Holding

A licence under Section 4 of the Telegraph Act may be extended only at the sole discretion of the Union of India, subject to constitutional principles, and the auction of spectrum is a permissible method of allocation.

Summary

The Supreme Court considered appeals and writ petitions filed by Bharti Airtel Ltd and other telecom operators seeking renewal or extension of their licences granted under Section 4 of the Telegraph Act, 1885. The operators argued that the licences created a contractual right to extension and that the Government’s decision to allocate spectrum through auction violated their rights and the TRAI’s recommendations. The Court held that the licences are contracts but do not confer an automatic right of renewal; extension is at the sole discretion of the licensor (the Union of India) and must be exercised in accordance with constitutional mandates of equality, non‑arbitrariness and public interest. It further affirmed that auction is a permissible, intra‑vires method for disposing of spectrum, consistent with the 2G judgment, and that the Government is not bound by TRAI’s recommendations. Consequently, the appeals and writ petitions were dismissed.

Issues considered

The nature of licences under Section 4 of the Telegraph Act: whether they create an automatic right of renewal or extension for the licensee.
Whether the Union of India, as licensor, must honour an extension request made in the 19th year of the licence term.
The constitutional requirements (Article 14, equality, non‑arbitrariness) applicable to the allocation of natural resources such as spectrum.
Whether the auction of spectrum is the only constitutionally permissible method of disposal of the resource.
The extent to which the Government must consider TRAI’s recommendations under Section 11 of the TRAI Act.

Legislation cited

Indian Contract Act, 1872s. 23
Indian Telegraph Act, 1885s. 4
Indian Wireless Telegraphy Act, 1933
Telecom Regulatory Authority of India Act, 1997s. 11, s. 18

Subjects

spectrum auctionlicence renewaltelecom regulationTelegraph ActTRAI Actconstitutional lawpublic interestArticle 14natural resources allocation2G case

Judgment

[2015] 5 S.C.R. 867

BHARTI AIRTEL LTD. A
v.
UNION OF INDIA
(Civil Appeal No.2803of2014)
B
MAY 14, 2015
[J. CHELAMESWAR AND R.K. AGRAWAL, JJ.]

Telecom Regulatory Authority of India Act, 1997- s. C
18 - Telegraph Act, 1885 - s. 4, proviso - Wireless
Telegraphy Act, 1933 - Extension of licence - In 2G case,
grant of licence and allotment of spectrum by Union of India
pursuant to two press release, set aside - Pursuant thereto,
Union of India taking steps to conduct ari auction pertaining D
to the certain operators whose licenses were coming to an
end in 2014 - Stipulation in licences that validity period is of
20 years and Licensor may extend the period for another 10
years subject to certain conditions specified therein - E
Licensees sought extension/renewal of their licence -
Government of India as also TDSAT rejected the same -
Held: Licensees have no automatic right of renewal/extension
on the expiry of the original tenure of the license - Extension
is at the sole discretion of licensor subject to the conditions F
stated - Licensor's obligations are not simply confined to
the contract/license. They also flow from the Constitution and
the laws of the land- Mandate and wisdom of the executive"
in the matter of choosing the most suitable method of
distribution of natural resources is to be respected - This is G
clearly a matter of an economic policy entailing an intricate
economic choice and the Court lacks necessary expertise
to make such choice - Thus, auction is the only "permissible
and intra vires method for disposal - Impugned decision of
867 H
868 SUPREME COURT REPORTS [2015] 5 S.C.R.

A the Government, which resulted in huge inflow of revenue in
the auctions conducted during the pendency of this litigation,
cannot be said to be a totally irrational or irrelevant
consideration in the context of the spectrum management,
more particularly, 2G case - Licensees are not compelled to
B pay any specific tariffs fixed by the licensor, for availing the
right to use the spectrum - If the price for securing allocation
of spectrum is likely to go up because of the procedure of
auctioning to have access to spectrum, it goes up because
of the market forces - There are people who are willing to
C acquire such a right paying a higher price on the assessment
that they would be able to carry on the business profitably
even after paying higher amounts for acquisition of spectrum
- Licensees are corporate houses with enormous economic
power, which enables them to secure adequate expert advice
0
in the matter of financial planning - It cannot be believed
that they would make any investment without making a
reasonable assessment of the possible return on such
investment - There is no compulsion by the State in this
E regard.
Dismissing the appeals and writ petitions, the
Court

HELD: 1.1 A license granted under Section 4(1)
F of the Telegraph Act such as the one granted to each of
the LICENSEES is a contract between the LICENSOR
and the LICENSEE. From the language of the relevant
clauses of the licences, it is clear that the LICENSEES
have no automatic right of renewal/extension on the
G expiry of the original tenure of the license. The contract
only provided for extension of the period of license at
the sole discretion of the LICENSOR subject to the
condition that the LICENSEE makes an application
H seeking an extension during the 19th year of the
BHARTI AIRTEL LTD. v. UNION OF INDIA 869

currency of the licence. It appears that all of the A
LICENSEES did make such an application. [Para 37, 39]
[893-H; 894-A, B-D]

1.2 Under the terms of the license, the LICENSOR
is required to extend the license only on "mutually agreed B
terms and conditions", if such an extension is sought in
the 19th year of the currency of the licence. Where the
LICENSEE does not make an application in the 19th year
but makes it just a few days before the expiry of the 20th
year, the LICENSEE still would not have a right of C
consideration because such a claim is plainly
unsupported by the text of the contract and the failure
to seek extension in the 19th year, makes the
continuance of the service to the public uncertain. The
Government of India cannot afford to remain waiting D
without making alternative arrangements, because the
disruption in the communication in the modern world
may lead to many undesirable consequences apart from
causing inconvenience to the public. The alternative
pos~ibility of the LICENSEE not making an application E
for extension at all because he is not interested in the
extension, the LICENSOR cannot insist that the
LICENSEE should continue to offer the service either
on the same economic considerations or otherwise. The F
language of the contract-"mutually agreed terms"-clearly
indicates so. Under the contract neither the LICENSOR
nor the LICENSEE has a right to insist that other party
should continue with the contract even if such other
party is not willing to continue except on such terms and G
conditions on which the other party may desire to
continue. Such terms and conditions obviously include
terms and conditions regarding the economic
stipulations subject to which either of the parties is
willing to be in the contract. However, the LICENSOR H
being the Union of India, its discretion to stipulate terms
870 SUPREME COURT REPORTS [2015] 5 S.C.R.

A to act whimsically. The authority of the Union is fettered
by two constitutional limitations; firstly, that any decision
of the State to grant access to natural resources, which
belong to the people, must ensure that the people are
adequately compensated and, secondly, the process by
B which such access is granted must be just, non-arbitrary
and transparent, vis-a-vis private parties seeking such
access. [Para 41, 42, 44) [894-F-H; 895-A-G; 896-E-F]

1.3 By a statutory declaration made under Section
C 4 and its proviso, it can be seen that no person other
than the Government of India has any right to establish,
maintain and work telephones. It is the exclusive
privilege of the Government oi indla, which could be
permitted to be exercised by others by a grant from the
D Government of India. Such licences are in the nature of
largesse from the State. No doubt, the authority of the
State to distribute such largess is always subject to the
condition that the State must comply with the conditions
of Article 14 of the Constitution i.e. the distribution must
E be on the basis of some rational policy. Even the
language of the proviso to Section 4, which stipulates
that the grant of license should be "on such conditions
and in consideration of such payments as it thinks fit",
F must necessarily be understood that the conditions must
be rational and the payments forming the consideration
for the grant of license must be non-discriminatory. The
conditions contained in the licenses stipulate that the
term of the license could be extended on mutually agreed
G terms, if the Government of India deems it expedient. The
obligations of the Government of India flowing from the
Constitution as well as a statute necessarily require the
Government of India to grant licences only in public
interest and for public good. [Paras 45, 46] [897-A-F]

H 1.4 The decision of the LICENSOR to conduct an auction
BHARTI AIRTEL LTD. v. UNION OF INDIA 871

for granting access to spectrum, obviously, complies A
with the second of the requirements specified by this
Court in 2G Case. The adequacy of compensation which
the Government of India seeks to derive by holding an
auction for allowing access to spectrum is just and fair
in the circumstances. [Para 53] [899-8-C] B

1.5 The LICENSEES would necessarily have to
pass on their burden to the ultimate consumers. That
need not necessarily mean that there should be an
enhancement in the tariffs. There is always a possibility C
of maintaining the tariffs at a lower level if the consumers
base is sufficiently large, i.e. more the consumers base,
more the turnover. Therefore, the possibility of avoidance
of the need to increase the tariffs, all depends upon the
facts and figures. Adjudicating the issue without concrete D
facts and figures in this regard only on some
hypothetical basis is neither permissible nor justified.
[Para 55] [900-A-C]
.
1.6 It was submitted that the question of extension E
of license must be decided by the Government on the ·
basis of objective and rational criteria by taking into
account relevant materials, cannot be accepted. The
submission must carry a great weight if the LICENSOR'S
(Government of India) obligations are regulated purely F
by the terms of the contract. But LICENSOR'S
obligations are not simply confined to the contract/
license. They also flow from the Constitution and the laws
of the land. Obviously, the obligations flowing from the
Constitution stand on a higher footing and it· is the G
Government of India's duty to satisfy the obligations
flowing from the Constitution and the laws of the land in
preference to obligations flowing from a contract It is a
well settled principle of law that where there is a conflict H
between obligations flowing from a contract and those
872 SUPREME COURT REPORTS [2015] 5 S.C.R.

