CENTRE FOR PUBLIC INTEREST LITIGATION AND OTHERS v. UNION OF INDIA AND OTHERS

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(Writ Petition (Civil) No. 423 of 2010) B FEBRUARY 2, 2012

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A ignoring the concerns regarding fairness and transparency in spectrum allocation raised from various quarters including the Prime Minister, Ministry of Finance and also some of its own officers - This is also clear from the fact that soon. after obtaining the licences, some of the beneficiaries off-loaded B their stakes to others, in the name of transfer of equ/fy or infusion of fresh capital by foreign companies, and thereby made huge profits - There was no merit in the reasoning of TRAI that the consideration of maintaining a level playing field prevented a realistic reassessment of the entry fee - The C material produced clearly showed that the then Minister of C&IT wanted to favour some companies at the cost of Public Exchequer and took various steps to achieve same - In view of illegality of entire process, licences and spectrum a/location quashed - Costs of Rs 5 crores each imposed on parties getting the' most undue benefit - Directions issued for regrant 0 of licences and a/location spectrum in 2G band in 22 service areas by auction, as was done for a/location of spectrum in 3G band Central Government to consider recommendations of TRAI and take appropriate decision within next one month and fresh licences to be granted by E public auction - However, licences/spectrum granted previously through FCFS method i.e. between 2001 and 24.9.2007 not disturbed because said earlier cases were not questioned before this Court.

F History of the growth of telecommunications in the country and the reforms introduced 1984 onwards - Discussed.

New Economic Policy of India as announced on 24.7.1991; National Telecom Policy 1994 and National G Telecom Policy 1999 - Objectives of - Discussed. Constitution of India, 1950:

CENTRE FOR PUBLIC INTEREST LITIGATION & 149 ORS. v. UNION OF INDIA & ORS. understood as elements having intrinsic utility to mankind - A 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 B 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 c because the State benefits immensely from their value - 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 0 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.

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A method for discharging this burden and the methods like first- come-fi rst-served when used for alienation of natural resources/public property are likely to be misused by unscrupulous people who are only interested in Qarnering maximum financial benefit and have no respect for the B constitutional ethos and values.

CENTRE FOR PUBLIC INTEREST LITIGATION & 151 ORS. v. UNION OF INDIA & ORS. 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 reposed trust and who have taken oath to discharge duties in accordance with the B 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.

On 28.8.2007, TRAI made recommendations regarding the principles of fair competition, no restriction on the number of access service providers in any service area, scarce availability of spectrum, need for spectrum management, measures to increase spectrum efficiency, allocation of spectrum and compliance of roll out obligations by the service providers. It also recommended that in future all spectrum excluding the spectrum in 800, 900 and 1800 MHz banCls in 2G services should be auctioned. E On 17.10.2007, the Minister of C&IT approved the recommendations made by TRAI. However, no action was taken in terms of paragraph 2.40 of the r.ecommendations wherein it was emphasised that the existing spectrum ,, allocation criteria, pricing methodology and the management system suffered from a number of deficiencies and the whole issue needed to 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 which required the Department of Telecom and Ministry of Finance to discuss and agree on H

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A s~ectrumpricing .. In the meanwhile, on 24.9.2007, the DoJ prepared a note mentioning therein that as on that date, 167 applications were received from 12 companies for 22 service areas and opined that it was difficult to handle such a large number of applications at any point B of time.

