Supreme Court of India
CELLULAR OPERATORS ASSOCIATION OF INDIA AND OTHERSversusTELECOM REGULATORY AUTHORITY OF INDIA AND OTHERS
- Citation
- 2016 INSC 410
- Decided
- 11 May 2016
- Disposal
- Appeal(s) allowed
- Bench
- KURIAN JOSEPH
Holding
The Telecom Consumers Protection (Ninth Amendment) Regulations, 2015 are ultra vires the TRAI Act, manifestly arbitrary, and violative of Articles 14 and 19(1)(g); they are therefore struck down.
Summary
The Cellular Operators Association of India and other telecom service providers challenged the Telecom Consumers Protection (Ninth Amendment) Regulations, 2015, which required service providers to credit Rs 1 to the calling consumer for each call drop (up to three per day). The Delhi High Court upheld the regulations, but the Supreme Court allowed the appeal, holding that the regulations exceed the powers granted under Section 36 read with Section 11 of the Telecom Regulatory Authority of India Act, 1997, are manifestly arbitrary, violate Articles 14 and 19(1)(g) of the Constitution, interfere with licence conditions without authority, and fail the transparency requirement. Consequently, the regulations were struck down. The Court also emphasized that subordinate legislation must be consistent with the parent Act’s purpose and must pass the tests of reasonable restriction and non‑arbitrariness.
Issues considered
- Whether the Ninth Amendment Regulations are within the regulatory‑making powers conferred by Section 36(1) read with Section 11 of the TRAI Act, 1997.
- Whether the regulations are manifestly arbitrary and therefore violative of Article 14 of the Constitution.
- Whether the regulations constitute an unreasonable restriction on the right to carry on business under Article 19(1)(g) and fail the test of reasonable restriction under Article 19(6).
- Whether the regulations interfere with licence conditions without statutory authority.
- Whether the regulations satisfy the transparency requirement under Section 11(4) of the TRAI Act.
- Whether the doctrine of reading down can be applied to save the regulations.
Legislation cited
- Airports Economic Regulatory Authority of India Act, 2008s. 13(4)
- Companies Act, 1956s. 402(d)
- Companies Act, 2013s. 242(2)(e)
- Competition Act, 2002s. 27(d)
- Electricity Act, 2003s. 79(l)(f), s. 86(l)(f)
- Indian Telegraph Act, 1885s. 4(1)
- Right to Information Act, 2005s. 4(1)
- Telecom Regulatory Authority of India Act, 1997s. 11(4), s. 11(l)(b)(i), s. 11(l)(b)(v), s. 36(1)
Subjects
telecom regulationcall dropsconsumer protectionultra viresfundamental rightsArticle 14Article 19(1)(g)reasonable restrictiontransparencysubordinate legislationlicence conditionsarbitrariness
Judgment
[2016] 9 S.C.R. 1
CELLULAR OPERATORS ASSOCIATION OF INDIA AND A
OTHERS
v.
TELECOM REGULATORY AUTHORITY OF INDIA AND
OTHERS
(Civil Appeal No. 5017of2016) B
MAYll,2016
[KURIAN JOSEPH AND R. F. NARIMAN, JJ,)
Telecom Consumers Protection (Ninth Amendment)
Regulations, 2015 - Validity of - As per the amendment of the
Regulations every originating cellular mobile telephone service c
provider was made liable to credit the calling consumer with one
rupee for each call drop, upto a maximum three call drops per day
- Validity of the amendment challenged - High Court upheld its
validity - On appeal, held: The amending Regulation is ultra vires
the Telecom Regulatory Authority of India Act, 1997 as it does not D
carry out the purpose of the Act - It is violative of the fundamental
rights of the service providers as provided in Art. 14 and 19(1)(g)
of the Constitution - The Regulation is also liable to be struck down
on the ground that it amounts to interference with the licence
conditions of the service providers without authority of law and
also because it completely avoids the adjudicatory process - Telecom E
Regulatory Authority of India Act, 1997 - Constitution of India -
Arts. 14 and 19(l)(g) - Quality of Service Regulations, 2009.