A flowing from the law, the obligations flowing from the
contract must necessarily yield to obligations flowing
from the Constitution and laws. [Para 57,58) [901"8, D-
E; 902-A-8]

B 1.7 The submission of the licensees that they have
made in the for the purpose of providing services to its
customers , such infrastructure is created by borrowing
from various banks and financial institutions and if
licences of the licencees is not extended, it would result
C in huge wastage of the national financial and material
resources, is rejected on the ground that it is too vague
and without any basis in the pleadings. [Para 58) [891-
8-C; 902-8-C)

o 1.8 In view of the statement in the policy
announced on 15.02.2012, the LICENSEES submitted
that the only clear decisions taken are that (i) in future
only unified licences will be granted and (ii) the allocation
of spectrum will be delinked from the licence. It is clear
E that no final policy decision was taken by the
Government regarding the method and manner of
allocation of spectrum even with respect to licences to
be granted in future. Insofar as the existing licences are
concerned, the policy of the Government is that they are
F required to extended for another 10 years as per the
provisions of the "extant licensing regime with suitable
terms and conditions" etc. Therefore, the decision of the
Government of India to auction the right of spectrum in
the· cases of those areas where the LICENSEES held
G licences so far is not only inconsistent with the terms
and conditions of the policy announced on 15.02.2012
as the impugned decision is not only in consistent with
the "extant licensing regime" but also a decision is taken
H without consulting TRAI - a requirement which is
mandatory u/s. 11(1)(a)(ii). The TRAI Act mandates that
BHARTI AIRTEL LTD. v. UNION OF INDIA 873

the Government of India "shall seek the A
recommendations of the Authority" while stipulating the
"terms and conditions to a service provider" and TRAI
failed to discharge its functions stipulated under Section
11(1)(b)(i) which calls upon TRAI to "ensure compliance
of terms and conditions of licence". [Para 69] [906-C-G; B
907-A]

1.9 The LICENSEES submitted that the impugned
decision of the Government of India to allocate spectrum
by conducting an auction is contrary to the C
recommendations of the TRAI dated 15.10.2014 and also
contrary to the policy statement of the Minister dated
15.02.2012. The tenor of the policy is clear that the
delinking of spectrum from licence would only be with
reference to future and the extension of the existing D
licence is required to be on the basis of the "extant
licensing regime". In other words, the policy is only
prospective and applying the same to existing
LICENSEES would not only be contrary to the tenor of
the policy statement but also make it retrospective in E
operation. Further the impugned action cannot be faulted
because the policy statement insofar as it seeks to apply
only for the allocation of spectrum in future would be
contrary to the decision of this Court in 2G case and void F
to that extent. [Para 70, 72] [907-B; 908-A-B, G]

1.10 Even assuming for the sake of arguments that
the recommendations of TRAI are final, the G~vernment
of India is not bound by the same in view of the first
proviso to Section 11(1) of TRAI Act. TJie obligation of G
the Government of India arising under the second
proviso thereof to seek opinion of TRAI is only to ensure
that there is a rational process of decision-making where
the factors relevant are examined by an expert body H
before the Government takes a final decision on any one
874 SUPREME COURT REPORTS [2015] 5 S.C.R.

A of the matters enumerated under Section 11(1)(a). As
pointed out by Subodh Kumar Committee, the
Government is required to address the multiple goals
. for spectrum management such as efficient utilisation,
optimal revenue generation, sufficient competition,
B obviously to avoid monopoly in the telecom market etc.
The Subodh Kumar Committee rightly observed that
these goals are simultaneously "synergistic as well as
conflicting". Therefore, the Parliament stipulated that
such issues are initially examined by an expert body
C leaving it open to the Government to take a final decision
as to which one of these various 'synergistic as well as
conflicting' factors must outweigh by the other factors.
Apart from that, from the language of the 2nd proviso
the obligation to consult TRAI arises only in the case of
0
"new licence" but not the renewal/extension of an
existing licence. [Para 76] [912-B-F]

1.11 The impugned decision of the Government,
which in fact resulted in huge inflow of revenue in the
E auctions conducted during the pendency of this
litigation, cannot be said to be a totally irrational or
irrelevant consideration in the context of the spectrum
management, more particularly, in the light of decision
F of this Court in 2G case. [Para 77] [912-G]

1.12 The LICENSEES are not compelled to pay any
specific tariffs fixed by the LICENSOR (Union of India),
for availing the right to use the spectrum. If the price for
securing allocation of spectrum is likely to go up
G because of the procedure of auctioning to have access
to spectrum, it goes up because of the market forces.
Because there are people who are willing to acquire such
a right paying a higher price on the assessment that they
H would be able to carry on the business profitably even
BHARTI AIRTEL LTD. v. UNION OF INDIA 875

after paying higher amounts for acquisition of spectrum. A
The LICENSEES are corporate houses with enormous
economic power, which enables them to secure
adequate expert advice in the matter of financial
planning. It cannot be believed thatthey would make any
investment without making a reasonable assessment of B
the possible return on such investment. There is no
compulsion by the State in this regard. [Para 82) [915-E-
G]
1.13 In 2G case, this Court observed that this C
Court "respects the mandate and wisdom of the
executive" in the matter of choosing the most suitable
method of distribution of natural resources. This Court
noted that this is clearly a matter of an economic policy
entailing an intricate economic choice and the Court D
lacks necessary expertise to make such choice. In the
light of the observation that at least in the matter of
disposal of spectrum, auction is the only "permissible
and intra vi res method for disposal". Therefore, the
submission of the LICENSEES that auction is not the E
only method of disposal of natural resources is rejected.
[Para 84) [917-E-F]

Centre for Public Interest Litigation & Others v. Union
of India & Others 2012 (3) SCR 147 : (2012) 3 SCC 1; F
Natural Resources Allocation, In Re. Special
Reference No. 1 of 2012 2012 (9) SCR 311 : (2012) 10
SCC 1; Union of India & Another v. Association of
Unified Telecom Service Providers of India & Others
2011 (14) SCR 657 : (2011) 10 SCC 543; State of G
Punjab & Another v. Devans Modem Breweries Ltd. &
Another 2003 (5) Suppl. SCR 930 : (2004) 11 SCC
26; Har Shankar & Others v. The Dy. Excise and
Taxation Commissioner & Others 1975 (3) SCR 254:
H
876 SUPREME COURT REPORTS [2015] 5 S.C.R.

A (1975) 1 SCC 737; Panna Lal & Others v. State of
Rajasthan & Others 1976 (1) SCR 219: (1975) 2 SCC
633; Hotel Sea Gull v. State of West Bengal & Others
2002 (2) scR 576 : (2002) 4 sec 1

B Kera/a State Electricity Board v. Mis. S.N. Govinda
Prabhu and Bros. & Others 1986 (3) SCR 628 : (1986)
4 sec 198- held inaaplicable.

Case Law Reference
c 2012 (3) SCR 147 : Referred to Para 2

2012 (9) SCR 311 Referred to Para 30

(2011) 10 sec 543 Referred to Para 36
D
2003 (5) Suppl. SCR 930 Referred to Para 36

1975 (3) SCR 254 Referred to Para 36

1976 (1) SCR 219 Referred to Para 36
E
2002 (2) SCR 576 Referred to Para 57

1986 (3) SCR 628 Held inapplicable. Para 81,82

CIVILAPPELLATE JURISDICTION: Civil Appeal No.
F 2803of2014

From the Judgment and Order dated 31.01.2014 of the.
Telecom Disputes SettlementAppellate Tribunal in Petition No.
458of2013.
G
WITH

Civil Appeal Nos. 1969, 2072, 5376, 9116 of2014.

Writ Petition (C) Nos. 1056, 971 of2014.
H
BHARTI AIRTEL LTD. v. UNION OF INDIA 877

~ A
Writ Petition (C) No. 180 of2015.

K. K. Venugopal, Gopal Jain, Tarun Gulati, Manjul
Bajpai, Sparsh Bhargava, Kishore Kunal, Anupam Mishra, B
Shashi Mathews, Neil Hildreth,AnkurTalwar, Shashwat Bajpai,
R. Chadrachud, Kartikey Boddh, Percival Billimoria, Atul N.,
Vishur Bhatia, Stephanie Sonawane, N. Ganpathy, Yoginder
Handoo, Lakshmesh Karnath, Mahesh Agarwal, Rishi
· Agarwala, E. C.Agarwala, Shelly Bhasin, ParasAnand,Ayushi c
Chad ha for the Appellant.

Ranjit Kumar, SG, Guru Krishna Kumar, Jaideep Gupta,
Mukul Gupta, Shailender Saini, Shankar Divate, Ajay Sharma,
Binu Tamta; Dhruv Tamta, Ritin Rai, D. S. Mahra, Moh it Paul,
0
Amit Bansal for the Respondent.

The Judgment of the Court was delivered by

CHELAMESWAR, J. 1. These five civil appeals
under Section 18 of the Telecom Regulatory Authority of India E
Act, 1997 (hereinafter referred to as the ''TRAI Act") and three
writ petitions raise common questions. Each of the appellants.
or the petitioners, as the case may be, in these matters
(hereinafter collectively referred to as 'LICENSEES') is a
licensee holding a licence granted under Section 4 of the Indian F
Telegraph Act, 1885 for providing TELEGRAPH services in
the various earmarked service areas.

2. It appears from the judgment of this Court in Centre
for Public Interest Litigation & Others v. Union of India & G
Others, (2012) 3 SCC 1, hereinafter referred to as 2G case,
that the first telegraph link in India was experimented in 1839
between Calcutta and Diamond Harbor separated by a
distance of21 miles. By an act of the British Parliament, known
as the Indian Telegraph Act, 1885, the privilege of"establishing, H
878 SUPREME COURT REPORTS [2015] 5 S.C.R.

A maintaining and working of telegraphs" within the territory of
British India was exclusively conferred under Section 4 upon
the Central Government - an expression which bore different
meanings at different points of time in this country, the details
of which may not be necessary for the purpose of this case.
B However, proviso to the said section enabled the Central
Government to licence any person to exercise the privilege
which is otherwise exclusive to the Central Government.

3. The advancement of technology made wireless
C communication 1 possible which led to the enactment of the
Indian Wireless Telegraphy Act, 1933.

4. On 28th January, 1882, Major E. Baring, Member of
the Governor General's Council declared open three
o telephone2 exchanges in Calcutta, Bombay and Madras,
marking the beginning of telephone communications in India.
Over the next 133 years, there has been a mind boggling
advancement in the telecommunication technology. Strangely,
there is no enactment in this country dealing with the
E establishment and working of telephones. The 160 year old
telegram system in this country was officially closed on 14th
July, 2013. Ironically, the Indian Telegraph Act, 1885 and the
Indian Wireless Telegraphy Act, 1933 still continue on the

F 1
· Section 2.(1)

'wireless communication
• means any transmission, omission or reception of signs, signals, writing, images and
sounds, or intelligence of any nature by means of electricity, magnetism, or Radio
waves or Hertzian waves, without the use of wires or other continuous electrical
conductors between the transmitting and the receiving apparatus;
G 2 Alexander Graham Bell is commonly credited with the invention of telephone. He
obtain_ed a patent in 1876 for an apparatus for transmitting vocal or other sounds
electrically. There is some controversy as to who was the real inventor of telephone.
There is a very strong claim by an Italian scientist called Antonio Meucci. A resolution
was passed by the United States House of Representatives in 2002 recognising that
Meucci did pioneering work on the development of telephone and "if Meucci had been
H able to pay$ 10 fee to maintain a caveat after 1874, no patent could have been issued
to Bell".
BHARTI AIRTEL LTD. v. UNION OF INDIA . 879
[CHELAMESWAR, J.]

statute book. By virtue of the various amendments made from A
time to time, these two enactments still continue to govern the
entire activity of establishment, maintenance and working of
telephones and various other telecommunication services.

