CELLULAR OPERATORS ASSOCIATION OF INDIA AND OTHERS v. TELECOM REGULATORY AUTHORITY OF INDIA AND OTHERS

REGULATORY AUTHROITY OF INDIA [R. F. NARIMAN, J.]

either to mend or bend it even if such recasting is in accord with A good reason and conscience. In such circumstances, it is not possible for the court to remake the statute. Its only duty is to strike it down and leave it to the legislature if it so desires, to amend it. What is further, if the remaking of the statute by the courts is to lead to its distortion that course is to be scrupulously s· avoided. One of the situations further where the doctrine can never be called into play is where the statute requires extensive additions and deletions. Not only it is no part of the court's duty to undertake such exercise, but it is beyond its jurisdiction to do so." [para 255]

35Copy pinpoint35. Applying the aforesaid test to the Impugned Regulation, it is c clear that the language of the Regulation is definite and unambiguous - every service provider has to credit the account of the calling consumer by one rupee for every single cal I drop which occurs within its network. The Explanatory Memorandum to the aforesaid Regulation further makes it clear, in paragraph 19 thereof, that the Authority has come to the conclusion that call drops are instances of deficiency in service delivery on the part of the service provider. It is thus unambiguously clear that the Impugned Regulation is based on the fact that the service provider js alone at fault and must pay for that fault. In these circumstances, to read a proviso into the Regulation that it will not apply to consumers who . are at fault themselves is not to restrict general words to a particular meaning, but to add something to the provision which does not exist, which would be nothing short of the court itself legislating. For this reason, it is not possible to accept the learned Attorney General's contention that the Impugned Regulation be read down in the manner suggested by him. F

36Copy pinpoint36. The other string to the bow ofthis argument is that the Impugned Regulation would be worked in such a manner that the service provider would be liable to pay only when it is found that it is at fault. This again falls foul of constitutional doctrine. In Collector of Customs v. Nathella Sampath-'1 Chetty, ( 1962) 3 SCR 786, this Court held: G "The possibility of abuse of a statute otherwise valid does not impart to it any element of invalidity. The converse must also follow that a statute which is otherwise invalid as being unreasonable cannot be saved by its being administered in a reasonable manner. The constitutional validity of the statute would H

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A have to be determined on the basis of its provisions and on the ambit of its operation as reasonably construed. If so judged it passes the test of reasonableness, possibility of the powers conferred being improperly used is no ground for pronouncing the law itself invalid and similarly ifthe law properly interpreted and tested in the light of the requirements set out in Part III of the B Constitution does not pass the test it cannot be pronounced valid merely because it is administered in a manner which might not conflict with the constitutional requirements." [at pp.825 -826)

37Copy pinpoint37. This statement of the law applies on all fours to the facts of the present case, and is a complete answer to the Attorney General's c contention that the Impugned Regulation would be administered so that the service provider would be liable under it only when it is at fault for call drops.

38Copy pinpoint38. The learned Attorney General has argued that the Impugned Regulation accords with the Statement of Objects and Reasons of the D TRAI Act, 1997. As has been pointed out by us, the original Act was amended in the year 2000, in which its Preamble was substituted. The substitution indicates that the policy of the 1997 Act, as amended by the 2000 Act, is to protect the interests of service providers and consumers of the telecom sector together, so that the orderly growth of the telecom sector is ensured thereby. We are afraid that the orderly growth of the telecom sector cannot be ensured or promoted by a manifestly arbitrary or unreasonable regulation which makes a service provider pay a penalty without it being necessarily at fault.

39Copy pinpoint39. We were then told that the Impugned Regulation was framed keeping in mind the small consumer, that is, a person who has a pre-paid SIM Card with an average balance of Rs. I 0/- at a time, and that the Regulation goes a long way to compensate such person. The motive for the Regulation may well be what the Attorney General says it is, but that does i10t make it immune from Article 14 and the twin tests of Article 19( 6). The Authority framing the Regulation must ensure that its means are as pure as its ends - only then will regulations made by it pass constitutional muster. ·

40Copy pinpoint40. We were also told that huge profits were made by the service providers, and that the amount they would have to pay would not even be a flea bite compared to the profits they make, viewed in the background that they are not pouring in enough funds for infrastructure development.

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REGULATORY AUTHROITY OF INDIA [R. F. NARIMAN, J.]

This was stoutly resisted by the appellants, pointing out that the so called huge profits earned is misleading, as the figure of net debt is far greater than that of revenue earned, and that huge sums had been pumped in for infrastructure development. Without going into the factual controversy thus presented, there are two answers to this submission. First and foremost, whether the service providers make profits or losses cannot be said to be relevant for determining whether the Impugned Regulation is otherwise arbitrary or unreasonable. If the Attorney General were correct, then the converse proposition would also be true - namely, that even if all the service providers were suffering huge losses, then such regulation, since it makes them fork out crores of rupees and add to their losses, would have to be held to be unconstitutional. Assuming that six c out of the twelve service providers make profits, and the other six make losses, the Impugned Regulation cannot be held to be constitutional so far as those making a profit, and unconstitutional qua those making losses. And what ifthe same service provider makes a profit in one year and a loss in the succeeding year. Is the Impugned Regulation unconstitutional D in the first year and constitutional in the succeeding year? Obviously not. Secondly, it is always open to the Authority, with the vast powers given to it under the TRAI Act, to. ensure, in a reasonable and non- arbitrary manner, that service providers provide the necessary funds for infrastructure development and deal with them so as to protect the interest of the consumer. Consequently, this submission is also without substance. E

