LOOP TELECOM AND TRADING LIMITED versus UNION OF INDIA AND ANR. on 3 March 2022

LOOP TELECOM AND TRADING LIMITED

v.

UNION OF INDIA AND ANR.

(Civil Appeal Nos. 1447-1467 of 2016)

MARCH 03, 2022

[DR. DHANANJAYA Y CHANDRACHUD, SURYA KANTAND VIKRAM NATH, JJ.]

Telecommunication: Contract Act, 1872 – ss.65, 23, 56 –Unified Access Service Licenses (UASL) – 2G Spectrum – IllegalAllocation – Claim for Refund of Entry Fee – In the instant case,the appellant applied for grant of UASL for 21 service areas – Inthe meantime, the Court in Centre for Public Interest Litigation v UnionOf India declared the policy of the Union for allocation of 2Gspectrum as illegal holding that such policy was arbitrary in natureas it provided allocation on the basis of “First Come First Serve”and therefore opened the door of biasness – On the basis of thesaid judgment the appellant sought relief of refund of Entry Feebefore the Telecom Disputes Settlement and Appellate Tribunalbasing the plea that the allocation was in the nature of the contractand the same has become void in the light of the aforesaid judgmentand hence the appellant is entitled to recourse u/ss.65, 23 &56 ofContract Act – The Tribunal dismissed the appellant’s plea on theground that the quashing of the appellant’s license in the aforesaidjudgment cannot be equated with the UASL agreement becomingvoid within the meaning of s.65 and also that the same has notbecome void u/ss.23 and 56 of the Act – The tribunal further heldthat since the appellant was at pari delicto hence could not claimrefund of Entry Fee – On appeal, held – The appellant was in paridelicto with the Department of Telecommunication, the 2G spectrumallocation exercise of which was held illegal, arbitrary andconstitutionally infirm by the court in the above referred judgment– Further since the appellant was at fault hence could not claimrecourse to s. 65 of the Act – Also that the appellant was party inthe above referred case and despite knowing the fact that the Courtin such case was to quash the process of allocation and award ofthe licenses in which it did not claim refund of Entry Fee and hencecould not be allowed to raise such plea in the present case.

A

B

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DEF

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ATelecom Regulatory Authority of India Act 1997: ss.14, 15,16, 18 – Telecom Disputes Settlement and Appellate Tribunal –Jurisdiction – Scope and Extent – The jurisdiction of civil courtshas been ousted by s.15 – s.16 enables the TDSAT to regulate itsown procedure, guided by the principles of natural justice – Anappeal on a substantial question of law lies to Supreme Court underBs.18 of the TRAI Act – TDSAT was a creature of statute and wasempowered to determine its jurisdiction, subject to the constraintsstipulated in the statute – s.14, as such, does not put any constraintson the jurisdiction of the TDSAT – Telecommunication.

A

Contract Act, 1872 – ss. 20, 56, 65 – Scope – The expressionC“discovered to be void” u/s.20 comprehend a situation in whichparties were suffering from a mistake of fact from the very beginningbut had not realized at the time of entering into the agreement orsigning of the documents that they were suffering from any suchmistake and had therefore acted bona fide while entering into suchDagreements – The word “impossible” u/s 56 has to be construed inits practical sense and not just in its literal sense – s.65 does notoperate in derogation of the maxim in pari delicto potior est conditiopossidentis – The application of s.65 has to be limited to those caseswere the party claiming restitution itself was not in pari delicto.

EDismissing the appeals, the Court

Conclusion

EDismissing the appeals, the Court

HELD: 1. The decision of this Court in CPIL, which wasrendered on 2 February 2012, arose from petitions under Article32 of the Constitution. The petitions questioned the grant ofUASLs to the private respondents in those proceedings (whichFincluded the appellant), on the ground that the procedure whichwas adopted by DoT was arbitrary, illegal and in violation of Article14 of the Constitution. This Court held that an auction conductedafter due publicity was perhaps the best method for fulfilling theconstitutional requirement of preserving equity in the alienationof natural resources. In the absence of such a mechanism, thisGCourt held that alienation of natural resources/public property islikely to be misused by unscrupulous people who are onlyinterested in garnering maximum financial benefit and have norespect for constitutional ethos and values. This Court found thateverything was stage-managed to favour of those who were able toH

know in advance the change in the implementation of the first-come-first served policy. [Paras 12, 15, 17][350-F-G; 352-G-H; 355-F]

2. Reading the judgment in CPIL, it is impossible to acceptthe submission that the fraud in the- First Come First Serve policylay at the doorstep of the Union government alone and that theappellant was free from taint or wrong doing. The decision of thisCourt held that the - First Come First Serve policy was writ largewith arbitrariness, and was intended to favour certain specificentities at a grave detriment to the public exchequer. Undoubtedly,the authors of the First Come First Serve policy were the officialactors comprised within the Union government. But equally, thedecision did not exculpate the private business entities whoobtained UASLs and became the beneficiaries of their decision.The decision of this Court concludes in no uncertain terms thatthe then Minister of Communications and Information Technologywanted to favour of some companies at the cost of the publicexchequer, and that as a matter of fact the entire process was¯stage-managed to favour those who had access to the nitty-grittiesof the policy in advance. As a result, the Court found thatcompanies which had submitted applications in 2004 or 2006 wereside-lined by favouring those who had applied between Augustand September 2007 and who ¯succeeded in getting higher seniorityentitling them to allocation of spectrum on priority basis. Thebeneficiaries of the patently unconstitutional mechanism deployedfor the allocation of spectrum were corporate entities who werefavoured under the ¯First Come First Serve policy. The appellantis one of them. The distinction made by the judgment of this Courtbetween the three licensees who were subjected to costs of Rs 5crores and four licensees, including the appellant, who weresubject to costs of Rs 50 lakhs was because in the case of a formertheir stakes had been offloaded ostensibly in the name of a freshinfusion or transfer of equity. However, it is evident that all theselicensees were complicit in the illegal exercise of obtainingfavours for themselves by the indulgence of those in power. That,above all, was the foundation of the decision in CPIL and thejustification for quashing licences and the allocation of the 2Gspectrum. This Court then directed the TRAI to frame freshrecommendations for the grant of licences and for the allocation AB

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Aof spectrum in the 2G band in twenty-two service areas by auction,as was done for the allocation of spectrum in the 3G band. Thus,the decision in CPIL leaves no manner of doubt that the appellantwas in pari delicto along with the Union government. [Paras 18,20][357-A-E, G-H; 358-A-C]

BCentre for Public Interest Litigation v. Union of India(2012) 3 SCC 1 : [2012] 3 SCR 147 – relied on.

3. The appellant made no effort to urge during the courseof the submissions before the Court in CPIL that they should beallowed a refund of Entry Fee in the event that the Court were toCquash the process and the award of licences. Significantly, theappellant did not seek the permission of this Court at that stageto reserve their liberties of agitating a claim for refund of EntryFee in separate proceedings. Besides having such a course ofaction open to them before the judgment was delivered, theappellants had their remedies open in law even after the decisionDby seeking liberty of adopting independent proceedings foragitating the refund of the Entry Fee. Not having done this at anystage in, or in connection with, the proceedings relating to thedecision in CPIL, the appellant cannot be permitted to do sosubsequently. [Para 37][371-E-G]

E

4. The TRAI Act governs the functioning of the TDSAT.The jurisdiction of civil courts has been ousted by Section 15.Section 16 enables the TDSAT to regulate its own procedure,guided by the principles of natural justice. An appeal on asubstantial question of law lies to this Court under Section 18 ofFthe TRAI Act. Section 14(a) of the TRAI Act empowers theTDSAT to adjudicate any dispute: (i)Between a licensor andlicensee; (ii)Between two or more service providers; and(iii)Between a service provider and a group of consumers. [Paras26 and 27][361-B-D]

GCellular Operators Association of India v. Union ofIndia (2003) 3 SCC 186 : [2002] 5 Suppl. SCR 222;Union of India v. TATA Teleservices (Maharashtra Ltd)(2007) 7 SCC 517 : [2007] 9 SCR 285 - relied on.

H

5. In Tarsem Singh, this Court was confronted with acontract being void under Section 20 of the Indian Contract Actas the parties were under a mistake of fact regarding the metricfor assessing the area of land that was the subject of the contract.This Court, while interpreting the expression discovered to bevoid , held that these words comprehend a situation in whichparties were suffering from a mistake of fact from the verybeginning but had not realized at the time of entering into theagreement or signing of the documents that they were sufferingfrom any such mistake and had therefore acted bona fide whileentering into such agreements. In determining a claim ofrestitution, the claiming party’s legal footing in relation to theillegal act (and in comparison to the defendant) must beunderstood. Unless the party claiming restitution participated inthe illegal act involuntarily or the rule of law offers them protectionagainst the defendant, they would be held to be in pari delicto andtherefore, their claim for restitution will fail. In adjudicating aclaim of restitution under Section 65 of the Indian Contract Act,the court must determine the illegality which caused the contractto become void and the role the party claiming restitution hasplayed in it. If the party claiming restitution was equally or moreresponsible for the illegality (in comparison to the defendant),there shall be no cause for restitution. This has to be determinedon the facts of each individual case. [Paras 43, 48, 52][375-A-C;378-B-C; 382-E-F]

Tarsem Singh v. Sukhmindar Singh (1998) 3 SCC 471;Kuju Collieries Ltd. v. Jharkhand Mines Ltd. (1974) 2SCC 533 : [1975] 1 SCR 703; Inmani Appa Rao v.Gollapalli Ramalingamurthi [1962] 3 SCR 739;Narayanamma v. Govindappa 2019 (19) SCC 42;Satyabrata Ghose v. Mugneeram Bangur & Co. [1954]SCR 310 – relied on.

6. The appellant was in pari delicto with DoT and the thenofficials of the Union government. The appellant was thebeneficiary of the First Come First Serve policy which wasintended to favour a group of private bidding entities at the costof the public exchequer. The contention of the appellant that it AB

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Awas exculpated from any wrong doing by the judgment of thisCourt in CPIL is patently erroneous. The process leading up tothe award of the UASLs and the allocation of the 2G spectrumwas found to be arbitrary and constitutionally infirm. The needfor an open and transparent bidding process for the allocation ofnatural resources was substituted by a process which wasBdesigned to confer unlawful benefits on a group of selected biddersby which the appellant benefitted. The appellant has tried toobviate these findings by relying on its acquittal by the SpecialJudge, CBI. The criminal trial before the Special Judge, CBIwas limited to the question as to whether the promoters of theCappellant had cheated the DoT by providing a false representationof its compliance with Clause 8 of the UASL Guidelines, since itwas allegedly being controlled by the Essar group. The SpecialJudge, CBI acquitted the promoters of the appellant since theprosecution was unable to prove that: (i) officers of DoTconsidered the representation of the appellant to be false; (ii)Dthe appellant was engaging in a sham transaction; or (iii) theappellant was actually controlled by the Essar group. Hence, theacquittal of the promoters of the appellant of these criminalcharges does not efface or obliterate the findings which arecontained in the final judgment of this Court in CPIL. Hence, asEa beneficiary and confederate of fraud, the appellant cannot belent the assistance of this Court for obtaining the refund of theEntry Fee. In any event, such a course of action before the TDSATwas clearly in the teeth of the judgment of this Court in CPIL.[Para 60][387-F-H; 388-A-D]FUnion of India v. Telecom Regulatory Authority of India(1998) 46 DRJ 557; Tarsem Singh v. Sukhminder Singh1998 (3) SCC 471 : [1998] 1 SCR 456; Vedanta Ltd. v.The Goa Foundation & Ors. Review Petition (Civil)Diary No. 18447 of 2020 (9 July 2021); Goa FoundationGv. Sesa Sterlite Limited & Ors. (2018) 4 SCC 218 :[2018] 2 SCR 361; T P Moideen Koya v. Governmentof Kerala (2004) 8 SCC 106 : [2004] 4 Suppl. SCR 904; R K Garg v. Union of India (1981) 4 SCC 675 : [1982]1 SCR 947 – relied on.

A

S Tel Pvt. Ltd. v. Union of India 2015 SCC OnLineTDSAT 1 – distinguished.

Union of India v. Karam Chand Thapar and Bros. (CoalSales) Ltd. (2004) 3 SCC 504 : [2004] 2 SCR 997;Union of India v. AUSPI 5 (2011) 10 SCC 534 – referred B

to.

Patel v. Mirza [2016] 3 WLR 399; Holman v. Johnson(1775) 1 Cowp 341, 343; 98 ER 1120, 1121 – referredto.

C

R Yashod Vardhan and Chitra Narayan, Pollock &Mulla The Indian Contract and Specific Relief ActsVolume I (16th edition, LexisNexis) – referred to.

Case law reference

CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 1447-1467 of 2016.

G

From the Judgment and Order dated 16.09.2015 of the TelecomDisputes Settlement Appellate Tribunal, New Delhi in Petition Nos.329,435-449 and 451-455 of 2012.

With

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Civil Appeal No. 893 of 2019.

ADr. Abhishek Manu Singhvi, Huzefa Ahmadi, Sr. Advs., Ms. ParulShukla, Amit Bhandari, Prateek Gupta, Ms. Madhavi Agrawal, Ms.Anwesha Padhi, Advs. for the Appellant.

Vikramjit Banrejee, ASG, Akshay Amritanshu, Nachiketa Joshi,Apoorv Kurup, T. S. Sabarish, Mohd. Akhil, Gurmeet Singh Makker,BAdvs. for the Respondents.