Electromagnetic Radiation - Waves - Frequencies - B
Spectrum

5. 'Electromagnetic (EM) radiation is a phenomenon
which occurs in the universe. Sunlight is a familiar example of
EM radiation. So is the light from stars. EM radiation travels c
in waves at different frequencies. Frequency of a wave and
its length are inversely proportional. Generally, EM radiation
is classified on the basis of wavelength into radio wave,
microwave, terahertz (or sub-millimeter) radiation, infrared, the
visible region is perceived as light, ultraviolet, X-rays and o
gamma rays. Waves with frequencies ranging from 300 GHz
to 3 kHz (corresponding wave length ranging from 1 millimeter
to 100 kilometers) are called radio waves. Radio waves have
the longest wave lengths in the electromagnetic spectrum. The
entire range of frequencies in EM radiation is called EM E
spectrum.

"EM radiation interacts with matter in different ways across
the spectrum. These types of interaction are so different
that historically different names have been applied to F
different parts of the spectrum, as though these were
different types of radiation. Thus, although these
"different kinds" of EM radiation form a quantitatively
continuous spectrum of frequencies and wavelengths, the
spectrum remains divided for practical reasons related G
to these qualitative interaction differences."

6. Any EM radiation (including radio waves) travels with
the speed of light in vacuum i.e. 299,792,458 meters per
second. The distance is called the wavelength of a Hertz radio H
880 SUPREME COURT REPORTS [2015] 5 S.C.R.

A signal (HZ). Megahertz (MHz) radio signal has a wavelength
of 984 feet. Wave length of radio waves is measured in units
called Hertz -a name given to the unit after Heinrich Hertz a
. German scientist who in 1887 demonstrated the reality of radio
waves the existence of which was theoretically predicted
B earlier in 1867 by James Clerk Maxwell (a Scottish
mathematical physicist).

7. Radio waves can be generated artificially and used
forthe transmission of sound or for passing information. Radio
C frequencies are divided into groups called bands which have
similar characteristics. Artificially generated radio waves are
used for fixed and mobile radio communication broadcasting,
radar and other navigation systems, communication satellites,
computer networks etc.
D
8. To prevent interference between different users, the
artificial generation and use of radio waves is strictly regulated
by law, coordinated by an international body called the
International Telecommunications Union (ITU). The radio
E spectrum is divided into a number of bands on the basis of
frequency and allocated to different users.

9. Till 1991, the activity of establishment, maintenance
and working of telephones was completely controlled by the
F .Government of India. Pursuant to the New Economic Policy
announced by the Government of India on 24. 7.1991, some of
the services in telecommunication sector were opened up to
the private investment in 1992.
".......... the following services: (a) Electronic Mail; (b)
G
Voice Mail; (c) Data Services; (d)Audio Text Services;
(e) Video Text Services; (f) Video Conferencing; (g) Radio
Paging; and (h) Cellular Mobile Telephone. In respect of
services (a) to (f), the companies registered in India were
H permitted to operate under a licence on non-exclusive
BHARTI AIRTEL LTD. v. UNION OF INDIA 881
[CHELAMESWAR, J.]

basis. For services covered by (g) and (h) mentioned · A
above, keeping in view the constraints on the number of
companies that could be allowed to operate, a policy of
selection through a system of tendering was followed for
grant of licences."
B
[Para 5 of 2G case (supra)]

10. All services, which were opened up to private
investment referred to above, are EM wave based services.
Therefore, they fall within the definition of the expression c
"TELEGRAPH" 3 occurring under Section 3(1)(AA) of the
Telegraph Act. Since the privilege to conduct the activity of
establishment, maintenance and working of a TELEGRAPH
could be permitted by the Government by private parties under
a licence, there arose a need to regulate utilization of D
frequencies by the LICENSEES for carrying on the business
in TELEGRAPHS.

11. Some of the frequencies are exclusively reserved
for th_e defence and security operations of India which, for E
obvious reasons, cannot be made accessible to private
parties.

12. The New Telecom Policy 1994 (NTP 1994) was
announced by the Government of India on 13.5.1994. In F
furtherance of the said Policy, 22 Cellular Mobile Telephone
Service (CMTS); 6 Basic Telephone Service (BTS) licences
were granted to operators:
3· 3.(1AA) 'telegraph' means any appliance, instrument, material or apparatus used or

capable of use for transmission or reception of signs, signals, writing, images and G
sounds or intelligence of any nature by wire, visual or other electro-magnetic emissions,
radio waves or Hertzian waves, galvanic, electric or magnetic means.
Explanation. -'Radio waves' or 'Hertzian waves' means electromagnetic waves of
frequencies lower than 3,000 giga-cycles per second propagated in space without
artificial guide;
-Substituted and re-numbered for Section 3(1) by the Act 15 of 1961 H
882 SUPREME COURT REPORTS [2015] 5 S.C.R.

A 13. In addition, paging licences were awarded in 27
cities and 18 State circles.

14. These licences were bundled with spectrum within
which a licensee was entitled to operate. The licences were
B granted on the basis of selection through a system of tendering.

15. On 2Qlh November 1998, a Group was constituted
by the Government of India to review the then existing telecom
policy and suggest reforms. Based on the report of the said
C Group, the New Telecom Policy 1999 (NTP 1999) was
formulated which became effective from 1.4.1999.

16. It took note of the fact situation as it existed on that
day in the following words:
'
.f
D "The Government invited private sector participation in a
phased manner from the early nineties, initially for value
added services such as Paging Services and Cellular
Mobile Telephone Services (CMTS) and thereafter for
Fixed Telephone Services (FTS). After a competitive
E bidding process, licenses were awarded to a CMTS
operators in the four metros, 14 CMTS operators in 18
state circles, 6 BTS operators in 6 state circles and to
paging operators in 27 cities and 18 state circles. VSAT
services were liberalized for providing data services to
F
closed user groups. Licences were issued to 14
operators in the private sector out of which only nine
licencees are operational. The Government has recently
announced the policy for Internet Service Provision (ISP)
G by private operators and has commenced licensing of
the same. The Government has also announced opening
up of Global Mobile Personal Communications by
Satellite (GMPCS) and has issued one provisional
license. Issue of licenses to other prospective GM PCS
H
BHARTI AIRTEL LTD. v. UNION OF INDIA 883
[CHELAMESWAR, J.]

operators is under consideration." A

17. The NTP 1999 took note of the existence of various
licences granted under the NTP 1994 and made a policy
statement that the Government intends to resolve the problems
of existing operators in a manner ''which is consistent with their B
contractual obligations and is legally tenable". 4

18. Pursuant to the policy statement, the Government
of India devised a scheme for the migration of existing
LICENSEES under the NTP 1994 to the new regime under c
the NTP 1999. The Scheme known as Package for Migration
of Existing LICENSEES of Cellular and Basic Telecom
Services to New Telecom Policy. The terms of the policy insofar
as relevant for our purpose are as follows:-
D
" ..... the following Package is proposed to migration of
the existing Cellular (Metros and Telecom Circle) and
Basic Telecom Service Operators to NTP-99 regime:~

(i) The cut off date for change over to NTP-99 regime
will be 1.8.1999. E

(ii) The licensee will be required to pay one time Entry
fee and License Fee as a percentag9 share of gross
revenue under the license. The Entry Fee chargeable
will be licence fee dues payable by existing LICENCEES F
upto 31.07.1999, calculated upto this date duly adjusted
consequent upon notional extension of effective date as
4· Resolution of problems of existing operators

The New Policy Framework which seeks to significantly redefine the G
competitive nature of industry, would be applicable to new LICENCEES.
There are, however, multiple licences that have been issued by the
Government for cellular mobile services, basic services, radio paging services, internet
services etc. It is the Government's intention to satisfactorily resolve the problems
being faced by existing operators in a manner which is consistent with their contractual
obligations and is legally tenable. H
884 SUPREME COURT REPORTS [2015] 5 S.C.R.

A in para (ix) below, as per the conditions of existing
licence.

(iii) The Licence fee as a percentage of gross revenue
under the licence shall be payable w.e.f. 1.8.99. The
B Government will take a final decision about the quantum
of the revenue share to be charged as licence fee after
obtaining recommendations of the Telecom Regulatory
Authority of India (TRAI). In the meanwhile, Government
have decided to fix 15% of the gross revenue of the
c Licensee as provisional license fee. The gross revenue
for the purpose would be the total revenue of the Licensee
company excluding the PSTN related call charges paid
to DOT/MTNL and service tax collected by the licensee
on behalf of the Government from their subscribers. On
D receipt of TRAl's recommendation and Government's
final decision, final adjustment of provisional dues will
be effected depending upon the percentage of revenue
share and the definition of revenue for this purpose as
may be finally decided.
E
xxx xxxx xxxx xxxx
(xi) The period of licence shall be 20 years starting from
the effective date of the existing licence agreement."
F
19. In the year 2003, the Central Government came out
with an Office Memorandum dated 11.11.2003 which
contained guidelines for Unified Access (Basic & Cellular)
Services Licence (UAS Licences). The relevant portion of the
G document reads as follows:-
"Government, in the public interest in general and
consumer interest in particular and for the proper conduct
of telegraphs and telecommunications services, has
decided to move towards a Unified Access Services
H
Licensing regime. As a first step, as recommended by
BHARTI AIRTEL LTD. v. UNION OF INDIA 885
[CHELAMESWAR, J.]

TRAI, Basic and Cellular services shall be unified within A
the service area. In pursuance of this decision, the
following shall be the broad Guidelines for the Unified
Access Services License.

(i) The existing operators shall have an option to B
continue under the present licensing regime(with present
terms & conditions) or migrate to new Unified Access
Services Licence (UASL) in the existing service areas,
with the existing allocated/ contracted spectrum.
c
(ii) The license fee, service area, rollout obligations and
performance bank guarantee under the Unified Access
Services Licence will be the same as for Fourth Cellular
Mobile Service Providers (CMSPs)."
D
20. Some of the LICENSEES migrated to the UAS
Licensing regime. Even under the said regime, the validity of
licence was initially for a period of 20 years from the effective
date and extendible by 10 years. 5

21. Under the National Telecom Policy-2012 (for short "NTP- E
2012"), the Government of India decided to "de-link" licence
and the spectrum for the purpose of grant of fresh licences.

22. In the meanwhile, the grant of licence and allotment of
spectrum by the Union of India pursuant to the two press F
releases issued on 10.01.2008 became subject matter of
litigation before this Court which eventually culminated into 2G
Case. By the said judgment, this Court set aside all the
licences granted pursuant to the abovementioned press
5· 3. Duration of Licence
G
3.1 This LICENCE shall be valid for a period of 20 years from the effective date unless
revoked earlier for reasons as specified elsewhere in the document.
4. Extension of Licence
4.1 The LICENSOR may extend, if deemed expedient, the period of LICENSE by 10
years at one time, upon request of the LICENSEE, if made during 19'h year of the H
License period on terms mutua lly agreed. The decision of the LICENSOR shall be final
in regard to the grant of extension.
886 SUPREME COURT REPORTS [2015] 5 S.C.R.