Constitution of India:
Arts. 14, 19(1)(g) and 19(6) - Constitutional validity of F
Telecom Consumers Protection (Ninth Amendment) Regulations,
2015 - Held: In order to pass Constitutional muster u/Art.14, the
Regulation should not be manifestly arbitrary - So far as
Art.19(1)(g) is concerned, u!Art. 19(6), the State has to conform to
two separate and independent tests i.e. test of 'reasonable restriction'
and test of 'public interest' - The test of reasonable restriction is G
distinct from the test of the law being in general public interest - In
the present casij though the Regulation might have been brought in
the interest ojgeneral public, it is manifestly arbitrary and therefore
violative of Art. 14 and is an unreasonable restriction on the
fundamentr:Jl right of the service providers granted u/Art. l 9(1)(g) H
I
2 SUPREME COURT REPORTS [2016] 9 S.C.R.
A and the same has been framed without intelligent care and
deliberation.
Arts.19(l)(g) and 19(6) - A proper balance between the
freedoms guaranteed u/Art. 19(1)(g) and the control permitted u/Art.
19(6) must be struck in all cases before the impugned law can be
B said to be a reasonable restriction in the public interest.
Legislation:
Validity of legislation - Held: A statute which is otherwise
invalid as being unreasonable, cannot be saved or held valid by its
being administered in a reasonable manner.
c
Subordinate Legislation - Validity of - Held: A Regulation
must be consistent with both letter as well as purpose of the parent
Act - A Regulation contrary to the purpose of parent Act could be
ultra vires the Act and hence invalid.
D Subordinate Legislation - Constitutionality of - Grounds for
challenging - Held: Subordinate legislation can be challenged on
any of the grounds available for challenge against plenary
legislation.
Subordinate Legislation - Requirement of transparency in -
E Suggestion of the Court to Parliament to frame legislation by which
all subordinate legislation is subject to transparent process - The
transparency will not only reduce arbitrariness in subordinate
legislation making, but would also conduce to openness in
governance.
Interpretation of Statutes:
F
Doctrine of reading down - Applicability of - The doctrine
would apply only when general words used in a statute or regulation
can oe confined in a particular manner so as not to infringe a
constitutional right.
G Reading down of a provision - Addition of something by the
court to the provision which does not exist, would amount to
legislations by court.
Natural Justice - Ordinarily legislative functions do not
require that natural justice be followed - Natural justice need not
H be followed, except where the statute so provides.
CELLULAR OPERATORS ASSN. OF INDIA v. TELECOM 3
REGULATORY AUTHROITY OF INDIA
Words and Phrases: A
'Transparency' - Meaning of, in the context of Telecom
Regulatory Authority of India Act, 1997.
Allowing the appeals, the Court
HELD: 1.1 The power to make the Impugned Regulation B
i.e. Telecom Consumers Protection (Ninth Amendment)
Regulations, 2015 is traceable to Section 36(1) of the Telecom
Regulatory Authority of India Act, 1997. Though the Regulation
making power under the said Act is wide and pervasive, and is
not trammeled by the provisions of Section 11, 12(4) and 13, it is
a power that is non-delegable and, therefore, legislative in nature. c
The exercise of this power is hedged in with the condition that it
must be exercised consistently with the Act and the Rules
thereunder in order to carry out the p urposes of the Act. Since
the regulation making power has first to be consistent with the
Act, it is necessary that it not be inconsistent with Section 11 of D
the Act, and in particular Section ll(l)(b) thereof. This is for the
reason that the functions of the Authority are laid down by this
Section, and that the Impugned Regulation itself refers to Section
ll(l)(b)(i) and (v) as the source of power under which the
impugned Regulation has been framed. [Paras 22, 23] (33-E; 34-
H; 35-A-C] . E
BSNL v. Telecom Regulatory Authority of India 2013
(12) SCR 999: (2014) 3 SCC 222 - relied on.