41Copy pinpoint41. The learned Attorney General strongly relied upon a passage from a Constitution Bench judgment in Prag Ice & Oil Mills v. Union oflndia, (1978) 3 sec 459, to the following effect:- "The Parliament having entrusted the fixation of prices to the expert judgment of the Government, it would be wrong for this F Court, as was done by common consent in Premier Automobiles [20 L Ed 2d 312] to examine each and every minute detail pertaining to the Governmental decision. The Government, as was said in Permian Basin Area Rate cases, is entitled to make pragmatic adjustments which may be called for by particular G circumstances and the price control can be declared unconstitutional only if it is patently arbitrary, discriminatory or demonstrably irrelevant to the pol icy which the legislature is free to adopt. The interest of the producer and the investor is only one of the variables in the "constitutional calculus ofreasonableness" H

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A and courts ought not to interfere so long as the exercise of Governmental power to fix fair prices is broadly within a "zone of reasonableness". lfwe were to embark upon an examination of the disparate contentions raised before us on behalf of the contending parties, we have no doubt that we shall have exceeded our narrow and circumscribed authority. B Before closing, we would like to mention that the petitioners rushed to this Court too precipitately on the heels of the Price Control Order. Thereby they deprived themselves of an oppo11unity to show that in actual fact, the Order causes them irreparable prejudice. Instead, they were driven through their ill-thought haste c to rely on speculative hypothesis in order to buttress their grievance that their right to property and the right to do trade was gone or was substantially affected. A little more patience, which could have been utilised to observe how the experiment functioned, might have paid better dividends." (para 71 ).

42Copy pinpoint42. The observations made in the aforesaid judgment are wholly distinguishable. In the present case, if the appellants had not gone to cou1t when they did, the Regulation would have affected their fundamental rights on and from 1.1.2016. Fu1ther, they would have been denied interim and/or other relief on the ground 'that they have not moved the Court E without undue delay. Also, to say that the Impugned Regulation is only an experimental measure that would last in its present form for six.months is again wholly incorrect. The Impugned Regulation begins to tick on and from 1.1.2016, in which case three rupees per day, for call drops made not exclusively owing to the fault of the service provider, would have to be paid. Further, it is only the Explanatory Memorandum which F says that the Authority may review the aforesaid Regulation after working of the said Regulation after six months; and that too only if found to be necessary. Obviously, this would not mean that the aforesaid Regulation would necessarily be reviewed at all, even after six months. We are, therefore, unable to subscribe to the aforesaid submission.

43Copy pinpoint43. We now come to a very important part of the submissions made on behalf of the appellants. The appellants have strongly contended that a 2% allowance of call drops on the basis of averaging call drops per month has been allowed to them by the Quality of Service Regulations already referred to hereinabove. This would amount to the Authority H penalizing the service provider even when it complies with another

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regulation made under the same source of power, and for this reason A alone, the Impugned Regulation must be held to be bad as being manifestly arbitrary. The learned Attorney General refuted this submission in two ways. First, he argued that Quality of Service Regulations and regulations made to benefit consumer~ must be viewed separately, as they are distinct regulations in parallel streams. He also argued that the 2% average 8 allowance for call drops is different and distinct from paying compensation for call drops inasmuch as, conceivably, in a given set of facts, call drops may take place extensively in a given sector but not in other sectors so that an average of 2% per month is yet maintained, but the service provider would be penalized as it has not been able to maintain a 3% standard laid down qua deficiency of service in individual towers leading c to call drops. However, the persons who suffer in the sector in which call drops are many and frequent would then have no protection. We are afraid neither of these reasons avails the Authority. First and foremost, the 2009 Quality of Service Regulation is made under Section 11 (I )(b)(v), which is the very Section which is claimed to be the source of the D Impugned Regulation. Secondly, both regulations deal with the same subject matter- namely, call drops, and both regulations are made in the interest of the consumer. !fan average of2% per month is allowable to every service provider for call drops, and it is the admitted position that all service providers before us, short of Aircel, and that too in a very small way, have complied with the standard, penalizing a service provider E who complies with another Regulation framed with reference to the same source of power would itself be manifestly arbitrary and would render the Regulation to be at odds with both Articles 14 and 19( I )(g).

44Copy pinpoint44. In this regard, it would be of assistance to note what this Court held in The Lord Krishna Sugar Mills Ltd. and Anr. v. Union F of India and Anr., [ 1960) I SCR 39: "It is, however, contended that though one can look at the surrounding circumstances, it is not open to the Court to examine other laws on the subject, unless those laws be incorporated by reference. In our opinion, this is a fallacious argument. The Court G in judging the reasonableness of a law, will necessarily see, not only the surrounding circumstances but all contemporaneous legislation passed as part of a single scheme. The reasonableness of the restriction and not of the law has to be found out, and if restriction is under one law but countervailing advantages are H

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A created by another law passed as part of the same legislative plan, the Court should not refuse to take that other law into account." [at para 56]

45Copy pinpoint45. In view of the aforesaid, it is clear that the Quality of Service Regulations and the Consumer Regulations must be read together as B part of a single scheme in order to test the reasonableness thereof. The countervailing advantage to service providers by way of the allowance of 2% average call drops per month, which has been granted under the 2009 Quality of Service Regulations, could not have been ignored by the Impugned Regulation so as to affect the fundamental rights of the appellants, and having been so ignored, would render the Impugned c Regulation manifestly arbitrary and unreasonable.

