Judgment sc-2017-4-972-1036

A refer to the NIA and deal with the submissions keeping in view the law in the field. Clause 5.3 of the NIA which deals with spectrum cap, that is, the quantum of spectrum an operator can hold in a LSA, is extracted below:- "5.3 Spectrum Holding Capping Rule B For the purpose of this Auction the bidding by the bidders for each of the Service Areas in each of the bands will be restricted by a Cap which would depend on the Spectrum assigned in the respective band (1800 MHzl900 MHz! 800 MHz) and also on the Total Spectrum assigned in all the bands namely 800 MHz! 900 c MHz/ 1800 MHz/ 2.1 GHz/ 2.3 GHz/ 2.5 GHz along with respective paired frequencies. 5.3.1 Overall Cap The Overall Cap for each of the Service Areas is calculated as 25% of the Total Spectrum Assigned for Telecom services in above D mentioned frequency bands (including the Spectrum put for these auctions). ** For the purpose of arriving at Overall Cap, the Total Spectrum Assigned in a Service Area is considered as the sum total of the current holdings of all the Telecom Service Providers across all E · bands in the respective Service Area PLUS the Spectrum put to auction in that particular Service Area. **It may be noted that the Spectrum which is expiring in 2015-16 will not be considered in the Current Holdings. The same spectnun will only be considered as the Spectrum put to auction. · F 5.3.3. Cap in 900 MHz band The Spectrum Cap for each operator in each of the Service Areas in 900 MHz band is calculated as 50% of the Total Spectrum assigned, both uplink and downlink, for Telecom services in 900 MHz band. G **For the purpose of arriving at Spectrum Cap in 900 MHz band, the Total Spectrum Assigned in a Service Area in 900 MHz band is considered as the sum total of the current holdings of all the telecom operators in 900 MHz band in the respective Service Area PLUS the Spectrum put to auction in 900 MHZ band in that H

RELIANCE TELECOM LTD. & ANR. v. UNION OF INDIA & 1015 ANR. [DIPAK MISRA, J.]

particular Service Area. A ••It may be noted that the Spectrum which is expiring in 2015-16 will not be considered in the Current Holdings. The same spectrum will only be considered as the Spectrum put to auction."

42Copy pinpoint42. The stipulations in the said Clause are criticized by the petitioners on the ground that it creates different classes of bidders without B any justification and, in fact, the classification is absolutely unreasonable. As the Clause reflects, certain conditions have been envisaged by which three categories of bidders, namely, "existing licensees", "expiring licensees" and "new entrants" have been introduced. The submission is that there was no warrant to put a cap and further fix a minimum bidding c criteria. The argument on behalf of the petitioners is that the above auction being non-competitive is vitiated. The proponement of the Union of India is that provisions had been provided by excluding some and permitting some to top up regard being had to the commercial interest and keeping in view the interest of the consumers. That apart, it has been urged that there is room for new entrants who may invest and allow better competition and also there would be avoidance of monopoly by the big players. The thrust of the matter is whether the clause is so arbitrary and erroneous as to invite the frown of Article 19. To put it differently, it is to be considered whether the classification is without any basis and whether the postulate is so unreasonable that a prudent sense of commerce will abhor to give it any space.

43Copy pinpoint43. Having adumbrated to the previous litigations, we shall presently refer to the NIA. Clause 3 of the NIA deals with the eligibility and conditions. Clause 3.1 provides the eligibility criteria to participate in the auction and Clause 3.2 provides for associated eligibility conditions.· The F relevant part of Clause 3.2 is as follows:- "3.2 Associated Eligibility Conditions (i) Existing Unified Licence (Access Service)/Exiting UASL/ CMTS/UL licensees shall be treated as 'New Entrant' in those service area(s) for the frequency bands in which they do not hold G spectrum at present. In other words, UAS/CMTS/UL(AS)/UL licensees who hold spectrum only in a particular Service Area are also allowed to participate in the auction as 'New Entrant' in that service area for the frequency band in which they do not hold spectrum at present*. Their eligibility to bid for spectrnm blocks H

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A in that particular service area will be that of a new entrant. They will also need to comply with conditions for spectrum allotment and other prescribed conditions such as roll out obligations, FBG, etc. *for the Purpose, 1800 MHz and 900 MHz Bands are B considered as some band (ii) Existing UASL/CMTS/UL(AS)/UL licensees shall be treated as 'Existing Licensee' in those service areas for the frequency band(s) in which they already hold spectrum. Their eligibility to bid for spectrum blocks will be that of an existing operator. For c the limited purpose of this provision, 900MHz band, 1800 MHz band will be treated as the same band. (iii) Bidders whose licences are due for expiry of 2015-16 and whose spectrum in 900 and 1800 MHz band has been put to auction will also be treated as 'New Entrants'. D (iv) Entities (not an existing licensee) will be treated as 'New Entrants' and will have to obtain a Unified License. (v) Licensees covered by the note under Clause 1.4 of UAS licence condition are allowed to bid only for the spectrum band which they currently hold. For the limited purpose of this provision, 900 E MHz and 1800 MHz will be treated as same band. (vi) For the purpose of this auction, a cap of 25% of the 'total spectrum assigned' in 800/900/1800/2100/2300/2500 MHz bands with applicable paired band put together and 50% within a given band in each of the access service area shall apply for total spectrum holding by each operator. For the purpose of calculation of the cap in this auction, the spectrum put to auction would be included in the 'total spectrum assigned'. This cap will be applicable as on the last date of application for participating in Auction. Total Spectrum assigned for unpaired and both unlink and downlink spectrum in case of paired spectrum is taken into account."