1.2 The Impugned Regulation is not referable to Section
ll(l)(b)(i) and (v) of the Act inasmuch as it has not been made to F
ensure compliance of the terms and conditions of the licence nor
has it been made to lay down any standard of quality of service
that needs compliance. This being the case, the Impugned
Regulation is tie lwrs Section 11 but cannot ,be said to ·be
inconsistent with Section 11 of the Act. [Para 24] [36-H; 37-A"B]
G
1.3 Under Section 36, not only does the Authority have to
make regulations consistent with t!te Act and the Rules made
thereunder, but .it also has.to carry out the purposes of the Act,
as can be discerned from the Preamble to the Act. If, far from
carrying out the purposes of the Act, a Regulation is made contrary
H
4 SUPREME COURT REPORTS [2016] 9 S.C.R.
A to such purposes, such Regulation cannot be said to be consistent
with the Act, for it must be consistent with both the letter of the
Act and the purposes for which the Act has been enacted. In
attempting to protect the interest of the consumer of the telecom
sector at the cost of the interest of a service provider who
complies with the leeway of an average of 2% of call drops per
B
month given to it by another Regulation, framed under Section
ll(l)(b)(v), the balance that is sought to be achieved by the Act
for the orderly growth of the telecom sector has been violated.
Therefore, the impugned Regulation does not carry out the
purpose of the Act and must be held to be ultra vires the Act on
c this score. [Para 24) [37-D-F)
State of Tamil Nadu v. P. Krishnamoorthy 2006 (3) SCR
396 : (2006) 4 sec 517 - relied on.
2.1 One of the tests for challenging the constitutionality of
subordinate legislation is that subordinate legislation should not
D be manifestly arbitrary. Also, it is settled law that subordinate
legislation can be challenged on any of the grounds available for
challenge against plenary legislation. [Para 25] [37-G]
Indian Express Newspapers v. ·Union of India 1985 (2)
SCR 287 : (1985) 1 SCC 641; Khoday Distilleries Ltd.
E v. State of Karnataka 1995 (6) Suppl. SCR 759 : (1996)
10 SCC 304; Sharma Transport v. Government of
Andhra Pradesh 2001 (5) Suppl. SCR 390 : (2002) 2
sec 188 - relied on.
2.2 Thus, under Article 19(6) of the Constitution, the State
F has to conform to two separate and independent tests if it is to
pass constitutional muster - the restriction on the appellants'
fundamental right must first be a reasonable restriction, and
secondly, it should also be in the interest of the general public.
The test of reasonable restriction is. however, a test separate
and distinct from the test of the law being in the interest of the
G general public. [Paras 29, 31) [39-F; 40-D-E]
Rustom Cavasjee Cooper (Banks Nationalisation) v.
Union of India 1970 (3) SCR 530 : (1970) 1 SCC 248
- followed.
Chi11taman Rao v. State of Madhya Pradesh 1950 SCR
H 759 - relied on.
CELLULAR OPERATORS ASSN. OF INDIA v. TELECOM 5
REGULATORY AUTHROITY OF INDIA
2.3 Though TRAI may have brought in the impugned A
Regulation in the interest of general 1mblic, yet it is important to
note that, apart from the common good in the form of consumer
interest, the Regulation must also pass a separate and
independent test of not being manifestly arbitrary or unreasonable.
When viewed from the angle of manifest arbitrariness or
B
reasonable restriction, sounding in Article 14 and Article 19(1)(g)
respectively, the Regulation must, in order to pass constitutional
muster, be as a result of intelligent care and deliberation, that is,
the choice of a course which reason dictates. Any arbitrary
invasion of a fundamental right cannot be said to contain this
quality. A proper balance between the freedoms guaranteed and c
the control permitted under Artieie 19(6) must be struck in all
cases before the. impugned law can be said to be a reasonable
restriction in the public interest. [Para 31) [40-E-H)_
Delhi Science Forum v. Union of India 1996 (2) SCR
767 : (1996) 2 sec 405 - referred to. D
2.4 According to TRAI, the cause _for caH drops is
twofold - one owing to the fault of the consumer, and the other
owing to the fault of the service provider. The technical paper
dated 13.11.2015 shows that an average of 36.9% can be call
drops owing to the fault of the consumer. If this is so, the E
Impugned Regulation's very basis is destroyed: the Regulation
is based on the fact that the service provider is 100% at fault.