A releases.

23. Union of India announced the NTP-2012 in which it
sought to de-link the licences and allocation of spectrum in
respect offuture licences. Shortly thereafter on 2.2.2012, the
B judgment of this Court in 2G case was pronounced. On
15.02.2012, the Minister of Telecommunication & Information
Technology issued a statement. Insofar as the existing UAS,
CMTS and Basic Services Licences are concerned, it is stated
therein that (i) no more UAS licences linked with spectrum will
C be awarded, (ii) all future licences will be Unified Licences,
(iii) allocation of spectrum will be delinked from the licence,
(iv) The validity of existing UAS (& CMTS and Basic services)
licences may be extended for another 10 years at one time,
as per the provisions of the extant licensing regime with
D suitable Terms & Conditions so as not to imply automatic
continuance of existing licence and related conditions including
quantum and price of any spectrum allocated. The relevant
portion of the full text of the statement would be considered
later in this judgment.
E
24. The licences granted to the various LICENSEES
are due to expire on various dates in 2014-2015.

25. Pursuant to the judgment in 2G case, the Union of
F India took steps to conduct an auction of the 900 MHz band
and 1800 MHz band insofar as they pertain to the certain
operators whose licenses were coming to an end in 2014.

26. Each bf the LICENSEES herein hold licences for
G different service areas. It appears from the impugned order
of the TDSAT dated 31.01.2014, which is a common order in
the four petitions filed by four different LICENSEES (Vodafone
Mobile Service Ltd., Loop Mobile India, Bharti Airtel Ltd. &
Idea Cellular Ltd.). Some of the LICENSEES hold Cellular
H Mobile Telephone Service licence (CMTS licence) while others
BHARTI AIRTEL LTD. v. UNION OF INDIA 887
[CHELAMESWAR, J.]

hold Unified Access Service license (UAS licence). Both the A
classes of licences stipulated that the licences are valid for a
period of 20 years and provide that the Licensor may extend ·
the period of licence for another 10 years subject to certain
conditions specified in the licence. The relevant conditions
contained in both the classes of licences are broadly similar B
with certain minor variations in the language employed.
CMTS UM
PEJiod cl Licerce: The i:ericx! of The LICENSE shall be valid
license shall be t\\enty years for a period cl 20 years fi'om c
from tra effecti1.e dcie of the the effective date uness
existirg license ageerralt re1.0ked earlier for reasors as
unless teminated for tra reasors spa:;ified elseWiere in the
stated tha-ein The Licenser m:tf dccurralt.lhe LICENSffi
extend the i:ericx! of license, if rray extend, if doored
rElluesta::t during 19" ~ar fraTI eiq:>edient, the i:eriod cl D
the effa;tive date fcr a pEJiod of LU CENCE by 10 years a
10 years ci a time 01 m.tually one time, upon reqJest of the
~rea:l tffmS and oorditiais. LICENSEE, if rrade during
The decision of licenser shall be 19h year of the Licenre period
final in regard to gant of on terms rrutualy ageed. E
extensi01. The decision of the
LICENSOR shall be fina in
regard to the grant ri
extension
Whether the minor variations in the language employed by the F
LICENSOR make any difference in the context of the right of
the LICENSEES to seek an extension of a licence is one of
the aspects which is required to be examined by us.

27. Since both the classes of licences contemplate G
seeking of an extension by the LICENSEE during the 1gth year
of the currency of the licence, the LICENSEES approached
the Government of India seeking an extension/renewal of their
licences. Alleging that there was no response from the
Government of India, some of the LICENSEES went to the H
888 SUPREME COURT REPORTS [2015] 5 S.C.R.

A Delhi High Court filing writ petitions seeking appropriate
directions to the Government of India. The said writ petitions
were disposed of by an order dated 22.02.2013 of the Delhi
High Court directing the Government of India to dispose of the
applications of the writ petitioners within a stipulated time
B frame. The High Court also observed that in the event of the
Government of India's decision going adverse to the interest
of the petitioners, the petitioners would be "at liberty to take
recourse to appropriate remedy".

C 28. Pursuant to the directions of the Delhi High Court,
the applications of the petitioners were considered and rejected
by the Government of India on different dates. Aggrieved by
the same, the LICENSEES approached the TDSAT. Their
petitions were dismissed by an order dated 31.01.2014.
D Hence, the appeals under Section 18 of the TRAI Act. Some
of the LICENSEES approached this court directly without
going to the TDSAT by filing writ petitions invoking the
jurisdiction of this court underArticle 32 of the Constitution of
India.
E
29. TDSAT recorded that "the right to extension of the
licence is undeniably a valuable right of the licensee" but held
that such a right is not an absolute right. If the LICENSOR
(Union of India) does not deem it expedient to grant such
F licence, it is under no such obligation to grant such extension.
The expression 'expedient' in the context of the licences only
means "public interest and for public good". Therefore, the
tribunal opined that it•is open to the Central Government to
refuse the extension if it is of the opinion that the grant of
G extension would not be in public interest or sub-serve public
good. The tribunal also opined that" ..... for the purpose of
grant of extension it is Central Government alone that is the
judge of public interest and public good. The Central
H Government may frame a policy or revise and existing policy
BHARTI AIRTEL LTD. v. UNION OF INDIA 889
[CHELAMESWAR, J.]

in larger public interest and in case the extension of the existing A
licences militates against the new policy it would be a valid
and acceptable ground for refusing extension". The tribunal
also opined that the absence of the employment of the
expression "if deemed expedient" in the relevant clause of UAS
licence, made no difference insofar as the authority of the B
Government of India for rejecting the extension of the licences.

30. In coming to such a conclusion, the tribunal took
note of the judgment of this Court in 2G case and also the
subsequent opinion of this Court dated 27.9.2012 in Natural C
Resources Allocation, In Re. Special Reference No. 1 of
2012, (2012) 10 SCC 1 and the Press Statement made by
the then Telecom Minister on 15.2.2012. The tribunal also noted
certain recommendations made by the TRAI on Spectrum
Management and Licensing Framework dated 11.5.2012 D
alongwith certain other regulations and clarifications and
concluded that:
"......... show that after deep and careful consideration
of the matter, in consultation with the expert statutory E
authority in the sector, the Government has framed a
policy for management and dispensation of spectrum in
the larger public interest. Any extension of the expiring
licenses is bound to undermine the implementation of
the policy and that is justification enough and sufficient F
for the Government to decline the extension for the
licenses."
31. On behalf of the licensees, the following submissions
are made: G
1. The licences, such as the one under consideration in
this batch of matters, are nothing but contracts between
the Union of India and the LICENSEES. They secured
the licences in the year 1994-95 admittedly through a H
890 SUPREME COURT REPORTS [2015] 5 S.C.R.

A transparent process of bidding. Under the terms of the
said licences/contract, the LICENSEES have a right to
have their claim for extension appropriately considered
in terms of the contract. Therefore, the respondents are
neither entitled nor justified in calling upon the
B LICENSEES to participate in the auction of the spectrum
to obtain the necessary spectrum to work their respective
licences. Such a decision of the respondent is violative
of the contractual rights of the LICENSEES.

C It is also the case of the LICENSEES that under the terms
of the licence, they are entitled to seek an extension, but
not a 'renewal' of the licence. The employment of the
word "extension" in the licence confers a higher right than
the right to seek a renewal.
D
2. The principle that the State owned resources cannot
be alienated except by a process of auction is not a
principle applicable universally and is so clarified by this
Court in Natural Resources Allocation, In Re, Special
E Reference No.1 of 2012, (2012) 10 SCC 1.

3. The decision of this Court in 2G case by which this
Court found fault with the policy of the Government of India
to grant licences on the basis of "first come first serve"
F without auctioning the spectrum is applicable only to the
licences granted in 2008 but not to every licence granted
under Section 4 of the Indian Telegraph Act, 1885.

4. Maximization of revenue shall not be the only
G consideration for the Union of India while deciding to hold
the auction in question. Union of India was under an
obligation to ensure continuity of telecom services to
millions of people who are already utilizing services of
the existing operators. Introducing new operators at this
H stage would cause disruption in the service to the
BHARTI AIRTEL LTD. v. UNION OF INDIA 891
[CHELAMESWAR, J.]

customers and likely to create an unhealthy competition A
for access to spectrum which would eventually burden
the ultimate consumer.

5. Each of the LICENSEES has made a huge investment
in the infrastructure for the purpose of providing services B
to its customers. Such infrastructure is created by
borrowing from various banks and financial institutions.
If the licences of the LICENSEES are not extended, it
would result in a huge wastage of the national financial
and material resources. If the licences of the existing C
operators are not renewed, such infrastructure would
simply go waste resulting into not only loss to the national
resources but also lead to a situation in which the recovery
of the loans obtained by various operators would become
doubtful. D

6. Under the TRAI Act, the authority, constituted under
Section 3, is under an obligation to make
recommendations either suo moto or on a request of
the Central Government regarding the terms and E
conditions of licence to a service provider and efficient
management of available spectrum. The authority also
has a duty to "ensure compliance of terms and conditions
of a license". The Government of India in violation of
such statutory stipulation ignored the recomme(ldation F
made by the authority and put the spectrum in auction.

32. On behalf of the Union of India, it is argued by the
learned Solicitor General that none of the LICENSEES have
any vested right for either renewal or extension 'Of their G
respective licences. Under the terms and conditions of the
licences, the LICENSEES are only entitled for a consideration
of their claim for extension of their licences period. However,
such a right is subject to the following conditions:
H
892 SUPREME COURT REPORTS [2015] 5 S.C.R.

A i) There must be a request from the licensee for such
an extension of the period of licence;

ii) Such a request must be made during the 19th year
from the effective date of the licence;
B
iii) The extension of the licence is at the discretion of
the LICENSOR as is evident from the language of
the relevant clauses of the license which states that
the LICENSOR may extend;
c iv) That condition of clause 4.1 which says that "the
decision of the LICENSOR in regard to the grant of
extension is final" indicates that the discretion
vested in the LICENSOR is absolute.