46Copy pinpoint46. Secondly, no facts have been shown to us which would indicate that a particular area would be filled with call drops thanks to the fault on the part of the service providers in which consumers would be severely inconvenienced. The mere ipse dixit of the learned Attorney General, D without any facts being pleaded to this effect, cannot possibly make an unconstitutional regulation constitutional. We, therefore, hold that a strict penal liability laid down on the erroneous basis that the fault is entirely with the service provider is manifestly arbitrary and unreasonable. Also, the payment of such penalty to a consumer who may himself be at fault, and which gives an unjustifiable windfall to such consumer, is also manifestly arbitrary and unreasonable. In the circumstances, it is not necessary to go into the appellants' submissions that call drops take place because of four reasons, three of which are not attributable to the fault of the service provider, which includes sealing and shutting down towers by municipal authorities over upon they have no control, or whether they are attributable to only two causes, as suggested by the Attorney General, being network related causes or user related causes. Equally, it is not necessary to determine finally as to whether the reason for a call drop can technologically be found out and whether it is a network related reason or a user related reason.

47Copy pinpoint47. In Shree Bhagwati Steel Rolling Mills v. Commissioner of Central Excise, (2016) 3 SCC 643, Rules 96 -ZO, ZP and ZQ of the Central Excise Rules, 1994, which consisted inter alia of penalty provisions, were struck down by this Court. One of the reasons for striking down the aforesaid Rules is that a mandatory penalty became H leviable despite the fact that fault on the part of assessee could not be

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established. This Court held: A "It is also correct in saying that there may be circumstances of force majeure which may prevent a bona fide assessee from paying the duty in time, and on certain given factual circumstances, despite there being no fault on the part of the assessee in making the deposit of duty in time, a mandatory penalty of an equivalent B amount of duty would be compulsorily leviable and recoverable from such assessee. This would be extremely arbitrary and violative of Article 14 for this reason as well. Further, we agree with the High Court in stating that this would also be violative of'the appellant's fundamental rights under Article 19(1 )(g) and would not be saved by Article 19(6), being an unreasonable restriction c on the right to carry on trade or business. Clearly the levy of penalty in these cases of a mandatory nature for even one day's delay, which may be beyond the control of the assessee, would be arbitrary and excessive." [at para 35]

48Copy pinpoint48. Jn the present case, also, a mandatory penalty is payable by D the service provider for call drops that may take place which are not due to its fault, and may be due to the fault of the recipient of the penalty, which is violative ofArticles 14 and 19( I )(g).

49Copy pinpoint49. The reason given in the Explanatory Memorandum for compensating the consumer is that the compensation given is only notional. E The very notion that only notional compensation is awarded, is also entirely without basis. A consumer may well suffer a call drop after 3 or 4 seconds in a voice call. Whereas the consumer is charged only 4 or 5 paise for such dropped call, the service provider has to pay a sum of rupee one to the said consumer. This cannot be called notional at all. It is also not clear as to why the Authority decided to limit compensation to three call drops per day or how it arrived at the figure of Re. I to compensate inconvenience caused to the consumer. It is equally unclear as to why the calling party alone is provided compensation because, according to the Explanatory Memorandum, inconvenience is suffered due to the interruption of a call, and such inconvenience is suffered both by the calling party and the person who receives the call. The receiving party can legitimately claim that his inconvenience when a call drops, is as great as that of the calling party. And the receiving party may need to make the second call, in which case he receives nothing, and the calling party receives Re.I for the additional expense made by the receiving H

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A party. All this betrays a complete lack ofintelligent care and deliberation in framing such a regulation by the Authority, rendering the Impugned Regulation manifestly arbitrary and unreasonable.

50Copy pinpoint50. However, the learned Attorney General referred to a recent judgment being DSC-Viacon Ventures Pvt. Ltd. (Now Known as B DSC Ventures Pvt. Ltd) v. Lal Manohar Pandey and Ors., (Civil Appeal Nos. 6781-6782 of2015, decided on August 27, 2015). He referred to paragraph 21 in order to show that a certain amount of guess work is unavoidable in matters of this nature. 51 . The context in which this statement occurs in paragraph 21 is c very different from the present context. This Court held that a toll can only be collected for maintaining a road. The patches in which the road is not properly maintained should reduce proportionately the amount of toll that is to be paid. As there was no data in that case to indicate the extent of road length and the resultant inconvenience to users of the road, a certain amount of guess work was said to be unavoidable. The D present is a case in which we are not informed as to how rupee one is computed, how three call drops per day has been arrived at, or why the calling party alone is provided compensation. These matters go out of mere guess work, and into the realm of unreasonableness, as obviously, as has been held by us, there was no intelligent care and deliberation E before any of these parameters have been fixed.

52Copy pinpoint52. We have already seen that the Impugned Regulation is dated 16.10.2015, which was to come into force only on 1.1.2016. We have been shown a technical paper issued by the same Authority on 13.11.2015 i.e. a few days after the Impugned Regulation, in which the Authority F has itself recognised that 36.9% of call drops take place because of the fault at the consumer's end. Instead of having a re look at the problem in the light of the said technical paper, the Authority has gone ahead with the Impugned Regulation, which states that the said Regulation has been brought into force because of deficiency of service in service providers leading to call drops. The very basis of this statement contained in the G Explanatory Memorandum to the Impugned Regulation is found by the self-same Authority to be incorrect only a few days after publishing the Impugned Regulation. This itself shows the manifest arbitrariness on the part of the TRAI, which has not bothered to have a relook into the said problem. For all the aforesaid reasons, we find that the Impugned H Regulation is manifestly arbitrary and therefore violative of Article 14,

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REGULATORY AUTHROITY OF INDIA [R. F. NARIMAN, J.]

and is an unreasonable restriction on the right of the appellants' A fundamental right under Article 19( 1)(g) to carry on business, and is therefore struck down as such.

