Thursday, February 2, 2012

Spectrum of Law: Extracts from Supreme Court’s 2G Scam Judgement

Writ petition (Civil) No. 423 of 2010 Centre for Public Interest Litigation and others Vs Union of India and others  and Writ Petition (Civil) No. 10 of 2011 Dr. Subramanian Swamy  Vs Union of India and others – (Division Bench of Justice GS Singhvi and Justice Asok Kumar Ganguly)          
“1.        The important questions which arise for consideration in these petitions ,.......

 (i)      Whether the Government has the right to alienate, transfer or distribute natural resources/national assets otherwise than by following a fair and transparent method consistent with the fundamentals of the equality clause enshrined in the Constitution?

(ii)      Whether the recommendations made by the Telecom Regulatory Authority of India (TRAI) on 28.8.2007 for grant of Unified Access Service Licence (for short ‘UAS Licence’) with 2G spectrum in 800, 900 and 1800 MHz at the price fixed in 2001, which were approved by the Department of Telecommunications (DoT), were contrary to the decision taken by the Council of Ministers on 31.10.2003?

 (iii)    Whether the exercise undertaken by the DoT from September 2007 to March 2008 for grant of UAS Licences to the private respondents in terms of the recommendations made by TRAI is vitiated due to arbitrariness and malafides and is contrary to public interest?

(iv)     Whether the principle of first-come-first-served followed by the DoT for grant of licences is ultra vires the provisions of Article 14 of the Constitution and whether the said principle was arbitrarily changed by the Minister of Communications and Information Technology (hereinafter referred to as ‘the Minister of C&IT’), without consulting TRAI, with a view to favour some of the applicants?

(v)     Whether the licences granted to ineligible applicants and those who failed to fulfil the terms and conditions of the licence are liable to be quashed?


58.  Question No.1.... even though there is no universally accepted definition of natural resources, the same can be understood as naturally occurring elements which have an intrinsic utility. They may be renewable or non renewable. They are thought of as the individual elements of the natural environment that provide economic and social services to human society and are considered valuable in their relatively unmodified, natural, form. A natural resource’s value rests in the amount of the material available and the demand for it. The latter is determined by its usefulness to production. As the State in which a natural resource is located benefits immensely from this value, natural resources are considered national assets. In Article 39(b) of the Constitution it has been provided that the ownership and control of the natural resources of the community should be so distributed so as to best sub-serve the common good but no comprehensive legislation has been enacted to generally define natural resources and framework for their protection. Of course, environment laws have been so framed that they deal with specific natural resources, i.e., Forest, Air, Water, Costal Zones, etc.

64.     The doctrine of equality which emerges from the concepts of justice and fairness guides the State in determining the actual mechanism of distribution of natural resources. It has two aspects: first, it regulates the rights and obligations of the State vis-à-vis its people and demands that the people be granted equitable access to natural resources and/or its products and that they are adequately compensated for the transfer of the resource to the private domain; and second, it regulates the rights and obligations of the State vis-à-vis private parties seeking to acquire/use the resource and demands that the procedure adopted for distribution is just, non-arbitrary and transparent and that it does not discriminate between similarly placed private parties.