D 33. Learned Solicitor General also submitted that even
the limited right of consideration created under the contract is
always subject to change of policy by the LICENSOR (Union
of India) and its statutory and constitutional obligations. The
Union of India as a matter of policy took a decision not to extend
E the licenses of these LICENSEES, as the extension of a
license would necessarily imply the extension of the privilege
to use the spectrum which had been bundled with the original
grant. The Government took such a decision in the light of the
F decision of this Court in 2G case. The prospect of the
exchequer getting a huge amount by putting the spectrum for
auction is a relevant consideration justifying the decision to
put the spectrum for auction. So long as the decision to put
the spectrum on auction is uniformly applicable to all'
G LICENSEES across the Board, such a policy decision of the
Government of India prevails over the right, if any of the
LICENSEES to have their claim for extension of the license
be considered either on the same terms on which the licenses
were granted or on terms which the LICENSEES are
H
BHARTI AIRTEL LTD. v. UNION OF INDIA 893
[CHELAMESWAR, J.]

suggesting. The learned Solicitor General submitted that even A
in terms of the license conditions, the extension can only be
on "mutually agreed terms and conditions" or "on terms mutually
agreed". It is not open for the petitioners to argue that the
LICENSOR is bound to grant extension on terms which the
licensee dictates. B

34. Now, we proceed to examine the submissions of
the LICENSEES.

35. At the outset, we agree with the LICENSEES that c
a licence granted under Section 4 of the Act is a contract
between the Government of India and the LICENSEES.

36. In Union of India & Another v. Association of
Unified Telecom Service Providers of India & Others,
0
(2011) 1Osec543, relying upon an earlier Constitution Bench
judgment of this Court in State of Punjab & Another v.
Devans Modern Breweries Ltd. &Another, (2004) 11 SCC
26, which in turn relied upon two earlier decisions of this Court
in Har Shankar & Others v. The Dy. Excise and Taxation E
Commissioner & Others, (1975) 1 SCC 737 and Panna
Lal & Others v. State of Rajasthan & Others, (1975) 2 SCC
633, this Court held -
"40 .....Thus, once a licence is issued under the proviso
F
to sub-section (1) of Section 4 of the Telegraph Act, the
licence becomes a contract between the licensor and
the licensee. Consequently, the terms and conditions of
the licence including the definition ..... are part of a
contract between the licensor and the licensee." G
37. Therefore, now it is the settled position of law that a
license granted under Section 4(1) of the Telegraph Act such
as the one granted to each of the LICENSEES herein is a
contract between the LICENSOR and the LICENSEE.
H
894 SUPREME COURT REPORTS (2015] 5 S.C.R.

A 38. If the licences in question are nothing but contracts,
the next question would be, is there any right of extension of
licence created in favour of LICENSEE under the contract?

39. From the language of the relevant clauses of the
s licences which are noted earlier, it is clear that the LICENSEES
have no automatic right of renewal/extension on the expiry of
the original tenure of the license. The contract only provided
for extension of the period of license at the sole discretion of
the LICENSOR subject to the condition that the LICENSEE
C makes an application seeking an extension during the 19th
year of the currency of the licence. It appears that all of the
LICENSEES did make such an application.

40. The question which requires examination is -what
D are the obligations of the LICENSOR on receipt of such an
application? The obligations of the LICENSOR flow from two
sources, (i) From the contract, (ii) from the Constitution of India
and the relevant provisions of the statute (Indian Telegraph Act,
1885). In the event of any conflict between the said two sets
E of obligations, the further question would be which one of the
conflicting obligations prevail?

41. Under the terms of the license, the LICENSOR is
required to extend the license only on "mutually agreed terms
F and conditions", if such an extension is sought in the 19th year
of the currency of the licence. To test the correctness of the
submission that under the contract, the LICENSOR is under
an obligation to consider the extension of licence, we take an
example of a case where the LICENSEE does not make an
G application in the 19th year but makes it just a few days before
the expiry of the 2Q 1h year. Does the LICENSEE still have a
right of consideration? In our opinion, the answer should be
'No' for two reasons; (i) that such a claim is plainly unsupported
by the text of the contract, (ii) the failure to seek extension in
H
BHARTI AIRTEL LTD. v. UNION OF INDIA 895
[CHELAMESWAR, J.]

the 191h year, makes the continuance of the service to the public A
uncertain. The Government of India cannot afford to remain
waiting without making alternative arrangements, Because the
disruption in the communication in the modern world may lead
. to many undesirable consequences apart from causing
inconvenience to the public. Take the alternative possibility of B
the LICENSEE not making an application for extension at all
because he is not interested in the extension (a very unlikely
scenario). Can the LICENSOR insist that the LICENSEE
should continue to offer the service either on the same
economic considerations or otherwise? The answer seems C
to be plain and 'No'. The language of the contract- "mutually
agreed terms" - clearly indicates so. Though it requires an
examination whether the LICENSOR i.e. the State can compel
the LICENSEE in a given case in exercise of its authority either
0
legislative or executive. Therefore, under the contract neither
the LICENSOR nor the LICENSEE has a right to insist that
other party should continue with the contract even if such other
party is not willing to continue except on such terms and
conditions on which the other party may desire to continue. E
Such terms and conditions obviously include terms and
conditions regarding the economic stipulations subject to which
either of the parties is willing to be in the contract.

42. However, the LICENSOR being the Union of India, F
its discretion to stipulate terms and conditions is regulated by
certain constitutional mandates apart from stipulations of any
law applicable.

43. Insofar as the constitutional mandate in the context
of a license under Section 4 of the Telegraph Act are concerned, G
this Court in 2G case at para 85 held as follows:

"85. As natural resources are public goods, the doctrine
of equality, which emerges from the concepts of justice
H
896 SUPREME COURT REPORTS [2015] 5 S.C.R.

A and fairness, must guide the State in determining the
actual mechanism for distribution of natural resources.
In this regard, the doctrine of equality has two aspects:
first, it regulates the rights and obligations of the State
vis-a-vis its people and demands that the people be
B granted equitable access to natural resources and/or its
products and that they are adequately compensated
for the transfer of the resource to the private
domain; and second, it regulates the rights and
obligations of the State vis-a-vis private parties seeking
c to acquire/use the resource and demands that the
procedure adopted for distribution is just, non-arbitrary
and transparent and that it does not discriminate between
similarly placed private parties."
D 44. The LICENSOR/Union of India does not have the
freedom to act whimsically. As pointed out by this Court in 2G
case in the above-extracted paragraph, the authority of the
Union is fettered by two constitutional limitations; firstly, that
any decision of the State to grant access to natural resources,
E which belong to the people, must ensure that the people are
adequately compensated and, secondly, the process by which
such access is granted must be just, non-arbitrary and
transparent, vis-a-vis private parties seeking such acce'ss.

F 45. By a statutory declaration made under Section 4 of
the Indian Telegraph Act, 1885, it is declared that the
Government of India shall have the exclusive "privilege for
establishing, maintaining and working telegraphs" (which
includes telephones). The proviso to Section 4 of the said
G Act authorizes the Government of India to grant license to
establish, maintain and work telegraphs (which includes
telephones) "on such conditions and in consideration of such
payments" as it thinks fit. Telephones include both wired and
H wireless telephones like cellular mobile phones, the
BHARTI AIRTEL LTD. v. UNION OF INDIA 897
[CHELAMESWAR, J.]

establishment and working of which necessarily requires A
access to spectrum which again is controlled by the·
Government of India as it is already declared to be a natural
resource by this Court. It can thus, be seen that no person
other than the Government of India has any right to establish,
maintain and work telephones. It is the exclusive privilege of B
the Government of India, which could be permitted to be
exercised by others by a grant from the Government of India.

46. In other words, such licences are in the nature of
largesse from the State. No doubt, the authority of the State C
to distribute such largess is always subject to the condition
that the State must comply with the conditions of Article 14 of
the Constitution i.e. the distribution must be on the basis of
some rational policy. Even the language of the proviso to
Section 4 of the Telegraph Act, which stipulates that the grant D
of license should be "on such conditions and in consideration
of such payments as it thinks fit", must necessarily be
understood that the conditions must be rational and the
payments forming the consideration for the grant of license
must be non-discriminatory. The conditions contained in the E
licenses in question stipulate that the term of the license could
be extended on mutually agreed terms, if the Government of
India deems it expedient. The obligations of the Government
of India flowing from the Constitution as well as a statute F
necessarily require the Government of India to grant licences
as rightly pointed by the Tribunal (TDSAT) only "in public interest
and for public good".

47. This Court in 2G Case after elaborate discussion
on the nature of the State's authority to deal with the natural G
resources held that" ...... spectrum has been internationally
accepted as a scarce, finite and renewable natural resource
which is susceptible to degradation in case of inefficient
utilization. It has a high economic value in the light of the H
898 SUPREME COURT REPORTS [2015] 5 S.C.R.

A demand for it on account of the tremendous growth in the
telecom sector. Although it does not belong to a particular
State, right of use has been granted to the States as per
international norms." (Para 77)

B 48. While recognizing the power of the State to distribute
natural resources this Court held that the State is bound to "act
in consonance with the principles of equality and public trust
and ensure that no action is taken which may be detrimental
to public interest". (Para 75)
c
49. In para 89, the Court concluded as follows:-

"89. "In conclusion, we hold thatthe State is the legal owner
of the natural resources as a trustee of the people and
although it is empowered to distribute the same, the
D
process of distribution must be guided by the
constitutional principles including the doctrine of equality
and larger public good."
.
50. This Court further held: "........... State and its
E . agencies/instrumentalities must always adopt a rational
method for disposal of public property .......". "It is the burden
of the State to ensure that a non-discriminatory method is
adopted for distribution and alienation which would necessarily
F result in national/public interest". (Para 95)

51. This Court opined that a "duly publicized auction
conducted fairly and impartially is perhaps the best method
for discharging the burden of the State to ensure protection of
public interest."
G
52. The conditions of licences/contracts in whatever
language provided for consideration for the extension of a
licence are necessarily required to be interpreted in
consonance with the obligation of the LICENSOR/Union of
H
BHARTI AIRTEL LTD. v. UNION OF INDIA 899
[CHELAMESWAR, J.]

India under the Constitution and the laws. Otherwise, the A
contract would be rendered void for being inconsistent with
public policy, the principle expressly incorporated under Section
23 of the Indian Contract Act, 1872.

53. The decision of the LICENSOR to conduct an B
auction for granting access to spectrum, obviously, complies
with the second of the requirements specified by this Court in
para 85 of the 2G Case judgment. The question whether such
a decision also complies with the requirements of the first of
the two facets mentioned therein is the issue in this batch of C
matters. In other words, the adequacy of compensation which
the Government of India seeks to derive by holding an auction
for allowing access to spectrum is just and fair in the
circumstances.
D
54. The case of the LICENSEES is that such a
procedure would promote an unhealthy competition among the
persons aspiring to secure such a spectrum. The cost of sur.h
acquisition would eventually result in burdening the consumers,
i.e. the users of the telephones. Because, higher the amount E
spent by the LICENSEE in securing the spectrum the greater
the need forthe LICENSEE to fix highertariffforthetelephone
services in order to make the service commercially viable.
Though the prospect of securing a larger amount for the
exchequer is undeniable the same would be at the cost of the F
consumers, as the burden will ultimately be passed on by the
LICENSEE to the consumers. The LICENSEES also
submitted that in view of the fact that the LICENSEES invested
huge amount running into thousands of crores in the last twenty
years of the working of the licenses for building the infrastructure G
in order to provide necessary telecom services to the people
of this country, not only the LICENSEE would suffer an
economic damage but the Nation also would suffer damage
in terms of the wastage of the resources already created.
H
900 SUPREME COURT REPORTS [2015] 5 S.C.R.