44Copy pinpoint44. Clause 3.3 deals with unified licences, Clause 3.4 provides for associated licences, Clause 3.5 deals with prospective new entrants, Clause 3.6 speaks of roll out obligations and Clause 3.6.1 provides for roll out obligations for spectrums in 1800 MHz, 900 MHz and 800 MHz H

RELIANCE TELECOM LTD. & ANR. v. UNION OF INDIA & 1017 ANR. [DIPAK MISRA, J.]

band in service areas other than metro service areas. Clause 4 provides A for auction details which are categorized into various compartments, namely, confidentiality and anti-competitive activity, application requirements, ownership compliance certificate, principal qualification conditions, earnest money deposit, payment terms and various other aspects. Clause 5 deals with spectrum in 1800 MHz, 900 MHz am! 800 B MHz bands - auction rules. Clause 5.1 deals with the conduct of auction and Clause 5.2 states about overview of the auction stages. Clause 5.3 provides spectrum holding capping rule. Clause 5.3.2 reads as under:- "3.2 Cap in 1800 MHz band The spectrum cap for each operator in each of the Service Areas c in 1800 MH band is calculated as 50% of the total spectrum assigned, both uplink and downlink, for telecom services in 1800 MHz band.

** For the purpose of arriving at spectrum cap in 1800 MHz band, the total spectrum assigned in a service area in 800 D MHz band is considered as the sum total of the current holdings of all the telecom operators in 1800 MHz band in the respective service area plus the spectrum put to auc;tion in· 1800 MHz band in that particular service area. It maybe noted that the spectrum which is expiring in 2015- E 16 will not be considered in the Current Holdings. The same spectrum will only be considered as the spectrum put to auction. Spectrum cap for each operator in 1800 MHz band on the maximum spectrum for each of the service area is as given in F Table 5-E below:

Table 5-E Cap on Bidding for each Operator for each Service Area in 1800 MHz band

Total spectrum assigned for both sides of G spectrum in case of paired spectrum is taken into account

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A Service Area Maximum Cap for ·each Operator (In MHz)* Andhra Pradesh 54.60 Bihar 28.⁵⁵ Gujarat 46.00 B Harvana 47.10 Himachal Pradesh 43.05 Kamataka 50.60 ·- Kerala 52.45 Kolkata 48.80 c North East 48.80 Odisha 52.50 Punjab 43.45 Raiasthan 46.60 Tamilnadu 65.00 Uttar Pradesh (East) 47.25 D Uttar Pradesh (West) 39.90 *50% of total assigned spectrum and spectrum put for ·auction in the band in a service area. It may be noted that for a service area in 1800 MHz band, the E total of the current holding of spectrum in 1800 MHz band and ·the total spectrum for which the bidder is submitting the bid for a service area should not exceed the cap which is mentioned in the Table 5-E above. Total spectrum assigned for both sides of spectrum in case of paired spectrum is taken into account."

45Copy pinpoint45. The principal grievances of the petitioners, as is lucent, are that the principle of capping adopted by the respondent keeps the petitioners away from bidding in respect of a particular quantum and · further it makes the bid non-competitive; that the reduction of overall spectrum caps despite the available quantum of commercially viable spectrum amounts to hoarding; that the calculation of overall spectrum G whicl> has reduced the quantum of spectrum put to auction is erroneous; that though there is increase in the available spectrum which includes fresh spectrum and surrendered spectrum by some operators, yet there has been unjustified reduction in the available spectrum for commercial allocation instead of increasing proportionately; that some of the H

RELIANCE TELECOM LTD. & ANR. v. UNION OF INDIA & 1019 ANR. [DIPAK MISRA, J.]

petitioner" are debarred from holding what they are holding in praesenti; A that the recommendation of TRAI should have been given adequate weightage by the n:spondents with regard to the principle of capping and availability of spectrum for commercial allocatiop by way of auction; that the available quantum should have been at least notionally added for the purpose of determining the cap which has not been done as a B consequence of which the auction becomes wholly arbitrary; that the exclusion of the surrendered spectrum from the process of calculation is irrational and unreasonable and that there is no transparency in the auction. As noted earlier, on behalf of the respondent-Union of India, emphasis is laid on providing a cap as that would facilitate availability of minimum amount of spectrum for ensuring benefit to the consumers and also to allow new entrants who may require a .certain minimum amount of spectrum for establishing a network with good coverage and sufficient capacity at a reasonable price. It is also put forth-that it is reasonable that various bands of spectrum are not sold in small quantum so that a successful bidder has sufficient spectrum for deploying advance technology. The principle of top up is allowed so that the.existing licensee can bid for the same for maximizing its efficiency which would ultimately benefit the consumers. Giving the examples ofNorth East, it is contended that only 8.8 MHz spectrum is available and the term of minimum of 5 MHz is stipulated for new entrants including expiring licensees so that they can top up for efficiency and provide adequate service to the consumers. It has also been put forth that where 5 MHz is not available in the LSA in contiguous space, it has been decided that the minimum bid must be for 4.4 MHz. To buttress the said submission, example has been given of West Bengal where 5 MHz is not available in 900 MHz band and only 4.4 MHz is available in 800 MHz band. Similarly, the said principle is followed in 800 MHz and 1800 MHz bands. The existing licensee has to bid for minimum 0.6 MHz spectrum in order to top up so as to come to the level of 5 MHz.