The Judgment of the Court was delivered by DR. DHANANJAYA Y CHANDRACHUD, J.

AThe Appeals.................................................................3*

C

BSubmissions of Counsel.................................................7*CThe CPIL judgment......................................................22*DThe claim for refund of Entry Fee.................................31*EJurisdiction of TDSAT.................................................34*FThe claim founded on frustration and restitution.............50*GThe policy of set off......................................................65*

D

HConclusion...............................................................69*

A The AppealsE

1. These appeals under Section 18 of the Telecom RegulatoryAuthority of India Act 1997[1] arise from the judgments dated 16 September2015 and 11 December 2018 of the Telecom Disputes Settlement andAppellate Tribunal[2]. The appellant claimed a refund of Rs 1454.94 croresrepresenting the Entry Fee (together with interest) paid by it for 2GFlicences for twenty-one service areas. By the judgment of this Court inCentre for Public Interest Litigation v. Union of India[3], the 2Glicences which were granted by the Union of India, including to theappellant, were quashed. The appellant claims to be entitled to the refundof its Entry Fee on, as it contends, “well settled principles of civil,contractual and constitutional law”.G

1 “TRAI Act”2 “TDSAT”3 (2012) 3 SCC 1 (“CPIL”)H* Pagination is as per the original judgment.

2. The appellant applied for the grant of Unified Access ServiceLicences[4] for twenty-one service areas on 3 September 2007. A Letterof Intent was issued. The appellant paid the circle wise Entry Fee of Rs1.1 crores and furnished a Performance Bank Guarantee and FinancialBank Guarantee for the twenty-one areas. The appellant entered intoUASL agreements on 3 March 2008 for the twenty-one service areaswith the respondent, which came into effect from 25 January 2008.Among the conditions which were stipulated in the UASL agreements,those governing the duration of the licence and the Entry Fee were inthe following terms:

“3. Duration of License

3.1 This LICENCE shall be valid for a period of 20 years fromthe effective date unless revoked earlier for reasons as specifiedelsewhere in the document.

[…]

18. FEES PAYABLE

18.1 Entry Fee:

One Time non-refundable Entry Fee of Rs 1.1 crore has beenpaid by the LICENSEE prior to signing of this License agreement.”

3. On 2 February 2012, this Court by its judgment in CPIL (supra)declared that the policy of the Union government for allocation of 2Gspectrum on a “First Come First Serve” basis was illegal. As aconsequence, the UASLs which were granted by the Union governmentwere quashed. On 25 May 2012, the appellant instituted a petition[5] beforethe TDSAT seeking, among other things, a refund of the Entry Fee ofRs 1454.94 crores, inclusive of interest. The appellant has stated that on1 June 2012 it shut down its operations after porting out all its subscribers.

4. By its judgment dated 16 September 2015, the TDSAT dismissedthe First Telecom Petition holding, inter alia, that:

(i) The quashing of the appellant’s licences by this Court inits judgment in CPIL (supra) cannot be equated with theUASL agreements becoming void within the meaning of 4 “UASL”

5 Petition No 329 of 2012 (“First Telecom Petition”)

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Section 65 of the Indian Contract Act 1872[6]. This Courtquashed the UASLs since it found the Union government’spolicy of “First Come First Serve” to be illegal andarbitrary. Hence, the appellant cannot claim restitutionunder Section 65; A

B(ii)The quashing of the appellant’s licences by this Court in itsjudgment in CPIL (supra) cannot be brought under theIndian Contract Act, since the UASL agreements had notbecome void under Sections 23 and 56 of the Indian ContractAct; and C(iii)Even assuming that the appellant’s UASL agreementsbecame void under the Indian Contract Act, its claim forrestitution under Section 65 would be governed by theprinciple of in pari delicto potio rest conditiondefendentis (in equal fault, better is the condition of thepossessor). A refund of the Entry Fee could not be madeDuntil the possibility of the appellant being in pari delictowas completely effaced. When the TDSAT delivered itsjudgment, the appellant was facing trial before the SpecialJudge, CBI for charges under Section 120-B and 420 ofthe Indian Penal Code 1860 in a case relating to the grantEof UASLs.

By a judgment dated 21 December 2017, the appellant wasacquitted of criminal charges by the Special Judge, CBI. The CentralBureau of Investigation has filed a petition for leave to appeal againstthe order of acquittal, which is presently pending before the Delhi HighFCourt.

5. Aggrieved by the judgment of the TDSAT dated 16 September2015, the appellant moved this Court in Civil Appeal Nos 1447-1467 of2016. On 13 May 2016, the appellant sought liberty of this Court towithdraw the civil appeals, and to approach this Court once again if itGbecame so necessary. Leave was accordingly granted by this Court.

6. The appellant then instituted another petition before the TDSAT[7]raising the issue of a refund of the Entry Fee, on the ground that it had 6 “Indian Contract Act”H7 Telecom Petition No 63 of 2018 (“

7 Telecom Petition No 63 of 2018 (“Second Telecom Petition”)

A

been exonerated by the Special Judge, CBI. By its judgment dated 11December 2018, the TDSAT dismissed the Second Telecom Petitionnoting that the appellant had made a second attempt for claiming thesame relief which had been sought earlier in the First Telecom Petition.It further held that had the TDSAT sought to provide the appellant withthe remedy of approaching it after the conclusion of the trial before theSpecial Judge, CBI, it would have indicated it in its judgment. Finally, itwas also noted that this Court, through its order dated 13 May 2016, didnot grant the appellant the leave to approach the TDSAT but only toapproach this Court.

B

The judgment dated 11 December 2018 has given rise to the filingof the second set of civil appeals[8] by the appellant. The appellant alsomoved a Miscellaneous Application[9] in Civil Appeal Nos 1447-1467 of2016 seeking permission for the revival of the earlier civil appeals, whichhad been permitted to be withdrawn on 13 May 2016.

C

7. By an order dated 7 January 2020, the MiscellaneousApplications seeking the revival of the first set of civil appeals wereallowed, keeping open all the contentions including the contentions ofthe respondents based on the earlier order dated 13 May 2016. Thisjudgment will accordingly govern both, the original set of civil appealswhich stand revived in pursuance of the order dated 7 January 2020 andthe second set of civil appeals.

DE

B Submissions of Counsel

8. Dr A M Singhvi, learned Senior Counsel appearing on behalf ofthe appellant, has urged the following submissions:

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(i) Since the licences of the appellant were quashed by thejudgment of this Court in CPIL (supra), the appellant isentitled to a refund of its Entry Fee based on civil, contractualand constitutional principles;

(ii) The appellant paid an Entry Fee of Rs 1454.94 crores fortwenty-one service areas and the licences were valid for aGperiod of twenty years. The appellant was prevented fromproviding services under the licences because:

8 Civil Appeal No 893 of 2019

9 Miscellaneous Application Nos 198-218 of 2019

H

(a) This Court held that respondent’s “First Come FirstServe” policy for grant of licences was flawed,arbitrary and illegal; and A

(b) As a consequence, licences which were grantedunder said the policy (including the licences of theBappellant) were quashed;

(iii) The quashing of the licences by this Court amounted to afrustration of each licence, which was in the nature of acontract, in terms of Section 56 of the Indian Contract Act.Consequently, the appellant is entitled to a restitution of theCEntry Fee paid in terms of Section 65, as the licences werequashed not on account of the fault of the appellant but dueto the culpability of the Union government;

(iv) The well settled principle is that no person can be prejudicedbecause of an act of a court (actus curiae neminemgravabit); D

(v) The substratum of TDSAT’s decision which disallowed theclaim of the appellant in view of the pending criminalproceedings has been wiped off by the acquittal of theappellant by the Special Judge, CBI; E(vi)The set off policy of the Union government, in terms ofwhich a set off of the Entry Fee which was paid was grantedonly to those entities who participated in the fresh round ofauction which took place after the judgment of this Court inCPIL (supra), is based on incorrect classification whichFlacks intelligible differentia and nexus to its object. Further,the set off policy suffers from manifest arbitrariness and isdiscriminatory. Thus, it should be struck down as beingviolative of Article 14 of the Constitution;

(vii) The set off policy of the Union government allowing thegrant of a set off of the Entry Fee, albeit to certain bidders,Gis an admission of a debt that is due and payable:

(a) On 12 October 2012, the respondent issued “Queriesand Responses to an NIA” and in answer to QueryNumber 74 regarding the set off of Entry Fee, it wasstated as follows:

H

“A set-off is allowed against the Earnest Moneyand the payment due in the event of spectrumbeing won in this auction. The total amount ofsuch set off shall be limited to the total entry feepaid by the entity for all its licenses which havebeen quashed by the Supreme Court. No interestwill be due on this amount.”

(b) The Empowered Group of Ministers[10] held a meetingon 18 October 2012, at which a decision was takenin the following terms:

“13. The EGoM considered the letter dated12.10.2012 from the Minister of Information andBroadcasting regarding set-off of entry fee againstthe earnest money and payment due in the eventof spectrum being won and noted that the entryfee paid by TSPs whose licenses were quashedwas for a period of 20 years. While on one hand,the TSPs could be expected to have paid a pro-rata amount for the period of operation of thelicense, i.e. 2008-2012, on the other hand, therecould be a claim for refund with interest for thepro-rata amount for the balance period.Therefore, the EGoM decided to allow suchTSPs to adjust an amount equivalent to theirfull entry fee, without any interest, againstthe auction payments, both for participationand/or final payment on successfulconclusion. It was clarified that the set-offwould be permitted only to the quashedlicense holders participating in the auction.Such set-off would be allowed to the extentof total entry fee paid for all quashed licenseson an aggregate basis without considerationof the expired period of license, only if theysucceed in the auction…”

G

342SUPREME COURT REPORTS

A(c)Pursuant to the above policy of granting a set off,the Union government has granted a set off of theEntry Fee to Telewings (formerly Uninor), Videocon,Idea Cellular Limited and Sistema Shyam. Inparticular, a set off has been granted to Telewingsdespite there being grave criminal charges against itBincluding, inter alia, charges under the Preventionof Corruption Act 1988;

(viii) The proposition that the policy of the Union of India to permitthe grant of a set off of the Entry Fee amounts to anadmission that a refund of the Entry Fee is payable andCdue, finds support in the decision of this Court in Union ofIndia v. Karam Chand Thapar and Bros. (Coal Sales)Ltd.[11];

(ix) The non-refund of the Entry Fee to the appellant isdiscriminatory for the following reasons:

D

(a) A set off towards the fee payable for the spectrumhas been permitted to those Telecom ServiceProviders[12] who participated in and won spectrum inthe subsequent auction after the judgment of thisCourt in CPIL (supra); E

(b) The licences of eight TSPs were quashed by thisCourt by its judgment in CPIL (supra). There cannotbe any distinction or classification in law betweenthe said eight TSPs and similar treatment must beafforded to all. The classification based on theirFdecision to participate in the subsequent auction forrefund of Entry Fee is discriminatory and has nonexus with the object sought to be achieved by theset off policy;

(c) Out of the eight TSPs, four TSPs participated in theGsubsequent auction and were permitted a set off oftheir Entry Fee towards payment for the auctionallotted spectrum. Details of the cases where a setoff was granted are:

11 (2004) 3 SCC 504H12 “TSPs”

The remaining four TSPs, including the appellant, did notparticipate in the subsequent auction for spectrum. Theirdetails are tabulated below:

C

D

E

(d) TDSAT afforded differential treatment to theappellant due to the pendency of criminal proceedingsagainst it. In any event, this ground ceases to exist inview of the acquittal of the appellant of criminalcharges on 21 December 2017 by the Special Judge,CBI. Following the appellant’s acquittal, there is norationale for denying refund of Entry Fee to theappellant;

(x) The set off policy penalises a business entity for taking acommercial decision not to participate in the subsequentauction. Whether or not an entity should have participatedin the auction of spectrum following the decision of this F

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344SUPREME COURT REPORTS

Court in CPIL (supra) was entirely for each of them todetermine and this cannot form the basis for granting ordenying a set off; A

(xi) The non-refund of the Entry Fee to the appellant suffersfrom manifest arbitrariness:

B

(a) The set off policy creates a separate class betweensimilarly placed TSPs whose licences were quashed,on the basis of whether or not a bidder or entity haschosen to participate in the fresh auction; and (b)A business entity may have valid reasons not toparticipate in the fresh auction, for which it cannotbe penalized; C

(xii) The appellant ought not to be punished for the wrongdoingof the respondent:

(a) In the judgment in CPIL (supra), this Court held thatthe “First Come First Serve” policy of the Uniongovernment for the grant of telecom licenses wasflawed, arbitrary and illegal; D

(b) This Court further imposed costs of Rs 5 crores uponthose licence holders before it who had benefitted atEthe cost of the public exchequer and had offloadedtheir stakes for thousands of crores in name of freshinfusion of or transfer of equity. On the other hand,costs of only Rs 50 lakhs were imposed on thoselicence holders (including the appellant) who hadFallegedly benefited by the wholly arbitrary andunconstitutional action of the Department ofTelecommunication[13] for the grant of UASLs andthe allocation of the 2G spectrum band. Hence, norole was attributed to the appellant for quashing ofits licenses; G

G

(c) In any event, the appellant has been acquitted ofcriminal charges on 21 December 2017 by the SpecialJudge, CBI; H13 “DoT”

14 “Telegraph Act”

15 (2011) 10 SCC 534 (“AUSPI”)

A(e)In the absence of any legislative interventionprecluding the grant of the refund, the rights of theparties would be governed by the law of contract.Thus, the doctrine of frustration under Section 56and the principle of restitution under Section 65 ofthe Indian Contract Act would stand attracted in theBpresent case; (f)Judicial orders are declaratory and retrospective innature. The judgment in CPIL (supra) relates backto the validity of the licences. The appellant had onlysix thousand subscribers before the licences wereCquashed and was in the phase of rolling out andinvesting capital as a result of which it did not acquireany substantial benefit; (g)Since the licences were provided on a representationthat they would have a tenure of twenty years butDwere declared to be void within four years due to theflawed policy of the Union Government, the appellantwill be entitled to refund of the Entry Fee with interest;and (h)The respondent is estopped from relying upon theEUASL Guidelines and UASL agreements, whichprovide that the Entry Fee is non-refundable. This isbecause the licences were not quashed either due toa default on part of the appellant or its withdrawal,but due to the policy of the Union government beingfound to be illegal and arbitrary; andF

(xiv) The decisions[16] of this Court in the relation to the paymentof Adjusted Gross Revenue[17] have no relevance to thepresent case.