The Minister of C&IT fixed 1.10.2007 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 C would be accepted after 1.10.2007. Few companies had ma~e applications for UAS Licence in 2004 and some 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, D 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 E 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. F " The Law Secretary placed the papers before the Law Minister on 1.11.2007 who recorded in the note that the said .issue required discussion. When the note was placed before the Minister of C&IT, he on his own recorded that the Loi may be issued to the applicants G received upto 25.9.2007. Simultaneously, he sent letter 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 mentioned that the DoT has decided to continue with the existing policy of first-come- H

CENTRE FOR PUBLIC INTEREST LITIGATION & 153 ORS. v. UNION OF INDIA & ORS. first-served for processing of applications received up to A 2.5.9.2007 and the procedure for processing the remaining applications would be decided at a later date, if any spectrum is left available after processing the applications received up to 25.9.2007. B The Minister of C&IT did not bother to consider the suggestion made by the Prime Minister that a fair and transparent method should be adopted for grant of fresh licences. The Minister of C&IT sent a reply to the Prime Minister wherein he brushed aside the suggestion made by the Prime Minister by saying that it was unfair, discriminatory, arbitrary and capricious to auction the spectrum to new applicants as it would not give them a level playing field. On 22.11.2007, the Finance Secretary dispatched letter to the DoT expressing 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. E

The DoT replied to the Finance Secretary that as per the Cabinet decision dated 31.10.2003, the DoT had been authorised 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. 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, he observed that the matter of entry fee was deliberated in the department several times in light of various guidelines and the TRAI recommendations and H

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A accordingly decision was taken not to revise the entry fee. The Minister C&IT sent letter dated 26.12.2007 to the Prime Minister changing the first come first serve policy. The letter stated that an applicant who fulfilled the conditions of LOI first would be granted licence first, B although several applicants would be issued LOI simultaneously. After 12 days, the DoT prepared a note incorporating therein the changed first-come-first-served policy to which reference was made by the Minister of C&IT in letter dated 26.12.2007 sent to the Prime Minister. c On tlile same day the Minister of C&IT approved the change. 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. On 10.1.2008 i.e., after three days of postponement of the 0 meeting of the Telecom Commission, a press release was issued by the DoT wherein it was stated that 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. 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 of the terms of Lois within the prescribed period. AU 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. Soon after obtaining the Lois, 3 of the successful applicants offloaded their stakes for thousands of crores in the name of infusing

CENTRE FOR PUBLIC INTEREST LITIGATION & 155 ORS. v. UNION OF INDIA & ORS. equity. One of the applicant 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 in the High Court with the prayer that the first press release dated 10.1.2008 may be quashed. The High Court 8 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 pe~itioner to pay Rs.17.752 crores towards additional revenue share over and above the applicable spectrum revenue share. The C decision of the High Court was upheld by the Supreme Court.

The questions which arose for consideration in these writ petitions were whether the Government has the right to alienate, transfer or distribute natural resources/ D national assets otherwise than by following a fair and transparent method consistent with the fundamentals of the equality clause enshrined in the Constitution; whether the recommendations made by the Telecom Regulatory Authority of India (TRAI) on 28.8.2007 for grant of Unified Access Service Licence (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; 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; whether the policy of first- G. 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 (the Minister of C&IT'), without H

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A consulting TRAI, with a view to favour some of the applicants; and 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.

C 1.1. 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 0

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, E maintain or work a telegraph in any part of India. 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 · F 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- G DoT) was set up for developing indigenous technologies and permissions were given to the private sector to . manufacture subscriber-equipment. In 1986, Mahanagar Telephone Nigam Ltd., (MTNL) and Videsh Sanchar Nigam Ltd., (VSNL) were set up. The New Economic H

CENTRE FOR PUBLIC INTEREST LITIGATION & 157 ORS. v. UNION OF INDIA & ORS. 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 c (f), the companies registered in India were permitted to operate under a licence on non-exclusive basis. For services covered by (g) and (h), keeping in view the constraints on the number of companies that could be allowed to operate, a policy of selection through a system 0 of tendering was followed for grant of licences. [paras 2- 5] [178-G-H 179-A-G]

1.2. National Telecom Policy 1994

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 H

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A interest of the country. 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 Chennai (Madras). In the second phase, in B 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 c 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. [Paras 6-7] [179-H; 180-A-G] D 1.3. New Telecom Policy 1999 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 E 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 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

