SC cancels 122 2G licences issued by Raja, refers role of Chidambaram to trial court

A two-judge bench comprising Justices G S Singhvi and A K Ganguly said this direction shall become operative after four months.

 

The apex court left it to the trial court to decide whether Union Home Minister P Chidambaram needed to be probed for his role as the then Finance Minister in the alleged scam.

 

The Supreme Court also decided that there was no need to set up a Special Investigation Team (SIT) to oversee the probe by the Central Bureau of Investigation (CBI) into the allocation of 2G spectrum and said the monitoring could be done by the Central Vigilance Commission (CVC).

 

The three crucial verdicts came on a petition by Janata Party president Subramanian Swamy seeking a probe by the CBI into the alleged role of Chidambaram in the allocation of 2G spectrum, a plea by the Centre for Public Interest Litigation, represented by senior advocate Prashant Bhushan for an SIT to monitor the CBI probe in the matter and a joint plea by the two of them seeking cancellation of the 2G licences.

 

The court It said that, keeping in view the decision taken by the Central Government in 2011, the Telecom Regulatory Authority of India (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.

It said the Centre shall consider the recommendations of TRAI and take appropriate decision within the next one month and fresh licences be granted by auction.

 

The court imposed costs of Rs 5 crore on Etisalat DB Telecom Pvt Ltd (Swan Telecom Ltd), Unitech Wireless Group and Tata Teleservices Ltd, who it said had been "benefited at the cost of public exchequer" by a wholly arbitrary and unconstitutional action taken by the Department of Telecom (DoT) for grant of Universal Access Service (UAS) licences and allocation of spectrum in 2G band and who offloaded their stakes for many thousand crores in the name of fresh infusion of equity or transfer of equity".

 

It asked Loop Telecom Pvt Ltd, S-Tel, Allianz Infratech and Sistema Shyam Tele Services Ltd, who too, it said, had benefited by the decision, to pay costs of Rs 50 lakhs each.

 

The court did not impose any cost on the respondents who had submitted their applications in 2004 and 2006 and whose applications were kept pending till 2007.

 

The court said that, within four months, 50 per cent of the cost shall be deposited with the Supreme Court Legal Services Committee for being used for providing legal aid to poor and indigent litigants. The remaining 50 per cent cost shall be deposited in the funds created for resettlement and welfare schemes of the Ministry of Defence, it said.

The court held that the State is the legal owner of natural resources, such as spectrum, as a trustee of the people and, although it is empowered to distribute the same, the process of distribution must be guided by the Constitutional principles, including the doctrine of equality and larger public good.

 

The bench found fault with TRAI for recommending allocation of 2G spectrum on the basis of 2001 price by invoking the theory of level playing field, although by its own assessment the existing sytem of spectrum allocation criteria, pricing methodology and the management system suffered from a number of deficiencies which needed to be addressed.

 

"...yet it decided to recommend the allocation of spectrm at the price determined in 2001. All this was done in the name of growth, affordability, penetration of wireless services in semi-urban and rural areas, etc. Unfortunately, while doing so, TRAI completely overlooked that one of the main objectives of the National Telecom Policy (NTP) 1999 was that spectrum should be utilised efficiently, economically, rationally and optimally and there should be a transparent process of allocation of frequency spectrum as also the fact that in terms of the decision taken by the Council of Ministers in 2003 to approve the recommendations of the Group of Ministers the DoT and Ministry of Finance were required to discuss and finalise the spectrum pricing formula.

 

"To say the least, the entire approach adopted by TRAI was lopsided and contrary to the decision taken by the Council of Ministers and its recommendations became a handle for the then the Minister of C&IT and the officers of the DoT who virtually gifted away the important national asset at throw away prices by willfully ignoring the concerns raised from various

quarters including the Prime Minister, Ministry of Finance and also some of its own officers. This becomes clear from the fact that soon after obtaining the licences, some of the beneficiaries off-loaded their stakes to others, in the name of transfer of equity or infusion of fresh capital by foreign companies, and thereby made huge profits. We have no doubt that if the method of auction had been adopted for grant of licence which could be the only rational transparent method for distribution of national wealth, the nation would have been enriched by many thousand crores," it said.

The court said that, even though the scope of judicial review in such matters was extremely limited, it had no hesitation to record a finding that the recommendations made by TRAI were flawed in many respects and implementation thereof by the DoT resulted in gross violation of NPT 1999 and the decision taken by the Council of Ministers on 31.10.2003.

 

It said that, being an expert body, it was incumbent upon TRAI to make suitable recommendations on pricing of spectrum in 2G band. "We do not find merit in the reasoning of TRAI that the consideration of maintaining a level playing field prevented a realistic reassessment of the entry fee," it said.

 

The court said there was a fundamental flaw in the first-come-first-served policy inasmuch as it involved 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 policy has inherently dangerous implications. Any person who has access to the 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 is likely to 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," it observed.