46Copy pinpoint46. The interest of the consumer and the maximization of price has been highlighted. It has also been urged that the petitioners have participated in the auction and have been successful in certain areas and have failed in certain places and the whole intention is to monopolise the market. It is contended that the limit for acquisition of spectrum is intended to discourage the hoarding of spectrum and to encourage level playing fields and to advance healthy competition and keep at bay any kind of H

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A artificial escalation. Commenting on the transfer case of Reliance Telecom Ltd., it is argued that the- spectrum available for the auction was 8.8 MHz in the 900 MHz band and the entire 8.8 MHz of spectrum in 900 MHz has been bid and the successful bidder is Mis. Bharti Hexacom Ltd. The other petitioner, Mis. Reliance, has been successful in 5 MHz of spectrum in 800 MHz band in North East area at the end of B the auction. As far as 5 MHz in 2100 MHz band is concerned, Mis. Vodafone Ltd. has become the successful bidder and entered into the contract.

47Copy pinpoint47. Mr. Rohatgi and Mr. Ranjit Kumar have submitted that there was free competition and any bidder was permitted to outbid the other c and when a free competitive market was provided, there is no ground to attach the auction by calling it unfair or non-transparent. As far as the exclusion of the spectrum is concerned, it has been set forth that certain quantum of spectrum has been reserved for the defence. It is also put forth that subject to process and requirement of harmonization of available spectrum, it shall be put to auction in the future auctions. The process of harmonization, as is known, is quite complex and it is required to be carried with the defence in order that they may vacate spectrum without compromising their operational requirements. That apart, there is a requirement of contiguous chunk without clubbing it with auctioned spectrum. In any case, the petitioners cannot insist for re-writing the terms of the tender conditions and they cannot demand that the whole thing should be put to auction and no capping rule can be applied.

48Copy pinpoint48. Capping rule is basically a formula which has worked out as an experimentation, as the completion of the auction as shown. The cap as compared has the aggregate of total spectrum assigned in the service area and the total spectrum being put to auction. If the cap is to be determined based on the "commercially usable spectrum", as put forth by the petitioners, as commercially assigned spectrum as postl' lated in the tender, it would be re-writing the tender conditions. Commenting on the non-inclusion of spectrum on surrender, it is pointed out that even if the said spectrum is actually surrendered, the peti~ioners cannot seek any relief for the availability of the spectrum and the auction thereof .would be considered by the Union of India in a different auction for obtaining maximum revenue regard being had to the public interest.

49Copy pinpoint49. At this juncture, it is necessary to state that as per the affidavit filed by the Union of India, after the leave was granted to conduct the

RELIANCE TELECOM LTD. & ANR. v. UNION OF INDIA & 1021 ANR. [DIPAK MISRA, J.]

auction, which commenced on 4.3.2015 and continued for 19 days except A Sundays, 115 rounds were conducted fore-auction of 108.⁷⁵ MHz of spectrum in 800 MHz band in 20 LSA, 177 .8 MHz of spectrum in 900 MHz band in 17 LSA, 99.2 MHz spectrum in 1800 MHz band in 15 LSAs and 85 MHz of spectnwi in 2100 MHz band in 17 LSAs. The estimated result of the auction has been brought by way of tabular chart, B which we think it necessary to reproduce:- Band Quantum of Value of the Quantum Value of tl1e Value of the (MHz) Spectrum Spectrum put provisionally Spectrum Spectrum put on on offer at won by provisionally prol'isionally Auction Reserve Price bidders \\'OU by won by bidders (MHz) (in Rs. Crore) (MHz) bidders at at Auction c Reserve Price detennined price (Jn Rs. Crore) (fu Rs. Crore) 800 108.⁷⁵ 13562.50 86.25 9710.00 17158.79 900 177.8 40223.80 168.00 3i841.00 i2964.54 1800 99.2 8936.20 93.80 8292.40 9636.17 D 2100 85 17555.00 70.00 9620.00 10115.41 Total 470.⁷⁵ 802i⁷.50 418.05 65463.40 109874.91

50Copy pinpoint50. Having narrated the factual score, the process of NIA, the grievances articulated and the reply thereto by the Union of India and the successful bidders who have entered into contract and the result of the auction, it is necessitous to recapitulate the parameters for interference in respect of matters pertaining to decision oflargesse by auction. Let it be stated at the beginning, as directed in the 2G case, spectrum as a natural resource has to be put to auction and it has been put to auction. Prior to referring to certain authorities with regard to the principles laid down by this Court as regards the fundamental principle of holding auction, we think it apt to deal with the contention pertaining to TRAI's recommendation and non-acceptance of the same. The Union of India sent the reference back to the TRAI. The question in this context that requires to be posed is whether the recommendations ofTRAI are binding on the Central Government. G

51Copy pinpoint51. Section 11 of the TRAI Act deals with the functions of the authority, that is, TRAI. The said provision empowers it to make recommendations either suo motu or on a request from the licensor on certain matters. The provisos appended to the said Section, being H

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A relevant, are extracted hereunder:- "Provided that the recommendations of the Authority specified in clause (a) of this sub-section shall not be binding upon the Central Government: Provided further that the Central Government shall seek the B recommendations of the Authority in respect of matters sriecified in sub-clauses (i) and (ii) of clause (a) of this sub-section in respect of new licence to be issued to a service provider and the Authority shall forward its recommendations within a period of sixty days from the date on which that Government sought the c recommendations: Provided also that the Authority may request the Central Government to furnish such information or documents as may be necessary for the purpose of making recommendations under sub- clauses (i) and (ii) of clause (a) of this sub-section and that D Government shall supply such information within a period of seven days. from receipt of such request: Provided also that the Central Government may issue a licence to a service provider if no recommendations are received from the Authority within the period specified in the second proviso or within such period as may be mutually agreed upon between the Central Government and the Authority: Provided also that if the Central Government, having considered that recommendation of the Authority, comes to a prima facie · conclusion that such recommendation cannot be accepted or needs modifications, it shall refer the recommendation back to the Authority for its reconsideration, and the Authority may, within fifteen days from the date of receipt of such reference, !orward to the Central Government its recommendation after considering the reference made by that Government. After receipt of further recommendation if any, the Central Government shall take a final decision."

