main points raised by the respondents are:

(i) The petitioners are not entitled to challenge the recommendations made  

by TRAI and the policy decisions taken by the Government for grant of UAS  

Licences.

(ii) The  Court  cannot  review  and  nullify  the  recommendations  made  by  

TRAI in the matter of allocation of spectrum in 800, 900 and 1800 MHz bands  

at the rates fixed in 2001.  

(iii) The report prepared by the CAG cannot be relied upon for the purpose of  

recording a finding that the procedure adopted for the grant of UAS Licences is  

contrary to Article 14 of the Constitution. The private respondents have also

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claimed that the observations made by the CAG and the conclusions recorded  

by him are seriously flawed and are based on totally unfounded assumptions.

(iv) The UAS Licences were given strictly in accordance with the modified  

first-come-first-served  policy.  That  the  respondents  were  able  to  fulfil  LoI  

conditions because newspapers had already published stories about the possible  

grant of licences in the month of January, 2008.  

(v) That  those  who  had  made  applications  in  2004  and  2006  cannot  be  

clubbed with those who had applied in the month of August and September,  

2007 because in terms of the existing UASL guidelines they were entitled to  

licences.

(vi) That  private  respondents  have  made  huge  investments  for  creating  

infrastructure to provide services in different  parts of the country and if  the  

licences granted to them are cancelled at this stage, public interest would be  

adversely affected.

(vii) That  the  private  respondents  have  been  able  to  secure  foreign  direct  

investment  of  thousands  of  crores  for  providing  better  telecom  services  in  

remote areas of the country and any intervention by the Court would result in  

depriving the people living in those areas of telecom services.

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(viii) The  Government  and  TRAI  have  already  initiated  action  for  levy  of  

penalty/liquidated damages for non-compliance of the roll out obligations and  

violation of conditions of the license. That the licensees have not violated any  

conditions of the license and that the notices issued by TRAI alleging the same  

have already been challenged before TDSAT and in most cases, interim orders  

have been passed.  That the remedy, if any, available to the petitioners is to  

approach the TDSAT.

(ix) Some  of  the  respondents  have  also  questioned  the  application  of  the  

policy of first-come-first-served by asserting that even though they had applied  

in 2004 and 2006, and licences had been granted to them before 25.9.2007, the  

allocation of spectrum was delayed till 2008 and those who had applied in 2007  

were placed above them because they could fulfil the conditions of LoI in terms  

of the distorted version of the policy first-come-first-served.

50. The petitioners have filed rejoinder affidavit and reiterated the assertions  

made in  the main  petition that  the grant  of  UAS Licences  is  fundamentally  

flawed and is violative of the Constitutional principles. They have also placed  

on  record  report  dated  31.1.2011  submitted  by  the  One  Man  Committee,  

(hereinafter referred to as ‘One-Man Committee Report’), comprising Justice  

Shivaraj V. Patil (former Judge of this Court), which was constituted by the

62

Government of India vide Office Memorandum dated 13.12.2010 to examine  

the  appropriateness  of  the  procedure  followed  by  the  DoT  in  issuance  of  

licences and allocation of spectrum during the period 2001 to 2009. They have  

also placed on record photostat copies of the notings recorded on the files of the  

DoT.  

ARGUMENTS

51. Shri  Prashant  Bhushan,  learned  counsel  for  the  petitioners  in  Writ  

Petition (C) No. 423 of 2010 and Dr. Subramanian Swamy, who is petitioner-

in-person in Writ Petition (C) No. 10 of 2011 made the following submissions:

(i) The spectrum, which is a national asset, cannot be distributed by  

adopting the policy of first-come-first-served on the basis of the  

application received by the DoT without  any advertisement  and  

without holding auction.

(ii) The grant of licences bundled with spectrum is  ex-facie arbitrary  

illegal and violative of Article 14 of the Constitution.

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(iii) The decision of the Minister of C&IT to pre-pone the cut-off date  

from 1.10.2007 to 25.9.2007, which eliminated large number  of  

applications, is violative of Article 14 of the Constitution and the  

entire exercise undertaken with reference to this cut-off date has  

resulted in discrimination vis-à-vis other eligible applicants.

(iv) Once  the  cut-off  date  fixed  by  the  Minister  of  C&IT  for  

consideration of the applications received in the light of the earlier  

press release fixing the last date as 1.10.2007 has been declared to  

be  arbitrary  and  unconstitutional  by  the  High  Court,  the  

consequential actions taken by the DoT on that basis are liable to  

be annulled.  

(v) The first-come-first-served policy suffers from a fundamental flaw  

inasmuch as there is no defined criterion for operating that policy.  

There  is  no  provision  for  issue  of  advertisement  notifying  

obligations for grant of licence and allocation of spectrum and any  

person who makes an application becomes entitled to get licence  

and spectrum.  

(vi) The first-come-first-served policy was manipulated by the Minister  

of  C&IT to favour  some of the applicants  including those  who

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were not even eligible. Shri Bhushan pointed out that, out of 122  

applications, 85 were found to be ineligible and those who could  

obtain  information  either  from  the  concerned  Minister  or  the  

officers of DoT about the change of the criteria for implementing  

the  first-come-first-served  policy  got  advantage  and  acquired  

priority over those who had applied earlier.  

(vii) The meeting of the Telecom Commission scheduled for 9.1.2008  

was deliberately postponed because vide letter  dated 22.11.2007  

the  Finance  Secretary  had  strongly  objected  to  the  charging  of  

entry fee fixed in 2001.

(viii) Shri  Bhushan  pointed  out  that  the  recommendations  made  by  

TRAI  on  28.8.2007  were  contrary  to  public  interest  as  well  as  

financial interest of the nation because at the time of entry of 4 th  

cellular operator the same TRAI had suggested multi-stage bidding  

and even for allocation of 3G spectrum the methodology of auction  

was suggested but, for no ostensible reason, the so-called theory of  

level  playing field was innovated for  grant of UAS Licences in  

2007 on the basis of the entry fee fixed in 2001. Learned counsel  

emphasized that  the transfer  of  equity by three of  the licensees

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immediately  after  issue  of  licences  for  gain  of  many  thousand  

crores shows that if the policy of auction had been followed, the  

nation would have been enriched by many thousand crores.