9. Opposing the submissions which have been urged on behalf ofthe appellant, Mr Vikramjit Banerjee, learned Additional Solicitor General,Gappearing on behalf of the Union of India has urged the followingsubmissions:

16 Union of India v. Association of Unified Telecom Service Providers of India andOrs., (2020) 3 SCC 525; and Union of India v. Association of Unified TelecomService Providers of India and Ors., Civil Appeal Nos 6328-6399 of 2015H17 “AGR”

(i) The Entry Fee paid by the appellant is specifically madenon-refundable by the UASL Guidelines which were issuedby the DoT on 14 December 2005. Once the Letters ofIntent were issued to the appellant for twenty-one serviceareas, the appellant deposited the Entry Fee for each circlein accordance with the UASL Guidelines on 10 January2008. The appellant became eligible for the issuance ofUASLs for each of the twenty-one service areas onlythereafter. The UASL agreements which were entered intobetween the Union Government and the appellant on 4March 2008 expressly contemplated that the Entry Fee wasa one-time non-refundable fee. The Entry Fee being non-refundable in nature, the appellant cannot now seek a refund;

(ii) The issues which are sought to be raised in the present civilappeals are squarely governed by the judgment in CPIL(supra). The judgment of this Court examined the validityof the licences and spectrum allocation made to the licenseesincluding the appellant. The judgment in CPIL (supra) foundthat the licensees had unfairly gained access to the thenMinister in-charge as well as certain officers of the DoT inorder to gain preferences. This Court found that the grantof licences was “stage-managed” to favour specificlicensees, including the appellant, as a result of which costsof Rs 50 lakhs were also imposed on them;

(iii) While quashing the grant of the licences, the judgment inCPIL (supra) did not grant any refund of the Entry Fee.The claim for restitution not having been allowed by thisCourt in CPIL (supra), the appellant cannot seek to do soat this stage;

(iv) After the judgment in CPIL (supra) quashing the UASLsgranted to the appellant, the appellant has ceased to be alicensee for the purposes of Section 14(1)(a) of the TRAIAct, which empowers the TDSAT to adjudicate disputesbetween a licensor and a licensee. The TDSAT did nothave jurisdiction under the provisions of Section 14(1)(a).In any event, the TDSAT by its judgment dated 16September 2015 rejected the appellant’s claim for refundon the ground that it was incompetent to do so, the licences A

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having been quashed by the judgment of this Court. Havingmoved this Court in the first set of civil appeals, the appellantwithdrew the civil appeals on 13 May 2016, though withliberty to move this Court again, if it became so necessary.Thus, in view of the order dated 13 May 2016, the appellantcould have only moved this Court and not TDSAT. However,it instituted a Second Telecom Petition before the TDSAT.The TDSAT by its judgment dated 11 December 2018rejected the second attempt of the appellant for claimingthe same relief, since this would essentially amount to areview of the judgment in CPIL (supra). Thus, moving theSecond Telecom Petition was not only contrary to Section14 of the TRAI Act but also in violation of the text andspirit of the order dated 13 May 2016 of this Court;

(v) The decision of the EGoM dated 31 October 2012 grantingset off to those bidders who had participated and were foundto be successful in the fresh round of auctions was a one-time concession offered to TSPs whose licences werequashed earlier, in order to ensure that telecom serviceswere provided to consumers in an uninterrupted manner.The decision in CPIL (supra) did not bar licensees fromparticipating in the subsequent auction. Since the Entry Feespaid by licensees covered by the judgment in CPIL (supra)could not have been refunded, the EGoM decided to adjusttheir Entry Fee in the subsequent auction in the event thatthey were declared successful. It was believed that thiswould encourage the participation of all TSPs in thesubsequent auction and increase the prospects of a higherprice discovery, thereby ultimately benefitting the publicexchequer. This set off policy was uniformly applied to alllicensees covered by the judgment in CPIL (supra),including the appellant, and thus is not discriminatory. NoTSP covered by the decision in CPIL (supra) was compelledto participate in the subsequent auction being conducted bythe DoT by the virtue of the set off policy. Rather, the policyonly sought to increase participation in the subsequentauction by offering a concession in the form of set off of the previously paid Entry Fee, in case they emergedsuccessful in the fresh auction. Being a policy decision involving industry specific issues, this Court should becircumspect in interfering with this decision of the Uniongovernment;

(vi) The acquittal of the promoters of the appellant in the criminalcase has no bearing on the refund of the Entry Fee. Thejudgment of the Special Judge, CBI acquitting the promotersof the appellant was only concerned with the allegedviolation of Clause 8 of the UASL Guidelines issued byDoT. The acquittal has no bearing on the findings of thisCourt in CPIL (supra), according to which UASL andallocation of spectrum was held to be “stage managed”and violative of the principles of public law. This precludesthe appellant from claiming any refund or restitution; and

(vii) As a matter of fact, the judgment of this Court in CPIL(supra) has imposed costs of Rs 50 lakhs on the appellantfor wrongly benefitting from the wholly arbitrary andunconstitutional exercise of licence and spectrum allocation.Consequently, even under the contract law, the appellant isdisentitled from claiming any refund or restitution of theEntry Fee based on the principle of in pari delicto.

10. In the submissions made in the rejoinder, both Dr A M Singhviand Mr Huzefa A Ahmadi, learned Senior Counsel, have submitted thatthe judgment in CPIL (supra) does not expressly or impliedly bar therefund of Entry Fee. As a matter of fact, the TDSAT held that thedecision of this Court was not conclusive in ruling out a refund. Thejudgment in CPIL (supra) was reserved on 17 March 2011 and wasdelivered on 2 February 2012, and the quashing of the licences could nothave been contemplated by any of the litigants. Theoretically, even if theclaim for restitution could have been made before this Court at thatstage, the appellant is not precluded from raising the claim before thisCourt in the present proceedings. Further, Sections 14 and 15 of theTRAI Act confer a plenary remedy before the TDSAT. Hence, theappellant moved the TDSAT within a few weeks of the judgment inCPIL (supra). It was urged that for the principles of constructive resjudicata to apply, the bar must be clearly evident. In a Public InterestLitigation petition, it would not be appropriate to apply the principles ofconstructive res judicata against the respondent (the appellant herein)save in an exceptional case. Elaborating on the above submissions, Mr.Huzefa Ahmadi urged that:

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A(i)The right to claim restitution would arise only after thelicences were quashed by this Court and hence, the decisionin CPIL (supra) does not operate as constructive resjudicata;

(ii) The relief sought before this Court in the public interestBpetition under Article 32 of the Constitution which led tothe decision in CPIL (supra) was the setting aside of theauction and damages. This Court did not grant damagesper se while it imposed costs on the licensees. Hence, interms of Section 11 of the Civil Procedure Code 1908, theprayer for damages must be deemed to have been refused;Cand

(iii) The ultimate direction in CPIL (supra) was that itsobservations would not apply to other proceedings andhence, there was no intent to foreclose other rights underthe law.

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In view of these premises, it has been urged that the petition underArticle 32 which led to the decision in CPIL (supra) did not seek theforfeiture of the Entry fee and hence, the principles of constructive resjudicata would find no application at all. This Court having imposedcosts of Rs 5 crores on one set of licensees and Rs 50 lakhs on anotherEgroup of licensees (which included the appellant), it would be whollydisproportionate to forfeit an amount of Rs 1454.94 crores in the absenceof an implied forfeiture in terms of the earlier decision of this Court.

11. The rival submissions will now be analysed.

FC The CPIL judgment

12. The decision of this Court, which was rendered on 2 February2012, arose from petitions under Article 32 of the Constitution. Thepetitions questioned the grant of UASLs to the private respondents inthose proceedings (which included the appellant), on the ground that theprocedure which was adopted by DoT was arbitrary, illegal and in violationGof Article 14 of the Constitution. Among the grounds of challenge, it wasurged that:

(i) Since the cut-off of 25 September 2007 fixed for consideringthe applications had been held to be arbitrary by the DelhiHigh Court (which was approved by this Court), theH

procedure adopted by DoT with the approval of the Ministerfor Communications and Information Technology was liableto be declared as arbitrary and illegal; A

(ii) The DoT had violated the recommendations made byTelecom Regulatory Authority of India[18] that there shouldbe no cap on the number of access service providers in anyBservice area;

(iii) As noted in the report of the Comptroller and AuditorGeneral, the consideration of a large number of ineligibleapplications and the grant of licences to them was illegaland arbitrary; C

(iv) The method adopted by DoT for grant of licences wasflawed because it was based upon the recommendationsmade by TRAI, which were arbitrary and contrary to publicinterest, since they recommended the granting of licencesat the entry fees which were determined in 2001; D

(v) While granting licences which were bundled with thespectrum at a price which was fixed in 2001, the DoT didnot consult the Finance Ministry and violated the decisiontaken by the Council of Ministers in 2003;

(vi) The “First Come First Serve” policy violated Article 14,and its distortion by the then Minister of Communicationsand Information Technology and the consequent grant oflicences was liable to be annulled; and E

(vii) The Union government did not take any action to cancelthe licences of a number of licensees who had failed tofulfil the roll-out obligations and violated the conditions ofthe licences.

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13. While dealing with the grounds of challenge, in the course ofthe judgment, this Court underscored that natural resources, such asspectrum, are public goods and the doctrine of equality and public trustmust guide the State in determining the actual mechanism for theirdistribution. After analysing the rationale adopted by TRAI forrecommending the allocation of the 2G spectrum on the basis of 2001prices, this Court held:

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18 “TRAI”

A“91. To say the least, the entire approach adopted by TRAI waslopsided and contrary to the decision taken by the Council ofMinisters and its recommendations became a handle for the thenMinister of Communications and Information Technology and theofficers of DoT who virtually gifted away the important nationalasset at throw-away prices by wilfully ignoring the concerns raisedBfrom various quarters including the Prime Minister, Ministry ofFinance and also some of its own officers. This becomes clearfrom the fact that soon after obtaining the licences, some of thebeneficiaries offloaded their stakes to others in the name of transferof equity or infusion of fresh capital by foreign companies, andCthereby made huge profits. We have no doubt that if the methodof auction had been adopted for grant of licence which could bethe only rational transparent method for distribution of nationalwealth, the nation would have been enriched by many thousandcrores.”

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D14. This Court found a basic flaw in the “First Come First Serve”policy, holding:

“94. There is a fundamental flaw in the first-come-first-servedpolicy inasmuch as it involves an element of pure chance oraccident. In matters involving award of contracts or grant ofElicence or permission to use public property, the invocation of first-come-first-served policy has inherently dangerous implications.Any person who has access to the power corridor at the highestor the lowest level may be able to obtain information from thegovernment files or the files of the agency/instrumentality of theState that a particular public property or asset is likely to be disposedFof or a contract is likely to be awarded or a licence or permissionis likely to be given, he would immediately make an applicationand would become entitled to stand first in the queue at the costof all others who may have a better claim.”

15. This Court held that an auction conducted after due publicityGwas perhaps the best method for fulfilling the constitutional requirementof preserving equity in the alienation of natural resources. In the absenceof such a mechanism, this Court held that alienation of natural resources/public property is likely to be misused by unscrupulous people who areonly interested in garnering maximum financial benefit and have no respectfor constitutional ethos and values.H

16. In the course of its decision, this Court held, in no uncertainterms, that the then Minister for Communications and InformationTechnology had acted to favour some companies at the cost of the publicexchequer:

“97. The exercise undertaken by the officers of DoT betweenSeptember 2007 and March 2008, under the leadership of thethen Minister of Communications and Information Technology waswholly arbitrary, capricious and contrary to public interest apartfrom being violative of the doctrine of equality. The materialproduced before the Court shows that the Minister ofCommunications and Information Technology wanted to favoursome companies at the cost of the public exchequer and for thispurpose, he took the following steps:

(i) Soon after his appointment as Minister of Communicationsand Information Technology, he directed that all the applicationsreceived for grant of UAS licence should be kept pending till thereceipt of the TRAI recommendations.

(ii) The recommendations made by TRAI on 28-8-2007 were notplaced before the full Telecom Commission which, among others,would have included the Finance Secretary. The notice of themeeting of the Telecom Commission was not given to any of thenon-permanent members despite the fact that the recommendationsmade by TRAI for allocation of spectrum in 2G bands had seriousfinancial implications. This has been established from the pleadingsand the records produced before this Court which show that afterissuance of licences, 3 applicants transferred their equities for atotal sum of Rs 24,493 crores in favour of foreign companies.Therefore, it was absolutely necessary for DoT to take the opinionof the Finance Ministry as per the requirement of the Governmentof India (Transaction of Business) Rules, 1961.