This becomes clear from a reading of the text of the said
Regulation together with the Explanatory Memorandum. This
being the case, it is clear that the service provider is made to pay
for call drops that may not be attributable to his fault, and the F
consumer receives compensation for a call drop that may be
attributable to the fault of the consumer himself, and that makes
the Impugned Regulation a regulation framed without intelligent
care and deliberation. [Para 32) [41-B-D)
2.5 The impugned Regulation cannot be read down to mean G
that it would apply only when the fault is that of the service
provider. The doctrine of reading down would apply only when
general words used in a statute or regulation can be confined in a
particular manner so as not to infringe a constitutional right. The
language of the impugned Regulation is definite and H
6 SUPREME COURT REPORTS [2016] 9 S.C.R.
A unambiguous - every service provider has to credit the account
of the calling consumer by one rupee for every single call drop
which occurs within its network. The Explanatory Memorandum
to the aforesaid Regulation further makes it clear, in paragraph
19 thereof, that the Authority has come to the conclusion that
call drops are instances of deficiency in service delivery on the
B
part of the service provider. It is thus unambiguously clear that
the impugned Regulation is based on the fact that the service
provider is alone at fault and must pay for that fault. In these
circumstances, to read a proviso into the Regulation that it will
not apply to consumers who are at fault themselves is not to
c restrict general words to a particular meaning, but to add
something to the provision which does not exist, which would be
nothing short of the court itself legislating. [Paras 33, 35) (41-E;
43-C-E]
In Re: Hindu Womens Rights. to Property Act, 1937 AIR
D 1941 FC 72 - relied on.
Delhi Transport Corpn. v. D.T.C. Mazdoor Congress
1990 (1) Suppl. SCR 142 : 1991 Supp (1) sec 600 -
followed.
2.6 The plea that the impugned Regulation would be worked
E in such a manner that the service provider would be liable to pay
only when it is found that it is at fault, again falls foul of
constitutional doctrine. A statute which is otherwise invalid as
being unreasonable cannot be saved by its being administered in
a reasonable manner. [Para 36) (43-F-H]
F Collector of Customs v. Nathe/la Sampathu Chetty
(1962) 3 SCR 786 - relied on.
2.7 The impugned Regulation does not accord with the
Statement of Objects and Reasons of the TRAI Act, 1997. The
policy of the 1997 Act, as amended by the 2000 Act, is to protect
G the interests of service providers and consumers of the telecom
sector together, so that the orderly growth of the telecom sector
is ensured thereby. The orderly growth of the telecom sector
cannot be ensured or promoted by a manifestly arbitrary or
unreasonable regulation which makes a service provider pay a
penalty without it being necessarily at fault. The motive for the
H impugned Regulation may well be to compensate the small
CELLULAR OPERATORS ASSN. OF INDIA v. TELECOM 7
REGULATORY AUTHROITY OF INDIA
consumers, but that does not make it immune from Article 14 A
and the twin tests of Article 19(6). The Authority framing the
Regulation must ensure that its means are as pure as its ends -
only then will regulations made by it pass constitutional muster.