(ix) Both, Shri Prashant Bhushan and Dr. Subramanian Swamy pointed  

out that although the Prime Minister had suggested that a fair and  

transparent method be adopted for grant of UAS Licences through  

the  process  of  auction,  the  Minister  of  C&IT  casually  and  

arbitrarily brushed aside the suggestion and granted licence to the  

applicants for extraneous reasons.  

(x) Shri Prashant Bhushan also questioned the grant of the benefit of  

the  policy  of  dual  technology  to  Tata  Teleservices  Ltd.  by  

contending  that  this  was  a  result  of  manipulation  made  by  the  

service provider. Dr. Subramanian Swamy also raised a concern  

regarding the national security and pointed out that some of the  

applicants  who  have  trans-border  connections  have  received  

licences and they may ultimately prove to be dangerous for  the  

nation.  

52. Shri G.E. Vahanvati, learned Attorney General referred to NTP 1994 and  

NTP 1999 and submitted that the policy decision taken by the Government of

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India for private sector participation, which could bring in the funds required  

for expansion of telecommunication services in different parts of the country,  

cannot be scrutinized by the Court. He submitted that in the last more than 20  

years,  the  telecom  services  have  expanded  beyond  anybody’s  expectation  

because of private sector participation and it cannot be said that granting UAS  

Licences  by  charging  the  entry  fee  determined  at  2001  prices  is  

unconstitutional.  Learned counsel referred to the history of development in the  

field of telecommunications and the concept of spectrum, and submitted that the  

policy decision taken by the DoT for migration of CDMA service providers was  

neither illegal nor unconstitutional.  

53. Shri  Salve,  learned  senior  counsel  appearing  for  respondent  No.  9,  

pointed out that Tata Teleservices had sent an application through fax for grant  

of  GSM for  the  existing licences  which were  issued  on 19.10.2007 and no  

exception can be taken to this because Reliance Telecom, which had applied for  

GSM on 6.2.2006, was given the benefit of migration to dual technology on  

18.10.2007, i.e. even before the policy was made public. Learned senior counsel  

argued  that  the  decision  not  to  auction  UAS  Licences  was  based  on  the  

recommendations  of  TRAI  and  as  the  petitioners  have  not  challenged  the  

recommendations for two years, the exercise undertaken by the DoT for grant  

of UAS Licences in 2008 and subsequent allotment of spectrum should not be

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nullified.  Shri  Salve  argued  that  the  question  of  institutional  integrity  is  

involved in the matter and if the Court comes to the conclusion that auction is  

the  only  method  for  grant  of  licences  and  allocation  of  spectrum  then  

everything  should  be  annulled  right  from  2001.  Learned  senior  counsel  

submitted that multi-stage bidding was done only for the purpose of entry of 4 th  

cellular operator but, thereafter, no auction was held. He submitted that if the  

spectrum was allotted free of charge till 2007, there could be no justification for  

auction of licences or spectrum in 2007.

54. Shri C.A. Sundaram, learned counsel  appearing for respondent  Nos.  2  

and 4, heavily relied on paragraphs 7.2, 7.4, 7.12, 7.29, 7.30, 7.37 and 7.39 of  

TRAI’s  recommendations  dated  27.10.2003  and  argued  that  the  

recommendations  made  in  2007 were nothing but  a  continuation of  the  old  

policy and, therefore,  the petitioners are not entitled to question the method  

adopted  for  grant  of  UAS Licences  pursuant  to  the 2007 recommendations.  

Learned senior counsel submitted that the policy for grant of UAS Licences and  

allocation of spectrum cannot be said to be  per se arbitrary because the same  

was  decided  after  great  deliberations  and  consideration  of  international  

practices.  He  also  relied  upon  the  speech  made  by  the  Prime  Minister  on  

2.11.2007 and submitted  that  the action of  the DoT should  not  be nullified

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because  that  will  have  a  far-reaching  adverse  impact  on  the  availability  of  

telecommunication services in the country.

55. Shri Vikas Singh, learned senior counsel appearing for respondent no. 10,  

argued that the recommendations made by TRAI in 2007, which were approved  

by the Minister of C&IT are in national interest because the same would attract  

investment by foreign players and would benefit the people at large. Learned  

counsel emphasised that his client has already invested Rs. 6,000 crores and it  

would be totally unjust if the licence granted in 2008 is cancelled. Shri Vikas  

Singh also submitted that after the grant of licences and allocation of spectrum  

the people have been hugely benefited inasmuch as the telecom services have  

become competitive with the international market and even cheaper than that.

56. Shri C. S. Vaidyanathan, learned senior counsel appearing for respondent  

No. 8, argued that the application made by his client was pending since June,  

2006 and its priority was pushed down due to the application of the distorted  

version of the first-come-first-served policy. Shri Vaidyanathan pointed out that  

when the Minister of C&IT announced that applications will not be received  

after 1.10.2007, there was a huge rush of applications and a large number of  

players who had no experience in the field of telecom made applications and  

got the licences.

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57. Dr.  Abhishek  Manu  Singhvi,  learned  senior  counsel  appearing  for  

respondent nos. 11 and 12, argued that his clients had made applications much  

prior to 2007 but they were unfairly clubbed with those who had applied in  

2007 and in this manner  the principle of equality was violated. Dr. Singhvi  

submitted that if the applications made prior to 2007 had been processed as per  

the existing policy, respondent Nos. 11 and 12 would have received licences  

bundled with spectrum without competition/objection from anyone.  

58. Shri Dayan Krishnan, learned counsel for respondent No. 6, adopted the  

arguments of other learned counsel and submitted that the licences granted in  

2007 should not be quashed at this belated stage.