(iii) The officers of DoT who attended the meeting of the TelecomCommission held on 10-10-2007 hardly had any choice but toapprove the recommendations made by TRAI. If they had notdone so, they would have incurred the wrath of the Minister ofCommunications and Information Technology.

(iv) In view of the approval by the Council of Ministers of therecommendations made by the Group of Ministers in 2003, DoT

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Ahad to discuss the issue of spectrum pricing with the Ministry ofFinance. Therefore, DoT was under an obligation to involve theMinistry of Finance before any decision could be taken in thecontext of Paras 2.78 and 2.79 of the TRAI’s recommendations.However, as the Minister of Communications and InformationTechnology was very much conscious of the fact that theBSecretary, Finance, had objected to the allocation of 2G Spectrumat the rates fixed in 2001, he did not consult the Finance Ministeror the officers of the Finance Ministry.

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(v) The Minister of Communications and Information Technologybrushed aside the suggestion made by the Minister of Law andJustice for placing the matter before the Empowered Group ofMinisters. Not only this, within few hours of the receipt of thesuggestion made by the Prime Minister in his letter dated 2-11-2007 that keeping in view the inadequacy of spectrum,transparency and fairness should be maintained in the matter ofallocation thereof, the Minister of Communications and Information C

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Technology rejected the same by saying that it will be unfair,discriminatory, arbitrary and capricious to auction the spectrum tonew applicants because it will not give them level playing field.

(vi) The Minister of Communications and Information TechnologyEintroduced the cut-off date as 25-9-2007 for consideration of theapplications received for grant of licence despite the fact thatonly one day prior to this, a press release was issued by DoTfixing 1-10-2007 as the last date for receipt of the applications.This arbitrary action of the Minister of Communications andInformation Technology though appears to be innocuous, actuallyFbenefited some of the real estate companies who did not haveany experience in dealing with telecom services and who hadmade applications only on 24-9-2007 i.e. one day before the cut-off date fixed by the Minister of Communications and InformationTechnology on his own.

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(vii) The cut-off date i.e. 25-9-2007 decided by the Minister ofCommunications and Information Technology on 2-11-2007 wasnot made public till 10-1-2008 and the first-come-first-served policy,which was being followed since 2003 was changed by him on 7-1-2008 and was incorporated in press release dated 10-1-2008.This enabled some of the applicants, who had access either to the H

Minister or the officers of DoT to get the demand drafts, bankguarantee, etc. prepared in advance for compliance with conditionsof the LoIs, which was the basis for determination of seniority forgrant of licences and allocation of spectrum.

(viii) The meeting of the full Telecom Commission, which wasscheduled to be held on 9-1-2008 to consider issues relating togrant of licences and pricing of spectrum was deliberatelypostponed on 7-1-2008 so that the Secretary, Finance andSecretaries of three other important Departments may not be ableto raise objections against the procedure devised by DoT for grantof licence and allocation of spectrum by applying the principle oflevel playing field.

(ix) The manner in which the exercise for grant of the LoIs to theapplicants was conducted on 10-1-2008 leaves no room for doubtthat everything was stage-managed to favour those who wereable to know in advance the change in the implementation of thefirst-come-first-served policy. As a result of this, some of thecompanies which had submitted applications in 2004 or 2006 werepushed down in the priority and those who had applied betweenAugust and September 2007 succeeded in getting higher seniorityentitling them to allocation of spectrum on priority basis.”

This is a clear indicator of the complicity between the Ministerand the business entities he was acting to favour on the basis of the“First Come First Serve” policy.

17. This Court found that “everything was stage-managed tofavour those who were able to know in advance the change in theimplementation of the first-come-first served policy”. It was in thebackdrop of the above finding, that this Court issued the followingdirections:

“102. In the result, the writ petitions are allowed in the followingterms:

(i) The licences granted to the private respondents on or after 10-1-2008 pursuant to two press releases issued on 10-1-2008 andsubsequent allocation of spectrum to the licensees are declaredillegal and are quashed.

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

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(iii) Keeping in view the decision taken by the Central Governmentin 2011, TRAI shall make fresh recommendations for grant oflicence and allocation of spectrum in 2G band in 22 service areasby auction, as was done for allocation of spectrum in 3G band.

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

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(v) Respondents 2, 3 and 9 who have been benefited at the costof public exchequer by a wholly arbitrary and unconstitutionalaction taken by DoT for grant of UAS licences and allocation ofCspectrum in 2G band and who offloaded their stakes for manythousand crores in the name of fresh infusion of equity or transferof equity shall pay costs of Rs 5 crores each. Respondents 4, 6, 7and 10 shall pay costs of Rs 50 lakhs each because they too hadbeen benefited by the wholly arbitrary and unconstitutional exerciseDundertaken by DoT for grant of UAS licences and allocation ofspectrum in 2G band. We have not imposed costs on therespondents who had submitted their applications in 2004 and 2006and whose applications were kept pending till 2007.

(vi) Within four months, 50% of the costs shall be deposited withthe Supreme Court Legal Services Committee for being used forproviding legal aid to poor and indigent litigants. The remaining50% costs shall be deposited in the funds created for Resettlementand Welfare Schemes of the Ministry of Defence.

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(vii) However, it is made clear that the observations made in thisFjudgment shall not, in any manner, affect the pending investigationby CBI, Directorate of Enforcement and other agencies or causeprejudice to those who are facing prosecution in the casesregistered by CBI or who may face prosecution on the basis ofcharge-sheet(s) which may be filed by CBI in future and theSpecial Judge, CBI shall decide the matter uninfluenced by thisGjudgment. We also make it clear that this judgment shall notprejudice any person in the action which may be taken by otherinvestigating agencies under the Income Tax Act, 1961, thePrevention of Money-Laundering Act, 2002 and other similarstatutes.”

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18. Reading the judgment of this Court in CPIL (supra), it isimpossible to accept the submission which has been urged on behalf ofthe appellant that the fraud in the “First Come First Serve” policy lay atthe doorstep of the Union government alone and that the appellant wasfree from taint or wrong doing. The decision of this Court held that the“First Come First Serve” policy was writ large with arbitrariness, andwas intended to favour certain specific entities at a grave detriment tothe public exchequer. Undoubtedly, the authors of the “First Come FirstServe” policy were the official actors comprised within the Uniongovernment. But equally, the decision did not exculpate the privatebusiness entities who obtained UASLs and became the beneficiaries oftheir decision. The decision of this Court concludes in no uncertain termsthat the then Minister of Communications and Information Technologywanted to favour some companies at the cost of the public exchequer,and that as a matter of fact the entire process was “stage-managed” tofavour those who had access to the nitty-gritties of the policy in advance.As a result, the Court found that companies which had submittedapplications in 2004 or 2006 were side-lined by favouring those who hadapplied between August and September 2007 and who “succeeded ingetting higher seniority entitling them to allocation of spectrum onpriority basis”.

19. In the concluding part, the judgment in CPIL (supra) imposedcosts of Rs 5 crores each on three licensees on the ground that they hadbenefited at the cost of the public exchequer by a “wholly arbitraryand unconstitutional action” taken by DoT for the grant of licencesand allocation of spectrum, and who had subsequently offloaded theirstakes for many thousand crores in the name of fresh infusion or transferof equity. On the other hand, the appellant was amongst the four licenseeswho were directed to pay a cost of Rs 50 lakhs each “because they toohad been benefited by the wholly arbitrary and unconstitutionalexercise undertaken by DoT for grant of UASL and allocation ofspectrum of 2G band”.

20. The beneficiaries of the patently unconstitutional mechanismdeployed for the allocation of spectrum were corporate entities whowere favoured under the “First Come First Serve” policy. The appellantis one of them. The distinction made by the judgment of this Courtbetween the three licensees who were subjected to costs of Rs 5 croresand four licensees, including the appellant, who were subject to costs of AB

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ARs 50 lakhs was because in the case of a former their stakes had beenoffloaded ostensibly in the name of a fresh infusion or transfer of equity.However, it is evident that all these licensees were complicit in the illegalexercise of obtaining favours for themselves by the indulgence of thosein power. That, above all, was the foundation of the decision in CPIL(supra)and the justification for quashing licences and the allocation ofBthe 2G spectrum. This Court then directed the TRAI to frame freshrecommendations for the grant of licences and for the allocation ofspectrum in the 2G band in twenty-two service areas by auction, as wasdone for the allocation of spectrum in the 3G band. Thus, the decision inCPIL (supra) leaves no manner of doubt that the appellant was in pariCdelicto along with the Union government.

D The claim for refund of Entry Fee

21. The nature of the Entry Fee has to be understood from theUASL Guidelines which were issued by the DoT on 14 December 2005.Clause 6[19] of the Guidelines required each applicant seeking a UASLDfor a given service area to deposit a “non-refundable entry fee” inaccordance with Annexure 1, which elucidated the quantum of the feewhich was payable for different service areas. Clause 14[20] indicatesthat the Entry Fee was payable in addition to the annual licence feewhich was payable for holding a UASL.

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22. Letters of Intent were issued to the appellant for providingunified access service to twenty-one service areas. The appellantdeposited the circle wise Entry Fee, in terms of the UASL Guidelines,on 10 January 2008 in the amount of Rs 1454.94 crores. It is only uponthe payment of this Entry Fee that the appellant became eligible to beFissued UASLs in the twenty-one service areas. Clause 18.1[21] of theUASL agreement acknowledged the payment of a “onetime non-refundable entry fee” prior to the signing of the agreement. Thus, theEntry Fee was a onetime non-refundable fee payable. According to the 19 “6 The detail of non-refundable Entry fee, Category of service area, Financial bankGguarantee, performance bank guarantee, Net worth and Paid up equity capital requiredunder the Unified Access Services Licence for each service area is as per Annexure-I.The prescribed paid-up equity capital shall be maintained during currency of the licence.”20 “14 In addition to the non refundable Entry fee described above, the Licensee shallalso pay Licence fee annually @ 10/8/6% of Adjusted Gross Revenue (AGR) forcategory A/B/C service areas respectively excluding spectrum charges.”21 “18.1 Entry Fee: One Time non-refundable Entry Fee of Rs .1.1 Crore has been paidHby the LICENSEE prior to signing of this Licence agreement.”

Union government, this was payable by an applicant for participating inthe process of obtaining the UASL and was distinguishable from thelicence fee under Clause 10.1[22], which was relatable to the actualoperation of the licence.

23. In the course of its judgment dated 16 September 2015, theTDSAT dealt with the submission of the Union of India that the EntryFee was “non-refundable” in terms of the UASL Guidelines. Dealingwith the submission, the TDSAT observed:

“To us it appears that submissions based on section 4 of theTelegraph Act or the characterisation of the entry fee in the UASLguidelines and the licence as “non-refundable” is really beggingthe question. The submissions would have carried weight if thepetitioners’ licences were cancelled or terminated for any violationof the term of the licences or were surrendered by it by its ownaccord. In the facts of the present case the petitioner failed to getentry into…the exclusive domain reserved by law for the State...”

24. There is much to commend in the above line of reasoning ofthe TDSAT. The Entry Fee, under the terms of the UASL Guidelinesand the UASL agreements, was a one-time non-refundable fee. TheTDSAT held that the submission of the Union of India would havecredence if the licences were terminated for breach or if the licenseewere to voluntarily surrender the licence. However, this was a casewhere the licence was held to be unlawful, due to its grant being inbreach of the constitutional mandate under Article 14. All the licencesand the allocation of spectrum came to be cancelled by the decision inCPIL (supra) on the ground that the policy and the process followed bythe Union government were arbitrary, and unjustified benefits had been 22 “10.1 The LICENSOR reserves the right to suspend the operation of this LICENCEin whole or in part, at any time, if, in the opinion of the LICENSOR, it is necessary orexpedient to do so in public interest or in the interest of the security of the State or forthe proper conduct of the TELEGRAPH. Licence Fee payable to the LICENSOR willnot be required to be paid for the period for which the operation of this LICENCEremains suspended in whole. If situation so warrant, it shall not be necessary forLicensor to issue a notice for seeking comments of the LICENSEE for this purpose andthe decision of the Licensor shall be final and binding.

Provided that the LICENSOR shall not be responsible for any damage or loss caused orarisen out, of aforesaid action. Provided further that the suspension of the licence willnot be a cause or ground for extension of the period of the LICENCE and suspensionperiod will be taken as period spent.”

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Agranted to the licensees. Thus, the TDSAT held that, strictly speaking,the contractual term stipulating that the Entry Fee was non-refundablewould not by and in itself preclude the claim for refund on the basis ofthe judgment of this Court in CPIL (supra), which held that the entireprocess leading up to the award of the licences was arbitrary andconstitutional. The TDSAT having entered the above finding, for theBrest of the discussion, this judgment will also proceed on that premise.

E Jurisdiction of TDSAT

E Jurisdiction of TDSAT

25. The appellant has objected to TDSAT’s conclusion that theappellant’s remedy does not fall in the contractual realm between itselfCand the Union of India. Since the public law remedy of restitution wasneither claimed before nor granted by this Court in CPIL (supra), theTDSAT went into the genesis of the dispute and consequential reliefsgranted by this court. . The TDSAT held that since the challenge wasfocused on the arbitrary and mala fide actions that were embodied inthe policy of allotting 2G spectrum licences, the quashing of the licencesDwas a necessary consequence of the grant of the licences being vitiated.Thus, the TDSAT held that “a direction for refund [is] outside thepurview of the Contract Act and an exercise of Constitutional powersis clearly beyond the authority of this Tribunal [TDSAT] and in thatregard the petitioner must approach the Court that quashed itsElicenses, that is, Supreme Court and seek appropriate reliefs”.