[Paras 38, 39] [44-D-E, F-G]
2.8 Profits or losses of the service providers cannot be B
relevant for determining whether the Impugned Regulation is
otherwise arbitrary or unreasonable. It is always open to the
Authority, with the vast powers given to it under the TRAI Act,
to ensure, in a reasonable and non-arbitrary manner, that service
providers provide the necessary funds for infrastructure
development and deal with them so as to protect the interest of c
the consumer. [Para 40 ] [45-B, D-E]
2.9 It cannot be said that the appellants have approached
the Court in haste. If the appellants had not gone to court when
they did, the Regulation would have affected their fundamental ·
rights on and from 1.1.2016. Further, they would have been denied D
interim and/or other relief on the ground that they have not moved
the Court without undue delay. [Para 42] [46-D-E]
Prag Ice & Oil Mills v. Union of India 1978 (3) SCR
293 : (1978) 3 sec 459 - distinguished.
E
2.10 To say that the Impugned Regulation is only an
experimental measure that would last in its present form for six
months is again incorrect. It is only the Explanatory Memorandum
which says that the Authority may review the aforesaid Regulation
after working of the said Regulation after six months, and that
too only if found to be necessary. Obviously, this would not mean F
that the aforesaid Regulation would necessarily be reviewed at
all, even after six months. [Para 42] [46-E-G]
2.11 The Quality of Service Regulations and the Consumer
Regulations must be read together as part of a single scheme in
order to test the reasonableness thereof. The countervailing G
advantage to service providers by way of the allowance of 2%
average call drops per month, which has been granted under the
2009 Quality of Service Regulations, could not have been ignored
by the Impugned Regulation so as to affect the fundamental rights
of the appellants, and having been so ignored, would render the
H
8 SUPREME COURT REPORTS [2016] 9 S.C.R.
A Impugned Regulation manifestly arbitrary and unreasonable. [Para
45) [48-B-C]
The Lord Krishna Sugar Mills Ltd. and Anr. ll Union of
India and Anr. (1960) 1 SCR 39 - relied on.
2.12 The 2009 Quality of Service Regulation is made under
B Section ll(l)(b)(v), which is the very Section which is claimed to
be the source of the impugned Regulation. Both the regulations
deal with the same subject matter - namely, call drops, and both
regulations are made in the interest of the consumer. If an average
of 2% per month is allowable to every service provider for call
c drops, and it is the admitted position that all service providers
before the Court, short of Aircel, and that too in a very small way,
have complied with the standard, penalizing a service provider
who complies with another Regulation framed with reference to
the same source of power would itself be manifestly arbitrary and
would render the Regulation to be at odds with both Articles 14
D and 19(l)(g). [Para 43] [47-D-E]
2.13 A strict penal liability laid down on the erroneous basis
that the fault is entirely with the service provider is manifestly
arbitrary and unreasonable. Also, the payment of such penalty to
a consumer who may himself be at fault, and which gives an
E unjustifiable windfall to such consumer, is also manifestly arbitrary
and unreasonable. [Para 46) [48-D-E]
Shree Bhagwati Steel Rolling Mills v. Commissioner of
Central Excise (2016) 3 SCC 643 - relied on.
F 2.14 The reason given in the Explanatory Memorandum for
compensating the consumer is that the compensation given is
only notional. The very notion that only notional compensation is
awarded, is also entirely without basis. A consumer may well
suffer a call drop after 3 or 4 seconds in a voice call. Whereas the
consumer is charged only 4 or 5 paise for such dropped call, the
G service provider has to pay a sum of rupee one to the said
consumer. This cannot be called notional at all. It is also not
clear as to why the Authority decided to limit compensation to
three call drops per day or how it arrived at the figure of Re.1 to
compensate inconvenience caused to the consumer. It is equally
unclear as to why the calling party alone is provided compensation
H
CELLULAR OPERATORS ASSN. OF INDIA v. TELECOM 9
REGULATORY AUTHROITY OF INDIA
because, according to the Explanatory Memorandum, A
inconvenience is suffered due to the interruption of a call, and
such inconvenience is suffered both by the calling party and the
person who receives the call. The receiving party can legitimately
claim that his inconvenience when a call drops, is as great as that
of the calling party. And the receiving party may need to make
B
the second call, in which case he receives nothing, and the calling
party receives Re.1 fo1· the additional expense made by the
receiving party. All this betrays a complete lack of intelligent
care and deliberaHon in framing such a regulation by the Authority,
rendering the impugned Regulation manifestly arbitrary and
unreasonable. [Para 49) [49-E-H; 50-A) c
DSC-Viacon Ventures Pvt. Ltd. (Now Known as DSC
Ventures Pvt. Ltd) v. Lal Manohar Pandey and Ors.