59. Shri  Rakesh  Dwivedi,  learned  senior  counsel  for  TRAI,  referred  to  

TRAI’s written submissions to justify why it had not recommended auction of  

licences. Learned senior counsel extensively referred to the recommendations  

made  by  TRAI in  2007 and submitted  that  even though it  was  specifically  

suggested that the DoT should take a comprehensive decision on the allocation  

of spectrum, no effort was made in that direction and the licences were granted  

without determining availability of spectrum. Shri Dwivedi also submitted that  

TRAI  has  already  initiated  action  for  cancellation  of  licences  of  those

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respondents who have violated the terms of licence and/or failed to fulfil roll-

out obligations.  

60. Learned  counsel  for  both  the  sides  relied  upon  a  large  number  of  

decisions. Shri Prashant Bhushan and Dr. Subramanian Swamy relied upon the  

following judgements: K. Manjusree v. State of Andhra Pradesh (2008) 3 SCC  

512, Monarch  Infrastructure (P) Ltd. v. Commissioner, Ulhasnagar Municipal  

Corpn. (2000) 5 SCC 287,  Home Communication Ltd. and Anr. v. Union of  

India  and  Ors.  52  (1993)  DLT 168,  Jamshed  Hormusji  Wadia  v.  Board  of  

Trustees,  Port  of  Mumbai  (2004)  3 SCC 214,  Chaitanya Kumar  v.  State  of  

Karnataka (1986) 2 SCC 594, Shivsagar Tiwari v. Union of India, (1996) 6  

SCC  558,  Common  Cause,  A  Registered  Society  (Petrol  pumps  matter)  v.  

Union of India (1996) 6 SCC 530 and Nagar Nigam v. Al Faheem Meat Exports  

(P) Ltd. (2006) 13 SCC 382. Learned Attorney General and learned counsel  

appearing  for  the  private  respondents  relied  upon  Delhi  Science  Forum  v.  

Union of India (1996) 2 SCC 405, BALCO Employees’ Union (Regd.) v. Union  

of India (2002) 2 SCC 333, Villianur Iyarkkai Padukappu Maiyam v. Union of  

India  (2009)  7  SCC 561,  Ministry  of  Labour  and  Rehabilitation  v.  Tiffin’s  

Barytes  Asbestos  &  Paints  Ltd.  (1985)  3  SCC  594,  United  India  Fire  and  

General Insurance Co. Ltd. v. K.S. Vishwanathan (1985) 3 SCC 686, State of  

T.N. v. M.N. Sundararajan (1980) 4 SCC 592, Sunil Pannalal Banthia v. City &

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Industrial Development Corporation of Maharashtra Ltd. (2007) 10 SCC 674,  

Bombay Dyeing & Mfg. Co. Ltd. (3) v. Bombay Environmental Action Group  

(2006) 3 SCC 434, Prem Chand Somchand Shah v. Union of India (1991) 2  

SCC 48 and Sanjeev Coke Mfg. Co. v. Bharat Coking Coal Ltd. (1983) 1 SCC  

147.

61. Before dealing with the arguments of the learned counsel for the parties  

and adverting to some of the precedents, we consider it necessary to mention  

that during the course of hearing, Shri Prashant Bhushan and Dr. Subramanian  

Swamy heavily relied upon the CAG report as also the One-Man Committee  

Report.  Learned Attorney  General  and learned senior  counsel  appearing for  

some  of  the  private  respondents  also  referred  to  the  One-Man  Committee  

Report. However, as the CAG report is being examined by the Public Accounts  

Committee  and  Joint  Parliamentary  Committee  of  Parliament  we  do  not  

consider it  proper to refer to the findings and conclusions contained therein.  

Likewise, we do not consider it necessary to advert to the observations made,  

and the suggestions given by the One-Man Committee because the Government  

of India has already taken a decision to segregate spectrum from licence and  

allot the same by auction.  This is evident from the following extracts of the  

press statement dated 29.1.2011 issued by the present Minister of C&IT:

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“In future, the spectrum will not be bundled with licence. The licence  to be issued to telecom operators will  be in the nature of ‘unified  licence’  and  the  licence  holder  will  be  free  to  offer  any  of  the  multifarious telecom services. In the event the licence holder would  like to offer wireless services, it will have to obtain spectrum through  a  market  driven  process.  In  future,  there  will  be  no  concept  of  contracted spectrum and, therefore, no concept of initial or start-up  spectrum.  Spectrum  will  be  made  available  only  through  market  driven process.  

While moving towards a new policy dispensation, it is necessary to  ensure  a  level  playing  field  between  all  players.  Hence  going  forward,  any  new policy  of  pricing  would  need  to  be  applied  to  equally  to  all  players.  Additionally,  assignment  of  balance  of  contracted  spectrum  may  need  to  be  ensured  for  the  existing  licensees who have so far been allocated only the start up spectrum  of 4.4 MHz. It  may be recalled that showcause notices have been  issued to certain licensees for cancellation.  Only in respect  of the  licences that will be found valid after the process is completed, the  additional 1.8 MHz will be assigned on their becoming eligible, but  the spectrum will be assigned to them at a price determined under the  new policy.  

We need to seriously consider the adoption of an auction process for  allocation and pricing of spectrum beyond 6.2 MHz while ensuring  that there is adequate competition in the auction process.

TRAI had made recommendations in May 2010 and indicated that it  would  apprise  the  Government  of  the  findings  of  a  study  on  the  question  of  pricing  of  2G  spectrum  in  future.  This  is  expected  shortly. We would examine their recommendations speedily as soon  as they are received, keeping the perspectives that I have outlined,  while finalizing our new policy. I am confident that we will be able  to design a policy that ensures that existing licence holders get the  spectrum  they  need  and  are  entitled  to,  while  simultaneously,  ensuring that the Government also receives revenues commensurate  with the current market value of spectrum.”