CENTRE FOR PUBLIC INTEREST LITIGATION & 159 ORS. v. UNION OF INDIA & ORS. 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 8 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 C 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. NTP 1999 categorized 8 services in the telecom sector, namely; (i) Cellular Mobile Service Providers D (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 E 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. 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 H

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A it is essential to revise the National Frequency Allocation Plan (NFAP) in its 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 8 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 C 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 D 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 E further examined in the light of ITU guidelines. In this reg a: rd the following course of action shall be adopted viz.: spectrum usage fee shall be charged; an lnter- Miniisterial Group to be called Wireless Planning Coordination Committee, as a part of the Ministry of F Communications for periodical review of spectrum availability and broad allocation policy, should be set up; and massive computerization in WPC Wing would be started in the next three months so as to achieve the objective of making all operations completely G computerized by the end of the year 2000. [Paras 8-10] [180-H; 181-A-H; 182-A-H; 183-A-H; 184-A-B] Establishment of the Telecommunication Commission and the Telecom Regulatory Authority of India.

H· 2. On 11.4.1989, the Council of Ministers passed a

CENTRE FOR PUBLIC INTEREST LITIGATION & 161 ORS. v. UNION OF INDIA & ORS. resolution and decided to establish the Telecom A Commission. 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 B brought before the Telecom Commission. In 1997, Parliament enacted the Telecom Regulatory Authority of India Act, 1997 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 c Disputes Settlement and Appellate Tribunal (TDSAT). [Paras 11-12] [184-C-D; 187-B-D]

3.1. Question No.1: Even though there is no universally accepted definition of natural resources, they are generally understood as elements having intrinsic D 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 E 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 F· 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 G, 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 at every stage of the distribution of natural resources. In . H

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A 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 B 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. The ownership regime relating to natural resources can also be c 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 sdvereignty (of peoples and nations) over (their) natural resources as asserted in the 17th Session 0 of tlhe 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 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. 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

CENTRE FOR PUBLIC INTEREST LITIGATION & 163 ORS. v. UNION OF INDIA & ORS. particular State, right of use has been granted to States A as per international norms. [Paras 63-65] [241-F-H; 242- A-H; 243-A-C]

3.2. In India, the Courts have given an expansive interpretation to the concept of natural resources and 8 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. 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 regard, the doctrine of equality has two aspects: first, it regulates the rights and obligations of the State vis-a-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-a-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. F [Paras 66, 69] [243-D-E; 246-D-F]

Secretary, Ministry of Information & Broadcasting, Govt. of India v. Cricket Assn. of Bengal (1995) 2 SCC 161: 1995 (1) SCR 1036; Reliance Natural Resources Limited v. G Reliance Industries Limited (2010) 7 SCC 1: 2010 (5) SCR 704; Re Special Reference No. 1 of 2001 (2004) 4 SCC 489: 2004 (3) SCR 534; MC. Mehta v. Kamal Nath (1997) 1 SCC 388: 1996 (10) Suppl. SCR 12; Akhil Bharatiya Upbhokta Congress v. State of M.P. (2011) 5 SCC 29: 2011 H

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A (5) SCR 77; Ugar Sugar Works Ltd. v. Delhi Administration (2001) 3 sec 635: 2001 (2) SCR 630; State of UP. v. Choudhary Rambeer Singh (2008) 5 SCC 550: 2008 (4) SCR 610; State of Orissa v. Gopinath Dash (2005) 13 SCC 495: 2005 (5 ) Suppl. SCR 699; Meerut Development Authority B v. Association of Management Studies (2009) 6 SCC 171: 2009 (6) SCR 663; Ramanna Dayaram Sheffy v. International Airport Authority of India (1979) 3 SCC 489: 1979 (3) SCR 1014; S.G. Jaisinghani v. Union of India AIR 1967 SC 1427: 1967 SCR 703; Kasturilal Lakshmi Reddy c v. State of J & K (1980) 4 SCC 1: 1980 (3) SCR 1338; Common Cause v. Union of India (1996) 6 SCC 530: 1996 (6) Suppl. SCR 719; Shrilekha Vidyarthy v. State of UP. (1991) 1 sec 212: 1990 (1) Suppl. SCR 625; UC v. Consumer Education and Research Centre (1995) 5 SCC 0 482: 1995 (1) Suppl. SCR 349; New India Public School v. HUDA (1996) 5 sec 510: 1996 (3) Suppl. SCR 597; Sachidanand Pandey v. State of West Bengal (1987) 2 SCC 295: 1987 (2) SCR 223 - relied on. ·