52Copy pinpoint52. In Association of Unified Telecom Service Providers of India (supra), the Court has held that notwithstanding sub-section (I) of Section 4 of the Telegraph Act vesting exclusive privilege in the Central Government in respect of telecommunication activities and H

RELIANCE TELECOM LTD. & ANR. v. UNION OF INDIA & 1023 ANR. [DIPAK MISRA, J.]

notwithstanding the proviso to sub-section ( 1) of Section 4 of the A Telegraph Act vesting in the Central Government the power to decide on the conditions ?f licence including the payment to be paid by the licensee for the licence, TRAI has been conferred with the statutory power to make recommendations on the terms and conditions of the licence to a service provider and the Central Government is bound to seek the recommendations of TRAI on such terms and conditions at different stages, but the recommendations of TRAI are not binding on the Central Government and the final decision on the terms and condi<ions of a licence to a service provider rests with the Central Government. The legal consequence is that if there is a difference between TRAI and the Central Government with regard to a particular term or condition ofa licence, as in the present case, the recommendations ofTRAI will not prevail and instead the decision of the Central Government will be final and binding. The Court has further laid down that TRAI, being an expert body, discharges recommendatory functions under clause (a) of sub-section(!) of Section 11 of the TRAIAct and discharges regulatory and other functions under clauses (b), (c) and (d) of sub-section (1) of Section 11 of the TRAI Act and it being an expert body, the recommendations ofTRAI under clause (a) of sub-section (1) of Section 11 of the TRAI Act have to be given due weightage by the Central Government but the recommendations ofTRAI are not binding on the Central Government. The Court has further ruled that the regulatory and other functions under clauses (b), (c) and (d) of sub-section (1) of Section 11 of the TRAI Act have to be performed independent of the Central Government and are binding on the licensee subject only to an appeal in accordance with the provisions of the TRAl Act. Thus, the interpretation made in the said case makes it clear that the recommendations given by TRAI are not binding but deserve to be given due weightage. Certain areas have been separated regard being had to the nature of the language employed in the TRAIAct where the authority can act independent of the Central Governinent. We are only concerned with the part that pertains to recommendation. In the case at hand, the Central Government had sought the recommendation and then referred it back. Ultimately, it formulated the policy for auction of the spectrum. Therefore, the criticism that is advanced that once there is a reference back, the Central Government should have been guided by_ the recommendations has no justification inasmuch as the Central Government has the ultimate authority to take a decision. O;f co11rse, H

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A such a decision, especially a decision relating to frame a policy for NIA has to be in accord with the norms of Article 14 of the Constitution.

53Copy pinpoint53. Presently, we shall refer to certain authorities in the field and, thereafter, adjudge the grievances so eloquently articulated by the learned counsel for the petitioners.

54Copy pinpoint54. In Tata Cellular (supra), a three-Judge Bench, after extensive consideration of the earlier decisions in the matter ofjudicial review and its scope of applicability to government contracts and tenders, ruled that the modem trend points to judicial restraint in administrative action and the court does not sit as a court of appeal but merely reviews the manner c in which the decision was made. It further opined that the court does not have the expertise to correct the administrative decision and if a review of the administrative decision is permitted, it will be substituting its own decision without the necessary expertise which itself may be fallibl.e. The Court further expressed that the terms of the invhation to tender cannot be open to judicial scrutiny because the invitation to tender is in the realm of contract and the Government must be allowed to have a fair play in the joints as it is a necessary concomitant for an administrative body functioning in an administrative sphere or quasi-administrative sphere. It was also observed that the decision must not only be tested by the application ofWednesbury principle of reasonableness but must also be free from arbitrariness and must not be affected by bias or actuated by mala fides and while quashing decisions, heavy administrative burden on the administration and increase on expenditure have to be kept in view.

55Copy pinpoint55. In Raunaq International Ltd. v. I. V.R. Construction Ltd. F and otlzers 10 , it has been held that the award of a contract, whether it is by private party or by a public body or the State, is essentially a commercial transaction and prudent principle of commerce do weigh while making a commercial decision.

56Copy pinpoint56. In Mo11arch Infrastructure (P) Ltd. v. Ulhasnagar G Municipal Corpn. and others", this Court was concerned with the question relating to NIT issued by Ulhasnagar Municipal Corporation for appointment of agents for collection of octroi and revision of terms and conditions thereof. The Court held that it cannot say whether the 10 (1999) 1 sec 492 11 (2000) s sec 2s1 H

RELIANCE TELECOM LTD. & ANR. v. UNION OF INDIA & 1025 ANR. [DIPAK MISRA, J.]

conditions are better than what were prescribed earlier, for in such A matters, the authority calling for tenders is the best judge. The Court declined to restore status quo ante.

57Copy pinpoint57. In Cellular Operators Association of India & Others v. Union oi India & Others 12 , this Court, after referring to Tata Iron & Steel Co. Ltd. v. Union of India and another 3, held that where legal B 1

issues are intertwined with those involving determination of policy and a plethora of technical issues, courts of law have to be very wary and must exercise their jurisdiction with circumspection for they must not transgress into the realm of policy-making, unless the policy is inconsistent with the Constitution and the laws. It has been further ruled that on matters affecting policy and those that require technical expertise, the c court should show deference to, and follow the recommendations of the Committee which is more qualified to address the issues.