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62. We  shall  now  consider  the  questions  enumerated  in  the  opening  

paragraph of the judgment.  

63. Question No.1:   

At the outset,  we consider it  proper to observe that even though  there is no  

universally  accepted  definition  of  natural  resources,  they are  generally  

understood  as  elements  having  intrinsic  utility  to  mankind.  They  may  be  

renewable or non renewable. They are thought of as the individual elements of  

the natural environment that provide economic and social services to human  

society  and  are  considered  valuable  in  their  relatively  unmodified,  natural,  

form.  A natural resource’s value rests in the amount of the material available  

and the demand for it. The latter is determined by its usefulness to production.  

Natural  resources  belong to  the  people  but  the  State  legally  owns  them on  

behalf of its people and from that point of view natural resources are considered  

as national  assets,  more so because  the State  benefits  immensely from their  

value.  The State is empowered to distribute natural resources.  However, as  

they  constitute  public  property/national  asset,  while  distributing  natural  

resources, the State is bound to act in consonance with the principles of equality  

and public trust and ensure that no action is taken which may be detrimental to  

public interest.  Like any other State action, constitutionalism must be reflected

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at every stage of the distribution of natural resources.    In Article 39(b) of the  

Constitution it has been provided that the ownership and control of the material  

resources of the community should be so distributed so as to best sub-serve the  

common good, but no comprehensive legislation has been enacted to generally  

define  natural  resources  and  a  framework  for  their  protection.  Of  course,  

environment  laws  enacted  by  Parliament  and  State  legislatures  deal  with  

specific natural resources, i.e., Forest, Air, Water, Costal Zones, etc.

64. The  ownership  regime  relating  to  natural  resources  can  also  be  

ascertained  from international  conventions  and  customary  international  law,  

common law and national constitutions. In international law, it rests upon the  

concept  of  sovereignty  and  seeks  to  respect  the  principle  of  permanent  

sovereignty (of peoples and nations) over (their) natural resources as asserted in  

the 17th Session of the United Nations General Assembly and then affirmed as a  

customary international norm by the International Court of Justice in the case of  

Democratic Republic of Congo v. Uganda. Common Law recognizes States as  

having the authority to protect  natural resources insofar  as the resources are  

within  the  interests  of  the  general  public.  The  State  is  deemed  to  have  a  

proprietary interest in natural resources and must act as guardian and trustee in  

relation  to  the  same.  Constitutions  across  the  world  focus  on  establishing  

natural  resources  as  owned by,  and for  the benefit  of,  the country.  In most

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instances  where  constitutions  specifically  address  ownership  of  natural  

resources,  the  Sovereign  State,  or,  as  it  is  more  commonly  expressed,  ‘the  

people’, is designated as the owner of the natural resource.   

65. Spectrum  has  been  internationally  accepted  as  a  scarce,  finite  and  

renewable  natural  resource  which  is  susceptible  to  degradation  in  case  of  

inefficient utilisation.  It has a high economic value in the light of the demand  

for it on account of the tremendous growth in the telecom sector.  Although it  

does not belong to a particular State, right of use has been granted to States as  

per international norms.   

66. In India, the Courts have given an expansive interpretation to the concept  

of natural resources and have from time to time issued directions, by relying  

upon  the  provisions  contained  in  Articles  38,  39,  48,  48A and  51A(g),  for  

protection  and  proper  allocation/distribution  of  natural  resources  and  have  

repeatedly insisted on compliance of the constitutional principles in the process  

of  distribution,  transfer  and  alienation  to  private  persons.   The  doctrine  of  

public trust, which was evolved in Illinois Central Railroad Co. v. People of the  

State of Illinois 146 U.S. 387 (1892), has been held by this Court to be a part of  

the Indian jurisprudence in M.C. Mehta v. Kamal Nath (1997) 1 SCC 388 and  

has  been applied  in  Jamshed  Hormusji  Wadia  v.  Board  of  Trustee,  Port  of

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Mumbai  (2002)  3 SCC 214,  Intellectuals  Forum,  Tirupathi  v.  State  of  A.P.  

(2006) 3 SCC 549 and Fomento Resorts and Hotels Limited v. Minguel Martins  

(2009) 3 SCC 571.  In Jamshed Hormusji Wadia’s case, this Court held that the  

State’s actions and the actions of its agencies/instrumentalities must be for the  

public  good,  achieving  the  objects  for  which  they  exist  and  should  not  be  

arbitrary  or  capricious.  In  the  field  of  contracts,  the  State  and  its  

instrumentalities should design their activities in a manner which would ensure  

competition and non-discrimination.  They can augment their resources but the  

object should be to serve the public cause and to do public good by resorting to  

fair and reasonable methods.  In  Fomento Resorts and Hotels Limited case, the  

Court  referred to the article of Prof.  Joseph L. Sax and made the following  

observations:  

“53. The public trust doctrine enjoins upon the Government to protect  the resources for the enjoyment of the general public rather than to  permit their use for private ownership or commercial purposes. This  doctrine puts an implicit embargo on the right of the State to transfer  public  properties  to  private  party  if  such  transfer  affects  public  interest, mandates affirmative State action for effective management  of natural resources and empowers the citizens to question ineffective  management thereof.

54. The heart of the public trust doctrine is that it imposes limits and  obligations  upon  government  agencies  and  their  administrators  on  behalf  of  all  the  people  and  especially  future  generations.  For  example,  renewable  and  non-renewable  resources,  associated  uses,  ecological values or objects in which the public has a special interest  (i.e. public lands, waters, etc.) are held subject to the duty of the State

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not to impair such resources, uses or values, even if private interests  are  involved.  The  same  obligations  apply  to  managers  of  forests,  monuments,  parks,  the  public  domain  and  other  public  assets.  Professor  Joseph  L.  Sax  in  his  classic  article,  “The  Public  Trust  Doctrine in Natural Resources Law: Effective Judicial Intervention”  (1970), indicates that the public trust doctrine, of all concepts known  to law, constitutes the best  practical and philosophical  premise and  legal tool for protecting public rights and for protecting and managing  resources, ecological values or objects held in trust.