26. This Court will analyse whether the TDSAT had the jurisdictionto entertain the claim for a refund of the Entry Fee. The TDSAT is anadjudicatory body constituted under the TRAI Act. Initially, the TRAIwas empowered to regulate the telecom sector in India and adjudicateFupon disputes. The adjudicatory powers of TRAI, specifically with respectto issuing directions to DoT, were placed in issue before the Delhi HighCourt in Union of India v. Telecom Regulatory Authority of India[23].The Delhi High Court held that TRAI did not possess the authority toissue directions to DoT. In order to overcome the effect of this position,the TRAI Act was amended in 2000 and the TDSAT was established.GTDSAT’s website[24] elaborates on the Statement of Objects and Reasonsto the Telecom Regulatory Authority of India (Amendment) Act 2000and notes:

23 (1998) 46 DRJ 557

24 Available at <https://tdsat.gov.in/admin/introduction/uploads/TDSAT%20INTRO.pdf>Haccessed on 28 February 2022

“In order to bring in functional clarity and strengthen the regulatoryframework and the disputes settlement mechanism in thetelecommunication sector, the TRAI Act of 1997 was amendedin the year 2000 and TDSAT was set up to adjudicate disputesand dispose of appeals with a view to protect the interests ofservice providers and consumers of the telecom sector and topromote and ensure orderly growth of the telecom sector…”

The TRAI Act governs the functioning of the TDSAT. Thejurisdiction of civil courts has been ousted by Section 15. Section 16enables the TDSAT to regulate its own procedure, guided by the principlesof natural justice. An appeal on a substantial question of law lies to thisCourt under Section 18 of the TRAI Act. In the above statutory context,the jurisdiction of TDSAT will be evaluated below.

27. Section 14(a)[25] of the TRAI Act empowers the TDSAT toadjudicate any dispute:

(i) Between a licensor and licensee;

(ii) Between two or more service providers; and

(iii) Between a service provider and a group of consumers.

28. The scope of the TDSAT’s powers to adjudicate “any dispute”was interpreted in Cellular Operators Association of India v. Unionof India[26]by a three-judge Bench of this Court. The Court held that the 25 “14. Establishment of Appellate Tribunal.—The Central Government shall, bynotification, establish an Appellate Tribunal to be known as the Telecom DisputesSettlement and Appellate Tribunal to—(a) adjudicate any dispute—

(i) between a licensor and a licensee;

(ii) between two or more service providers;

(iii) between a service provider and a group of consumers:Provided that nothing in this clause shall apply in respect of matters relating to—(A) the monopolistic trade practice, restrictive trade practice and unfair trade practicewhich are subject to the jurisdiction of the Monopolies and Restrictive Trade PracticesCommission established under sub-section (1) of Section 5 of the Monopolies andRestrictive Trade Practices Act, 1969 (54 of 1969);

(B) the complaint of an individual consumer maintainable before a Consumer DisputesRedressal Forum or a Consumer Disputes Redressal Commission or the NationalConsumer Redressal Commission established under Section 9 of the Consumer ProtectionAct, 1986 (68 of 1986);

(C) the dispute between telegraph authority and any other person referred to in sub-section (1) of Section 7-B of the Indian Telegraph Act, 1885 (13 of 1885);..”26 (2003) 3 SCC 186

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Apowers envisaged by the TRAI Act for the TDSAT are wide and itwould not be appropriate for this Court to impose limitations on them.Chief Justice G B Pattanaik noted:

“8…Chapter IV containing Section 14 was inserted by anamendment of the year 2002 and the very Statement of ObjectsBand Reasons would indicate that to increase the investors’confidence and to create a level playing field between the publicand the private operators, suitable amendment in the TelecomRegulatory Authority of India Act, 1997 was brought about andunder the amendment, a tribunal was constituted called theTelecom Disputes Settlement and Appellate Tribunal forCadjudicating the disputes between a licensor and a licensee,between two or more service providers, between a service providerand a group of consumers and also to hear and dispose of appealagainst any direction, decision or order of the Authority. Theaforesaid provision was absolutely essential as the organizationsDof the licensor, namely, MTNL and BSNL were also serviceproviders. That being the object for which an independent tribunalwas constituted, the power of that Tribunal has to be adjudgedfrom the language conferring that power and it would not beappropriate to restrict the same on the ground that the decisionwhich is the subject-matter of challenge before the Tribunal wasEthat of an expert body.

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[…]

Having regard to the very purpose and object for which theAppellate Tribunal was constituted and having examined theFdifferent provisions contained in Chapter IV, more particularly,the provision dealing with ousting the jurisdiction of the civil courtin relation to any matter which the Appellate Tribunal is empoweredby or under the Act, as contained in Section 15, we have nohesitation in coming to the conclusion that the power of theAppellate Tribunal is quite wide, as has been indicated in the statuteGitself and the decisions of this Court dealing with the power of acourt, exercising appellate power or original power, will have noapplication for limiting the jurisdiction of the Appellate Tribunalunder the Act. Since the Tribunal is the original authority toadjudicate any dispute between a licensor and a licensee orbetween two or more service providers or between a service H

provider and a group of consumers and since the Tribunal has tohear and dispose of appeals against the directions, decisions ororder of TRAI, it is difficult for us to import the self-containedrestrictions and limitations of a court under the judge-made law towhich reference has already been made and reliance was placedby the learned Attorney-General…”

Justice S B Sinha, in his concurring opinion, further elaborated onthe jurisprudence surrounding tribunals constituted under regulatorystatutes. The judgment noted that the TDSAT was a creature of statuteand was empowered to determine its jurisdiction, subject to the constraintsstipulated in the statute. The appeal to this Court under Section 18 hasbeen confined to a “substantial question of law”. Since no such constraintshave been placed on the jurisdiction of the TDSAT under Section 14, thejurisdiction of the TDSAT was held to be broader:

“27. TDSAT was required to exercise its jurisdiction in terms ofSection 14-A of the Act. TDSAT itself is an expert body and itsjurisdiction is wide having regard to sub-section (7) of Section 14-A thereof. Its jurisdiction extends to examining the legality,propriety or correctness of a direction/order or decision of theauthority in terms of sub-section (2) of Section 14 as also thedispute made in an application under sub-section (1) thereof. Theapproach of the learned TDSAT, being on the premise that itsjurisdiction is limited or akin to the power of judicial review is,therefore, wholly unsustainable. The extent of jurisdiction of acourt or a tribunal depends upon the relevant statute. TDSAT is acreature of a statute. Its jurisdiction is also conferred by a statute.The purpose of creation of TDSAT has expressly been stated byParliament in the amending Act of 2000. TDSAT, thus, failed totake into consideration the amplitude of its jurisdiction and thusmisdirected itself in law…

[…]

29. If a jurisdictional question or the extent thereof is disputedbefore a tribunal, the tribunal must necessarily decide it unless thestatute provides otherwise. (See Judicial Review of AdministrativeLaw by H.W.R. Wade and C.F. Forsyth, p. 260.) Only when aquestion of law or a mixed question of fact and law are decidedby a tribunal, the High Court or the Supreme Court can exerciseits power of judicial review.

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34. Statutory recommendations made by it are normally acceptedby the Central Government, as a result of which the rights andobligations of the parties may seriously be affected. It was in theaforementioned premise Parliament thought of creating anBindependent expert tribunal which, if an occasion arises therefor,may interfere with the finding of fact, finding of law or a mixedquestion of law and fact of the authority. Succinctly stated, thejurisdiction of the Tribunal is not circumscribed in any mannerwhatsoever…”

C29. Section 14 of the TRAI Act has also been interpreted in Unionof India v. TATA Teleservices (Maharashtra Ltd)[27] by a two-judgeBench of this Court. In that case, the respondent had moved the TDSATseeking a declaration that the action of the Union of India (the licensor)in raising a claim and recovering the amount was unlawful. Therespondent also sought a declaration that a set-off made by invoking aDcondition of the licence in respect of the Maharashtra service area wasillegal. The Union of India claimed that it was entitled to make the set-off and recover damages occasioned by the failure of the respondent tofulfil its obligations under a letter of intent issued in respect of theKarnataka Telecom circle. The TDSAT had rejected the claim of theEUnion of India that it was entitled to a legal or equitable set off and heldthat it had no jurisdiction to enter a counterclaim at the instance of theUnion of India. In appeal, this Court held that either as a licensor or aservice provider, the Union government could make an application toTDSAT regarding a dispute between it and the licensee, another serviceprovider or a group of consumers. This Court noted that there was noFreason to whittle down the right “of the Union government to movethe Tribunal for adjudication of its claim within the purview ofSection 14(1)”. This Court observed that if the subject matter wascapable of being raised by way of a claim under Section 14 of the TRAIAct, it would not be logical to exclude the power to raise a counterclaim.GHaving held that the TDSAT had jurisdiction to entertain a counter claim,the judgment dealt with the submission of the respondent that where alicence had not actually been issued to a party by the Union government,the dispute did not fall either under Clause (i) or (ii) of Section 14(a).The Court held that:

H27 (2007) 7 SCC 517 (“Tata Teleservices”)

“19…In other words, a dispute commencing with the acceptanceof a tender leading to the possible issue of a licence and disputesarising out of the grant of licence even after the period has expiredwould all come within the purview of Section 14(a) of the Act. Toput it differently, Section 14 takes within its sweep disputesfollowing the issue of a letter of intent, pre-grant of actual licenceas also disputes arising out of a licence granted between a quondamlicensee and the licensor.”

The Court observed that though the bid submitted by the respondenthad been accepted by the Union of India and a letter of intent wasissued, the contract ultimately did not come into existence since therespondent was insisting on certain modifications and the licence wasnot actually granted. The Court held:

“22. We have already indicated that a specialised tribunal has beenconstituted for the purpose of dealing with specialised mattersand disputes arising out of licences granted under the Act. Wetherefore do not think that there is any reason to restrict thejurisdiction of the tribunal so constituted by keeping out of itspurview a person whose offer has been accepted and to whom aletter of intent is issued by the Government and who had evenaccepted that letter of intent. Any breach or alleged breach ofobligation arising after acceptance of the offer made in responseto a notice inviting tender, would also normally come within thepurview of a dispute that is liable to be settled by the specialisedtribunal.”

This Court also held that there was no reason to restrict theexpression “licensee” appearing in Section 14(a)(i) to exclude a personlike the respondent to whom a Letter of Intent had been issued, whenthe Letter of Intent had been accepted but an attempt had been made tonegotiate certain terms before a formal contract was entered into andwork commenced. The Court held:

“23. We see no reason to restrict the expressions “licensor” or“licensee” occurring in Section 14(a)(i) of the Act and to excludea person like the respondent who had been given a letter of intentregarding the Karnataka Circle, who had accepted the letter ofintent but was trying to negotiate some further terms of commoninterest before a formal contract was entered into and the workwas to be started. To exclude disputes arising between the A

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366SUPREME COURT REPORTS

Aparties thereafter on the failure of the contract to gothrough, does not appear to be warranted or justifiedconsidering the purpose for which TDSAT has beenestablished and the object sought to be achieved by thecreation of a specialised tribunal.”

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30. Relying upon the judgment in Tata Teleservices (supra), theappellant claims that the refund of the Entry Fee falls within the purviewof Section 14(a)(i) of the TRAI Act. While evaluating the submissions, itmust be noted at the outset, that there is an inconsistency in the line ofsubmissions urged on behalf of the appellant. The Union of India submittedCthat the Entry Fee which was paid by the appellant was a one-time non-refundable fee in terms of the UASL Guidelines and the UASLagreement. The response of the appellant to the above submission isthat the licence was not terminated for a breach on the part of theappellant, nor did the appellant voluntarily surrender the licence. Hence,Daccording to the appellant, the clause in the guidelines and the agreementprecluding refund would not stand attracted. In other words, as a resultof the decision of this Court in CPIL (supra), the entire process leadingup to the award of licence for 2G spectrum was held to be vitiated andthe licences were quashed. The TDSAT has accepted this line ofsubmission of the appellant and held that the UASL condition in regardEto the non-refundability of the one-time Entry Fee would not per sestand attracted where the licence was not terminated for a breach butwas quashed by this Court by the exercise of its jurisdiction under Article32 for the reason that the entire process was found to be vitiated andmanifestly arbitrary. The basis of the claim which has been raised by theFappellant for refund is not a dispute over the terms which govern therelationship between the parties following the issuance of a Letter ofIntent but before the grant of an actual licence, or a dispute arising outof a licence granted between the licensor or a licensee. As a matter offact, it is also important to note that the appellant, as will be analyzed in greater detail later, has placed reliance on the doctrine that an agreementGwhich is void cannot be split up and none of the parties to the agreementcan be permitted to seek part-enforcement of a contract through a courtof law. In support of this proposition, reliance has been placed on thedecision of this Court in Tarsem Singh v. Sukhminder Singh[28]. A

H28 1998 (3) SCC 471 (“Tarsem Singh”)

two-judge Bench of this Court had held that if an agreement is held to bevoid, then none of the terms, “except in certain known exceptions,specially where the clause is treated to constitute separate andindependent agreement, severable from the main agreement” can beenforced separately and independently.