2015 (10) SCALE 249 - distinguished.
2.15 The technical paper issued by the same Authority on
13.11.2015 i.e. a few days after the impugned Regulation, the D
Authority has its~lf recognised that 36.9% of call drops take place
because of the fault at the consumer's end. Instead of having a
relook at the problem in.the light of the said technical paper, the
Authority has g,.one ahead with the impugned Regulation. The
very basis of this statement contained in the Explanatory E
Memorandum to the impugned Regulation is found by the self-
same Authority to be incorrect only a few days after publishing
the impugned Regulation. This itself shows the manifest
arbitrariness on the part of the TRAI, which has not bothered to
have a relook into the said problem. [Para 52) [50-F-H]
F
2.16 Thus, the impugned Regulation is manifestly arbitrary
and therefore violative of Article 14, and is an unreasonable
restriction on the right of the appellants' fundamental right under
Article 19(1)(g}"to carry on business, and is therefore, struck
down as such. [l'ara 52) (50-H; 51-A)
G
2.17 The impugned Regulation completely avoids the
adjudicatory p_1·ocess, and legislatively lays down a penal
consequence to a service provider for a call drop taking place
without the consumer being able to prove that he is not himself
responsible for such call drop and without proof of any actual
monetary loss. Whereas individual consumers, either before the H
10 SUPREME COURT REPORTS [2016] 9 S.C.R.
A Consumer Forum, or in a dispute as a group with service providers
before the TRAI, would fail in an action to recover compensation
for call drops, yet a statutory penalty is laid down, applicable
legislatively, and without any adjudication. This again makes the
impugned Regulation manifestly arbitrary and unreasonable. [Para
53] [51-C-D]
B
2.18 When compensation is to be paid to a person who is
affected by breach of a standard of quality required under the
Act, such compensation can only be for actual loss suffered, and
only as a result of fault of the service provider being established
before a quasi judicial Tribunal. This may be notwithstanding the
c fact that the service provider otherwise meets the average of
2% call drops per month allowed to him by the 2009 Quality of
Service Regulation. This is for the reason -that once fault and
actual loss suffered are established before a quasi judicial Tribunal,
it would not be open to plead, on the facts of an -individual case,
D that an overall standard of performance has been met. For this
reason also, a legislatively pre determined penalty, without fault
or loss being established by evidence before a quasi judicial
authority, and where the cause of a call drop may be because of
the consumer himself, renders the impugned Regulation
manifestly arbitrary and unreasonable. (Para 56) [52-F-H)
E
3. The licence conditions, which are a contract between the
service providers and consumers, have been amended to the
former's disadvantage by making the service provider pay a
penalty for call drops despite there being no fault which can be
traceable exclusively to the service provider, despite the service
F provider maintaining the necessary standard of quality required
of it - namely, adhering to the limit of an average of 2% of call
drops per month. Condition 28 of the licence requires the
licensee to ensure that the quality of service standards, as
prescribed by TRAI, are adhered to, and that the Impugned
G Regulation docs not lay down quality of service standards. This
being so, it is clear that the laying down of a penalty de lrors
condition 28, which also requires establishing of fault of the service
provider when it docs not conform to a quality of service standard
laid down by TRAI, would amount to interference with the licence
conditions of the service providers without authority of law. On
H
CELLULAR OPERATORS ASSN. OF INDIA v. TELECOM 11
REGULATORY AUTHROITY OF INDIA
this ground also, therefore, the Impugned Regulation deserves A
to be struck down. [Para 62) [54-F-H; 55-A-B)
Union of India v. Assn. of Unified Telecom Service
Providers of India 2011 (14) SCR 657 : (2011)10 SCC
543 - relied on.