55. The public trust doctrine is a tool for exerting long-established  public  rights  over short-term public  rights  and private  gain.  Today  every person exercising his or her right to use the air, water, or land  and associated natural ecosystems has the obligation to secure for the  rest  of  us  the right  to  live or  otherwise  use  that  same resource or  property for the long-term and enjoyment by future generations. To  say it another way, a landowner or lessee and a water right holder has  an obligation to use such resources in a manner as not to impair or  diminish the people’s rights and the people’s long-term interest in that  property  or  resource,  including  down  slope  lands,  waters  and  resources.”

67. In Secretary, Ministry of Information & Broadcasting, Govt. of India v.  

Cricket Assn. of Bengal, (1995) 2 SCC 161, the Court was dealing with the  

right of organizers of an event, such as a sport tournament, to its live audio-

visual  broadcast,  universally,  through an agency of  their  choice,  national  or  

foreign. In paragraph 78, the Court described the airwaves/frequencies as public  

property in the following words:  

“There is no doubt that since the airwaves/frequencies are a public  property and are also limited, they have to be used in the best interest  of the society and this can be done either by a central authority by  establishing its own broadcasting network or regulating the grant of  licences to other agencies, including the private agencies.”

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68. In Reliance Natural Resources Limited v. Reliance Industries Limited,  

(2010) 7 SCC 1, P. Sathasivam J., with whom Balakrishnan, C.J., agreed, made  

the following observations:

“It must be noted that the constitutional mandate is that the natural  resources belong to the people of this country. The nature of the word  “vest” must be seen in the context of the public trust doctrine (PTD).  Even  though  this  doctrine  has  been  applied  in  cases  dealing  with  environmental jurisprudence, it has its broader application.”

The Learned Judge then referred to the judgments, In re Special Reference No.  

1 of 2001 (2004) 4 SCC 489, M.C. Mehta v. Kamal Nath (1997) 1 SCC 388 and  

observed:

“This  doctrine  is  part  of  Indian  law  and  finds  application  in  the  present case as well. It is thus the duty of the Government to provide  complete protection to the natural resources as a trustee of the people  at large.”

The Court also held that natural resources are vested with the Government as a  

matter of trust in the name of the people of India, thus it is the solemn duty of  

the State to protect the national interest and natural resources must always be  

used in the interests of the country and not private interests.  

69. As natural resources are public goods,  the doctrine of equality,  which  

emerges  from the  concepts  of  justice  and  fairness,  must  guide  the  State  in  

determining the actual mechanism for distribution of natural resources. In this

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regard, the doctrine of equality has two aspects: first, it regulates the rights and  

obligations of the State vis-à-vis its  people and demands that  the people be  

granted equitable access to natural resources and/or its products and that they  

are  adequately  compensated  for  the  transfer  of  the  resource  to  the  private  

domain; and second, it regulates the rights and obligations of the State vis-à-vis  

private  parties  seeking  to  acquire/use  the  resource  and  demands  that  the  

procedure adopted for distribution is just, non-arbitrary and transparent and that  

it does not discriminate between similarly placed private parties.

70. In Akhil Bharatiya Upbhokta Congress v. State of M.P. (2011) 5 SCC 29,  

this  Court  examined  the  legality  of  the  action  taken by the  Government  of  

Madhya Pradesh to allot 20 acres land to an institute established in the name of  

Kushabhau Thakre on the basis of an application made by the Trust.  One of the  

grounds on which the appellant challenged the allotment of land was that the  

State  Government  had  not  adopted  any  rational  method  consistent  with  the  

doctrine  of  equality.   The  High  Court  negatived  the  appellant’s  challenge.  

Before this Court,  learned senior counsel appearing for  the State relied upon  

the judgments in Ugar Sugar Works Ltd. v. Delhi Administration (2001) 3 SCC  

635, State of U.P. v. Choudhary Rambeer Singh (2008) 5 SCC 550, State of  

Orissa  v.  Gopinath  Dash  (2005)  13  SCC  495  and  Meerut  Development

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Authority v. Association of Management Studies (2009) 6 SCC 171 and argued  

that the Court cannot exercise the power of judicial review to nullify the policy  

framed by the State  Government  to  allot  Nazul  land without  advertisement.  

This  Court  rejected  the  argument,  referred  to  the  judgments  in  Ramanna  

Dayaram Shetty v. International Airport Authority of India (1979) 3 SCC 489,  

S.G.  Jaisinghani  v.  Union of  India  AIR 1967 SC 1427,  Kasturilal  Lakshmi  

Reddy v. State of J & K (1980) 4 SCC 1, Common Cause v. Union of India  

(supra),  Shrilekha  Vidyarthy  v.  State  of  U.P.  (1991)  1  SCC  212,  LIC  v.  

Consumer Education and Research Centre (1995) 5 SCC 482, New India Public  

School v. HUDA (1996) 5 SCC 510 and held:

“What  needs  to  be  emphasised  is  that  the  State  and/or  its  agencies/instrumentalities  cannot  give  largesse  to  any  person  according  to  the  sweet  will  and  whims  of  the  political  entities  and/or  officers  of  the  State.  Every  action/decision  of  the  State  and/or  its  agencies/instrumentalities  to  give  largesse  or  confer  benefit must be founded on a sound, transparent, discernible and  well-defined policy, which shall be made known to the public by  publication in the Official Gazette and other recognised modes of  publicity  and  such  policy  must  be  implemented/executed  by  adopting  a  non-discriminatory  and  non-arbitrary  method  irrespective  of  the  class  or  category  of  persons  proposed  to  be  benefited by the policy. The distribution of largesse like allotment  of land, grant of quota, permit  licence, etc. by the State and its  agencies/instrumentalities  should  always  be  done  in  a  fair  and  equitable manner and the element of favouritism or nepotism shall  not influence the exercise of discretion, if any, conferred upon the  particular functionary or officer of the State.”