67.     Question No.2: Although, while making recommendations on 28.8.2007, TRAI itself had recognised that spectrum was a scarce commodity, it made recommendation for allocation of 2G spectrum on the basis of 2001 price by invoking the theory of level playing field.  Paragraph 2.40 of recommendations dated 28.8.2007 shows that as per TRAI’s own assessment the existing system of spectrum allocation criteria, pricing methodology and the management system suffered from number of deficiencies and there was an urgent need to address the issues linked with spectrum efficiency and its management and yet it decided to recommend the allocation of spectrum at the price determined in 2001.  All this was done in the name of growth, affordability, penetration of wireless services in semi urban and rural areas, etc.  Unfortunately, while doing so, TRAI completely overlooked that one of the main objectives of NTP 1999 was that spectrum should be utilised efficiently, economically, rationally and optimally and there should be a transparent process of allocation of frequency spectrum as also the fact that in terms of the decision taken by the Council of Ministers in 2003 to approve the recommendations of the Group of Ministers the DoT and Ministry of Finance were required to discuss and finalise the spectrum pricing formula.  To say the least, the entire approach adopted by TRAI was lopsided and contrary to the decision taken by the Council of Ministers and its recommendations became a handle for the then the Minister of C&IT and the officers of the DoT who virtually gifted away the important national asset at throw away prices.  This becomes clear from the fact that soon after obtaining the licences, some of the beneficiaries off-loaded their stakes to others, in the name of transfer of equity or infusion of fresh capital by foreign companies, and thereby made huge profits.  We have no doubt that if the method of auction had been adopted for grant of licence which could be the only rational transparent method for distribution of national wealth, the nation would have been enriched by many thousand crores.

68.     While it cannot be denied that TRAI is an expert body assigned with important functions under the 1997 Act, it cannot, while making recommendations, overlook the basic constitutional postulates and principles and make recommendations which should deny majority of people from participating in the distribution of national assets/state property.  Therefore, even though the scope of judicial review in such matters is extremely limited, keeping in view of the facts which have been brought to the notice of this Court, we have no hesitation to record a finding that the recommendations made by TRAI were flawed in many respects and implementation thereof by the DoT resulted in gross violation of the objective of NPT 1999.

69.     Question Nos.3 and 4:  There is a fundamental flaw in the principle of first-come-first-served inasmuch as it involves an element of pure chance or accident.  In matters involving award of contracts or grant of licence or permission to use public property, the invocation of first-come-first-served principle has inherently dangerous implications.  Any person who has access to power corridor at the highest or the lowest level may be able to obtain information from the Government files or the files of the agency/instrumentality of the State that a particular public property or asset is likely to be disposed of or a contract is likely to be awarded or a licence or permission would be given.  He would immediately make an application and would become entitled to stand first in the queue at the cost of all others who may have a better claim.  This Court has repeatedly held that wherever a contract is to be awarded or a licence is to be given the public authority must adopt a transparent and fair method for making selections so that all eligible persons get a fair opportunity of competition. To put it differently, the State and its agencies/instrumentalities must always adopt a rational method for disposal of public property and no attempt should be made to scuttle the claim of worthy applicants.  When it comes to alienation of scarce natural resources like spectrum etc., the State must always adopt a method of auction by giving wide publicity so that all eligible persons may participate in the process.  Any other methodology for disposal of public property and natural resources/national assets is likely to be misused by unscrupulous people who are only interested in garnering maximum financial benefit and have no respect for the constitutional ethos and values.

70.     The exercise undertaken by the officers of the DoT between September, 2007 and March 2008, under the leadership of the then Minister of C&IT was wholly arbitrary, capricious and contrary to public interest apart from being violative of the doctrine of equality.  The material produced before the Court shows that the Minister of C&IT wanted to favour some companies at the cost of the Public Exchequer....

(iv)     In view of the approval by the Council of Ministers of the recommendations made by the Group of Ministers, the DoT had to discuss the issue of spectrum pricing with the Ministry of Finance.  Therefore, the DoT was bound to involve the Ministry of Finance before any decision could be taken in the context of paragraphs  2.78 and 2.79 of TRAI’s recommendations.  However, as the Minister of C&IT was very much conscious of the fact that the Secretary, Finance, had objected to the allocation of 2G spectrum at the rates fixed in 2001, he did not consult the Finance Minister or the officers of the Finance Ministry.


(vi)     The cut off date, i.e. 25.9.2007 decided by the Minister of C&IT on 2.11.2007 was not made public till 10.1.2008 and the first-come-first-served principle, which was being followed since 2003 was changed by him at the last moment through press release dated 10.1.2008.  This enabled some of the applicants, who had access either to the Minister or the officers of the DoT to get the bank drafts etc. prepared towards performance guarantee etc. of about 1600 crores.