53Copy pinpoint53. Viewed at from a slightly different angle it is clear that if an individual consumer were to go to the consumer forum for compensation for call drops, he would have to prove that the call drop took place due to B the fault of the service provider. He would further have to prove that he has suffered a monetary loss for which he has to be compensated, which the Explanatory Memorandum itself says is impossible to compute. Thus, the Impugned Regulation completely avoids the adjudicatory process, and legislatively lays down a penal consequence to a service provider for a call drop taking place without the consumer being able to prove c that he is not himself responsible for such call drop and without proof of any actual monetary loss. Whereas individual consumers, either before the Consumer Forum, or in a dispute as a group with service providers before the TRAI, would fail in an action to recover compensation for call drops, yet a statutory penalty is laid down, applicable legislatively, and without any adjudication. This again makes the Impugned Regulation manifestly arbitrary and unreasonable.

54Copy pinpoint54. We have seen that the 2000 Amendment has taken 'away adjudicatory functions from the TRAI, leaving it with administrative and legislative functions. By Section 14 of the Act, adjudicatory functions have been vested in an Appellate Tribunal, where disputes between a group of consumers and the service providers are to be adjudicated by the Appellate Tribunal. In stark contrast, under the scheme of the Electricity Act, 2003, the Central Electricity Regulatory Commission and the various State Electricity Regulatory Commissions have to discharge legislative, administrative, and quasi-judicial functions. This is clear on a F reading of Section 79(l)(f) and Section 86(l)(f) of the Electricity Act, which are set out hereinbelow:- "Section 79. Functions of Central Commission: - (I) The Central Commission shall discharge the following functions, namely:- G

(f) to adjudicate upon disputes involving generating companies or transmission licensee in regard to matters connected with clauses (a) to (d) above and to refer any dispute for arbitration; Section 86. Functions of State Commission: - (I) The State H

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A Commission shall discharge the following functions, namely: - (f) adjudicate upon the disputes between the licensees, and generating companies and to refer any dispute for arbitration."

55Copy pinpoint55. Secondly, as part of the adjudicatory process, compensation can be paid to an affected person if a licensee fails to meet standards B prescribed without prejudice to any penalty which may be imposed or prosecution which may be initiated. This takes place under Section 57 of the said Act, which reads as under:- "Section 57. Consumer Protection: Standards of performance of licensee: ( 1) T~e Appropriate Commission may, c after consultation with the licensees and persons likely to be affected, specify standards of performance of a licensee or a class of licensees. (2) If a licensee fails to meet the standards specified under sub- section ( 1), without prejudice to any penalty which may be imposed D or prosecution be initiated, he shall be liable to pay such compensation to the person affected as may be determined by the Appropriate Commission: Provided that before determination of compensation, the concerned licensee shall be given a reasonable opportunity of being heard. E (3) The compensation determined under sub~section (2) shall be paid by the concerned licensee within ninety days of such determination."

56Copy pinpoint56. Obviously, when such compensation is to be paid to a person who is affected by breach of a standard of quality required under the F Act, such compensation can only be for actual loss suffered, and only as a result of fault of the service provider being established before a quasi judicial Tribunal. This may be notwithstanding the fact that the service provider otherwise meets the average of2% call drops per month allowed to him by the 2009 Quality of Service Regulation. This is for the reason that once fault and actual loss suffered are established before a quasi judicial Tribunal, it would not be open to plead, on the facts of an individual case, that an overall standard of performance has been met. For this reason also, a legislatively pre determined penalty, without fault or loss being established by evidence before a quasi judicial authority, and where the cause of a call drop may be because of the consumer himself, renders the Impugned Regulation manifestly arbitrary and unreasonable.

CELLULAR OPERATORS ASSN. OF INDIA v. TELECOM 53

REGULATORY AUTHROITY OF INDIA [R. F. NARIMAN, J.]

Modification of licence condition by Impugned Regulation A

57Copy pinpoint57. The appellants have also argued that the Impugned Regulation seeks to modify the licence conditions, and the licence conditions being a contract between the service provider and the consumer, such conditions can be modified only where the statute contains language by which an Authority is empowered to disregard an agreementbetween B the parties. It will be seen that Section 11 (I )(b )(ii), which has been set out hereinabove, expressly contains such language and therefore states that terms and conditions of interconnectivity between the service providers may be fixed notwithstanding anything contained in the terms and conditions of the licence granted before the commencement of the TRAI Amendment Act, 2000. c

58Copy pinpoint58. The same kind oflanguage is contained in Section 402(d) of the Companies Act, 1956, which reads as follows:- "Section 402. POWERS OF TRIBUNAL ON APPLICATION UNDER SECTION 397 OR 398. D Without prejudice to the generality of the powers of the Tribunal under section 397 or 398, any order under either section may provide for - (d) the termination, setting aside or modification of any agreement, howsoever arrived at, between the company on the one hand, E and any of the following persons, on the other, namely: (i) the managing director, (ii) any other director, (iii) and (iv)[***] F (v) the manager, upon such terms and conditions as may, in the opinion of the Tribunal be just and equitable in all the circumstances of the case."

59Copy pinpoint59. The said Section is now contained in Section 242(2)(e)ofthe Companies Act, 2013. G

"242. Powers of the Tribunal. (2) Without prejudice to the generality of the powers under sub- section (1), an order under that sub-section may provide for- (e) the termination, setting aside or modification, of any agreement, H

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A howsoever arrived at, between the company and the managing director, any other director or manager, upon such terms and conditions as may, in the opinion ofthe Tribunal, be just and equitable in the circumstances of the case."

60Copy pinpoint60. We were also referred to Section 27(d) of the Competition B Act, 2002, in this behalf which reads as follows: "27. Orders by Commission after inquiry into agreements or abuse of dominant position. Where after inquiry the Commission finds that any agreement referred to in section 3 or action of an enterprise in a dominant position, is in contravention of section 3 or section 4, c as the case may be, it may pass all or any of the following orders, namely:- ( d) direct that the agreements shall stand modified to the extent and in the manner as may be specified in the order by the Commission;."