Illinois Central Railroad Co. v. People of the State of E Illinois 146 U.S. 387 (1892) M.C. Mehta v. Kamal Nath (1997) 1 SCC 388: 1996 (10) Suppl. SCR 12; Jamshed Hormusji Wadia v. Board of Trustee, Port df Mumbai (2002) 3 SCC 214:; Intellectuals Forum, Tirupathi v. State of A.P. (2006) 3 SCC 549: 2006 (2) SCR 419; Fomento Resorts and Hotels F Limited v. Minguel Martins (2009) 3 SCC 571: 2009 (3) SCR 1; P. l.L. v. Union of India (2011) 4 SCC 1: 2011 (4) SCR 445 - referred to.

4. Question No.2: G 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 H of the recommendations dated 28.8.2007 shows that as

CENTRE FOR PUBLIC INTEREST LITIGATION & 165 ORS. v. UNION OF INDIA & ORS. per TRAl'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 det~rmined 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 c 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 0 recommendations of the Group of Ministers, the Department of Telecommunications (DoT) and Ministry of Finance were required to discuss and finalise the spectrum pricing formula. 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 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. 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. While it cannot be denied that TRAI is an expert body assigned with important H

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A 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 B though the scope of judicial review in such matters is extremely limited, ckeeping 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 C&IT and the officers of DoT for grant of UAS Licences may have caused huge loss to the nation, the recommendations made by TRAI were flawed in many respects and implementation thereof by the DoT resulted in gross violation of the objective of NPT 1999 and the 0 decision taken by the Council of Ministers on 31.10.2003. 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. 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. 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

CENTRE FOR PUBLIC INTEREST LITIGATION & 167 ORS. v. UNION OF INDIA & ORS. had itself pointed out. There is no merit in the reasoning of TRAI that the consideration of maintaining a level playing field prevented a realistic reassessment of the entry fee. [Paras 73-75] [248-G-H; 249-A-H; 250-A-H; 251- A] B Question Nos.3 and 4:

5. 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 niay have a better claim. 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 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. A duly publicised auction conducted fairly and impartially is perhaps the best method for discharging this burden H

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A and the methods like first-come-first-served when used for alienation of natural resources/public property are li°kelir to be misused by unscrupulous people who are only interested in garnering maximum financial benefit and have no respect for the constitutional ethos and B 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. The exercise undertaken by the officers of the DoT between c 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 showed that the then Minister of C&ff wanted to favour some companies at the cost of 0 the Public Exchequer and for this purpose, he took the following steps: (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 E 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 is 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,

H 1961. (iii) The officers of the DoT who attended the

CENTRE FOR PUBLIC INTEREST LITIGATION & 169 ORS. v. UNION OF INDIA & ORS.

meeting of the Telecom Commission held on 10.10.2007 A 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. (iv) In view of .the approval by the Council of Ministers of the recommendations made by the Group of B 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 TRAl's c 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 0 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 E 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. F (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 G 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 H

p. 170 Copy page pinpoint

A 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 B 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 c 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 licences and pricing of spectrum was deliberately postponed on 7.1.2008 so that the Secretary, Finance and 0 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 E 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 Augustand September 2007 succeeded in getting higher seniority entitling them to allocation of spectrum on priority basis. The argument 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 and legality of the licences granted to

