Case: Centre for Public Interest Litigation Vs. Union of India &amp; Others

The petitioner herein, viz., Centre for Public Interest Litigation, is a society registered under the Societies Registration Act, 1860. It claims that the very purpose for which this society was established was to bring causes to the Superior Courts, which are of grave public importance, by way of public interest litigation in an organised manner. In the present writ petition filed under Article 32 of the Constitution of India, the petitioner challenges the decision of the Government of India, taken sometime in March 2013, allowing voice telephony to respondent No. 2 (Reliance Jio Infocomm Ltd.) on payment of Rs.1,658 crores entry fee. Allegation of the petitioner is that the aforesaid amount at which the license for voice telephony is granted to respondent No. 2 is a pittance inasmuch as in normal course grant of this license would have fetched a whopping sum of Rs.25000 crores approximately. This insinuation is based upon a draft report of the Comptroller and Auditor General of India (CAG) which report estimated the aforesaid license fee/entry fee. It is also alleged that respondent No. 1, while allowing voice telephony to respondent No. 2, has not revised the Spectrum Usage Charges (SUC) matching with the charges which are paid by other operators who bought voice telephony. It is stated in the petition that whereas the other operators pay 3% to 5% revenue annually depending upon quantum of the spectrum they hold, respondent No. 2 in contrast would be paying just 1% of the revenue. In this way, alleges the petitioner, an undue favour is given to respondent No. 2 by charging abysmally less entry fee and demanding much lesser SUC, thereby causing loss of revenue to the Government over 20 years license period. It has also resulted in disturbance in the level-playing field between respondent No. 2 vis-a-vis other operators. The petitioner has tried to project that unwarranted favouritism is shown to respondent No. 2 and the decision making process, in this behalf, was also not only faulty but in violation of accepted norms as well.The factual details leading to the aforesaid allegations are averred in the petition which can be summated in the following25.02.2010, the respondent No. 1 issued Notice Inviting Applications (NIA) for the auction3G: Three or 4 blocks each of 5+5 MHz spectrum for 3G services in 2.1 GHz band at a reserve price of Rs.3,500 crore for a Pan-India license,BWA (4G): Two blocks each of 20 MHz spectrum for BWA services in 2.3 GHz band at a reserve price of Rs.1,750 crore for a Pan-Indiarespect of BWA (4G), as per the NIA conditions, a bidder could be an existing ISP-A licensee or UAS licensee (or obtain any of these licenses later if successful in the bid), but it can provide only such services which are allowed under the license it chooses. For example, an ISP-A licensee cannot provide voice telephony. In this regard, reliance is placed on the following clause of the3.1.2: "Services can only be offered subject to the terms and conditions of the license obtained by the operator. Award of spectrum does not confer a right to provide any telecom services, and these are governed by the terms and conditions of the license obtained by theMay-June 2010 the auctions for 3G and BWA were concluded. The 3G auction fetched Rs.16,750.58 crore for 5+5 MHz spectrum in 2100 MHz (or 2.1 GHz) band. Thus, per MHz price worked out to be Rs.1,675 crore. This spectrum price bequeathed the rights to provide both data andafter the 3G auction, the BWA auction began which fetched Rs.12,847.77 crore for 20 MHz pan-India license in the 2300 MHz (or 2.3 GHz) band. This works out to be Rs.642.39 crore perBroadband Services Pvt. Ltd. (IBSPL) emerged as the only company to have acquired pan-India BWA spectrum. Five other companies viz. Bharti Airtel (4 Service Areas), Aircel (8 Sas), Qualcomm (4SAs), Tikona (5 Sas) and Augere (1 SA) shared the remaining other Pan India slot (22 Serve Areas) of BWA spectrum in the country.It is also averred that IBSPL had an ISP-A license since November 2007 and had just one subscriber with revenue of Rs.16.28 lakhs during 2009-10, and its authorized share capital was Rs.3 crore and the paid up capital was Rs.2.51 crore. Infotel Digicomm Pvt. Ltd. (IDPL) held 99.99% share of the IBSPL at the time of submission of application in March 2010 for the BWA auction.It is alleged in the petition that within hours of completion of BWA auction on 11.06.2010, IBSPL increased the authorised share capital from Rs.3 crore to Rs.6,000 crore. On 17.06.2010, the company authorised its Board of Directors to allot 475 crore equity share of Rs.10 each to Reliance Industries Ltd. (RIL) and 25 crore equity share of Rs.10 to Infotel Digicomm Pvt. Ltd. (IDPL) aggregating to the equity capital of Rs.5,000 crore. On the same day, the company also decided to change from a private company to Public Limited Company (Infotel Broadband Services Ltd). Thus, the company within a week of winning the BWA spectrum disposed off 95% shares to RIL while 5% was retained by IDPL. Much later in March 2013, the company was renamed as Reliance Jio Infocomm Pvt. Ltd. On that basis, some suspicion is nurtured as to how IBSPL acquired BWA spectrum and thereafter stakes in IBSPL came under the control of RIL. The said IBSPL is now known as Reliance Jio Infocomm Pvt. Ltd. However, we may like to add here itself that the auction of BWA in which IBSPL turned out to be successful bidder resulting into acquisition of Pan-India BWA spectrum in its favour is not the subject matter of dispute and was never questioned by anybody. This auction, as is clear from the above, was held way back in May-June, 2010. Though, there were other prominent companies of repute who participated in the said auction and shared the remaining other Pan-India slot (22 Serve Areas), no competitor of IBSPL challenged BWA auction. The subject matter of challenge in the instant writ petition is the conversion of BWA spectrum to Unified License (UL) i.e. migration of existing BWA spectrum to UL which has been done by respondent No.1.