58Copy pinpoint58. In Union of India v. International Trading Co. and another14 , this Court held that non-renewal of permit by the Government to a private party on the ground of change in its policy cannot be faulted if such change is founded on reasonableness and is otherwise not arbitrary, irrational and perverse. It was observed that if the State acts within the bounds of reasonableness, it would be legitimate to take into consideration the national priorities and adopt trade policies and the ultimate test is whether, on the touchstone of reasonableness, the policy decision comes out unscathed. It further ruled that reasonableness of restriction is to be determined in an objective manner and from the standpoint of the interests of the general public and not from the standpoint of the interests of the persons upon whom the restrictions have been imposed or upon abstract consideration. A restriction cannot be said to be unreasonable merely because in a given case, it operates harshly. In determining whether there is any unfairness involved, the nature of the right alleged to have been infringed, the underlying purpose of the restriction imposed, the extent and urgency of the evil sought to be remedied thereby, the disproportion of the imposition and the prevailing condition at the relevant time enter into the judicial verdict. The Court G further held that the reasonableness of the legitimate expectation has to be determined with respect to the circumstances relating to the trade or business in question and canalisation of a particular business in favour of 12 (2003) 3 sec 186 1 • (1996) 9 sec 109 1 ' (2003) s sec 431 H

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A even a specified individual is reasonable where the interests of the country are concerned or where the business affects the economy of the country.

59Copy pinpoint59. In Directorate of Education v. Educomp Datamatics Ltd. and others 15 , this Court, applying the principles enunciated in Tata Cellular (supra) and Monarch Infrastructure (P) Ltd. (supra), held that the terms of the invitation to tender are not open to judicial scrutiny, · the same being in the realm of contract; that the Government must have a free hand in setting the terms of the tender; that it must have reasonable play in its joints as a necessary concomitant for an administrative body in an administrative sphere and the courts would interfere with the administrative policy decision only if it is arbitrary, discriminatcry, mala fide or actuated by bias and the courts cannot strike down the terms of the tender prescribed by the Government because it feels that some other terms in the tender would have been fair, wiser or logical. The courts can interfere only ifthe policy decision is arbitrary, discriminatory or mala fide.

60Copy pinpoint60. In BannariAmman Sugars Ltd. v. Commercial Tax Officer and others 16 , this Court was concerned with the question relating to withdrawal of benefits extended to the appellant therein as subsidy and it was held that while taking policy decision, the Government is not required to hear the persons who have been granted the benefit which is sought to be withdrawn.

61Copy pinpoint61. In Global Energy Ltd. and another v. Adani Exports Ltd. and others 17 , this Court reiterated the principles that the terms of the invitation to tender are not open to judicial scrutiny and the courts cannot whittle down the terms of the tender as they are in the realm of contract unless they are whoJly arbitrary, discriminatory or actuated by malice.

62Copy pinpoint62. In Master Marine Services (P) Ltd. v. Metcalfe & Hodgkinson (P) Ltd. and another18 , the Court, after referring to the principles stated in Tata Cellular (supra), observed that the government policy can be changed with changing circumstances and onl~' on the ground of change, such policy will not be vitiated and the Government has discretion to adopt a different policy or alter or change its policy calculated to serve the public interest and make it more effective as the " (20J4 J 4 sec 19 " (2005) 1 sec 625 17(2005) 4 sec 435 H 1 ' c2oosJ 6 sec 138

RELIANCE TELECOM LTD. & ANR. v. UNION OF INDIA & 1027 ANR. [DIPAK MISRA, J.]

choice in the balancing of the pros and cons relevant to the change in A policy lies with the authority, but change in policy must be in conformity with Wednesbury reasonableness and free from arbitrariness, irrationality, bias and malice.

63Copy pinpoint63. In Michigan Rubber (India) Limited v. State of Karnataka and others 19 , the Court, after referring to Jagdish Manda/ v. State of B Orissa and others20 and Tejas Constructions & Infrastructure (P) Ltd. v. Municipal Council, Sendhwa and another2 1, expressed the view that the basic requirement of Article 14 is fairness in action by the State, and non-arbitrariness in essence and substance is the heartbeat of fair play and actions are amenable to judicial review only to the e::.tent that the State must act validly for a discernible reason and not whimsically for any ulterior purpose and if the State acts within the bounds of reasonableness, it would be legitimate to take into consideration the national priorities. It further observed that fixation of a value of the tender is entirely within the purview of the executive and the courts hardly have any role to play in this process except for striking down such action of the executive as is proved to be arbitrary orunreason'lble. If the Government acts in conformity with certain healthy standards and norms such as awarding of contracts by inviting tenders, in those circumstances, the interference by courts is very limited unless the action of the tendering authority is found to be malicious and a misuse of its statutory powers and greater latitude is required to be conceded to the E State authorities in the matter of formulating conditions of a tender document and awarding a contract. The Court also laid emphasis on public interest and the prudence in applying the principle of restraint where the action is fair and reasonable and does not smack of mala fide. It was also emphasized that the courts cannot interfere with the terms of the tender prescribed by the Government simply because it feels that some other terms in the tender would have been fair, wiser or logical.

