Bharti Airtel Limited and Anr.   Vs.  Union of India

WRIT PETITION NO.1461 OF 2013

WITH

Vodafone Idea Limited  Vs.  Union of India and Others 

WRIT PETITION NO.2029 OF 2013

(DB, Before Manish Pitale & Shreeram V. Shirsat, JJ., Delivered by Manish Pitale, J.)

Overview

In this case, the Bombay High Court delivered an important ruling concerning the power of the Government to retrospectively impose financial obligations on telecom operators. The dispute arose when Bharti Airtel Ltd. and Vodafone Idea Ltd. challenged the decision of the Union of India to levy a One-Time Spectrum Charge (OTSC) on spectrum held beyond 6.2 MHz. It was to be imposed retrospectively between July 2008 and December 2012.

It was contended by the petitioners that the financial terms governing their telecom licences had already been settled under the existing licensing framework and could not be changed after the licences had already been granted and acted upon.

On the other hand, the Union Government argued that the spectrum is a scarce natural resource and that the levy was justified in public interest under its powers under Section 4 of the Indian Telegraph Act, 1995.

The central question to be determined by the Court was whether the Government could retrospectively change the consideration which was payable under existing telecom licences through executive action and impose a fresh financial burden upon licensees years after the allocation of spectrum.

Facts of the Case

The cause of the dispute lies in the evolution of India’s telecom licensing regime. Under the National Telecom Policy, 1994, fixed licence fees were  payable by the telecom operators. However, due to certain financial difficulties faced by service providers, National Telecom Policy, 1999 was introduced by the Government which shifted the sector to a revenue sharing model. 

The existing operators shifted to this framework by paying an entry fee and agreeing to share a percentage of their Adjusted Gross Revenue (AGR) with the Government.

Under the Unified Access Service Licence regime, the telecom operators, including the petitioners, received additional spectrum beyond what was initially allocated. They paid enhanced licence fees for the same as prescribed under the license conditions and applicable policy.

In July 2008, the Department of Telecommunications first proposed charging operators for spectrum held beyond 6.2 MHz. The proposal resulted in a 2012 decision of the Union Cabinet, which directed the levy of an OTSC. Based on the same in January 2013, demand notices were issued seeking substantial amounts from the petitioners including the retrospective charges for spectrum which was already allocated and utilised. Aggrieved by the same, the petitioners approached the Bombay High Court.

Legal Issues

1. Whether the writ petitions were maintainable, despite a remedy being available before the Telecom Disputes Settlement and Appellate Tribunal (TDSAT).
2. Whether the telecom licences, granted under Section 4 of the Telegraph Act constitute contractual arrangements which are binding.
3. Whether the Government could on its own alter the financial consideration payable under an existing licence.
4. Whether Section 4 of the Telegraph Act allows for the retrospective imposition of fresh financial liabilities.
5. Whether the levy could be justified on the ground of public interest.

Decision

The Bombay High Court allowed the petition and the impugned demand notices were quashed.

It was held by the Court that telecom licences are contractual and certainty of consideration is a fundamental aspect of any binding agreement. Once the parties acted upon the agreed licence conditions, the Government could not unilaterally impose a financial liability without any specific statutory authority.

The Court further found that Section 4 of the Telegraph Act authorises the government to prescribe consideration while granting a license but does not permit retrospective revision of such consideration through executive action. The argument as to the public interest, automatically equating to revenue maximisation, was also rejected while observing that the telecom policy framework was designed to promote affordable telecommunication services.

The Court ruled that executive decisions cannot operate retrospectively unless such power is conferred by law. Since the levy sought to impose financial obligations for a period before the 2012 decision, it was held to be arbitrary and the OTSC demands were set aside in their entirety.