Court's reasoning:
28. This submission lacks substance. During the course of arguments, the learned Solicitor General successfully demonstrated that what was auctioned in 2010 was spectrum, namely, 3G spectrum and BWA spectrum. Insofar as 3G spectrum auction is concerned, it was in blocks of 5 MHz i.e. each block of 2 x 5 MHz whereas BWA auction was in blocks of 20 MHz. The spectrum, therefore, was of different forms and thus, issuance of license would be different from spectrum. Moreover, NIA dated 25.02.2010 itself provided the eligibility conditions for an entity who could bid for BWA spectrum and further stipulation in this behalf was specifically stated aswe have already dealt with this aspect of the argument, we are addressing the issue now in the context of frontal attack made on the fixation of fee of Rs.1,658 crores which is charged from respondent no. 2 while allowing the migration from UAS to UL.In the first instances, we may observe that once the policy decision of the Government allowing migration from BWA spectrum to UL is found to be justified in the circumstances already noted above, the argument of the petitioner predicated on the judgment of this Court in 2G2 case does not hold good. Even otherwise the decision in the said case is based on altogether different backdrop. Judgment in the said case would reveal that in 2001, in order to increase competition from then existing two private players plus one PSU player per telecom circle, the Government introduced the 4th telecom operator in each circle. At this time, there was an auction conducted for grant of licenses and this license carried with it 4.4 + 4.4 MHz to start up spectrum and an assurance that further spectrum availability would be given to the licenses subject to availability (by 2010 the TRAI had suggested the grant of a minimum spectrum of 6.2 MHZ to each licensee as contracted spectrum). The Government had decided in 2001 when bids were invited for the 4th license that all future grants should be on market price. However, in a departure from this even in year 2007-08 the then Telecom Minister (following certain processes which was found to be flawed) invited applications for license based on a pre-determined license fee. This license fees was the same as the fee that was paid in 2001 by those who applied for the 4th telecom license. This Court found that the manner in which this decision had been arrived at was flawed and smacked of arbitrariness. It was also held that this spectrum is an extremely valuable natural resource and must only be made available at market price. The Court found that the license itself had no value, in that the real value was that of the spectrum.On the other hand, insofar as present case is concerned, auction of 3G spectrum as well as BWL spectrum held in 2010 was not challenged by anybody and no fault has even been found in the same. It is the spectrum which a vital resource and that was duly auctioned. The decision now taken, which is the subject matter of controversy in the present case, pertains to license, namely, switching over from UASL to UL, validity whereof has already beenBidders in the BWA Auction that currently hold an ISP-category B licence shall be required to migrate to an ISP-category A licence, by paying the applicable fees/charges for migration, before they are awarded the BWA Spectrum. The DoT guidelines stipulate that a UAS license or an ISP licence can only be awarded to an Indian Company. Hence, any foreign applicants will need to form, or acquire, an Indian company, to obtain a UAS licence or an ISP-category A licence. However, they are allowed to participate in the Auctions directly and apply for or acquire a licence subsequently through an Indian company, where they hold at least 26% equitycan only be offered subject to the terms and conditions of the licence obtained by the operator. Award of spectrum does not confer a right to provide any telecom services, and these are governed by the terms and conditions of the licence obtained by the operator.It becomes apparent from the above that the spectrum was different from license inasmuch as award of spectrum did not confer a right to provide any telecom services. Insofar as providing of telecom services are concerned, these were to be governed by the terms and conditions of the license obtained by the operator. The learned Solicitor General also handed over a comparative chart of varying points of view of the different Departments when the matter regarding migration from UASL to UL regime was being discussed and contemplated. A perusal thereof would show that there was a threadbare discussion on the issue wherein pros and cons of migration of telecom licenses to UL regime were discussed; various apprehensions expressed were considered; and ultimately