31. The reliance on the principle embodied in Tarsem Singh(supra) is a clear indicator that the basis of the claim of the refund doesnot emanate from the relationship between the appellant and therespondent as licensor and licensee. The claim for restitution is basedindependently on the ground that upon the decision of this Court in CPIL(supra) holding the licence to be unlawful, the appellant is entitled torestoration of the benefit which has been obtained by the Union of Indiaunder an agreement which is held to be void.

32. Apart from what has been stated above, the earlier analysisof the decision in CPIL (supra)indicates that when the controversy overthe allocation of 2G spectrum and the licences was the subject matter ofadjudication before this Court, the appellant as well as the Uniongovernment were defending the allocation of the spectrum and the grantof 2G licences. The appellant was on notice of the fact that the award oflicences in pursuance of the “First Come First Serve” policy was underchallenge and the main relief which was sought in the proceedings underArticle 32 was for the setting aside of the auction and the award ofdamages. It is in this backdrop, that the conduct of the appellant assumessignificance. The appellant did not, in the course of the adjudication beforethis Court, put forth the plea for refund of the Entry Fee in the event thatthe allocation of the spectrum or the grant of licences were to standvitiated.

33. This Court has noticed a rising trend of cases where partieshave attempted to take another bite at the cherry by initiatingproceedings over various forums, particularly to circumvent thejurisdiction of this Court which is in seisin of the matter. A purportedlyancillary remedy is urged in another forum as a dilatory tactic or as anattempt at forum shopping. One of us (Dr Justice D Y Chandrachud),speaking for a two-judge Bench of this Court in Vedanta Ltd. v. TheGoa Foundation & Ors.[29] had disapproved of such tactics. In thatcase, the Court dismissed a review petition against the decision in Goa 29 Review Petition (Civil) Diary No. 18447 of 2020 (9 July 2021)

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AFoundation v. Sesa Sterlite Limited & Ors.[30]which had analyseda party’s attempt to pursue litigation before the High Court in spite ofa conclusive decision of this Court which had quashed its mining leasesand directed issuances of fresh leases with fresh environmentalclearances in the State of Goa. In T P Moideen Koya v. Governmentof Kerala[31], a three-judge Bench of this Court disapproved of theBpractice of vexatious litigation when the effect of a binding judgementis sought to be diluted or altered in a manner that deviates from theprocedure for modification. The Court noted:

“13. It is well settled that a decision pronounced by a court ofcompetent jurisdiction is binding between the parties unless it isCmodified or reversed by adopting a procedure prescribed by law.It is in the interest of the public at large that finality should attachto the binding decisions pronounced by a court of competentjurisdiction and it is also in the public interest that individuals shouldnot be vexed twice over with the same kind of litigation. WhileDhearing a petition under Article 32 it is not permissible for thisCourt either to exercise a power of review or some kind of anappellate jurisdiction over a decision rendered in a matter whichhas come to this Court by way of a petition under Article 136 ofthe Constitution. The view taken in Bhagubhai DullabhbhaiBhandari v. District Magistrate [AIR 1956 SC 585 : 1956 SCRE533 : 1956 Cri LJ 1126] that the binding nature of the convictionrecorded by the High Court against which a special leave petitionwas filed and was dismissed cannot be assailed in proceedingstaken under Article 32 of the Constitution was approvedin Daryao v. State of U.P. [AIR 1961 SC 1457 : (1962) 1 SCRF574] (see para 14 of the Report).”

34. The judgment in CPIL (supra) contains a detailed enumerationof the facts which were brought to the attention of the Court and all thesubmissions which were placed on the record by the contesting parties.The submissions bear expressly on the lack of transparency and theGeffort on the part of the authorities of the Union government to benefit aselect group of persons/entities who were favoured under the “FirstCome First Serve” policy. The decision dwelt on the benefits which theselected entities have received — both in terms of excluding others as 30 (2018) 4 SCC 218H31 (2004) 8 SCC 106

well as in setting down the financial terms for the award of the licence.The determination of the Entry Fee was an integral element of the financialterms governing the award of the licence and was not a stand-alonefeature which could be isolated from the overall process leading up tothe award of licences. Therefore, the submission of the appellant thatthe right to appeal for a refund of the Entry Fee would enure after thedecision in CPIL (supra) would be a simplistic understanding of theprocess and the ultimate decision of this Court. While directing thecancellation of the licences and ordering a fresh auction, this Courtimposed costs of Rs 5 crores on one set of licensees and Rs 50 lakhs onanother set, after assessing their culpability in wrongly benefitting fromthe “wholly arbitrary” and “unconstitutional exercise” of license andspectrum allocation. It would be an improper reading of the judgment topostulate that the decision leaves open a claim for the refund of theEntry Fee. The payment of the Entry Fee was one element in the overallfinancial conspectus which led to the award of licences. The adjudicationbefore this Court in CPIL (supra) must be construed as a one compositewhole from which its parts cannot be separated.

35. The appellant has argued that if the TDSAT’s conclusion onthe jurisdiction were to be accepted, it would impinge on the expanse ofits jurisdiction and will exclude certain disputes falling within the ambitof public law. However, this argument is not a correct reading of theconclusion that TDSAT has arrived at. De hors the decision in CPIL(supra), the appellant’s dispute over the terms of the license with theUnion of India (licensor) would fall within the jurisdiction of the TDSATunder Section 14(a)(i), as affirmed by this Court in Tata Teleservices(supra). The respondent’s argument that the appellant is no longer a“licensor” after the quashing of the licenses would be a restrictive readingof the jurisdiction of the TDSAT in view of the decision in TataTeleservices (supra). However, since the policy on the allocation ofspectrum and the licences were quashed on the grounds of mala fidesand arbitrariness in the Union government’s policy, the subsequent enquiryinto viability of the refund of the Entry Fee would have to be agitatedbefore the same Court.

36. Such practice has been previously followed by the TDSAT. InAUSPI (supra), a two-judge Bench of this Court considered the decisionof the TDSAT on the definition of AGR which was upheld by this Courtin the exercise of its appellate jurisdiction under Section 18 of the TRAI

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AAct. This Court was called upon to decide whether a substantially similarquestion can be reagitated before the TDSAT after this Court’s dismissalof the civil appeal against the TDSAT order holding that AGR will includeonly revenue arising from licensed activities and not revenue fromactivities outside the licence of the licensee. The Court observed thatthe TDSAT had jurisdiction, only after specifically noting the order ofBthis Court granting the Union of India specific liberty to allege the issuesbefore the TDSAT. This Court noted:

“32. The first substantial question of law which we have to decideis whether after dismissal of Civil Appeal No. 84 of 2007 of theUnion of India by this Court on 19-1-2007 [Union of India v. Assn.Cof Unified Telecom Service Providers of India, Civil AppealNo. 84 of 2007 decided on 19-1-2007 (SC)] against the orderdated 7-7-2006 of the Tribunal, the Union of India can reagitatethe question decided in the order dated 7-7-2006 that the adjustedgross revenue will include only revenue arising from licensedDactivities and not revenue from activities outside the licence ofthe licensee.

33. For deciding this question, we must first look at the languageof the order dated 19-1-2007 [Union of India v. Assn. of UnifiedTelecom Service Providers of India, Civil Appeal No. 84 of 2007Edecided on 19-1-2007 (SC)] of this Court in Civil Appeal No. 84of 2007. The order dated 19-1-2007 [Union of India v. Assn. ofUnified Telecom Service Providers of India, Civil Appeal No. 84of 2007 decided on 19-1-2007 (SC)] is quoted hereinbelow:

“Heard the parties. Pursuant to the direction of TDSAT in theimpugned order, a fresh recommendation has been made by TRAI.In view thereof, we see no reasons to interfere. The appeal isdismissed. The appellant is, however, given liberty to urge thecontentions raised in this petition before TDSAT.”

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It will be clear from the language of the order dated 19-1-2007[Union of India v. Assn. of Unified Telecom Service Providers ofIndia, Civil Appeal No. 84 of 2007 decided on 19-1-2007 (SC)]that while dismissing the appeal, the Court has given liberty to theappellant, namely, Union of India, to urge the contentions raised inCivil Appeal No. 84 of 2007.

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LOOP TELECOM AND TRADING LIMITED v. UNION OF INDIAAND ANR. [DR. DHANANJAYA Y CHANDRACHUD, J.]

34...Thus, as per the express language of the order dated 19-1-2007 [Union of India v. Assn. of Unified Telecom Service Providersof India, Civil Appeal No. 84 of 2007 decided on 19-1-2007 (SC)]of this Court in Civil Appeal No. 84 of 2007, the Union of Indiacould raise each of the grounds extracted above before theTribunal. Hence, even if we hold that the order dated 7-7-2006 ofthe Tribunal got merged with the order dated 19-1-2007 [Union ofIndia v. Assn. of Unified Telecom Service Providers of India,Civil Appeal No. 84 of 2007 decided on 19-1-2007 (SC)] of thisCourt passed in Civil Appeal No. 84 of 2007, by the express libertygranted by this Court in the order dated 19-1-2007 [Union of Indiav. Assn. of Unified Telecom Service Providers of India, CivilAppeal No. 84 of 2007 decided on 19-1-2007 (SC)] , the Union ofIndia could urge before the Tribunal all the contentions coveredunder Grounds 1 to 6 extracted above including the contentionthat the definition of adjusted gross revenue as given in the licencecould not be challenged by the licensees before the Tribunal andwill include all items of revenue mentioned in the definition ofadjusted gross revenue in the licence.”

37. Apart from the above, it must be noted that the appellant madeno effort to urge during the course of the submissions before the Courtin CPIL (supra) that they should be allowed a refund of Entry Fee in theevent that the Court were to quash the process and the award of licences.Significantly, the appellant did not seek the permission of this Court atthat stage to reserve their liberties of agitating a claim for refund ofEntry Fee in separate proceedings. Besides having such a course ofaction open to them before the judgment was delivered, the appellantshad their remedies open in law even after the decision by seeking libertyof adopting independent proceedings for agitating the refund of the EntryFee. Not having done this at any stage in, or in connection with, theproceedings relating to the decision in CPIL (supra), the appellant cannotbe permitted to do so subsequently.

38. Attempting to get over this hurdle, the appellant urged beforethis Court that what could have been agitated in the course of theproceedings leading up to the decision in CPIL (supra)can well be agitatedin the present proceedings since the coram in both cases would be theSupreme Court and the appellant is now in appeal before this Courtagainst the decision of the TDSAT. Such a course of action would not AB

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Aplainly be open to the appellant since the jurisdiction which has beeninvoked presently in the civil appeal is the appellate jurisdiction arisingout of the decision of the TDSAT to reject the claim for refund of theEntry Fee. The conduct of the appellant indicates that on 13 May 2016,the appellant sought to withdraw the appeals against the order of theTDSAT. The Court had recorded – “the appellant prays for liberty toBwithdraw the present appeals and instead approach this Court onceagain if it becomes so necessary”. The appellant ought to have obtainedspecific liberty of the Court on 13 May 2016 of pursuing proceedingsbefore the TDSAT, something which is conspicuous by its absence inthe order which was passed by this Court. Yet, the appellant chose toCmove the TDSAT by filing the Second Telecom Petition. The TDSATnoted that the petition was a “second attempt” by the Appellant “forclaiming the same relief” which had been sought under the impugnedorder of the TDSAT. Thus, when the appellant failed in seeking relief on11 December 2018, it filed an appeal against the order of TDSAT andthen moved this Court for restoration of the first set of appeals whichDwas allowed on 7 January 2020. The course of action which has beenadopted by the appellant is anything but fair — withdrawing the civilappeals which were instituted against the first order of the TDSAT withoutobtaining specific liberty or permission to move the TDSAT, instituting asecond round of litigation before the TDSAT, and then obtaining a revivalEof the first set of civil appeals. A party must not be allowed to conductlitigation in this manner. Such a course of action is subject to graveabuse since it lays bare an effort at forum-shopping and selectivelydeciding where and before whom it would pursue its remedies. It is inthis backdrop, that the failure of the appellant to be fair with the Courtwhen it addressed its submissions in the judicial process leading up toFthe decision in CPIL (supra) must be assessed. For the above reasonswe are of the view that the TDSAT has correctly come to the conclusionthat the claim by the appellant for refund of the Entry Fee could nothave been entertained.

F The claim founded on frustration and restitutionG

39. In this section of the judgment, we will analyse the claim ofthe appellant that it is entitled to claim a refund of the Entry Fee on anapplication of the doctrine of frustration and the principle of restitution.The appellant has placed reliance on the provisions of Sections 56 and65 of the Contract Act. The basic postulate of the appellant is that whenHa licence is granted under the proviso to Section (4)(1) of the Telegraph

Act, the licence is in the nature of a contract between the governmentand licensee, thus bringing it within the ambit of the Indian Contract Act.

40. In AUSPI (supra), a two-judge Bench of this Court has held:“39. The proviso to sub-section (1) of Section 4 of the TelegraphAct, however, enables the Central Government to part with thisexclusive privilege in favour of any other person by granting alicence in his favour on such conditions and in consideration ofsuch payments as it thinks fit. As the Central Government ownsthe exclusive privilege of carrying on telecommunication activitiesand as the Central Government alone has the right to part withthis privilege in favour of any person by granting a licence in hisfavour on such conditions and in consideration of such terms as itthinks fit, a licence granted under the proviso to sub-section (1) ofSection 4 of the Telegraph Act is in the nature of a contractbetween the Central Government and the licensee.”