CENTRE FOR PUBLIC INTEREST LITIGATION & 171 ORS. v. UNION OF INDIA & ORS. them has not been questioned before this Court. [Paras A 76-78] [251-8-H; 252-A-H; 253-A-H; 254-A-H; 255-A-B]

6. 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 8 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. The Court should also 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 reposed trust and who have taken an oath to discharge duties in accordance with the F 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. [Para 79] [255-C-G] G

7. It is 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 H

p. 172 Copy page pinpoint

A 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 B manipulate the system. [para 80] [256-8-C]

K. Manjusree v. State of Andhra Pradesh (2008) 3 SCC 512: 2008 (2) SCR 1025; Monarch Infrastructure (P) Ltd. v. Commissioner, Ulhasnagar Municipal Corpn. (2000) 5 SCC C 287: 2000 (3) SCR 1159; 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: 2004 (1) SCR 483: Chaitanya Kumar v. State of Karnataka (1986) 2 SCC 594: 1986 (2) SCR 409; D Shivsagar Tiwari v. Union of India (1996) 6 SCC 558: 1996 (7) Suppl. SCR 478; Common Cause, A Registered Society (Petrol pumps matter) v. Union of India (1996) 6 SCC 530: 1996 (6) Suppl. SCR 719; Nagar Nigam v. Al Faheem Meat Exports (P) Ltd. (2006) 13 SCC 382: 2006 (10) Suppl. SCR 354; Delhi Science Forum v. Union of India (1996) 2 SCC E 405: 1996 (2) SCR 767; BALCO Employees' Union (Regd.) v. Union of India (2002) 2 SCC 333: 2001 (5) Suppl. SCR 511; Vil/ianur lyarkkai Padukappu Maiyam v. Union of India (2009) 7 SCC 561: 2009 (9) SCR 225; Ministry of Labour and Rehabilitation v. Tiffin's Barytes Asbestos & Paints Ltd. (1985) F 3 SCC 594: 1985 (2) Suppl. SCR 302; Vnited India Fire and General Insurance Co. Ltd. v. K. S. Vishwanathan (1985) 3 SCC 686; State of TN. v. M.N. Sundararajan (1980) 4 SCC 592: 1981 (1) SCR 471; Sunil Pannalal Banthia v. City & Industrial Development Corporation of Maharashtra Ltd. G (2007) 10 SCC 674: 2007 (3) SCR 798; Bombay Dyeing & Mfg. Co. Ltd. (3) v. Bombay Environmental Action Group (20.06) 3 SCC 434: 2006 (2) SCR 920; Prem Chand Somchand Shah v. Union of India (1991) 2 SCC 48: 1991 (1) SCR 232; Sanjeev Coke Mfg. Co. v. Bharat Coking Coal H Ltd. (1983) 1 SCC 147: 1983 (1) SCR 1000 - referred to.

CENTRE FOR PUBLIC INTEREST LITIGATION & 173 ORS. v. UNION OF INDIA & ORS. 8.ln the result, the writ petitions are allowed in the A 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 8 spectrum to the licensees are declared illegal and are quashed.

(ii) The above direction shall become operative after four months. c (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 o 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. E

(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.SO 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. No cost is imposed on the respondents who had submitted their applications in 2004 and H

174 SUPREME COURT REPORTS [2012] 3 S.C.R.·

A 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 B poor and indigent litigants. The remaining 50% cost shall be deposited in the funds created for Resettlement and Welfare Schemes of the Ministry of · Defence. However, it is made clear that the observations made in this judgment shall not, in any c 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 D may be filed by the CBI in future and the Special Judge, CBI shall decide the matter uninfluenced by this judgment. Jhis judgment shall not prejudice any person in the action which may be taken by other 'investigating agencies under Income Tax Act, 1961, E Prevention of Money Laundering Act, 2002 and other similar statutes. [Para 81) [256-D-H; 257-A-F] Case Law Reference: 2008 (2) SCR 1025 referred to Para 60 F 2000 (3) SCR 1159 referred to Para 60 (1993) DLT 168 referred to Para 60 2004 (1) SCR 483 referred to Para 60 G 1986 (2) SCR 409 referred to Para 60 1996 (7) Suppl. SCR 478 referred to Para 60 1996 (6) Suppl. SCR 719 referred to Para60 H 2006 (10) Suppl. SCR 354 referred to Para 60