A 55. We do not doubt that the LICENSEES would
necessarily have to pass on their burden to the ultimate
consumers. That need not necessarily mean that there should
be an enhancement in the tariffs. There is always a possibility
of maintaining the tariffs at a lower level if the consumers base
B is sufficiently large, i.e. more the consumers base, more the
turnover. Therefore, the possibility of avoidance of the need
to increase the tariffs. It all depends upon the facts and figures.
Adjudicating the issue without concrete facts and figures in
this regard only on some hypothetical basis i.s neither
C permissible nor justified. '·

56. Let us examine the alternative scenario. We shall
assume for the sake of argument that the impugned procedure
adopted by the Government of India would ultimately result in
D a situation where a LICENSEE would have no choice but to
charge higher amounts from the consumers in order to be
commercially viable. Whether such a result is desirable or not ·
is a question which falls within the realm of policy choices of
the Government of India. By all the established legal principles
E - this Court would not embark upon an examination of the
wisdom of such policy choices.

57. At this stage, we must also deal with certain
submissions made by Shri K.K. Venugopal, learned senior
F counsel appearing for one of the appellants. The phrase "if
deemed expedient" occurring in Clause 4.1 of the Licence
must be understood in the light of the interpretation of the
expression "expedient" in Hotel Sea Gull v. State of West
Bengal & Others, (2002) 4 SCC 1 wherein it was held by this
G Court to mean "whatever is suitable and appropriate for any
reason for the accomplishment of the specified object". It is
argued that the question of extension of licence must be
decided by the Government of India on the basis of objective
H and rational criteria by taking into account relevant materials
BHARTI AIRTEL LTD. v. UNION OF INDIA 901
[CHELAMESWAR, J.]

and eschewing irrelevant material. Learned senior counsel in A
his written submission 6 gave certain facts and figures which
according to him are relevant in coming to a conclusion
whether it would be expedient to extend the period of licence.
It is also submitted that the phrase "on terms mutually agreed"
must also be understood to mean that the Government of B
India's decision for extension of the licences be based only on
relevant and objective criteria such as "the quality, affordability,
reach of the services provided by the petitioner and the
investments made by it during the initial 20 year period, being
satisfactory, the license would be extended by 10 years at one C
time". (Written Submission)

58. We are of the opinion that the submissions of Shri
Venugopal must carry a great weight if the LICENSOR'S
(Government of India) obligations are regulated purely by the D
terms of the contract. But as already noticed by us, the
LICENSOR'S obligations are not simply confined to the
contract/license. They also flow from the Constitution and the
laws of the land. Obviously, the obligations flowing from the
Constitution stand on a higher footing and it is the Government E
of India's duty to satisfy the obligations flcwing from the
Constitution and the laws of the land in preference to
6
· It is submitted that through the past 19 years and even now on a continuing basis,
Writ Petitioners have been faithfully operating· their UAS license and have, as of 30 of
June 2014, invested over Rs.19,545 crores setting up a state of the art mobile network F
in these 6 circles; in three months period between April and June of financial year 2014
- 15 alone, the investments made by the Petitioner was Rs.544 crores, the Petitioners
are providing world class service to over 717 lakh subscribers as of June 2014, the
Petitioner has built an average subscriber market share of 23# (average for six circles
- the shares range between 19# and 32# for various circles), the petition is offering G
affordable tariffs and innovative services to consumers, the Petitioner is providing
direct and indirect employment to thousands of people, in last 3.5 years alone the
. Petitioner has contributed over Rs.11,035 crores to the government exchequer by
way of licence fee, Spectrum charges, direct and indirect taxes, etcetera between
financial year 2011-12 and financial year 2014-15 (upto June 2014). Petitioners have
thus altere d their position and invested thousands of Crores based on Government
promise/contract. H
902 SUPREME COURT REPORTS [2015] 5 S.C.R.

A obligations flowing from a contract. It is a well settled principle
of law that where there is a conflict between obligations flowing
from a contract and those flowing from the law, the obligations
flowing from the contract must necessarily yield to obligations
flowing from the Constitution and laws. We, therefore, reject
B the submission of Shri Venugopal.

The fifth submission of the licensees is required to be
rejected on the ground that it is too vague and without any basis
in the pleadings.
c
59. Last issue which requires examination is the
Scheme of the Telecom Regulatory Authority of India Act, 1997
and the role of the Authority7 created under the said Act and
the legal efficacy of its recommendations.
D
60. Section 3 of the said Act contemplates the
establishment of an authority called "the Telecom Regulatory
Authority of India" (for short "TRAl") 8 . TRAI is declared to be a
body corporate with all necessary and incidental powers under
E sub-section (2) 9 . The composition and the qualification
required of the persons to be appointed as the Chairperson
and the Members of TRAI, their respective powers and other
incidental matters are prescribed in Chapter II of the Act.

F 61. Section 11 (which occurs in Chapter Ill) enumerates
the functions of TRAI. The Section authorises the authority to
7
Section 2(b). "Authority" means the Telecom Regulatory Authority of India established
under sub-section (1) of section 3.
8
"Section 3. Establishment and incorporation of Authority. - (1) With effect from such
G date as the Central Government may, by notification appoint, there shall be established,
for the purposes of this Act, an Authority to be called the Telecom Regulatory Authority
of lr.dia.
9 Section 3(2) The Authority shall be a body corporate by the name aforesaid, having

perpetual succession and a common seal, with power, subject to the provisions of this
Act, to acquire, hold and dispose of property, both movable and immovable, and to
H contract, and shall, by the said name, sue or be sued.
BHARTI AIRTEL LTD. v. UNION OF INDIA 903
[CHELAMESWAR, J.]

make recommendations either suo motu ot on requests made A
by the LICENSOR on the various matters enumerated therein.
Relevant among them are: (i) terms and conditions of licence
_to a service provider; (ii) measures to facilitate competition
and promote efficiency in the operation of telecommunications
services so as to facilitate growth in such services; (iii) efficient B
management of available spectrum; and (iv) ensure
compliance of terms and conditions of licence, are some of
the functions which are relevant in the context of the present
controversy.
c
62. On 16.06.2006, the Government constituted a
Committee headed by Shri Subodh Kumar, Additional
Secretary, Department of Telecommunications. The
Committee consisted of technical experts from different
institutions, the Ministry of Defence etc. and included D
representatives of the private mobile telephone service
providers. The Committee submitted its report on 13.05.2009
which contained many recommendations. The Committee
examined the role of the Government and the goals before the
government and recorded as follows: E

"As the custodian of radio spectrum, the government must
satisfactorily address a number of goals for spectrum
management. These are: efficient utilization of the scarce
resource, optimal revenue generation, for the public F
exchequer, sufficient competition in the telecom market,
and rapid diffusion of telecom services. These goals
are synergistic as well as conflicting."

(emphasis supplied) G

It recommended delinking of the spectrum allocation from
licensing and recommended that "the way forward should be
to move away from an administratively determined criteria to
a market-driven approach. A market-determined mechanism H
904 SUPREME COURT REPORTS [2015] 5 S.C.R.

A for spectrum allocation will ensure that spectrum goes to the
entity that put the highest value on spectrum, and is best placed
to ensure its optimal use".

63. The Government of India thought it fit to seek the
B opinion of TRAI on the recommendation of Subodh Kumar
Committee by its letter dated 07.07.2009. In response, TRAI
submitted a very detailed report dated 11.05.2010.

64. In the impugned judgment of the TDSAT, it is
C recorded 10 that TRAI radically differed with the report of Subodh
Kumar Committee.

65. On 10.10.2011, the Government of India
(Department of Telecommunications) referred the
recommendations dated 11.05.2010 back to TRAI for
D reconsideration.

66. The TRAI reconsidered the matter and gave certain
clarifications on 03.11.2011.

E 67. The judgment of this Court in 2G Case was
pronounced on 02.02.2012. On 15.02.2012, thethen Minister
of Communications & Information Technology made a press
statement announcing the policy of the Government of India
regarding the grant of licences under the Telegraph Act, 1885
F and the allocation of spectrum.

68. It may be mentioned here that the press statement
mentions that such a policy statement is made after
consideration of the recommendations ofTRAl 11 •
G
10
· See para 32 of the impugned order
11 · "Recommendations ofTRAI on 'Spectrum Management and Licensing Framework' of

May 11, 2010 along with its further recommendations of February 08, 2011, clarifications
of May 03, 2011 and response dated November 03, 201 i were considered by the
H Telecom Commission. After consideration of the recommendations of the Telecom
Commission, the Department ofTelecommunications has taken following decisions: ...
BHARTI AIRTEL LTD. v. UNION OF INDIA 905
[CHELAMESWAR, J.]

69. In view of the statement in the policy announced on A
15.02.2012 to the effect that:

"1. No more UAS licences linked with spectrum will
be awarded.
B
2. All future licences will be Unified Licences and
allocation of spectrum will be delinked from the
licence. Spectrum, if required, will have to be obtained
separately. A final view on implementation of the
Unified License Regime would be taken after receipt c
of detailed Guidelines and Terms & Conditions from
TRAI for Unified Licence including migration path for
all existing licence(s) to Unified Licence.

3. In the event of any auction of spectrum pending
D
finalisation of the Unified Licensing Regime, UAS
licence without spectrum may be issued which could
be subject to a requirement to migrate to Unified
licence as and when the regime is put in place.
Detailed guidelines for such UAS licence without E
spectrum would be finalised after receipt of
recommendations ofTRAI in this regard."

xxx xxx xxx xxx xxx
8. The validity of existing UAS (& CMTS and Basic F
services) licences may be extended for another
10 years at one time, as per the provisions of
the extant licensing regime with suitable Terms &
Conditions so as not to imply automatic
continuance of existing license and related G
conditions including quantum and price of any
spectrum allocated.