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71. In Sachidanand Pandey v. State of West Bengal (1987) 2 SCC 295,  

the  Court  referred  to  some  of  the  precedents  and  laid  down  the  following  

propositions:

“State-owned or public-owned property is not to be dealt with at  the  absolute  discretion  of  the  executive.  Certain  precepts  and  principles have to be observed.  Public interest  is  the paramount  consideration. One of the methods of securing the public interest,  when it is considered necessary to dispose of a property, is to sell  the property by public auction or by inviting tenders. Though that  is  the  ordinary  rule,  it  is  not  an  invariable  rule.  There  may  be  situations  where  there  are  compelling  reasons  necessitating  departure from the rule but then the reasons for the departure must  be  rational  and  should  not  be  suggestive  of  discrimination.  Appearance  of  public  justice  is  as  important  as  doing  justice.  Nothing  should  be  done  which  gives  an  appearance  of  bias,  jobbery or nepotism.”

72. In conclusion, we hold that the State is the legal owner of the natural  

resources as a trustee of the people and although it is empowered to distribute  

the  same,  the  process  of  distribution  must  be  guided  by  the  constitutional  

principles including the doctrine of equality and larger public good.

73. Question No.2:  

Although,  while  making  recommendations  on  28.8.2007,  TRAI  itself  had  

recognised that spectrum was a scarce commodity, it made recommendation for  

allocation of 2G spectrum on the basis of 2001 price by invoking the theory of  

level playing field.  Paragraph 2.40 of the recommendations dated 28.8.2007

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shows that  as  per  TRAI’s  own assessment  the  existing  system of  spectrum  

allocation criteria, pricing methodology and the management system suffered  

from number of deficiencies and there was an urgent need to address the issues  

linked  with  spectrum efficiency  and  its  management  and  yet  it  decided  to  

recommend the allocation of spectrum at the price determined in 2001.  All this  

was done in the name of growth, affordability, penetration of wireless services  

in  semi  urban  and  rural  areas,  etc.   Unfortunately,  while  doing  so,  TRAI  

completely overlooked that one of the main objectives of NTP 1999 was that  

spectrum should be utilised efficiently, economically, rationally and optimally  

and there should be a transparent process of allocation of frequency spectrum as  

also the fact that in terms of the decision taken by the Council of Ministers in  

2003 to approve the recommendations of the Group of Ministers, the DoT and  

Ministry of Finance were required to discuss and finalise the spectrum pricing  

formula.  To say the least, the entire approach adopted by TRAI was lopsided  

and  contrary  to  the  decision  taken  by  the  Council  of  Ministers  and  its  

recommendations  became  a  handle  for  the  then  Minister  of  C&IT  and  the  

officers of the DoT who virtually gifted away the important national asset at  

throw  away  prices  by  willfully  ignoring  the  concerns  raised  from  various  

quarters including the Prime Minister, Ministry of Finance and also some of its  

own officers.  This becomes clear from the fact that soon after obtaining the

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licences, some of the beneficiaries off-loaded their stakes to others, in the name  

of  transfer  of  equity or  infusion of  fresh capital  by  foreign companies,  and  

thereby made huge profits.  We have no doubt that if the method of auction had  

been adopted for grant of licence which could be the only rational transparent  

method for distribution of national wealth, the nation would have been enriched  

by many thousand crores.  

74. While it  cannot be denied that TRAI is an expert body assigned with  

important  functions  under  the  1997  Act,  it  cannot  make  recommendations  

overlooking the basic constitutional postulates and established principles and  

thereby deny people from participating in the distribution of national wealth and  

benefit  a  handful  of  persons.   Therefore,  even though the scope  of  judicial  

review in such matters is extremely limited,  as pointed out in Delhi Science  

Forum v. Union of India (supra) and a large number of other judgments relied  

upon by the learned counsel  of  the respondents,   keeping in view the facts  

which have been brought to the notice of the Court that the mechanism evolved  

by TRAI for allocation of spectrum and the methodology adopted by the then  

Minister of C&IT  and the officers of DoT for grant of UAS Licences may have  

caused huge loss to the nation, we have no hesitation to record a finding that the  

recommendations  made  by  TRAI  were  flawed  in  many  respects  and

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implementation thereof by the DoT resulted in gross violation of the objective  

of NPT 1999 and the decision taken by the Council of Ministers on 31.10.2003.

75. We may also mention that  even though in its  recommendations  dated  

28.8.2007, TRAI had not specifically recommended that entry fee be fixed at  

2001  rates,  but  paragraph  2.73  and  other  related  paragraphs  of  its  

recommendations state that it has decided not to recommend the standard option  

for pricing of spectrum in 2G bands keeping in view the level playing field for  

the new entrants. It is impossible to approve the decision taken by the DoT to  

act upon those recommendations.  We also consider it necessary to observe that  

in today’s dynamism and unprecedented growth of telecom sector, the entry fee  

determined  in  2001  ought  to  have  been  treated  by  the  TRAI  as  wholly  

unrealistic for grant of licence along with start up spectrum.  In our view, the  

recommendations made by TRAI in this regard were contrary to the decision of  

the Council of Ministers that the DoT shall discuss the issue of spectrum pricing  

with the Ministry of Finance along with the issue of incentive for efficient use  

of spectrum as well as disincentive for sub-optimal usages.  Being an expert  

body, it was incumbent upon the TRAI to make suitable recommendations even  

for the 2G bands especially in light of the deficiencies of the present system  

which it had itself pointed out. We do not find merit in the reasoning of TRAI

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that the consideration of maintaining a level playing field prevented a realistic  

reassessment of the entry fee.