61Copy pinpoint61. In Union of India v. Assn. of Unified Telecom Service Providers oflndia, (2011) I0 SCC 543, this Court held: "A Constitution Bench of this Court in State ofPunjab v. Devans Modem Breweries Ltd. [(2004) 11 SCC 26] relying on Har Shankar case [( 1975) I SCC 73 7] and Panna Lal v. State of E Rajasthan [(1975) 2 SCC 633] has held in para 121 at p. I 06 that issuance ofliquor licence constitutes a contract between the parties. Thus, once a licence is issued under the proviso to sub-section (1) of Section 4 of the Telegraph Act, the licence becomes a contract between the licensor and the licensee." (para 40).

62Copy pinpoint62. Having regard to the above, it is clear that the licence conditions, whh:h are a contract between the service providers and consumers, have been amended to the farmer's disadvantage by making the service provider pay a penalty for call drops despite there being no fault which can be traceable exclusively to the service provider, and despite the service provider maintaining the necessary standard of quality required 0 of it- namely, adhering to the limit ofan average of2% of call drops per month. We have already seen that condition 28 of the licence requires the licensee to ensure that the quality of service standards, as prescribed by TRAI, are adhered to, and that the Impugned Regulation does not lay down quality of service standards. This being so, it is clear that the laying down of a penalty de hors condition 28, which, as we have seen,

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also requires establishing of fault of the service provider when it does not conform to a quality of service standard laid down by TRAI, would amount to interference with the licence conditions of the service providers without authority of law. On this ground also, therefore, the Impugned Regulation deserves to be struck down. Transparency B

63Copy pinpoint63. Section 11 (4) of the Act requires that the Authority shall ensure transparency while exercising its powers and discharging its functions. "Transparency" has not been defined anywhere in the Act. However, we find, in a later Parliamentary Enactment, namely, the Airports Economic Regulatory Authority oflndiaAct, 2008, that Section 13 deals c with the functions of the Airports Economic Regulatory Authority, (which is an Authority which has legislative and administrative functions). "Transparency" is defined, by sub-section (4), as follows:- "THE AIRPORTS ECONOMIC REGULATORY AUTHORITY OF INDIA ACT, 200R D

13. Functions of Authority. (4) The Authority shall ensure transparency while exercising its powers and discharging its functions, inter alia,- (a) by holding due consultations with all stake-holders with the E airport; (b) by allowing all stake-holders to make their submissions to the authority; and (c) by making all decisions of the authority fully documented and explained." F

64Copy pinpoint64. This definition of "transparency" p·rovides a good working test of 'transparency' referred to in Section 11(4) of the TRAI Act.

65Copy pinpoint65. In fact, a judgment of the Court of Appeal in England, being Regina v. North and East Devon Health Authority, Ex parte Coughlan, [2001] QB 213, puts the meaning of "consultation" rather G well as follows:- "It is common ground that, whether or not consultation ofinterested parties and the public is a legal requirement, if it is embarked upon it must be carried out properly. To be proper, consultation must be undertaken at a time when proposals are still at a formative stage; H

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A it must include sufficient reasons for particular proposals to allow those consulted to give intelligent consideration and an intelligent response; adequate time must be given for this purpose; and the product of consultation must be conscientiously taken into account when the ultimate decision is taken."

66Copy pinpoint66. No doubt in the facts of the present case, the Authority did hold due consultations with all stakeholders and did allow all stakeholders to make their submissions to the Authority. However, we find no discussion or reasoning dealing with the arguments put forward by the service providers, that call drops take place for a variety of reasons, some of which are beyond the control of the service provider and are because of the consumer himself. Consequently, we find that the conclusion that service providers are alone to blame and are consequently deficient in • service when it comes to call drops is not a conclusion which a reasonable person can reasonably arrive at. We are cognizant of the fact that ordinarily legislative functions do not require that natural justice be followed. However, it has been recognised in some of the judgments dealing with this aspect that natural justice need not be followed except where the statute so provides.

67Copy pinpoint67. In Union of India v. Cynamide India Ltd., (1987) 2 SCC 720, this Court held: E "The second observation we wish to makl;j_s._ legislative action, plenary or subordinate, is not subject to rules ofnaturaljustice. In the case of Parliamentary legislation, the proposition is self-evident. In the case ofsubordinate legislation, it may happen that Parliament may itself provide for a notice and for a hearing - there are several instances of the legislature requiring the subordinate legislating authority to give public notice and a public hearing before_ say, for example, levying a municipal rate - in which case the substantial non-observance of the statutorily prescribed mode of observing natural justice may have the effect of invalidating the subordinate legislation. The right here given to rate payers orothers is in the nature of a concession which is not to detract from the character of the activity as legislative and not quasi-judicial. But, where the legislature has not chosen to provide for any notice or · hearing, no one can insist upon it and it will not be permissible to read natural justice into such legislative activity." [para 5) H

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68Copy pinpoint68. Similarly, in M.R.F. Ltd. v. Inspector Kerala Govt., ( 1998) A 8 SCC 227, this Court held: "Learned counsel for the appellants contended that before raising the national and festival holidays from their original number under the Parent Act to the number of days contemplated by the Amending Act, the industries or their representatives should have B been given an opportunity of a hearing. This argument is wholly untenable. The principles of natural justice cannot be imported in the matter oflegislative action. If the legislature in exercise of its plenary power under Article 245 of the Constitution, proceeds to enact a law, those who would be affected by that law cannot legally raise a grievance that before the law was made, they should c have been given an opportunity of a hearing. This principle may, in limited cases, be invoked in the case of subordinate legislation specially where the main legislation itself lays down that before the subordinate legislation is made, a public notice shall be given and objections shall be invited as is usually the case, for example, in the making of municipal bye-laws. But the principle ofnaturaljustice, including the right of hearing, cannot be invoked in the making of law either by Parliament or by the State Legislature." [paras 23 - 24]