9. On extension, the UAS licensee will be required to
H
906 SUPREME COURT REPORTS [2015] 5 S.C.R.

A pay a fee which will be Rs.2 crore for Metro and 'A'
Circles, Rs.1 crore for 'B' circles and Rs.0.5 crore for
'C' circles. This fee does not cover the value of
spectrum, which shall be paid for separately. While
extending the licence, the licensee shall be assigned
B spectrum only up to the prescribed limit or the amount
of spectrum assigned to it before the extension,
whichever is less. Spectrum assigned by the
Government to the licensee in excess of the
Prescribed Limit shall be withdrawn."
c
the submission of LICENSEES is that the only clear decisions
taken are that (i) in future only unified licences will be granted
and (ii) the allocation of spectrum will be delinked from the
licence. It is clear that no final policy decision was taken by
D the Government regarding the method and manner of allocation
of spectrum even with respect to licences to be granted in
future. Insofar as the existing licences are concerned, the policy
of the Government is that they are required to extended for
another 10 years as per the provisions of the "extant licensing
E regime with suitable terms and conditions" etc. Therefore, the
decision of the Government of India to auction the right of
spectrum in the cases of those areas where the LICENSEES
held licences so far is not only inconsistent with the terms and
F conditions of the policy announced on 15.02.2012 as the
impugned decision is not only in consistent with the "extant
licensing regime" but also a decision taken without consulting
TRAI - a requirement which is mandatory under Section
11 (1 )(a)(ii) 12 . The TRAI Act mandates thatthe Government of
G India "shall seek the recommendations of the Authority" while
stipulating the "terms and conditions to a service provider" and
12
Section 11. Functions of Authority -(1) Notwithstanding anything contained in the
Indian Telegraph Act, 1885 (13 of 1885), the functions of the Authority shall be to
- (a) make recommendations, either suo motu or on a request from the licensor,
H on the following matters, namely:
- (ii) terms and conditions of license to a service provider;"
BHARTI AIRTEL LTD. v. UNION OF INDIA 907
[CHELAMESWAR, J.]

·' TRAI failed to discharge its functions stipulated under Section A
"11 (1)(b)(i) which calls upon TRAI to "ensure compliance of terms
and conditions of licence".

70. The LICENSEES also argued that the impugned
decision of the Government of India to allocate spectrum by B
conducting an auction is contrary to the recommendations of
·the TRAI dated 15.10.201413 and also contrary to the policy
13
· '2.5 ... ........ In sum, the two crucial facts are:
(i) The supply of spectrum is constrained; and
(ii) The auction is unusual in that licences are expiring and this knowledge is a priori known to all C
TSPs, enabling strategic decision-making on the latter's part.
2.6 This has important consequences. First, in any situation of short supply, market prices will rise.
If any new entrant or another existing licensee enters the fray, one outcome is certain; there will be
frenzied bidding viz. a race to the top. A similar escalation of prices was witnessed in the May 2910
auction when 3G spectrum was auctioned; the short supply of 3G spectrum led to a massive
increase over the reserve price. But, as pointed out above. in the upcoming auction, the short
supply of spectrum is but one dimension of the problem. The other is that incumbent operators D
would be willing to pay huge sums to retain their spectrum so as to protect their investments made
in the LSA and ensure continuity of business. And, all industrial rivals know this; whish is why even
a non-serious bidder is potentially in a position to push up the final auction price.
2.7 Second, there are only two possible outcomes of such an auction: (a) the incumbents win back
the 900 MHz spectrum albeit at significantly high prices; or, (b) one or both incumbent operators
lose the 900 MHz spectrum which is won by two or more other bidders. If an incumbent operator
wins back the 900 MHz spectrum but at a very high price, it will seriously limit its ability to invest E
viz. given the indebtedness of most TSPs and the availability of just a limited amount of resources,
whatever extra is paid for spectrum, in effect, reduces the amount available for investment in the
LSA. The second possibility is that the incumbent loses the spectrum. The implications here are
even graver. There will be immediate discontinuation of service in the LSA And a huge loss in
terms of the value of investment already made in that LSA.
2.8 Once services are discontinued, and a new entrant(s) come into the LSA, they will need time to
roll·out services. This will obviously pose problems for consumers. Moreover, if existing consumers
port out under Mobile Number Portability (MNP) to another TSP in the same LSA, then, in effect, the F
auction would have led to a consolidation of market power (dominance) of that TSP. (Leave aside
the fact that it effectively deprives consumers of choice of service provider).
2.9 What is more, there are potential spillover effects to other sectors. Given the larger indebtedness
of many TSPs to public sector banks (and private sector banks), an exit from an LSA raises the
prospect that some part of that TSP's debt could become a Non-Performing Asset (NPA). So, what
the Government gains in terms of higher prices of spectrum because of short supply, may also
lead to large NPAs of public sector banks which will ultimately require Government budgetary G
support viz. the socialization of public costs.
2.10 to sum up; there is a very real risk that bidding could lead to an escalation of auction prices
far beyond any reasonable value. Further, even if the incumbents win back the spectrum, there
will be serious limit to the investment ability of incumbents. And, if an incumbent operator loses out
to a new entrant (or, another licensee), the discontinuation of services would pose problems for
consumers leave aside the losses on capital investment made by the incumbent TSP in the
~ .........· H
908 SUPREME COURT REPORTS (2015] 5 S.C.R.

A statement of the Minister dated 15.02.2012. The tenor of the
policy is clear that the delinking of spectrum from licence would
only be with reference to future and the extension of the existing
licence is required to be on the basis of the "extant licensing
regime". In other words, the policy is only prospective and
B applying the same to existing LICENSEES would not only be
contrary to the tenor of the policy statement but also make it
retrospective in operation.

71. On the other hand, learned Solicitor General argued
C as follows:

"The reliance by the operators on stray observations by
TRAI is entirely misplaced. The Petitioners have relied
on observations of TRAI without placing its final
D recommendations. In its final recommendations dated
24.11.2014, TRAI did not recommend postponement of
the auction. In any event, per the first proviso to Section
11 (1) of the Telecom Regulatory Authority of India Act,
1997, even the final recommendations of TRAI are not
E binding on the Government."

(written submission)

72. We shall first deal with the obligation of the Board on
F the "retrospectivity of the policy". We assume for the sake of
argument that the impugned decision of the Union of India is
in fact contrary to the tenor of the policy statement dated
15.02.2012. Even then, in our view, the impugned action
cannot be faulted because the policy statement insofar as it
G seeks to apply only for the allocation of spectrum in future would
be contrary to the decision of this Court in 2G case and void
to that extent.

73. We now examine the other part of the submission of
H the LICENSEES. An analysis of the scheme of Section 11 of
BHARTI AIRTEL LTD. v. UNION OF INDIA 909
[CHELAMESWAR, J.]

the TRAI Act is necessary. Section 11 (1 }14 imposes two legal A
obligations on TRAI. Under sub-section (a) TRAI is obliged to
make recommendations with respect to eight matters
enumerated therein either suo motu or on a request of the
14 11 Functions of Authority B
(1) Notwithstanding anything contained in the Indian Telegraph Act, 1885 , the functions of the
Authority shall be to -
(a) make recommendations, either suo motu or on a request from the licensor, on the following
matters, namely: -
(i) need and timing for introduction of new service provider;
(ii) terms and conditions of licence to a service provider;
(Iii) revocation of licence for non-compliance of terms and conditions of licence;
c
(iv) measures to facilitate competition and promote efficiency in the operation of telecommunication
services so as to facilitate growth in such services;
(v) technological improvements in the services provided by the service providers;
(vi) type of equipment to be used by the service providers after inspection of equipment used in
the network;
D
(vii) measures for the development of telecommunication technology and any other matter relatable
to telecommunication industry in general;
(viii) efficient management of available spectrum;
(b) discharge the following functions, namely: -
(i) ensure compliance of terms and conditions of licence;
(ii) notwithstanding anything contained in the terms and conditions the licence granted before the E
commencement of the Telecom Regulatory Authority of India (Amendment) Act, 2000 , fix the
terms and conditions of inter-connectivity between the service providers;
(iii) ensure technical compatibility and effective inter-connection between different service providers;
(iv) regulate arrangement amongst service providers of sharing their revenue derived from providing
telecommunication services;
(v) lay-down the standards of quality of service to be provided by the service providers and ensure F
the quality of service and conduct the periodical survey of such service provided by the service
providers so as to protect interest of the consumers of telecommunication service;
(vi) lay-down and ensure the time period for providing local and long distance circuits of
telecommunication between different service providers;
(vii) maintain register of inter-connect agreements and of all such other matters as may be
provided in the regulations; (viii) keep register maintained under clause
G
(vii) open for inspection to any member of public on payment of such fee and compliance of such
other requirement as may be provided in the regulations;
(ix) ensure effective compliance of universal service obligations;
(c) levy fees and other charges at such rates and in respect of such services as may
be determined by regulations;
(d) perform such other functions including such administrative and financial functions
as may be entrusted to it by the Central Government or as may be necessary to carry
H
out the provisions of this Act:
910 SUPREME COURT REPORTS [2015] 5 S.C.R.

A LICENSOR. Undersub-section (b), TRAI is obliged to
discharge various functions numbering nine specified
thereunder.

74. For example, under Section 11 (1)(a)(ii) while it is
B one of the functions of the TRAI to make recommendations
regarding the terms and conditions of a licence to a service
provider, whereas under sub-section (b )(i), it is the function of
the TRAI to ensure compliance of terms and conditions of the
LICENSEES.
c
75. The first proviso to sub-section 11(1) makes a
categoric declaration that the recommendations of the TRAI
with respect to matters enumerated under sub-section (1 )(a)
"shall not be binding upon the Central Government".
D
PROVIDED that the recommendations of the Authority
specified in clause (a) of this sub-section shall not be
binding upon the Central Government:

No doubt, the second proviso to Section 11 ( 1) mandates that
E the Government of India shall seek the recommendations of
the TRAI in respect of certain matters specified under clause
(a) in respect of new licence to be issued. One of such items
with reference to which such consultation is mandatory is the
F terms and conditions of a license to a service provider [under
Section 11 (1 )(a)(ii)J.

"PROVIDED FURTHER that the Central Government
shall seek the recommendations of the Authority in
respect of matters specified in sub-clauses (i) and (ii) of
G clause (a) of this sub-section in respect of new licence
to be issued to a service provider and the Authority shall
forward its recommendations within a period of sixty
days from the date on which that Government sought
the recommendations."
H
BHARTI AIRTEL LTD. v. UNION OF INDIA 911
[CHELAMESWAR, J.]

