The Bombay High Court has quashed the Central Government’s decision to retrospectively impose a one-time spectrum charge on Bharti Airtel and Vodafone Idea for spectrum held beyond 6.2 MHz during the period between July 1, 2008, and December 31, 2012, holding that the levy lacked both statutory and contractual authority.
The Division Bench of Justice Manish Pitale and Justice Shriram V Shirsat allowed the writ petitions filed by the telecom operators and set aside the Union Cabinet decisions dated November 8, 2012, and December 28, 2012, along with the consequential demand notices issued by the Department of Telecommunications (DoT).
The Court held that the Union Government, acting as a licensor under Section 4 of the Indian Telegraph Act, 1885, could not unilaterally alter the financial terms of existing telecom licences or retrospectively impose additional monetary liabilities that were not contemplated under the licence agreements. It observed that once the telecom operators migrated to the revenue-sharing regime under the National Telecom Policy, 1999 (NTP-99), the relationship between the parties was governed by contractual terms, including the agreed entry fee and revenue-sharing obligations.
The dispute arose after the Central government decided in 2012 to impose a one-time spectrum charge linked to auction-discovered prices for spectrum held beyond 6.2 MHz. The levy was made applicable retrospectively from July 1, 2008, covering the period up to December 31, 2012. Pursuant to the Cabinet decisions, demand notices were issued to telecom service providers, including Bharti Airtel and Vodafone Idea.
Challenging the levy, the telecom companies contended that they had already paid consideration for the spectrum through licence fees, spectrum usage charges and revenue-sharing payments under the terms of their Unified Access Service (UAS) licences. They argued that the government lacked the authority to retrospectively impose a fresh financial burden without amending the licence conditions or obtaining the consent of the licensees.
Accepting the challenge, the High Court held that a telecom licence was a contractual arrangement supported by definite consideration and that any power exercised by the Union Government must derive from the licence conditions themselves. The Court observed that Section 4 of the Telegraph Act did not confer unfettered authority upon the government to impose additional liabilities contrary to the contractual framework governing the parties.
The Bench further held that the impugned decisions effectively imposed retrospective financial liability from 2008 despite being taken only in 2012. Since no enabling provision existed either in the statute or in the licence agreements authorising such retrospective imposition, the decisions amounted to executive action unsupported by law.
The Court examined the original 1994 telecom licences as well as the subsequent Unified Access Service licences and found that while the government was empowered to revise recurring spectrum usage charges, the contractual framework did not contemplate any additional entry fee or one-time charge for spectrum allocations within the prescribed limits. It noted that under the NTP-99 regime, additional spectrum allocation was already linked to enhanced revenue-sharing obligations and spectrum usage charges, which the operators had been paying.
The Court also referred to recommendations made by the Telecom Regulatory Authority of India (TRAI), which had indicated that any one-time spectrum charge, if imposed, should apply only to spectrum held beyond 10 MHz. The Bench noted that Bharti Airtel and Vodafone Idea held spectrum only up to 10 MHz in the relevant service areas during the period in question.
The Union Government defended the levy by arguing that spectrum is a scarce and valuable national resource and relied upon a 2016 judgment of the Madras High Court in the Aircel case, which had upheld a similar charge. However, the Bombay High Court held that the State could not retrospectively impose new financial obligations merely by invoking public interest or revenue considerations.
The Bench observed that the objectives of NTP-99 included affordable and widespread access to telecom services, increased rural tele-density and efficient utilisation of spectrum. Revenue maximisation was not among the stated objectives of the policy. Consequently, the concept of public interest in the context of NTP-99 could not be interpreted solely through the lens of revenue generation.
The Court further found that the government had not undertaken any modification, novation or amendment of the licence agreements before imposing the levy. Instead, it had sought to impose the one-time spectrum charge unilaterally and retrospectively without identifying any source of power in either the governing statute or the contractual terms.
Holding the impugned decisions to be legally unsustainable, the Court quashed the Cabinet decisions and the demand notices issued pursuant thereto. It also directed the authorities to return any bank guarantees furnished by the telecom operators and set aside all consequential actions taken on the basis of the impugned demands.
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