64Copy pinpoint64. In Maa Binda Express Carrier and another v. North-East Frontier Railway and others22 , this Court held that the scope of juc!icial review in matters relating to award of contracts by the State and its instrumentalities is settled by a long line of decisions of this Court which clearly recognise that the power exercised by the Government and its "(2012) s sec 216 20 (2001) 14 sec s11 21 (2012) 6 sec 464 22 (2014) 3 sec 760 H

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A instrumentalities in regard to allotment of contract is subject to judicial review at the instance of an aggrieved party, and the submission of a tender in response to a notice inviting such tenders is no more than making an offer which the State or its agencies are under no obligation to accept and, therefore, the bidders participating in the tender process cannot insist that their tenders should be accepted simply because a given tender is the highest or lowest depending upon whether the contract is for sale of public property or for execution of works on behaif of the Government. It further ruled that all that the participating bidders are entitled to is a fair, equal and non-discriminatory treatment in the matter of evaluation of their tenders and it is well settled that award of a contract is essentially a commercial transaction which must be determined on the basis of considerations that are relevant to such commercial decision and, hence, the terms subject to which tenders are invited are not open to jud;cial scrutiny unless it is found that the same have been tailor-made to benefit any particular tenderer or class of tenderers. The Court further held that in the matter of award of contracts, the Government and its agencies have to act reasonably and fairly at all points of time and to that extent, the tenderer has an enforceable right in the court which is competent to examine whether the aggrieved party has been treated unfairly or discriminated against to the detriment of public interest.

65Copy pinpoint65. In Census Commissioner & Others v. R. Krishnamurthj-3, E a three-Judge Bench of this Court, after noting several decisions, held that it is not within the domain of the courts to embark upon an enquiry as to whether a particular public policy is wise and acceptable or whether a better policy could be evolved and the courts can only interfere if the policy framed is absolutely capricious or not informed by reasons or totally arbitrary and founded ipse dixit offending the basic requirement ofArticle 14 of the Constitution. It further observed that in certain matters, as often said, there can be opinions but the court is not expected to sit as an appellate authority on an opinion.

66Copy pinpoint66. The present controversy has to be tested on the touchstone of the aforesaid parameters of judicial review. We have enumerated the submissions advanced by the petitioners, recorded the contentions of the Union oflndia and stated the proponements of the impleade<l parties so that the assail and the resistance to the same become clearly evident. Though the grounds of attack have been stated in a manifold manner, " (201 s) 2 sec 796 H

RELIANCE TELECOM LTD. & ANR. v. UNION OF INDIA & 1029 ANR. [DIPAK MISRA, J.]

yet they are really founded on certain basic assertions, namely, that the entire spectrum available has not been put to auction which tantamounts to hoarding by the Central Government; that an endeavour has been made by the authorities to keep the real competitors away by providing a cap and resultantly making the bid non-competitive; that the classification made in the NIA is hit by unreasonableness with no objective to serve because the condition of buying of 5 MHz of spectrum is not applicable to the existing/non-expiring licensees and providing minimum bidding option for different categories is wholly discriminatory; and that the surrendered spectrum or unused spectrum should have been notionally added so that there would have been fairness in auction, and that would have met the concept of legitimate expectation. C

67Copy pinpoint67. As the factual score depicts, the NIA had stipulated capping and simultaneously allowed certain categories to bid for a lesser quantum to enhance the existing spectrum with them so that they can reach a particular level. The reason shown by the respondents is that a minimum spectrum is determined to enhance the efficiency and capability of the service providers so that the arrangement can be beneficial to the consumers and they can avail requisite benefit and have better service. The licensees who do not have the specific quantum can bid for the balance so that the efficiency of service is enhanced. If a minimum is provided for a particular area or zone having regard to the necessity and the interest of the consumers, we are of the considered opinion that it subserves the larger public interest. The said stipulation might have affected the individual interest of certain categories of licensees or aspirants but that cannot weigh over the public interest.

68Copy pinpoint68. As far as the classification is concerned, it is noticed that some bidders have not been allowed to participate in respect of certain areas. The argument on behalf of the Central Government is that it has been done to curtail the monopoly and to encourage a broad based competition and further to allow certain entities who do not havP. the adequate spectrum so that there is augmentation of revenue as well as enhancement of efficiency in providing the service. it is further explained that it has been done keeping in view the commercial interest and the holistic concept of public interest. Learned counsel for the petitioners would contend that it is demolition and ruination of public trust because the State holds spectrum in trust and it cannot be allowed to hoard by adopting such a subterfuge. It is apt to note here that after holding of H

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69Copy pinpoint69. Additionally, it is put forth that the evolution of the telecommunication sector is a continuous process world-wide. New bands and technologies are being identified for providing coffiIUercial G services. For example, Wide Band Code Division Multiple Access (WCDMA) technology, commonly known as 3G technology, has been developed and was deployed in our country in 2100 MHz band. 465 MHz spectrum in this band was co-ordinated from the defence and got released for telecom commercial services in 2010 and was auctioned. H

RELIANCE TELECOM LTD. & ANR. v. UNION OF INDIA & 1031 ANR. [DIPAK MISRA, J.]

Further, as per the decision of the Government in January 2015, an additional 85 MHz of spectrum in this band was released by the defence and was part of the auction conducted in March 2015. It is also submitted that efforts are being made to get 15 MHz of spectrum released in each of the 22 service areas in 2100 MHz band also from the Defence. Although in this case also, no time frame can be set as to when it would be made available, yet it is expected to be released during the process of completion of harmonization of 1800 MHz band spectrum and it will make 345 MHz of spectrum available in this band; and accordingly, there is a proposal to include the same in the next auction. It is further canvassed that as a part of identifying new bands and technologies and releasing for providing commercial services, 880 MHz spectrum in Time Division C Duplex {TDD) mode was also included in 2300 MHz band for the aui:tion conducted in 2010 and 320 MHz of spectrum in this band is proposed to be included for the next auction. Similarly, 440 MHz spectrum in 2500 MHz band was allocated to BSNL and MTNL in 2007-08. However, 160 MHz spectrum was surrendered by them. TRAI has been requested to expedite recommendations for reserve price and associated conditions. A total quantum of 600 MHz of spectrum in this band, including that swTendered by BSNL/MTNL, is available. It is projected that the channeling plan adopted in India for 2500 MHz band requires further development to reach up to the International Mobile Technology (IMT) band considering the issues relating to techno-economic feasibility and availability of commercial eco-systems. That apart, it is also put forth that efforts are being made to make the spectrum reasonably available for auction and they will be included in the subsequent auctions. It has further been highlighted by the learned Attorney General that the availability of spectrum would be determined after it is harmonized with the need of the defence and feasibility of its inclusion due to techno- economic facets.