69Copy pinpoint69. The question of transparency raises a more fundamental question, namely, that of openness in governance. We find that the Right to Information Act of 2005 has gone a long way to strengthen democracy by requiring that the Government be transparent in its actions, so that an informed citizenry.is able then to contain corruption, and hold Governments and their instrumentalities accountable to the people of F India. The preamble to the said Act, in ringing terms, states:- "WHEREAS the Constitution oflndia has established democratic Republic; AND WHEREAS democracy requires an informed citizenty and transparency of information which are vital to its functioning and G also to contain corruption and to hold Governments and their instrumentalities accountable to the governed; AND WHEREAS revelation of information in actual practice is likely to conflict with other public interests including efficient H

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A operations of the Governments, optimum use of limited fiscal resources and the preservation of confidentiality of sensitive information; AND WHEREAS it is necessary to harmonise these conflicting interests while preserving the paramountcy of the democratic ideal; B Now, THEREFORE, it is expedient to provide for furnishing certain information to citizens who desire to have it."

70Copy pinpoint70. We find that under Section 4(1) every public authority is not only to maintain all its records duly catalogued and indexed but is to pub Iish, with in I 20 days from the enactment of the said Act, the procedure c followed by it in its decision making process, which includes channels of supervision and accountability. Section 4( I )(b )(iii) states: "4. Obligations of public authorities. -(I) Every public authority shall- (b) publish within one hundred and twenty days from the enactment of this Act,- (iii) the procedure followed in the decision making process, including channels of supervision and accountability." 7 I. Under Section 8, there is no obligation to give to any citizen information disclosure of which would prejudicially affect the sovereignty and integrity oflndia, the security of the State etc. Subject, therefore, to well-defined exceptions, openness in governance is now a legislatively establishedfact. In fact, in Chieflnformation Commissionerv. State of Mani put; (2011) 15 SCC page l, this Court had occasion to deal with· the aforesaid Act in the following terms: F "Before dealing with the controversy in this case, let us consider the object and purpose of the Act and the evolving mosaic of jurisprudential thinking which virtually led to its enactment in 2005. As its Preamble shows, the Act was enacted to promote tra1isparency and accountability in the working of every public G authority in order to strengthen the core constitutional values of a democratic republic. It is clear that Parliament enacted the said Act keeping in mind the rights of an informed citizenry in which transparency of information is vital in curbing corruption and making the Government and its instrumentalities accountable. The H Act is meant to harmonise the conflicting interests of the

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Government to preserve the confidentiality of sensitive information A with the right of citizens to know the functioning of the governmental process in such a way as to preserve the paramountcy of the democratic ideal. The Preamble would obviously show that the Act is based on the concept of an open society. B On the emerging concept of an "open Government'', about more than three decades ago, the Constitution Bench of this Court in State ofU.P. v. Raj Narain [(1975) 4 SCC 428: AIR 1975 SC 865) speaking through Mathew, J. held: (SCC p. 453, para 74) "74 . ... The people of this country have a right to know every c public act,. everything that is done in a public way, by their public functionaries. They are entitled to know the particulars of every public transaction in all its bearing.The right to knoll\ which is derived from the concept of freedom of speech, though not absolute, is a factor which should make one wary, when secrecy is claimed for transactions which can, at any rate, D have no repercussion on public security. [Ed.: See New York Times Co. v. United States, 29 L Ed 2d 822 : 403 US 713 ( 1971 ).] To cover with veil of secrecy, the common routine business, is not in the interest of the public. Such secrecy can seldom be legitimately desired." (AIR p. 884, para 74) E (emphasis supplied) Another Constitution Bench in S.P. Gupta v. Union of India [ 1981 Supp SCC 87 : AIR 1982 SC 149) relying on the ratio in Raj Narain [( 1975) 4 SCC 428: AIR 1975 SC 865] held: (S.P. Gupta case [ 1981 Supp SCC 87 : AIR 1982 SC 149] , SCC p. F 275, para 67) "67 . ... The concept of an open Government is the direct emanation from the right to know which seems to be implicit in the right of free speech and expression guaranteed under Article 19(1){a). Therefore, disclosure of information in regard G to the functioning of Government must be the rule and secrecy an exception justified only where the strictest requirement of public interest so demands. The approach of the court must be to attenuate the area of secrecy as much as possible consistently with the requirement of public interest, bearing in mind all the H

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A time that disclosure also serves an important aspect of public interest." (AIR p. 234, para 66) (emphasis supplied) It is, therefore, clear from the ratio in the above decisions of the Constitution Bench of this Court that the right to information, which is basically founded on the right to know, is an intrinsic part of the B fundamental right to free speech and expression guaranteed under Article 19(1)(a) of the Constitution. The said Act was, thus, enacted to consolidate the fundamental right of free speech. In Ministry of Information & Broadcasting, Govt. of India v. Crick_et As~7. of Benf{al [(1995) 2 SCC 161] this Court also c held that right to acquire information and to disseminate it is an intrinsic component of freedom of speech and expression. (See p. 213, para 43 of the Report.) Again in Reliance Petrochemicals Ltd. v. Indian Express Newspapers Bombay (P) Ltd. [( 1988) 4 SCC 592] this Court D recognised that the right to information is a fundamental right under A11icle 21 of the Constitution. This Court speaking through Sabyasachi Mukharj i, J ., as His Lordship then was, held: (SCC p. 613, para 34) "34 . ... We must remember that the people at large have a right to know in order to be able to take part in a participatory development in the industrial life and democracy. Right to know is a basic right which citizens ofa free country aspire in the broader horizon of the right to live in this age in our land under Article 21 of our Constitution. That right has reached new dimensions and urgency. That right puts greater responsibility upon those who take upon themselves the responsibility to inform." In Peoples Union for Civil Liberties v. Union of India [(2004) 2 SCC 476] this Court reiterated, relying on the aforesaid judgments, that right to information is a facet of the right to freedom of"speech and expression" as contained in Article 19( I)( a) of the Constitution G of India and also held that right to information is definitely a fundamental right. In coming to this conclusion, this Court traced the origin of the said right from the Universal Declaration of Human Rights, 1948 and also Article 19 of the International Covenant on Civil and Political Rights, which was ratified by India in 1978. This Court also found a similar enunciation of principle in the H