The principle which has been elucidated in the above extract isthat when the Union government parts with the exclusive privilege whichis conferred upon it by Section 4(1) of the Telegraph Act by granting alicence, the licence is in the nature of contract between the Uniongovernment and the licensee.

41. It is on the above premise that the appellant seeks to invokethe application of the doctrine of frustration of contract and of restoration.Section 56 of the Indian Contract Act provides as follows:

“56. Agreement to do impossible act.— An agreement to doan act impossible in itself is void.

Contract to do act afterwards becoming impossible orunlawful.—A contract to do an act which, after the contract ismade, becomes impossible, or, by reason of some event whichthe promisor could not prevent, unlawful, becomes void when theact becomes impossible or unlawful.

Compensation for loss through non-performance of actknown to be impossible or unlawful.—Where one person haspromised to do something which he knew, or, with reasonablediligence, might have known, and which the promisee did not know,to be impossible or unlawful, such promisor must makecompensation to such promisee for any loss which such promiseesustains through the non-performance of the promise.”

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A42. The doctrine of frustration is elucidated in the three-judgeBench decision of this Court in Satyabrata Ghose v. MugneeramBangur & Co[32]. Justice BK Mukherjee, while explaining the doctrineof frustration, observed:

“10. Although various theories have been propounded by the JudgesBand jurists in England regarding the juridical basis of the doctrineof frustration, yet the essential idea upon which the doctrine isbased is that of impossibility of performance of the contract; infact impossibility and frustration are often used as interchangeableexpressions. The changed circumstances, it is said, make theperformance of the contract impossible and the parties are absolvedCfrom the further performance of the contract impossible and theparties are absolved from the further performance of it as theydid not promise to perform an impossibility…We hold, therefore,that the doctrine of frustration is really an aspect or part of thelaw of discharge of contract by reason of supervening impossibilityDor illegality of the act agreed to be done and hence comes withinthe purview of Section 56 of the Indian Contract Act. It would beincorrect to say that Section 56 of the Contract Act applies onlyto cases of physical impossibility and that where this section is notapplicable, recourse can be had to the principles of English law onthe subject of frustration…”E

Thus, it was held that the applicability of Section 56 of the IndianContract Act is not limited to cases of physical impossibility. The Courtalso noted that in deciding cases in India, the only test which must apply“is that of supervening impossibility or illegality of the act agreedto be contractually done”. Thus, the Court enunciated the doctrineFunderlying Section 56 by construing the word “impossible” in its practicalsense, not just in its literal sense. Similarly, Section 20[33] of the IndianContract Act envisages a situation where an agreement is void whenboth parties are under a mistake as to a matter of fact.

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32 1954 SCR 310

33 “20. Agreement void where both parties are under mistake as to matter offact.—Where both the parties to an agreement are under a mistake as to a matter of factessential to the agreement, the agreement is void.

Explanation.—An erroneous opinion as to the value of the thing which forms theHsubject-matter of the agreement, is not to be deemed a mistake as to a matter of fact.”

43. In Tarsem Singh (supra), this Court was confronted with acontract being void under Section 20 of the Indian Contract Act as theparties were under a mistake of fact regarding the metric for assessingthe area of land that was the subject of the contract. This Court, whileinterpreting the expression “discovered to be void”, held that these wordscomprehend a situation in which parties were suffering from a mistakeof fact from the very beginning but had not realized at the time of enteringinto the agreement or signing of the documents that they were sufferingfrom any such mistake and had therefore acted bona fide while enteringinto such agreements. The agreement, as the Court held, in that casewas void from its inception and was discovered to be so at a much laterdate.

44. The appellant, besides placing reliance on Tarsem Singh(supra), has urged that all judicial decisions are retrospective (unless in aparticular case this Court makes its judgment prospective) and hence,the voidness which attaches to its UASLs would relate back to theirvery inception. It is on this basis that the appellant stakes its claim for arefund of the Entry Fee based on the principle of restitution.

45. Section 65 of the Indian Contract Act recognizes the principleof restitution, particularly when a contract is discovered to be or becomesvoid. It stipulates thus:

“65. Obligation of person who has received advantage undervoid agreement, or contract that becomes void.—When anagreement is discovered to be void, or when a contract becomesvoid, any person who has received any advantage under suchagreement or contract is bound to restore it, or to makecompensation for it, to the person from whom he received it.”

46. In Pollock & Mulla’s seminal treatise on the Indian ContractAct[34], it has been noted that Section 65 does not operate in derogation ofthe maxim in pari delicto potior est conditio possidentis:

“Section 65 is not in derogation of the common law maxims exdolo malo non oritur actio and in pari delicto potior estconditio possidentis; and only those cases as are not covered bythese maxims can attract application of the provision of section 34 R Yashod Vardhan and Chitra Narayan, Pollock & Mulla The Indian Contract andSpecific Relief Acts Volume I (16[th] edition, LexisNexis)

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A65 on the footing that when an agreement in its inception was notvoid and it was not hit by the maxims but is discovered to be voidsubsequently, right to restitution of the advantage received undersuch agreement is secured on equitable consideration. The sectionhas been held not to apply where both parties knew of the illegalityat the time the agreement was made, and were in pari delicto.”B

Thus, the application of Section 65 has to be limited to those caseswere the party claiming restitution itself was not in pari delicto.

47. In The Principles of Law of Restitution[35], it has been notedthat all claims for restitution are subject to a defence of illegality. TheCgenesis of this defence is in the legal maxim ex turpi causa non orituractio (no action can arise from a bad cause). A court will not assistthose who aim to perpetuate illegality. This rule was initially recognizedby the House of Lords in its decision in Holman v. Johnson[36]. LordMansfield held:

D“The objection, that a contract is immoral or illegal as betweenthe plaintiff and defendant, sounds at all times very ill in the mouthof the defendant. It is not for his sake, however, that the objectionis ever allowed; but it is founded in general principles of policy,which the defendant has the advantage of, contrary to the realEjustice, as between him and the plaintiff, by accident, if I may so.The principle of public policy is this; ex dolo malo non orituractio. No Court will lend its aid to a man who founds hiscause of action upon an immoral or illegal act. If, from theplaintiff ’s own stating or otherwise, the cause of actionappears to arise ex turpi causa, or the transgression of aFpositive law of this country, there the Court says he has noright to be assisted.”

The Principles of Law of Restitution subsequently notes that inGpari delicto potior est conditio possidentis is a way of qualifying theex turpi causa defence[37]:

35 Graham Virgo, The Principles of the Law of Restitution (3rd edition, OUP) pg 71036 (1775) 1 Cowp 341, 343; 98 ER 1120, 1121H37 Supra at 35, pg 711

LOOP TELECOM AND TRADING LIMITED v. UNION OF INDIAAND ANR. [DR. DHANANJAYA Y CHANDRACHUD, J.]

“This in pari delicto principle enables the court to analyse theparticular circumstances of the case to determine whether theclaimant is less responsible for the illegality than the defendant,for then, as between the claimant and the defendant, the just resultis that the claimant should not be denied relief, since the partiesare not in pari delicto. But where the claimant is moreresponsible for the illegality or the parties are consideredto be equally responsible, the in pari delicto principle appliesand restitution will be denied.”

Thus, when the party claiming restitution is equally or moreresponsible for the illegality of a contract, they are considered in paridelicto.

48. In the decision of the UK Supreme Court in Patel v. Mirza[38],Lord Sumption JSC has succinctly explained the nature of the inquiry todetermine whether a party is in pari delicto:

“241 To the principle that a person may not rely on his own illegalact in support of his claim, there are significant exceptions, whichare as old as the principle itself and generally inherent in it. Theseare broadly summed up in the proposition that the illegalityprinciple is available only where the parties were in paridelicto in relation to the illegal act. This principle must notbe misunderstood. It does not authorise a general inquiryinto their relative blameworthiness. The question iswhether they were legally on the same footing. The caselaw discloses two main categories of case where the law regardsthe parties as not being in pari delicto, but both are based on thesame principle.

242 One comprises cases in which the claimant’s participation inthe illegal act is treated as involuntary: for example, it may havebeen brought about by fraud, undue influence or duress on thepart of the defendant who seeks to invoke the defence…

243 The other category comprises cases in which the applicationof the illegality principle would be inconsistent with the rule of lawwhich makes the act illegal. The paradigm case is a rule of lawintended to protect persons such as the plaintiff against exploitation A

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Aby the likes of the defendant. Such a rule will commonly requirethe plaintiff to have a remedy notwithstanding that he participatedin its breach…”

Thus, in determining a claim of restitution, the claiming party’sBlegal footing in relation to the illegal act (and in comparison to thedefendant) must be understood. Unless the party claiming restitutionparticipated in the illegal act involuntarily or the rule of law offers themprotection against the defendant, they would be held to be in pari delictoand therefore, their claim for restitution will fail.

C49. The position is in India is similar to that of the case of KujuCollieries Ltd. v. Jharkhand Mines Ltd.[39], where a Bench of threelearned judges of this Court relied on a judgment of a five-judge benchof the then Hyderabad High Court. While construing the provisions ofSection 65, this Court held:

“8. A Full Bench of five Judges of the Hyderabad High Court inDBudhulal v. Deccan Banking Company [AIR 1955 Hyd 69 (FB) :ILR 1955 Hyd 101] speaking through our brother, JaganmohanReddy, J. as he then was, referred with approval to theseobservations of the Privy Council. They then went on to refer tothe observations of Pollock and Mulla in their treatise onEIndian Contract and Specific Relief Acts, 7th Edn. to the effectthat Section 65, Indian Contract Act does not apply toagreements which are void under Section 24 by reason of anunlawful consideration or object and there being no otherprovision in the Act under which money paid for an unlawfulpurpose may be recovered back, an analogy of English LawFwill be the best guide. They then referred to the reasoningof the learned authors that if the view of the Privy Council isright namely that “agreements discovered to be void” applyto all agreements which are ab initio void includingagreements based on unlawful consideration, it follows thatGthe person who has paid money or transferred property toanother for an illegal purpose can recover it back from thetransferee under this section even if the illegal purpose iscarried into execution and both the transferor and transfereeare in pari delicto. The Bench then proceeded to observe:

“In our opinion, the view of the learned authors is neither supportedby any of the subsequent Privy Council decisions nor is it consistentwith the natural meaning to be given to the provisions of Section65. The section by using the words “when an agreement isdiscovered to be void” means nothing more nor less than: whenthe plaintiff comes to know or finds out that the agreement isvoid. The word “discovery” would imply the pre-existence ofsomething which is subsequently found out and it may be observedthat Section 66, Hyderabad Contract Act makes the knowledge(Ilm) of the agreement being void as one of the pre-requisites forrestitution and is used in the sense of an agreement beingdiscovered to be void. If knowledge is an essential requisite evenan agreement ab initio void can be discovered to be voidsubsequently. There may be cases where parties enter into anagreement honestly thinking that it is a perfectly legal agreementand where one of them sues the other or wants the other to act onit, it is then that he may discover it to be void. There is nothingspecific in Section 65, Indian Contract Act or its correspondingsection of the Hyderabad Contract Act to make it inapplicable tosuch cases.

A person who, however, gives money for an unlawful purposeknowing it to be so, or in such circumstances that knowledgeof illegality or unlawfulness can as a finding of fact be imputedto him, the agreement under which the payment is madecannot on his part be said to be discovered to be void. Thecriticism that if the aforesaid view is right then a personwho has paid money or transferred property to another forillegal purpose can recover it back from the transfereeunder this section even if the illegal purpose is carried intoexecution, notwithstanding the fact that both the transferorand transferee are in pari delicto, in our view, overlooksthe fact that the courts do not assist a person who comeswith unclean hands. In such cases, the defendant possessesan advantage over the plaintiff — in pari delicto potior estconditio defendentio.

Section 84, Indian Trust Act, however, has made an exception ina case — where the owner of property transfers it to another forillegal purpose and such purpose is not carried into execution orthe transferor is not as guilty as the transferee or the effect of A

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Apermitting the transferee to retain the property might be to defeatthe provisions of any law the transferee must hold the propertyfor the benefit of the transferor.

This specific provision made by the legislature cannot be takenadvantage of in derogation of the principle that Section 65, ContractBAct, is inapplicable where the object of the agreement was illegalto the knowledge of both the parties at the time it was made. Insuch a case the agreement would be void ab initio and there wouldbe no room for the subsequent discovery of that fact.”

We consider that this criticism as well as the view taken bythe Bench is justified. It has rightly pointed out that if bothCthe transferor and transferee are in pari delicto the courtsdo not assist them.”

While upholding the view of the Hyderabad High Court, this Courtheld “it [the Full Bench of the Hyderabad High Court] has rightlyDpointed out that if both the transferor and transferee are in paridelicto the courts do not assist them”.