The only other part of Section 11 which is relevant in the context A
of the present issue is the fifth proviso to Section 11 ( 1) which
reads as follows:

"PROVIDED also that if the Central Government, having
considered th~t recommendation of the Authority, comes B
to a prima facie conclusion that such recommendation
cannot be accepted or needs modifications, it shall refer
the recommendation back to the Authority for its
reconsideration, and the Authority may, within fifteen days
from the date of receipt of such reference, forward to the C
Central Government its recommendation after
considering the reference made by that Goverpment. After
receipt of further recommendation if any, the Central
Government shall Jake a final decision."
D
From the tenor of the said proviso, it can be seen that once
recommendation is made by TRAI [with reference to matters
enumerated in clause (a)], the Government of India may either
accept the recommendation or may come to a prima facie
conclusion that such a recommendation cannot be accepted E
or needs certain modifications. Upon reaching such prima
facie conclusion, the Government of India is required to refer
the matter back to TRAI and TRAI is obliged to reconsider its
earlier recommendation and forward its opinion to the
Government of India. On receipt of such a reconsidered F
opinion ofTRAI, the Government of India is required to take a
final decision. In our opinion, the fifth proviso only stipulates
· the procedure to be followed by both the bodies - TRAI and
the Government of India - in the decision making process but
it does not whittle down the vigour of the first proviso which in G
no certain terms declares that the Government of India is not
bound by the opinion of the TRAI insofar as the
recommendations made by TRAI with respect to matters falling
under Section 11(1)(a).
H
912 SUPREME COURT REPORTS [2015] 5 S.C.R.

A 76. We do not propose to examine the submission of
learned Solicitor General that the recommendation of TRAI
dated 15.10.2014 relied upon by the LICENSEES are primary
recommendations, are not final. Even assuming for the sake
of arguments that the recommendations of TRAI are final, the
B Government of India is not bound by the same in view of the
first proviso to Section 11 (1) of TRAI Act. The obligation of the
Government of India arising under the second proviso thereof
to seek opinion ofTRAI is only to ensure that there is a rational
process of decision-making where the factors relevant are
C examined by an expert body before the Government takes a
final decision on any one of the matters enumerated under
Section 11 (1 )(a). As pointed out by Subodh Kumar Committee,
the Government is required to address the multiple goals for
spectrum management such as efficient utilisation, optimal
0
revenue generation, sufficient competition, obviously to avoid
monopoly in the telecom market etc. As rightly observed by
Subodh Kumar Committee, these goals are simultaneously
"synergistic as well as conflicting". Therefore, the Parliament
E stipulated that such issues are initially examined by an expert
body leaving it open to the Government to take a final decision
as to which one of these various 'synergistic as well as
conflicting' factors must outweigh by the other factors. Apart
from that, from the language of the 2"d proviso (supra) the
F obligation to consult TRAI arises only in the case of"new licence"
but not the renewal/extension of an existing licence.

77. The impugned decision of the Government, which in
fact resulted in huge inflow of revenue in the auctions conducted
G during the pendency of this litigation, cannot be said to be a
totally irrational or irrelevant consideration in the context of the
spectrum management, more particularly, in the light of
decision of this court in 2G case.

78. In this context, we need to examine two more decisions
H
BHARTI AIRTEL LTD. v. UNION OF INDIA 913
[CHELAMESWAR, J.]

relied upon by the respondents. They are - Kera/a State A
Electricity Board v. Mis. S.N. Govinda Prabhu and Bros.
& Others, (1986) 4 SCC 198 and Natural Resources
Allocation, In Re. Special Reference No.1of2012, (2012)
1Osec 1. Learned counsel for the LICENSEES relied heavily
on these two decisions in support of their submissions that: (i) B
alienation of assets owned or controlled by the State need not
necessarily be only through the process of public auction, and
(ii) profiteering should not be the prime consideration of the
State or State-owned bodies.
c
79. In Kera/a State Electricity Board (supra), this Court
opined that "a public utility monopoly undertaking ........ may
not be driven by pure profit motive - not that profit is to be
shunned but that service and not profit should inform its actions.
It is not the function of the Board to so manage its affairs as to D
earn the maximum profit". It was a case where the
enhancement of electricity tariffs under the Electricity Supplies
Act, 1948 was challenged. The principal ground of attach which
was accepted by the High Court was that the Kerala State
Electricity Board acted outside its statutory authority15 • The E
judgment essentially turned on the interpretation of the
language of the Electricity Supplies Act.

80. The said Act stipulated the principles on the basis of
which tariffs are required to be fixed and factors which are F
required to be taken into consideration. It also obliged the
State Electricity Board to conduct its operations in an
15
· The principal ground of challenge and that which was accepted by the High Court
was that the Kerala State Electricity Board acted outside its statutory authority by G
formulating a price structure intended to yield sufficient revenue to offset not merely
l~e expenditure properly chargeable to the revenue account for the year as contemplated
by Section 59 of the Act but also expenditure not so properly chargeable. Had Section
59 been strictly followed and had items of expenditure not chargeable to the revenue
account for the year been excluded, the revised tariff would have resulted in the
generation of a surplus far beyond the contemplation of Section 59 of the Act. H
914 SUPREME COURT REPORTS [2015) 5 S.C.R.

A economical viable manner. Section 51 oftheAct, as amended
from time to time (in 1978 and 1983) eventually stipulated -

"to provide that each Board shall have a surplus which
shall not be less than three per cent, or such higher
B percentage as the State Government may specify, of
the value of the fixed assets of the Board in service at
the beginning of the year;"

Interpreting the said section, this Court held
c "We are of the view that the failure of the Government to
specify the surplus which may be generated by the Board
cannot prevent the Board from generating a surplus after
meeting the expenses required to be met. Perhaps, the
quantum of surplus may not exceed what a prudent public
D
service undertaking may be expected to generate with
out sacrificing the interests it is expected to serve and
without being obsessed by the pure profit motive of the
private entrepreneur. The Board may not allow its
E character as a public utility undertaking to be changed
into that of a profit motivated private trading or
manufacturing house. Neither the tariffs nor the resulting
surplus may reach such heights as to lead to the inevitable
conclusion that the Board has shed A its public utility
F character. When that happens the Court may strike down
the revision of tariffs as plainly arbitrary. But not until then.
Not, merely because a surplus has been generated, a
surplus which can by no means be said to be extravagant.
The court will then refrain from touching the tariffs. After
G all, as has been said by this court often enough 'price
fixation' is neither the forte nor the function of the court."

81. We fail to understand as to how the general
observation that the "public utility monopoly undertaking ....... .
. H may not be driven by pure profit motive" made while examining
BHARTI AIRTEL LTD. v. UNION OF INDIA 915
[CHELAMESWAR, J.]

the tariffs fixed in exercise of the powers vested by a statute A
are relevant in the context of the present case. In our view, the
decision is wholly inapplicable to the facts of the present case
for the following reasons:

(i) Even in the case of tariffs fixed pursuant to the powers B
conferred by a statute this Court held that it would not
interfere unless such tariffs result in a generation of
surplus revenue reaching "such heights as to lead to
the inevitable conclusion that the Board has shed its
public character" and the tariffs are "extravagant". C

(ii) Persons seeking to avail the benefit of the supply of
electricity are left with no option but to make payments
in accordance with the tariffs fixed by the Electricity
Board, because the electricity board had a monopoly D
over the generation and distribution of electricity.

82. In the case in hand, the LICENSEES are not
compelled to pay any specific tariffs fixed by the LICENSOR
(Union of India), for availing the right to use the spectrum. If E
the price for securing allocation of spectrum is likely to go up
because of the procedure of auctioning to have access to
spectrum, it goes up because of the market forces. Because
there are people who are willing to acquire such a right paying
a higher price on the assessment that they would be able to F
carry on the business profitably even after paying higher
amounts for acquisition of spectrum. The LICENSEES are .
corporate houses with enormous economic power, which
enables them to secure adequate expert advice in the matter
of financial planning. We cannot believe that they would make G
any investment without making a reasonable assessment of
the possible return on such investment. There is no
compulsion by the State in this regard. Therefore, in our view,
the reliance placed on the Kera/a State Electricity Board
(supra) is wholly untenable. H
916 SUPREME COURT REPORTS [2015] 5 S.C.R.

A 83. Reliance is placed on the observations made in the
Special Reference (supra) in paragraphs 82 and 146 in
support of the submissions of the LICENSEES that auction is
not the only method of disposal of natural resources. In our
opinion, the LICENSEES' reliance on these paragraphs is
B wholly misconceived. These two paragraphs, instead of
supporting the case of the LICENSEES, are destructive of their
contention.

"82. Further, the final conclusions summarized in
C paragraph 102 of the judgment (SCC) in 2G case make
no mention about auction being the only permissible and
intra vires method for disposal of natural resources; the
findings are limited to the case of spectrum. In case
the Court had actually enunciated, as a proposition of
D law, that auction is the only permissible method or mode
for alienation/allotment of natural resources, the same
would have found a mention in the summary at the end of
the judgment.

E 146. To summarize in the context of the present
Reference, it needs to be emphasized that this Court
cannot conduct a comparative study of the various
methods of distribution of natural resources and suggest
the most efficacious mode, if there is one universal
F efficacious method in the first place. It respects the
mandate and wisdom of the executive for such
matters. The methodology pertaining to disposal of
natural resources is clearly an economic policy. It entails
intricate economic choices and the Court lacks the
G necessary expertise to make them. As has been
repeatedly said, it cannot, and shall not, be the endeavour
of this Court to evaluate the efficacy of auction vis-a-vis
other methods of disposal of natural resources. The Court
cannot mandate one method to be followed in all facts
H
BHARTI AIRTEL LTD. v. UNION OF INDIA 917
[CHELAMESWAR, J.]

and circumstances. Therefore, auction, an economic A
choice of disposal of natural resources, is not a
constitutional mandate. We may, however, hasten to add
that the Court can test the legality and constitutionality of
these methods. When questioned, the Courts are entitled
to analyse the legal validity of different means of B
distribution and give a constitutional answer as to which
methods are 135 Page 136 ultra vires and intra vires the
provisions of the Constitution. Nevertheless, it cannot and
will not compare which policy is fairer than the other, but,
if a policy or law is patently unfair to the extent that it falls c
foul of the fairness requirement of Article 14 of the
Constitution, the Court would not hesitate in striking it
down.

(emphasis supplied) D

84. In para 82, this Court was categoric that the findings
of 2G case were limited to the case of spectrum. Similarly, in
para 146, this Court observed that this Court "respects the
mandate and wisdom of the executive" in the matter of choosing E
the most suitable method of distribution of natural resources.
This Court noted that this is clearly a matter of an economic
policy entailing an intricate economic choice and the Court
lacks necessary expertise to make such choice. In the light of
the observation in para 82 that at least in the matter of disposal F
of spectrum, auction is the only "permissible and intra vires
method for disposal". Therefore, the submission of the
LICENSEES is required to be rejected.
85. For all the above-mentioned reasons, we see no merit G
in these appeals and writ petitions. Therefore, all the appeals
and writ petitions are dismissed. There shall be no order as
to costs.
Nidhi Jain Appeals and Writ Petitions dismissed. H