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Declaration of European Convention for the Protection of Human A Rights (1950) and found that the spirit of the Universal Declaration of 1948 is echoed in Article 19(1 )(a) of the Constitution. (See paras 45, 46 and 47 at pp. 494-95 of the Report.) The exercise ofjudicial discretion in favour of free speech is not only peculiar to our jurisprudence, the same is a part of the jurisprudence in all the countries which are governed by the rule of law with an independent judiciary. In this connection, if we may quote what Lord Acton said in one of his speeches: "Everything secret degenerates, even the administration ofjustice; nothing is safe that does not show how it can bear discussion and publicity." It is, therefore. clear that a society which adopts openness as a value of overarching significance not only permits its citizens a wide range of freedom of expression, it also goes further in actually opening up the deliberative process of the Government itself to the sunlight of public scrutiny. Frankfurter, J. also opined: "The ultimate foundation of a free society is the binding tie of cohesive sentiment. Such a sentiment is fostered by all those agencies of the mind and spirit which may serve to gather up the traditions of a people, transmit them from generation to generation, and thereby create that continuity of a treasured common life which constitutes a civilisation. 'We live by symbols.'The flag is the symbol of our national unity, transcending all internal differences, however large, within the framework of the F Constitution." Actually the concept of active liberty, which is structured on free speech, means sharing of a nation's sovereign authority among its people. Sovereignty involves the legitimacy of governmental action. And a sharing of sovereign authority suggests intimate G correlation between the functioning of the Government and common man's knowledge of such functioning. (Active Liberty by Stephen Breyer, p. I 5.)" [paras S - 16]

72Copy pinpoint72. In another context also this Court has emphasized the importance of openness of governance. In Global Energy Ltd. V. H

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A Central Electricity Regulatory Commission, (2009) 15 SCC 570 at 589, this Court stated: "The Jaw sometimes can be written in such a subjective manner that it affects the efficiency and transparent function of the Government. If the statute provides for pointless discretion to B agency, it is in essence demolishing the accountability strand within the administrative process as the agency is not under obligation from an objective norm, which can enforce accountability in decision-making process. All law-making, be it in the context of delegated legislation or primary legislation, has to conform to the fundamental tenets of transparency and openness on one hand c and responsiveness and accountability on the other. These are fundamental tenets flowing from due process requirement under Article 21, equal protection clause embodied in Article 14 and fundamental freedoms clause ingrained under Article 19. A modern deliberative democracy cannot function without these attributes."

73Copy pinpoint73. We have been referred to the U.S. Administrative Procedure Act, Section 553 of which states as follows:- 5 USCA § 553 § 553 - Rule making E (a)This section applies, according to the provisions thereof, except to the extent that there is involved- ( 1) a military or foreign affairs function of the United States; or (2) a matter relating to agency management or personnel or to public prope11y, loans, grants, benefits, or contracts. F (b )General notice of proposed rule making shall be published in the Federal Register, unless persons subject thereto are named and either personally served or otherwise have actual notice thereof in accordance with law. The notice shall include- (I) a statement of the time, place, and nature of public rule making G proceedings; (2) reference to the legal authority under which the rule is proposed; and (3) either the terms or substance of the proposed rule or a H description of the subjects and issues involved.

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Except when notice or hearing is required by statute, this subsection A does not apply- (A) to interpretative rules, general statements of policy, or rules of agency organization, procedure, or practice; or (B) when the agency for good cause finds (and incorporates the finding and a brief statement of reasons therefor in the rules issued) B that notice and public procedure thereon are impracticable, unnecessary, or contrary to the public interest. (c) After notice required by this section, the agency shall give interested persons an opportunity to participate in the rule making through submission of written data, views, or arguments with or c without opportunity for oral presentation. After consideration of the relevant matter presented, the agency shall incorporate in the rules adopted a concise general statement of their basis and purpose. When rules are required by statute to be made on the record after opportunity for an agency hearing, sections 556 and D 557 of this title apply instead of this subsection. (d)The required publication or service of a substantive rule shall be made not less than 30 days before its effective date, except- ( I) a substantive rule which grants or recognizes an exemption or relieves a restriction; E (2) interpretative rules and statements of policy; or (3) as otherwise provided by the agency for good cause found and published with the rule. (e) Each agency shall give an interested person the right to petition · F for the issuance, amendment, or repeal of a rule." In Corpus Juris Secundum (March 2016 Update) it is stated: "Under the informal rulemaking requirements of the Federal Administrative Procedure Act, after a federal administrative agency considers the relevant matter presented, it must incorporate G in the rules adopted a concise general statement of their basis and purpose. The purpose of the requirement is to enable courts, which have the duty to exercise review, to be aware of the legal and factual framework underlying the agency's actions. The requirement is a means of holding an agency accountable for H