consensus emerged for switching over to this regime. The discussion reveals that the Committee of the DoT in its comments proceeded on the premise that the BWA spectrum could not be used for any other purpose other than providing internet services. The other departments did not share this view. It was ultimately found that the view of the Committee was contrary to the plain language of the Notice Inviting Applications and specifically Q&R which was published by the DoT itself for the purpose of the auction. Difference of point of view of different departments shows the process of institutional decision making.The aforesaid discussion leads us to irresistible conclusion that decision of the Government permitting migration of telecom licenses to UL regime is valid, legal and without any blemish.Much is said on the veracity of CAG draft report by respondent no. 1 as well as respondent no. 2 in their attempt to show that the very basis of making calculation of alleged undue advantage of Rs.22,842 crores (in the draft report) or Rs.3,367.29 crores (in the final report). However, having regard to the aforesaid discussion, it may not be necessary to delve into this aspect in much greater details. It would be suffice to point out that the basic error committed by CAG was to compare 3G and BWA (4G) spectrum which mistake was realised in preparing the final report. It appears that these calculations are made by taking migration fee of Rs.1,658 crores which were prevalent in the year 2001 and on that basis it arrived at a figure of Rs.5025.29 crores which, according to CAG, should have been fixed. As respondent no. 2 paid a fee of Rs.1,658.57 crores, according to the CAG it has resulted in the loss of Rs.3,367.29 crores. However, the aforesaid assumption loses sight of the fundamental aspect, namely, in 2001 spectrum and license were unified which was not the position in the year 2010 when the two were segregated. It is stated at the cost of repetition that insofar as auction of BWA spectrum is concerned the same was auctioned at a price of Rs.12847.77 crores which is the most material aspect and has been totally glossed over. We, thus, do not find any error in the action of the Government in allowing the migration from UASL to UL by making respondent no. 2 to pay a sum of Rs.1,658 crores in this behalf.On going through the records, we find that the decision, namely, SUC be fixed at 1% AGR was based on relevant considerations. Not only TRAI had recommended the aforesaid charge to be fixed, there was an in depth examination of this recommendation of the TRAI by Government before accepting the same. Furthermore, it is also pertinent to note that on the basis of aforesaid decision, specific provisions were incorporated in the NIA for SUC for BWA spectrum.Apart from the above, there is one more reason not to interfere with the aforesaid stipulation of SUC. The Government has taken the position that the conditions in the license granted to respondent No. 2 empower the licenser/Government to change the terms of license and, therefore, whenever it is felt necessary and expedient in pubic interest, the percentage of SUC can be increased. However, the matter, for increase of SUC, was even examined after the recommendation of TRAI in the year 2013 that SUC be charged at an average rate instead of slab rate for various spectrum holdings as given in NIA of 2010 and subsequent NIAs of 2012 and January, 2013. The Telecom Commission considered this aspect and debated three options which could be considered for holders of BWA auction in the year 2010,be raised tobe kept at 1% and reported separately;for standalone BWA be kept at 1%, but if combined with spectrum bought in fresh auctions then the charge be the weighted average of acquired spectrum at 3% and BWA at 1%.Before taking a final decision as to which option be resorted to, the Telecom Commission recommended that a legal opinion be sought from the learned Attorney General. Matter was referred to the then Attorney General who opined that SUC charge be retained at 1% for BWA operators and on that basis, final decision in this behalf was taken. It is further pointed out that on the issue of revenue segregation, a committee had been formed which has submitted its report. The report is under consideration and decision on the report is likely in two months. After considering the report of the committee on the revenue segregation, appropriate action will be taken whether separate revenue reporting to continue or not or an increase in SUC is required for the proper conduct of telegraph as provided in the License Agreement. The decision on the report is expected in two months. In view of the aforesaid developments, for the time being, we leave the matter to the Government to take an appropriate decision in this