CENTRE FOR PUBLIC INTEREST LITIGATION & 175 ORS. v. UNION OF INDIA & ORS. 1996 (2) SCR 767 referred to Para 60 A 2001 (5) Suppl. SCR 511 referred to Para 60 2009 (9) SCR 225 referred to Para 60 1985 (2) Suppl. SCR 302 referred to Para 60. B (1985) 3 sec 686 referred to Para 60 1981 (1) S~R 471 referred to Para 60 2007 (3) SCR 798 referred to Para 60 2006 (2) SCR 920 referred to Para 60 c 1991 (1) SCR 232 referred to Para 60 1983 (1) SCR 1000 referred to Para 60 146 U.S. 387 (1892) referred to Para 66 D 1996 (10 ) Suppl. SCR 12 referred to Para 66 (2002) 3 sec 214 referred to Para 66 2006 (2) SCR 419 referred to Para 66 E 2009 (3) SCR 1 referred to Para 66 1995 (1) SCR 1036 relied on Para 67 2010 (5) SCR 704 relied on Para 68 2004 (3 ) SCR 534 relied on Para 68 F 1996 (10) Suppl. SCR 12 relied on Para 68 2011 (5) SCR 77 relied on Para 70 2001 (2) SCR 630 relied on Para 70 G 2008 (4) SCR 610 relied on Para 70 2005 (5) Suppl. SCR 699 relied on Para 70 2009 (6) SCR 663 relied on Para 70 1979 (3) SCR 1014 relied on Para 70 H

176 SUPREME COURT REPORTS [2012] 3 S.C.R.

A 1967 SCR 703 referred to Para 70 1980 (3) SCR 1338 relied on Para 70 1996 (6) Suppl. SCR 719 relied on Para 70 1990 (1) Suppl. SCR 625 relied on Para 70 B 1995 (1) Suppl. SCR 349 relied on Para 70 1996 (3) Suppl. SCR 597 relied on Para 70 1987 (2) SCR 223 relied on Para 71 c 2011 (4) SCR 445 referred to Para 79 .CIVIL ORIGINAL JURISDICTION : Writ Petition (Civil) No 423 of 2010. Under Article 32 of the Constitution of India. D WITH W.P. (C) No. 10 of 2011. Prashant Bhushan, Pranav Sachdeva, Dr. Subramanian E Swamy (Petitioner-in-Person) in W.P. No. 10 of 2011 for the Petitioners. G.E. Vahanvati, AG, Indira Jaising ASG, Rakesh Dwivedi, C.S. Vaidyanathan, Ramji Srinivasan, Dr. Abhishek Manu Singhvi, Meet Malhotra, C.A. Sundaram, Vikas Singh, Arijit F Prasad, T.A. Khan, Sonam Anand, Nishant Patil, Saket Singh, Abhishek Chaudhary, Varun Chaudhary, Preetika Dwivedi, Manjul Bajpai, Ankur Saigal, Mansoor Ali Shoket, Pukhnambam Ramesh Kumar, Nitin Kala, Vibha Dhawan, Manu Nair, Adit S. Pujari, Gopal Jain, Manik Karanjawala, Ruby Singh Ahuja (for G Karanjawala & Co.), Ritu Bhalla, Sahil Sharma, Omar Ahmad, Ananya Ghosh, Jai Mohan (for Suresh A. Shroff & Co.), Dayan Krishnan, Gautam Narayan for the Respondents.