‘Wholly arbitrary, capricious and contrary to public interest’
Reproduced here are excerpts from the concluding paragraphs of the Supreme Court’s verdict cancelling 122 2G licences issued during A. Raja’s term as Minister of Communications and Information Technology.
69. …There is a fundamental flaw in the principle of first-come-first-served inasmuch as it involves an element of pure chance or accident. In matters involving award of contracts or grant of licence or permission to use public property, the invocation of first-come-first-served principle has inherently dangerous implications. Any person who has access to power corridor at the highest or the lowest level may be able to obtain information from the Government files or the files of the agency/instrumentality of the State that a particular public property or asset is likely to be disposed of or a contract is likely to be awarded or a licence or permission would be given. He would immediately make an application and would become entitled to stand first in the queue at the cost of all others who may have a better claim… the duty of the Court to exercise its power in larger public interest and ensure that the institutional integrity is not compromised the State and its agencies/instrumentalities must always adopt a rational method for disposal of public property and no attempt should be made to scuttle the claim of worthy applicants. When it comes to alienation of scarce natural resources like spectrum etc., the State must always adopt a method of auction by giving wide publicity so that all eligible persons may participate in the process. Any other methodology for disposal of public property and natural resources/national assets is likely to be misused by unscrupulous people who are only interested in garnering maximum financial benefit and have no respect for the constitutional ethos and values.
70. The exercise undertaken by the officers of the DoT [Department of Telecommunication] between September, 2007 and March 2008, under the leadership of the then Minister of C&IT [Communications & Information Technology] [A.Raja] was wholly arbitrary, capricious and contrary to public interest apart from being violative of the doctrine of equality. The material produced before the Court shows that the Minister of C&IT wanted to favour some companies at the cost of the Public Exchequer and for this purpose, he took the following steps:
(i) Soon after his appointment as Minister of C&IT, he directed that all the applications received for grant of UAS [Universal Access Service] Licence should be kept pending till the receipt of TRAI [Telecommunication Regulatory Authority of India] recommendations.
(ii) The recommendations made by TRAI on 28.8.2007 were not placed before the full Telecom Commission which, among others, would have included the Finance Secretary. The notice of meeting of the Telecom Commission was not given to any of the non permanent members …
(iii) The officers of the DoT who attended the meeting of the Telecom Commission held on 10.10.2007 hardly had any choice but to approve the recommendations made by TRAI [or] they would have incurred the wrath of Minister of C&IT.
(iv) In view of the approval by the Council of Ministers of the recommendations made by the Group of Ministers, DoT had to discuss the issue of spectrum pricing with the Ministry of Finance…However, as the Minister of C&IT was very much conscious of the fact that the Secretary, Finance, had objected to the allocation of 2G spectrum at the rates fixed in 2001, he did not consult the Finance Minister or the officers of the Finance Ministry.
(v) The Minister of C&IT brushed aside the suggestion made by the Minister of Law and Justice for placing the matter before the empowered Group of Ministers. Not only this, within few hours of the receipt of the suggestion 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 of allocation of the spectrum, the Minister of C&IT rejected the same by saying that it will be unfair, discriminatory, arbitrary and capricious to auction the spectrum to new applicants because it will not give them level playing field. He simultaneously introduced cut off date as 25.9.2007 for consideration of the applications received for grant of licence despite the fact that only one day prior to this, press release was issued by the DoT fixing 1.10.2007 as the last date for receipt of the applications. This arbitrary action of the Minister of C&IT though appears to be innocuous was actually intended to benefit some of the real estate companies who did not have any experience in dealing with telecom services and who had made applications only on 24.9.2007, i.e. one day before the cut off date fixed by the Minister of C&IT on his own.
(vi) The cut off date, i.e. 25.9.2007 decided by the Minister of C&IT on 2.11.2007 was not made public till 10.1.2008 and the first-come-first served principle, which was being followed since 2003 was changed by him at the last moment through press release dated 10.1.2008. This enabled some of the applicants, who had access either to the Minister or the officers of the DoT, to get the bank drafts etc. prepared towards performance guarantee etc. of about Rs.1600 crores.
(vii) The manner in which the exercise for grant of LoIs [letters of intent] to the applicants was conducted on 10.1.2008 leaves no room for doubt that every thing was stage managed to favour those who were able to know in advance change in the implementation of the first-come-first served principle…
71. The argument of Shri Harish Salve, learned senior counsel that if the Court finds that the exercise undertaken for grant of UAS Licences has resulted in violation of the institutional integrity, then all the licences granted 2001 onwards should be cancelled does not deserve acceptance because those who have got licence between 2001 and 24.9.2007 are not parties to these petitions and legality of the licences granted to them has not been questioned before this Court.
72. In majority of judgments relied upon by learned Attorney General and learned counsel for the respondents, it has been held that the power of judicial review should be exercised with great care and circumspection and the Court should not ordinarily interfere with the policy decisions of the Government in financial matters. There cannot be any quarrel with [this]. However, when it is clearly demonstrated before the Court that the policy framed by the State or its agency/instrumentality and/or its implementation is contrary to public interest or is violative of the constitutional principles, it is the duty of the Court to exercise its jurisdiction in larger public interest …When matters like these are brought before the judicial constituent of the State by public spirited citizens, it becomes the duty of the Court to exercise its power in larger public interest and ensure that the institutional integrity is not compromised by those in whom the people have reposed trust and who have taken oath to discharge duties in accordance with the Constitution and the law …
73. Before concluding, we consider it imperative to observe that but for the vigilance of some enlightened citizens … and non governmental organisations who have been constantly fighting for clean governance and accountability of the constitutional institutions, unsuspecting citizens and the nation would never have known how scarce natural resource spared by the Army has been grabbed by those who enjoy money power and who have been able to manipulate the system.
74. In the result, the writ petitions are allowed in the following terms:
(i) The licences granted to the private respondents on or after 10.1.2008 pursuant to two press releases issued on 10.1.2008 and subsequent allocation of spectrum to the licensees are declared illegal and are quashed.
(ii) The above direction shall become operative after four months.
(iii) Within two months, TRAI shall make fresh recommendations for grant of licence and allocation of spectrum in 2G band in 22 Service Areas by auction, as was done for allocation of spectrum in 3G band.
(iv) The Central Government shall consider the recommendations of TRAI and take appropriate decision within next one month and fresh licences be granted by auction.
(v) Respondent Nos.2, 3 and 9 who were benefited by a wholly arbitrary and unconstitutional action taken by the DoT for grant of UAS Licences and allocation of spectrum in 2G band and who off-loaded their stakes for many thousand crores in the name of fresh infusion of equity or transfer of equity shall pay cost of Rs.5 crores each. Respondent Nos. 4, 6, 7 and 10 shall pay cost of Rs.50 lakhs each because they too had been benefited by the wholly arbitrary and unconstitutional exercise undertaken by the DoT for grant of UAS Licences and allocation of spectrum in 2G band.
(vi) 50% of the cost shall be deposited with the Supreme Court Legal Services Committee for being used for providing legal aid to indigent litigants. The remaining 50% cost shall be deposited in the Prime Minister’s Relief Fund.
(vii) However, it is made clear that the observations and conclusions contained in this order shall not, in any manner, affect the pending investigation by the CBI, Directorate of Enforcement and others agencies or prejudice the defence of those who are facing prosecution in the cases registered by the CBI and the Special Judge, CBI shall decide the matter uninfluenced by this judgment.
Justice G.S. Singhvi
Justice Asok Kumar Ganguly