50. In an earlier decision of this Court in Inmani Appa Rao v.Gollapalli Ramalingamurthi[40], a three-judge Bench held that whereboth the parties before the Court are confederates in the fraud, the CourtEmust lean in favour of the approach which would be less injurious topublic interest. Justice P B Gajendragadkar (as he then was), speakingfor the Court, held:

“12. Reported decisions bearing on this question show thatconsideration of this problem often gives rise to what may beFdescribed as a battle of legal maxims. The appellants emphasisedthat the doctrine which is pre-eminently applicable to the presentcase is ex dolo malo non oritur actio or ex turpi causa non orituractio. In other words, they contended that the right of actioncannot arise out of fraud or out of transgression of law; andaccording to them it is necessary in such a case that possessionGshould rest where it lies in pari delicto potior est conditio possidentis;where each party is equally in fraud the law favours him who isactually in possession, or where both parties are equally guilty theestate will lie where it falls. On the other hand, Respondent 1

H40 (1962) 3 SCR 739 (“Inmani Appa Rao”)

argues that the proper maxim to apply is nemo allegans suamturpitudinum audiendum est, whoever has first to pleadturpitudinum should fail; that party fails who first has to allegefraud in which he participated. In other words, the principle invokedby Respondent 1 is that a man cannot plead his own fraud. Indeciding the question as to which maxim should govern the presentcase it is necessary to recall what Lord Wright, M.R. observedabout these maxims in Berg v. Sadler and Moore [(1937) 2 KB158 at p. 62] . Referring to the maxim ex turpi causa non orituractio Lord Wright observed that “this maxim, though veiled in thedignity of learned language, is a statement of a principle of greatimportance; but like most maxims it is much too vague and muchtoo general to admit of application without a careful considerationof the circumstances and of the various definite rules which havebeen laid down by the authorities”. Therefore, in deciding thequestion raised in the present appeal it would be necessary for usto consider carefully the true scope and effect of the maximspressed into service by the rival parties, and to enquire which ofthe maxims would be relevant and applicable in the circumstancesof the case. It is common ground that the approach of theCourt in determining the present dispute must beconditioned solely by considerations of public policy. Whichprinciple would be more conducive to, and more consistentwith, public interest, that is the crux of the matter. To put itdifferently, having regard to the fact that both the partiesbefore the Court are confederates in the fraud, whichapproach would be less injurious to public interest.Whichever approach is adopted one party would succeedand the other would fail, and so it is necessary to enquireas to which party’s success would be less injurious to publicinterest.”

51. The principle which was enunciated in the judgment in InmaniAppa Rao (supra) has been more recently applied in a decision of athree-judge Bench of this Court in Narayanamma v. Govindappa[41].The Court held:

41 2019 (19) SCC 42

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A“28. Now, let us apply the other test laid down in Immani AppaRao [Immani Appa Rao v. Gollapalli Ramalingamurthi, (1962)3 SCR 739 : AIR 1962 SC 370] . At the cost of repetition, both theparties are common participator in the illegality. In such a situation,the balance of justice would tilt in whose favour is the question.As held in Immani Appa Rao [Immani Appa Rao v. GollapalliBRamalingamurthi, (1962) 3 SCR 739 : AIR 1962 SC 370] , if thedecree is granted in favour of the plaintiff on the basis of an illegalagreement which is hit by a statute, it will be rendering an activeassistance of the court in enforcing an agreement which is contraryto law. As against this, if the balance is tilted towards theCdefendants, no doubt that they would stand benefited even in spiteof their predecessor-in-title committing an illegality. However, whatthe court would be doing is only rendering an assistance which ispurely of a passive character. As held by Gajendragadkar, J.in Immani Appa Rao [Immani Appa Rao v. GollapalliRamalingamurthi, (1962) 3 SCR 739 : AIR 1962 SC 370] , theDfirst course would be clearly and patently inconsistent with thepublic interest whereas, the latter course is lesser injurious to publicinterest than the former.”

52. Hence, in adjudicating a claim of restitution under Section 65of the Indian Contract Act, the court must determine the illegality whichEcaused the contract to become void and the role the party claimingrestitution has played in it. If the party claiming restitution was equally ormore responsible for the illegality (in comparison to the defendant), thereshall be no cause for restitution. This has to be determined on the factsof each individual case.F53. The appellant before us has relied upon the decision of TDSATin S Tel Pvt. Ltd. v. Union of India[42 ]to establish that the blame forquashing of the UASLs lies with the Union government alone. The issuewhich came up for decision before the TDSAT in that case was whetherthe petitioner was entitled to the refund of the money which it paid forallocation of 3G spectrum under licences which were later quashed byGthe judgment of this Court. In that case, the petitioner had applied forUASLs in six circles/service areas on 7 July 2007. The Governmentissued a press note on 24 September 2007 prescribing a cut-off date of10 October 2007 for submissions of applications for a fresh UASL. On

28 September 2007, the petitioner applied for UASLs in sixteen circlesin addition to its earlier application for six circles. On 10 January 2008,by another press note, the deadline for fresh licences was retrospectivelyadvanced to 25 September 2007. On the same day, the governmentgranted licences to 122 applicants, including the petitioner’s previousapplication for six circles, whose applications had been received prior to25 September 2007. Against the denial of licences for sixteen circles onthe ground that the application was made beyond the cut-off date, thepetitioner moved the Delhi High Court challenging the action of thegovernment in retrospectively advancing the last date for submission ofapplications as arbitrary. The High Court held that the decision to fix thecut off-date for making applications, with a view to limit the number ofservice providers was contrary to the decision of the TRAI which thegovernment had purported to accept. The government was accordinglydirected to consider the petitioner’s application which was submitted on28 September 2007. The Division Bench having dismissed an intra courtappeal, led to proceedings before this Court. The Attorney General statedthat the application submitted by the petitioner was not rejected but washeld in abeyance and it would be considered on a first-come-first-servebasis in terms of the then prevailing policy in consultation with the TRAI.This Court disposed of the appeal while sustaining the findings recordedby the Delhi High Court in regard to the change in the cut-off dates. Forthe purpose of the present discussion, it would not be necessary to advertto the detailed analysis in the above case, save and except to note thatthe petitioner moved the TDSAT claiming a refund of the amount whichit had paid for the 3G spectrum in three service areas. Significantly inthat case, the TDSAT observed:

“In course of hearing of the case we repeatedly asked Mr. Banerjeewhat blame, if any, for the quashing of its licences extends to thepetitioner. Mr. Banerjee was unable to show anything from theSupreme Court judgment in Centre for Public InterestLitigation or from the Government records that might show thatthe petitioner was in any way responsible for the quashing of itslicences.

It is thus clear that though the petitioner’s UAS licences weredeclared illegal and quashed, that was not due to any fault by thepetitioner but on account of the illegalities committed by theGovernment in the issuance of those one hundred and twenty two(122) licences. While discussing the provisions of clauses 3.6 and AB

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A3.7 of the NIA it is noted above that those clauses deal with asituation where the licence is cancelled/terminated at the instanceof the licensor for some fault on the part of the licensee. Thequashing of the petitioner’s licences in the present case thus clearlydoes not fall under the two clauses in the NIA. Further, as a resultof the quashing of the petitioner’s licences its contract with theBGovernment relating to 3G spectrum got discharged on accountof frustration, as provided under section 56 of the Contract Act,leaving it open to the petitioner to seek the relief of restitution interms of section 65 of the Contract Act.”

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The decision of the TDSAT to allow a refund is thus clearlyCpostulated on the principle that the petitioner was not at fault, but theUASLs were quashed because of the illegalities committed by thegovernment. Therefore, there is a clear distinction between the facts asthey emerged before the TDSAT in S Tel (supra) and the facts of thepresent case.

D54. In the present case, the appellant has been held to be inparidelicto. The decision of this Court in CPIL (supra) leaves no manner ofdoubt that the appellant was among the group of licensees who werefound to be complicit in obtaining benefits under the “First Come FirstServe” policy of the Union government at the cost of the public exchequer.In such a situation and following the well-settled principles which haveEbeen enunciated above, the appellant could not be held entitled to claima refund of its Entry Fee.

55. On behalf of the appellant, it is sought to be urged that in theauction which followed the decision in CPIL (supra), the Uniongovernment granted fresh licences including for the areas which wereFgoverned by the licences in favour of the appellant at a much highervalue. This argument is completely unacceptable for the simple reasonthat if the Union government had held a transparent and objective processof conducting an auction when the initial licences were granted in favourof the appellant, a much higher value would have been realized by thepublic exchequer. The appellant has been the beneficiary of a manifestlyGarbitrary policy which was adopted by the Union government and whichwas quashed in the decision of this Court in CPIL (supra). That beingthe position, the appellant would not be entitled to a refund of the EntryFee even on the principle of restitution embodied in Section 65 of theIndian Contract Act.H

G The policy of set off

56. According to the appellant, the set off which was granted bythe Union government in pursuance of the decision of the EGoM on 31October 2012, constitutes an admission of liability. In this backdrop, ithas been submitted that the policy which was adopted by the Uniongovernment by allowing a set off to licensees whose licences have beenquashed subject to their participating in and being found successful inthe fresh auction, suffers from manifest arbitrariness.

57. By the judgment of this Court in the CPIL (supra), the licenseeswhose licences had been quashed were not barred from participating inthe subsequent auction for the grant of fresh licences. On 12 October2012, the Ministry of Communications and Information Technology issueda document titled “Queries and Responses to the NIA for competitivebids for allocation of spectrum issued by the DoT”. Among the queries,which were in the nature of Frequently Asked Questions, Query Numbers74 and 75 and the response were in the following terms:

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C58. On 31 October 2012, the Cabinet Secretariat of the Uniongovernment circulated the Minutes of the Meeting of the EGoM held on18 October 2012. The Minutes contain the rationale for the adoption ofa policy of set off in the following terms:

“13. The EGoM considered the letter dated 12.10.2012 from theDMinister of Information & Broadcasting regarding set-off of entryfee against earnest money and payment due in the event ofspectrum being won and noted that the entry fee paid by TSPswhose licenses were quashed was for a period of 20 years. Whileon the one hand, the TSPs could be expected to have paid a pro-Erata amount for the period of operation of the license, i.e. 2008-2012, on the other hand, there could be a claim for refund withinterest for the pro-rata amount for the balance period. Therefore,the EGoM decided to allow such TSPs to adjust an amountequivalent to their full entry fee, without any interest, against theauction payments, both for participation and for final payment onFsuccessful conclusion. It was clarified that the set-off would bepermitted only to the quashed license holders participating in theauction. Such set off would be allowed to the extent of total entryfee paid for all quashed licenses on an aggregate basis withoutconsideration of the expired period of license, only if they succeedGin the auction. The set off will be permitted against the EarnestMoney Bank Guarantee amount initially and later against theamount payable for auction price, irrespective of the number ofLocal Service Areas (LSAs) in which the holder of quashed licenseis successful in the auction and without requiring correlationbetween LSAs in which licenses were held earlier and the LSAsHin which the holder of the quashed licenses is successful.”

The Union government has submitted before this Court that theset off policy was formulated in order to encourage participation of alltelecom operators in the subsequent auction, increasing the possibility ofhigher price discovery to the benefit of the public exchequer. It has beenurged that the set off policy was aimed at the revival of the telecomindustry in a manner which encouraged uninterrupted supply of services.The policy sought to increase participation at a subsequent auction byoffering a concession in the form of a set off of the previously paidEntry Fee, in case the bidder had emerged successful in the fresh auction.

The appellant did not challenge the policy per se at that stage, nordid it attempt to enter into the fray at that stage when a fresh auctionwas held. In these circumstances, the policy decision adopted by theUnion government cannot be allowed to be questioned at the behest ofthe appellant who sought a refund simpliciter in proceedings before theTDSAT. As held by a Constitution Bench in R K Garg v. Union ofIndia[43], a greater free play in the joints must be accorded to decisions ofeconomic policy where the legislature or the executive is called upon tomake complex choices which cannot always conform to a straitjacketor doctrinaire solution.

59. For the above reasons, we do not find any reason to entertainthe challenge to the set off policy at this stage at the behest of theappellant.

H Conclusion

60. For the above reasons, we have come to the conclusion thatthe appellant was inpari delicto with DoT and the then officials of theUnion government. The appellant was the beneficiary of the “First ComeFirst Serve” policy which was intended to favour a group of privatebidding entities at the cost of the public exchequer. The contention of theappellant that it was exculpated from any wrong doing by the judgmentof this Court in CPIL (supra) is patently erroneous. The process leadingup to the award of the UASLs and the allocation of the 2G spectrumwas found to be arbitrary and constitutionally infirm. The need for anopen and transparent bidding process for the allocation of natural resourceswas substituted by a process which was designed to confer unlawfulbenefits on a group of selected bidders by which the appellant benefitted.

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AThe appellant has tried to obviate these findings by relying on its acquittalby the Special Judge, CBI. It is important to note that the criminal trialbefore the Special Judge, CBI was limited to the question as to whetherthe promoters of the appellant had cheated the DoT by providing a falserepresentation of its compliance with Clause 8 of the UASL Guidelines,since it was allegedly being controlled by the Essar group. The SpecialBJudge, CBI acquitted the promoters of the appellant since the prosecutionwas unable to prove that: (i) officers of DoT considered the representationof the appellant to be false; (ii) the appellant was engaging in a shamtransaction; or (iii) the appellant was actually controlled by the Essargroup. Hence, the acquittal of the promoters of the appellant of theseCcriminal charges does not efface or obliterate the findings which arecontained in the final judgment of this Court in CPIL (supra). Hence, asa beneficiary and confederate of fraud, the appellant cannot be lent theassistance of this Court for obtaining the refund of the Entry Fee. In anyevent, such a course of action before the TDSAT was clearly in theteeth of the judgment of this Court in CPIL (supra).D61. For the above reasons, we have come to the conclusion thatthere is no merit in the appeals. The appeals are accordingly dismissed.

62. Pending application(s), if any, stand disposed of.

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Devika Gujral(Assisted by : Mahendra Yadav, LCRA)

Appeals dismissed.

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