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A administering the laws in a responsible manner, free from arbitrary conduct. The statement is not intended to be an abstract explanation addressed to an imaginary complaint but is intended, rather, to respond in a reasoned manner to the comments received, to explain how the agency resolved the significant problems raised by the comments, and to show how that resolution led the agency 8 to the ultimate rule. The statement must identify what major issues of policy were ventilated and why the agency reacted to them as it did and should enable a reviewing court to ascertain such matters. The statement must respond to the major comments received, explain how they affected the regulation, and, where an c old regulation is being replaced, explain why the old regulation is no longer desirable. Agencies have a good deal of discretion in expressing the basis of a rule. The requirement is not to be interpreted over literally, but it should not be stretched into a mandate to refer to all specific issues raised in the comments on the proposed regulations. Although an agency must genuinely consider comments it receives from interested parties, there is no requirement that an agency discuss in great detail all comments, especially those which are frivolous or repetitive. Although the agency need not address every comm-ent received, it must respond in a reasoned manner to those that raise significant problems, to explain how the agency resolved any significant problems raised by the comments, and to show how that resolution led the agency to the ultimate rule. Conclusory statements will not fulfill the administrative agency's duty to incorporate in adopted rules a concise general statement of their basis and purpose. The agency must articulate a satisfactory explanation for its action. including a rational connection between the facts it found and the choices it made. Under some circumstance, agencies must identify specific studies or data that they rely upon in arriving at their decision to adopt a rule. G Regulations which lack a statement of basis and purpose may be upheld ifthe basis and purpose and obvious. Moreover, the failure of an agency to incorporate the statement does not render a rule ineffective as to parties to litigation who had knowledge of the rule. H

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Despite the statutory language mandating that the statement of basis of purposes be "incorporate[d] in the rules adopted," the statement of basis and purpose does not have to be published at precisely the same moment as the rules. Rather, the rules and statement need only be published close enough together in time so that there is no doubt that the statement accompanies, rather than rationalizes, the rules."

74Copy pinpoint74. We find that, subject to certain well defined exceptions, it would be a healthy functioning of our democracy if all subordinate legislation were to be "transparent" in the manner pointed out above. Since it is beyond the scope of this judgment to deal with subordinate legislation generally, and in particular with statutes which provide for c rule making and regulation making without any added requirement of transparency, we would exhort Parliament to take up this issue and frame a legislation along the lines of the U.S. Administrative Procedure Act (with ce11ain well defined exceptions) by which all subordinate legislation is subject to a transparent process by which due consultations with all stakeholders are held, and the rule or regulation making power is exercised after due consideration of all stakeholders' submissions, together with an explanatory memorandum which broadly takes into account what they have said and the reasons for agreeing or disagreeing with them. Not only would such legislation reduce arbitrariness in subordinate legislation making, but it would also conduce to openness in governance. It would also ensure the redressal, partial or otherwise, of grievances of the concerned stakeholders prior to the making of subordinate legislation. This would obviate, in many cases, the need for persons to approach courts to strike down subordinate legislation on the ground of such legislation being manifestly arbitrary or unreasonable. F

75Copy pinpoint75. In the present case, we find that the High Court judgment is flawed for several reasons. The judgment is not correct when it says that there can be no dispute that the Impugned Regulation has been made to ensure quality of service extended to consumers by service providers. As has been pointed out hereinabove, the Impugned Regulation G does not lay down any quality of service - what it does is to penalise service providers even though they conform to the 2% standard laid down by the Quality of Service Regulations, 2009. In holding that the Impugned Regulation therefore conforms to Section l l(l)(b)(v), the judgment is plainly incorrect. Similarly, the finding that notional H

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A compensation is given, and that therefore no penalty is imposed, is also wrong and set aside for the reasons given by us hereinabove. The finding that a transparent process was followed by TRAI in making the Impugned Regulation is only partly correct. While it is true that all stakeholders were consulted, but unfortunately nothing is disclosed as to why service providers were incorrect when they said that call drops were due to B various reasons, some of which cannot be said to be because of the fault of the service provider. Indeed, the Regulation, in assuming that every call drop is a deficiency of service on the part of the service provider, is plainly incorrect. Further, the High Court judgment, when it speaks of the technical paper of 13.11.2015, seems to have mixed it up with the c consultation paper dated 4.9.2015 referred to in the Explanatory Memorandum to the Impugned Regulation. The judgment has entirely missed the fact that the technical paper of 13.11.2015 unequivocally states that the causes for call drops are many and are often beyond the control of service providers and attributable to the extent of 36.9% to the consumers themselves. The judgment is also incorrect when it says 0 that 100% performance is not demanded from service providers when call drops are made. We have already pointed out that the 2% standard has admittedly been met by almost all the service providers, and this being so, even if the very first call drop and all other subsequent call drops are made within the network of a service provider and are within the parameters of 2%, yet the penal consequence of the amended regulation must follow. The judgment is also incorrect in stating that the Impugned Regulation has attempted to balance the interest of service providers by limiting call drops to be compensated to only three and by Iimiting compensation to only the calling and not the receiving consumer. We have already pointed out that a penalty that is imposed without any reason either as to the number of call drops made being three, and only to the calling consumer, far from balancing the interest of consumers and service providers, is manifestly arbitrary, not being based on any factual data or reason. We also find that when the service provider argued that it was being penalised despite being within the tolerance limit of2%, the answer given by the High Court is disingenuous, to say the least, when the High Court says that 2% is a quality parameter for the entire network as opposed to payment of compensation to an individual consumer. We are unable to appreciate the aforesaid reasoning. As has been held by us above, the two sets of Regulations have to be considered together when the Impugned Regulation is being tested on the ground of H

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violation of fundamental rights. Also, the High Court did not advert to a A large number of other submissions made by the appellants before them and/or answer them correctly in law. As a result, therefore, we set aside the judgment of the High Court and allow these appeals, declaring that the Impugned Regulation is ultra vires the TRAI Act and violative of the appellant's fundamental rights under Articles 14 and 19(1 )(g) of the B Constitution. Kalpana K. Tripathy Appeals allowed.