76. Question Nos.3 and 4:

There is a fundamental flaw in the first-come-first-served policy inasmuch as it  

involves an element of pure chance or accident.  In matters involving award of  

contracts or grant of licence or permission to use public property, the invocation  

of first-come-first-served policy has inherently dangerous implications.   Any  

person who has access to the power corridor at the highest or the lowest level  

may be able to obtain information from the Government files or the files of the  

agency/instrumentality of the State that a particular public property or asset is  

likely to be disposed of or a contract is likely to be awarded or a licence or  

permission is likely to be given, he would immediately make an application and  

would become entitled to stand first in the queue at the cost of all others who  

may  have  a  better  claim.   This  Court  has  repeatedly  held  that  wherever  a  

contract is to be awarded or a licence is to be given, the public authority must  

adopt a transparent and fair method for making selections so that all eligible  

persons get a fair opportunity of competition. To put it differently, the State and  

its agencies/instrumentalities must always adopt a rational method for disposal  

of public property and no attempt should be made to scuttle the claim of worthy

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applicants.   When  it  comes  to  alienation  of  scarce  natural  resources  like  

spectrum etc., it is the burden of the State to ensure that a non-discriminatory  

method  is  adopted  for  distribution  and  alienation,  which  would  necessarily  

result in protection of national/public interest.  In our view, a duly publicised  

auction  conducted  fairly  and  impartially  is  perhaps  the  best  method  for  

discharging this burden and the methods like first-come-first-served when used  

for alienation of natural resources/public property are likely to be misused by  

unscrupulous people who are only interested in garnering maximum financial  

benefit and have no respect for the constitutional ethos and values.  In other  

words, while transferring or alienating the natural resources, the State is duty  

bound  to  adopt  the  method  of  auction  by  giving wide  publicity  so  that  all  

eligible persons can participate in the process.

77. The exercise undertaken by the officers of the DoT between September,  

2007 and March 2008, under the leadership of the then Minister of C&IT was  

wholly arbitrary,  capricious and contrary to public interest  apart  from being  

violative of the doctrine of equality.  The material produced before the Court  

shows that the Minister of C&IT wanted to favour some companies at the cost  

of the Public Exchequer and for this purpose, he took the following steps:

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(i) Soon after his appointment as Minister of C&IT, he directed that  

all  the applications received for grant of UAS Licence should be kept  

pending till the receipt of TRAI recommendations.

(ii) The  recommendations  made  by  TRAI  on  28.8.2007  were  not  

placed before the full Telecom Commission which, among others, would  

have included the Finance Secretary.  The notice of the meeting of the  

Telecom  Commission  was  not  given  to  any  of  the  non  permanent  

members despite the fact that the recommendations made by TRAI for  

allocation of spectrum in 2G bands had serious financial  implications.  

This has been established from the pleadings and the records produced  

before this Court which show that after issue of licences, 3 applicants  

transferred their equities for a total sum of Rs.24,493 crores in favour of  

foreign companies.  Therefore, it was absolutely necessary for the DoT to  

take the opinion of the Finance Ministry as per the requirement of the  

Government of India (Transaction of Business) Rules, 1961.  

(iii) The officers of the DoT who attended the meeting of the Telecom  

Commission held on 10.10.2007 hardly had any choice but to approve  

the  recommendations  made  by TRAI.   If  they  had not  done so,  they  

would have incurred the wrath of the Minister of C&IT.

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(iv) In  view  of  the  approval  by  the  Council  of  Ministers  of  the  

recommendations made by the Group of Ministers in 2003, the DoT had  

to discuss the issue of spectrum pricing with the Ministry of Finance.  

Therefore, the DoT was under an obligation to involve the Ministry of  

Finance before any decision could be taken in the context of paragraphs  

2.78 and 2.79 of TRAI’s recommendations.  However, as the Minister of  

C&IT was very much conscious of the fact that the Secretary, Finance,  

had objected to the allocation of 2G spectrum at the rates fixed in 2001,  

he did not consult  the Finance Minister  or the officers  of the Finance  

Ministry.

(v) The Minister of C&IT brushed aside the suggestion made by the  

Minister of Law and Justice for placing the matter before the Empowered  

Group of Ministers.  Not only this, within few hours of the receipt of the  

suggestion made by the Prime Minister in his letter dated 2.11.2007 that  

keeping in view the inadequacy of spectrum, transparency and fairness  

should be maintained in the matter of allocation thereof, the Minister of  

C&IT rejected the same by saying that it will be unfair, discriminatory,  

arbitrary  and  capricious  to  auction  the  spectrum  to  new  applicants  

because it will not give them level playing field.  

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(vi) The  Minister  C&IT  introduced  cut  off  date  as  25.9.2007  for  

consideration of the applications received for grant of licence despite the  

fact that only one day prior to this, press release was issued by the DoT  

fixing 1.10.2007 as the last  date  for  receipt  of  the applications.   This  

arbitrary action of the Minister of C&IT though appears to be innocuous,  

actually benefitted some of the real estate companies who did not have  

any  experience  in  dealing  with  telecom  services  and  who  had  made  

applications only on 24.9.2007, i.e., one day before the cut off date fixed  

by the Minister of C&IT on his own.

(vii) The cut off date, i.e. 25.9.2007 decided by the Minister of C&IT  

on 2.11.2007 was not made public till 10.1.2008 and the first-come-first-

served policy, which was being followed since 2003 was changed by him  

on 7.1.2008 and was incorporated in press release dated 10.1.2008.  This  

enabled some of the applicants, who had access either to the Minister or  

the officers of the DoT to get the demand drafts,  bank guarantee, etc.  

prepared in advance for compliance of conditions of the LoIs, which was  

the  basis  for  determination  of  seniority  for  grant  of  licences  and  

allocation of spectrum.