(vii)    The manner in which the exercise for grant of LoIs to the applicants was conducted on 10.1.2008 leaves no room for doubt that every thing was stage managed to favour those who were able to know in advance change in the implementation of the first-come-first served principle.  As a result of this, some of the companies which had submitted applications in 2004 or 2006 were pushed down in the priority and those who had applied between August and September 2007 succeeded in getting higher seniority entitling them to allocation of spectrum on priority basis.

71.     The argument of Shri Harish Salve, learned senior counsel that if the Court finds that the exercise undertaken for grant of UAS Licences has resulted in violation of the institutional integrity, then all the licences granted 2001 onwards should be cancelled does not deserve acceptance because those who have got licence between 2001 and 24.9.2007 are not parties to these petitions and legality of the licences granted to them has not been questioned before this Court.

72.     ..... There cannot be any quarrel with the proposition that the Court cannot substitute its opinion for the one formed by the experts in the particular field and due respect should be given to the wisdom of those who are entrusted with the task of framing the policies.  However, when it is clearly demonstrated before the Court that the policy framed by the State or its agency/instrumentality and/or its implementation is contrary to public interest or is violative of the constitutional principles, it is the duty of the Court to exercise its jurisdiction in larger public interest and reject the stock plea of the State that the scope of judicial review should not be exceeded beyond the recognised parameters.  When matters like these are brought before the judicial constituent of the State by public spirited citizens, it becomes the duty of the Court to exercise its power in larger public interest and ensure that the institutional integrity is not compromised by those in whom the people have reposed trust and who have taken oath to discharge duties in accordance with the Constitution and the law without fear or favour, affection or ill will and who, as any other citizen, enjoy fundamental rights but is bound to perform duties.

73.     Before concluding, we consider it imperative to observe that but for the vigilance of some enlightened citizens who held important constitutional and other positions and discharge their duties in larger public interest and Non Governmental Organisations who have been constantly fighting for clean governance and accountability of the constitutional institutions, unsuspecting citizens and the Nation would never have known how scarce natural resource spared by the Army has been grabbed by those who enjoy money power and who have been able to manipulate the system.

74.     In the result, the writ petitions are allowed in the following terms:

(i)      The licences granted to the private respondents on or after 10.1.2008 pursuant to two press releases issued on 10.1.2008 and subsequent allocation of spectrum to the licensees are declared illegal and are quashed.

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

(iii)     Within two months, TRAI shall make fresh recommendations for grant of licence and allocation of spectrum in 2G band in 22 Service Areas by auction, as was done for allocation of spectrum in 3G band.

(iv)     The Central Government shall consider the recommendations of TRAI and take appropriate decision within next one month and fresh licences be granted by auction.

(v)     Respondent Nos.2, 3 and 9 who were benefited by a wholly arbitrary and unconstitutional action taken by the DoT for grant of UAS Licences and allocation of spectrum in 2G band and who off-loaded their stakes for many thousand crores in the name of fresh infusion of equity or transfer of equity shall pay cost of Rs.5 crores each.  Respondent Nos. 4, 6, 7 and 10 shall pay cost of Rs.50 lakhs each because they too had been benefited by the wholly arbitrary and unconstitutional exercise undertaken by the DoT for grant of UAS Licences and allocation of spectrum in 2G band.

(vi)     50% of the cost shall be deposited with the Supreme Court Legal Services Committee for being used for providing legal aid to indigent litigants.  The remaining 50% cost shall be deposited in the Prime Minister’s Relief Fund.

(vii)    However, it is made clear that the observations and conclusions contained in this order shall not, in any manner, affect the pending investigation by the CBI, Directorate of Enforcement and others agencies or prejudice the defence of those who are facing prosecution in the cases registered by the CBI and the Special Judge, CBI shall decide the matter uninfluenced by this judgment.

Please note: The relevance of extracts and emphasis supplied are purely based on my understanding of the law and its implications.  You may refer to the original judgement for a comprehensive view.  

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