70Copy pinpoint70. As we find, the decision taken by the Central Government is based upon certain norms and parameters. Though criticism has been advanced that it is perverse and irrational, yet we are disposed to think that it is a policy decision which subserves the consumers' interest. It is extremely difficult to say that the decision to conduct the auction in such a manner can be considered to be.mala fide or based on ·extraneous considerations.

71Copy pinpoint71. The grievance that has been stressed upon by the petitioners H

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A is that they had spent quite a sum at the time of grant of initial licence and they ha? a legitimate expectation to participate in the auction in every aspect and not to be kept at bay in certain areas for some unfathomable reason as a consequence of which they have not been able to get what they earlier had. According to them, the doctrine of "legitimate expectation" cannot be curtailed in this manner. The aforesaid B argument has a basic fallacy. The principle of"legitimate expectation" can never override public interest and when there is larger public interest, the question of legitimate expectation does not arise; and in any case, in the present case, if we allow ourselves to say so, this contention is absolutely sans merit. We are inclined to think that when auction is held c in respect of spectrum after taking into consideration certain range of facts and circumstances which are founded on economic and social policy factors, it is difficult to unsettle the NIA and the consequential effect thereof by applying the principle ofjudicial review. The procedure adopted in this kind of auction is neither to be equated nor compared with the process meant for grant of ordinary largesse. It is because of its complexity, technical expertise, enormous financial impact and the larger public interest. Recently, in Tamil Nadu Generation and Distribution Corporation Ltd (TANGEDCO) Rep. by its Chairman & Managing Director and Anr. etc. v. CSEPDI - Tris/1e Consortium, Rep. by its Managing Director & Anr. 2 ~, the Court, while discussing the role of fiscal evaluation, has observed that:- "At this juncture we are obliged to say that in a complex fiscal evaluation the Court has to apply the doctrine of restraint. Several aspects, clauses, contingencies, etc. have to be factored. These calculations are best left to experts and those who have knowledge and skills in the field. The financial computation involved, the capacity and efficiency of the bidder and the perception of feasibility of completion of the project have to be left to the wisdom of the financial experts and consultants. The courts cannot really enter into the said realm in exercise of power of judicial review. We cannot sit in appeal over the financial consultant's assessment. G Suffice it to.say, it is neither ex facie erroneous nor can we perceive as flawed for being perverse or absurd.

72Copy pinpoint72. In this context, a passage from A/cons Infrastructure Ltd. v. Nagpur Metro Rail Corporation Ltd. 25 is worth reproducing:- " 2016 (I 0) SCALE 69 .H "2016 (8) SCALE 765

RELIANCE TELECOM LTD. & ANR. v. UNION OF INDIA & 1033 ANR. [DIPAK MISRA, J.]

"We may add that the owner or the employer of a project, having authored the tender documents, is the best person to understand and appreciate its requirements and interpret its documents. The constitutional Courts must defer to this understanding and appreciation of the tender documents, unless there is mala fide or perversity in the understanding or appreciation or in the application of the terms of the tender conditions. It is possible that the owner or employer of a project may give an interpretation to the tender documents that is not acceptable to the constitutional Courts but that by itself is not a reason for interfering with the interpretation given."

73Copy pinpoint73. The said decision has been concurred with by another two- C Judge Bench in Montecarlo Ltd. v. NTPC Ltd. 26 stating thus:- "24. We respectfully concur with the aforesaid statement of law. w~ have reasons to do so. In the present scenario, tenders are floated and offers are invited for highly complex technical subjects. It requires understanding and appreciation of the nature of work D and the purpose it is going to serve. It is common knowledge in the competitive commercial field that technical bids pursuant to th~ notice inviting tenders are scrutinized by the technical experts and sometimes third party assistance from those unconnected with the owner's organization is taken. This ensures objectivity. Bidder's E expertise and technical capability and capacity must be assessed by the experts. In the matters of financial assessment, consultants are appointed. It is because to check and ascertain that tech'.lical ability and the financial feasibility have sanguinity and are workable and realistic. There is a multi-prong complex approach; highly technical in nature. The tenders where public largesse is put to F auction stand on a different compartment. Tender with which we are concerned, is not comparable to any scheme for allotment. This arena which we have referred requires technical expertise. Parameters applied are different. Its aim is to achieve high degree of perfection in execution and adherence to the time schedule. G But, that does not mean, these tenders will escape scrutir.y of judicial review. Exercise of power of judicial review would be called for if the approach is arbitrary or malafide or procedure adopted is meant to favour one. The decision making process 26 2016 (10) SCALE 50 H

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A should clearly show that the said maladies are kept at hay. But where a decision is taken that is manifestly in consonance with the language of the tender document or subserves the ;mrpose for which the tender is floated, the court should follow the principle of restraint. Technical evaluation or comparison by the court would be impermissible. The principle that is applied to scan and B understand an ordinary instmment relatable to contract in other spheres has to be treated differently than interpreting and appreciating tender documents relating to technical works and projects requiring special skills. The owner should be allowed to carry out the purpose and there has to be ailowance of free play c in the joints."