(viii) The  meeting  of  the  full  Telecom  Commission,  which  was  

scheduled to be held on 9.1.2008 to consider issues relating to grant of

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licences and pricing of spectrum was deliberately postponed on 7.1.2008  

so that the Secretary, Finance and Secretaries of three other important  

Departments may not be able to raise objections against the procedure  

devised by the DoT for grant of licence and allocation of spectrum by  

applying the principle of level playing field.

(ix) The  manner  in  which  the  exercise  for  grant  of  LoIs  to  the  

applicants  was conducted on 10.1.2008 leaves no room for doubt that  

every thing was stage managed to favour those who were able to know in  

advance the change in the implementation of the first-come-first served  

policy.  As a result of this, some of the companies which had submitted  

applications in 2004 or 2006 were pushed down in the priority and those  

who  had  applied  between  August  and  September  2007  succeeded  in  

getting  higher  seniority  entitling  them  to  allocation  of  spectrum  on  

priority basis.

78. The argument of Shri Harish Salve, learned senior counsel,  that if the  

Court finds that the exercise undertaken for grant of UAS Licences has resulted  

in  violation  of  the  institutional  integrity,  then all  the  licences  granted  2001  

onwards should be cancelled does not deserve acceptance because those who  

have got licence between 2001 and 24.9.2007 are not parties to these petitions

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and legality of the licences granted to them has not been questioned before this  

Court.

79. In majority of judgments relied upon by learned Attorney General and  

learned counsel for the respondents, it has been held that the power of judicial  

review should be exercised with great care and circumspection and the Court  

should not ordinarily interfere with the policy decisions of the Government in  

financial  matters.  There cannot  be any quarrel  with the proposition  that  the  

Court cannot substitute its opinion for the one formed by the experts in the  

particular field and due respect should be given to the wisdom of those who are  

entrusted with the task of framing the policies.  We are also conscious of the  

fact  that  the Court  should not  interfere  with the fiscal  policies of the State.  

However, when it is clearly demonstrated that the policy framed by the State or  

its  agency/instrumentality  and/or  its  implementation  is  contrary  to  public  

interest or is violative of the constitutional principles, it is the duty of the Court  

to exercise its jurisdiction in larger public interest and reject the stock plea of  

the State that the scope of judicial review should not be exceeded beyond the  

recognised parameters.  When matters like these are brought before the judicial  

constituent of the State by public spirited citizens, it becomes the duty of the  

Court  to  exercise  its  power  in  larger  public  interest  and  ensure  that  the  

institutional integrity is not compromised by those in whom the people have

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reposed trust and who have taken an oath to discharge duties in accordance with  

the Constitution and the law without fear or favour, affection or ill will and  

who, as any other citizen, enjoy fundamental rights and, at the same time, are  

bound  to  perform  the  duties  enumerated  in  Article  51A.  Reference  in  this  

connection can usefully  be made to  the judgment  of  the three Judge Bench  

headed by Chief Justice Kapadia in Centre for P.I.L. v. Union of India (2011) 4  

SCC 1.  

80. Before concluding, we consider it imperative to observe that but for the  

vigilance of some enlightened citizens who held important constitutional and  

other positions and discharged their duties in larger public interest  and Non  

Governmental  Organisations  who  have  been  constantly  fighting  for  clean  

governance and accountability of the constitutional institutions,  unsuspecting  

citizens  and  the  Nation  would  never  have  known  how  the  scarce  natural  

resource spared by the Army has been grabbed by those who enjoy money  

power and who have been able to manipulate the system.   

81. In the result, the writ petitions are allowed in the following terms:

(i) The licences  granted to  the private  respondents  on  or  after  10.1.2008  

pursuant to two press releases issued on 10.1.2008 and subsequent allocation of  

spectrum to the licensees are declared illegal and are quashed.

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(ii) The above direction shall become operative after four months.

(iii) Keeping in view the decision taken by the Central Government in 2011,  

TRAI shall make fresh recommendations for grant of licence and allocation of  

spectrum in 2G band in 22 Service Areas by auction, as was done for allocation  

of spectrum in 3G band.

(iv) The Central Government shall  consider the recommendations of TRAI  

and  take  appropriate  decision  within  next  one  month  and  fresh  licences  be  

granted by auction.

(v) Respondent Nos.2, 3 and 9 who have been benefited at the cost of Public  

Exchequer by a wholly arbitrary and unconstitutional action taken by the DoT  

for grant of UAS Licences and allocation of spectrum in 2G band and who off-

loaded their stakes for many thousand crores in the name of fresh infusion of  

equity or transfer of equity shall pay cost of Rs.5 crores each.  Respondent Nos.  

4, 6, 7 and 10 shall pay cost of Rs.50 lakhs each because they too had been  

benefited by the wholly arbitrary and unconstitutional exercise undertaken by  

the DoT for grant of UAS Licences and allocation of spectrum in 2G band.  We  

have not imposed cost on the respondents who had submitted their applications  

in 2004 and 2006 and whose applications were kept pending till 2007.

(vi) Within four months, 50% of the cost shall be deposited with the Supreme  

Court Legal Services Committee for being used for providing legal aid to poor

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and indigent litigants.  The remaining 50% cost shall be deposited in the funds  

created for Resettlement and Welfare Schemes of the Ministry of Defence.

(vii) However, it is made clear that the observations made in this judgment  

shall  not,  in  any  manner,  affect  the  pending  investigation  by  the  CBI,  

Directorate of Enforcement and others agencies or cause prejudice to those who  

are  facing prosecution in  the cases  registered  by the CBI or  who may face  

prosecution on the basis of chargesheet(s) which may be filed by the CBI in  

future and the Special Judge, CBI shall decide the matter uninfluenced by this  

judgment.  We also make it  clear  that  this  judgment  shall  not  prejudice  any  

person in the action which may be taken by other investigating agencies under  

Income Tax Act, 1961, Prevention of Money Laundering Act, 2002 and other  

similar statutes.

……………………………….J.      (G.S. SINGHVI)

……………………………....J. (ASOK KUMAR GANGULY)

New Delhi; February 02, 2012.