 

"When it comes to alienation of scarce natural resources like spectrum etc., it is the burden of the State to ensure that a non-discriminatory method is adopted for distribution and alienation, which would necessarily result in protection of national/public interest. In our view, a duly publicised auction conducted fairly and impartially is perhaps the best method for discharging this burden and the methods like first-come-first-served when used for alienation of natural resources/public property are 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. In other words, while transferring or alienating the natural resources, the State is duty bound to adopt the method of auction by giving wide publicity so that all eligible persons can participate in the process," it said.

The court went to say that the exercise undertaken by the officers of the DoT between September, 2007 and March 2008, under the leadership of the then Communications Minister  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...," it said.

 

The court said it considered it imperative to observe that, but for the vigilance of some enlightened citizens who held important Constitutional and other positions and discharged their duties in larger public interest and non-Governmental organisations who have been constantly fighting for clean governance and accountability of the constitutional institutions, unsuspecting citizens and the nation would never have known how the scarce natural

resource spared by Army has been grabbed by those who enjoy money power and who have been able to manipulate the system.

 

On the plea for setting up an SIT to monitor the probe, the court directed that, in the future, copies of the report(s) of the investigation conducted by the CBI and other agencies shall be made available to the Central Vigilance Commissioner (CVC) in sealed envelopes.

 

Within the next one week, the CVC and the Senior Vigilance Commissioner shall examine the report(s) and send their observations/suggestions to the Supreme Court in sealed envelopes, which shall be considered along with the report/s of the CBI and other investigating agencies.

 

It made it clear that this direction shall not in any manner be construed as a reflection on the integrity of the investigation so far done by the team of CBI and other investigating agency or which may be done in future or their competence to effectively perform the job in relation to 2G case.

 

In the matter relating to the role of Chidambaram, Swamy had argued, among other things, that he, as then Finance Minister, could have prevented then Communications Minister A Raja from allocating spectrum at very low prices.

 

The verdicts came two days after the Supreme Court had, on Tuesday, upheld Swamy's right to seek the prosecution of Raja in the 2G case and ruled that the Government must decide on applications seeking sanction to prosecute within four months or the sanction would be deemed to have been given.

 

The Comptroller and Auditor General of India (CAG) had, on November 16, 2010, said in its report that the Department of Telecommunications, headed by Raja, in January 2008 had issued 122 new licences for 2G spectrum at 2001 prices by flouting every canon of financial proprieity, rules and procedures.

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It said the DoT did not follow its own guidelines on eligibility conditions, arbitrarily changed the cut-off date for receipt of applications post facto and altered the conditions of the FCFS procedure at crucial junctures without valid and cogent reasons, which gave unfair advantage to certain companies over others, the report had said.

 

According to it, the DoT also did not do the requisite due diligence in the examination of the applications submitted for the UAS licenses, leading to the grant of 85 out of 122 UAS licences to ineligible applicants.

 

"These companies, created barely months ago, deliberately suppressed facts, disclosed incomplete information, submitted fictitious documents and used fraudulent means for getting UAS licences and thereby access to spectrum. Owners of these licences, obtained at unbelievably low price, have in turn sold significant stakes in their companies to the Indian/foreign companies at high premium within a short period of time. The premium earned by these new entrants to the telecom sector was nothing but the true value of the spectrum, which should have normally accrued to the public exchequer, had the transparent and fair market mechanism been followed for the allocation of UAS licences," the report had said.

 

The CAG had said Dual Technology was also introduced by the DoT in October 2007 in a hasty and arbitrary manner and in-principle approval was given to three operators on a day prior to the announcement of the policy, which gave the perception of discrimination against other players in the field.

 

"Further this decision was in contravention of the Cabinet decision of 2003, resulting in additional spectrum being allotted to certain operators at 2001 price," it had said.

 

"The methodology for allocation of 2G spectrum, a scarce finite national asset and for which there was an unprecedented demand for allocation, was not deliberated upon by the full Telecom Commission. Audit is of the view that such discussion with different stake holders represented in the Telecom Commission would certainly have benefitted Department of Telecommunications in arriving at a more credible and transparent procedure for allocation as also for ascertaining the true value of 2G spectrum," the report had said.

 

Raja had resigned from the Union Cabinet on November 4, 2010 amidst a growing clamour from the Opposition for his removal over alleged corruption in the allocation of 2G spectrum.

 

He, however, has maintained all along that he was innocent of any wrong-doing that he had, in fact, helped to bring about a telecom revolution in the country during his tenure, with the number of telephone subscribers going up from 300 million to 729 million and call rates coming down from Rs 1.50 per minute to 40 paise per minute and to 25 paise per minute for intra-circle calls.

 

The Minister and his supporters repeatedly argued that the allocation of 2G spectrum could not be compared with the recent auction of 3G spectrum, which had yielded huge revenues for the Government. They also claimed that the policy they followed had helped to grow the telecom sector in the country and to increase the tele-density by making the services affordable and accessible for more people. But, despite all their protestations, the suspicion of wrongdoing remained and Raja could not shake it off.

 

NNN

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