74Copy pinpoint74. It is necessary to add a clarification. In TANGEDCO (supra), the question arose with regard to grant of contract of a particular work and it involved a complex situation. In Montecarlo Ltd. (supra), the question was relating to technical evaluation and comparison. In the present case, we are concerned with putting certain natural resources into auction. In that regard, a decision has been taken. The grievances that have been adroitly accentuated are that the entire available spectrum should have been put to auction; that there should not have been any cap; that all could have been permitted to bid for everything; and that apart, the principle oflegitimate expectation ought to have been kept in view. The counter argument, as has been placed before us, is founded on two underlined principles, namely, to hold the auction whic.'1 would ·serve collective consumer interest thereby serving the public interest, and second, to get the maximum revenue. On one hand, the submission of the petitioners is that the auction is anti-competitive and on the other, the submission of the Central Government is that it is a healthy competition and avoidance of any kind of monopoly. There is also assurance in the reply that whatever has been left will be put to auction after getting the clearance from the defence and further keeping in view the a~pect of techno-economic and commercial eco-system feasibility. As far as the allocation to the defence and its need is concerned, it can be said that it is always in the realm of public interest and it subserves the interest of the nation. As far as the economic feasibility is concerned, multifold economic aspects have to be taken into consideration and as a resultant effect, as shown during the process of auction, the bids became higher and higher and there has been real competition whereby the offers have H

RELIANCE TELECOM LTD. & ANR. v. UNION OF INDIA & 1035 ANR. [DIPAK MISRA, J.]

been raised. There is remotely any allegation that attempt has been made to scuttle the competition. On the contrary, bidders have been allowed to bid and enhance their offer as a prudent commercial men would do. Therefore, it cannot be said that there has been no attempt to maximize the revenue. It will not be inapposite to note that the bidders who had preferred writ petitions and special leave petitions after having been successful in certain areas withdrew the petitions and in other areas where they were not able to bid because of the conditions in the tender, they have agitated their grievances.

75Copy pinpoint75. We have already discussed that the condition to put a cap and make a classification not allowing certain entities to bid is not an arbitrary one as it is based on the acceptable rationale of serving the cause of public interest. It allowed new entrants and enabled the existing entities to increase their cap to make the service more efficient. The Court cannot get and dwell as an appellate authority into complex economic issues on the foundation of competitors advancing the contention that they were not allowed to bid in certain spheres. As the stipulation in the tender was reasonable and not based on any extraneous considerations, the Court cannot interfere in the NIA in exercise of the power of judicial review. The contention is that the State cannot hoard the spectrum as per the 2G case. We are disposed to think that in tpe case at hand, it cannot be said that there has been hoarding. The directions given in the 2G case had been complied with and the auctions have been held thereafter from year to year. The feasibility of communication, generation of revenue and its maximization and subserving of public interest are to be kept in view. The explanation given by the Union of India for not putting the entire spectrum to auction is a reasonable one and it is put forth that an endeavour would be made to put it to auction when it becomes available in sufficient quantum. The Court cannot interfere with the tender conditions only on the ground that certain amount of spectrum has not been put to auction. The submission is that whatever has been put to auction and is available should have been notionally added so that the entities which have certain quantum of spectrnm in praesenti could have participated in the auction and put forth their bids for a higher quantum. This argument may look attractive on a first blush but pales into insignificance on a studied scrutiny. As is evincible, one of the petitioners had earlier more than 65 MHz in a band and because of the limited auction and non-addition ofavailable spectrum on notional basis, H

p. 1036 Copy page pinpoint

A it has obtained less quantum. With this submission, the contention of legitimate expectation has been associated. We have already repelled the submission pertaining to legitimate expectation. If there has been a reduction for a particular entity because of the terms and conditions of the tender, it has to accept it, for he cannot agitate a grievance that he could have obtained more had everything been added notionally. B Notionally adding up or not adding up, we think, is a matter of policy and that too a commercial policy and in a commercial transaction, a decision has to be taken as prudence would command. In this regard, reference to the decision in Asia Foundation & Construction Ltd. v. Trafalgar House Construction (I) Ltd. and others 27 would be apt. In the said c case, the Court referred to the authority in Tata Cellular (supra) and thereafter opined that though the principle of judicial review cannot tJ<>. denied so far as exercise of contractual powers of government bodies are concerned, but it is intended to prevent arbitrariness or favouritism and it is exercised in the larger public interest or if it is brought to the notice of the court that in the matter of award of a contract power has been exercised for any collateral purpose. In the instant case, we are unable to perceive any arbitrariness or favouritism or exercise of power for any collateral purpose in the NIA. In the absence of the same, to exercise the power of judicial review is not warranted. In the case at hand, we think, it is a prndent decision once there is increase ofrevenue and expansion of the range of service.

76Copy pinpoint76. It: needs to be stressed that in the matters relating to complex auction procedure having enormous financial ramification, interference by the Courts based upon any perception which is thought to be wise or assumed to be fair can lead to a situation which is not warrantable and may have unforeseen adverse impact. It may have the effect potentiality of creating a situation of fiscal imbalance. In our view, interference in such auction should be on the ground of stricter scmtiny when the decision making process commencing from NIA till the end smacks of obnoxious arbitrariness or any extraneous consideration which is perceivable.

77Copy pinpoint77. In view of the aforesaid analysis, we do not perceive any merit in these Transfer Cases and consequently, they are dismissed with no order as to costs.

Kalpana K. Tripathy Matters dismissed.

21 (1997) 1 sec 738