4.1 Section 11(4) of the TRAI Act requires that the B
Authority shall ensure transparency while exercising its powers
and discharging its functions. "Transparency" has not been
defined anywhere in the Act. However, the definition of
"transparency" as provided in s. 13(4) of the Airports Economic
Regulatory Authority of India Act, 2008 provides a good working c
test of 'transparency' referred to in Section 11(4) of the TRAI
Act. [Paras 63, 64] [55-B-C, F-G]
4.2 No doubt in the facts of the present case, the Authority
did hold due consultations with all stakeholders and did allow all
stakeholders to make their submissions to the Authority. D
However, no discussion or reasoning dealing with the arguments
put forward by the service providers, that call drops take place
for a variety of reasons, some of which arc beyond the control of
the service provider and are because of the consumer himself.
Consequently, the conclusion that scrv'ice providers are alone to
blame and arc consequently deficient in service when it comes E
to call drops is not a conclusion which a reasonable person can
reasonably arrive at. Ordinarily legislative functions do not
require that natural justice be followed. However, it has been
recognised in some of the judgments dealing with this aspect
that natural justice need not be followed except where the statute F
so provides. [Para 66) [56-B-D]
Union of India v. Cynamide India Ltd. 1987 (2) SCR
841 : (1987) 2 SCC 720; MR.F. Ltd. v. Inspector Kera/a
Govt. 1998 (2) Suppl. SCR 632 : (1998) 8 SCC 227 -
relied on. G
Regina v. North and East Devon Health Authority, Ex
parte Coughlan [2001] QB 213 - referred to.
4.3 The question of transparency raises a more fundamental
question, namely, that of openness in governance. The Right to
Information Act of 2005 has gone a long way to strengthen H
12 SUPREME COURT REPORTS (2016] 9 S.C.R.
A democracy by requiring that the Government be transparent in
its actions, so that an informed citizenry is able then to contain
corruption, and hold Governments and their instrumentalities
accountable to the people of India.· [Para 69) [57-E-F] ·
Chief Information Commissioner v. State of Manipur
B 2011 (13) SCR 505 : (2011) 15 SCC 1; Global Energy
Ltd. v. Central Electricity Regulatory C011!:nission 2009
(9) SCR 22 : (2009) 15 SCC 570 - relie.t on.
4.4 Thus, subject to certain well defined exceptions, it
would be a healthy functioning of democracy, if all subordinate
c legislation were to be "transparent". Parliament should frame a
legislation along the lines of the U.S. Administrative Procedure
Act (with certain well defined exceptions) by which all subordinate
legislation is subject to a transparent process by which due
consultations with all stakeholders are held, and the rule or
regulation making power is exercised after due consideration of
D all stakeholders' submissions, together with an explanatory
memorandum wb!ch broadly takes into account what they have
said and the reaso'iis for agreeing or disagreeing with them. Not
only would such legislation reduce arbitrariness in subordinate
legislation making, but it would also conduce to openness in
E governance. It would also ensure the redressal, partial or
otherwise, of grievances of the concerned stakeholders prior to
the making of subordinate legislation. Thfo would obviate, in
many cases, the need for persons to approach courts to strike
down subordinate legislation on the ground of such legislation
being manifestly arbitrary or unreasonable. [Para 74] [65-B-F)
F
Case Law Reference
2013 (12) SCR 999 relied on Para8
2006 (3) SCR 396 relied on Para 20
1985 (2) SCR 287 relied on Para25
G 1995 (6) Suppl. SCR 759 relied on Para 26
2001 (5) Suppl. SCR 390 relied on Para27
1970 (3) SCR 530 followed .' Para28
1950 SCR 759 relied on Para29
1996 (2) SCR 767 referred to Para 31
H
CELLULAR OPERATORS ASSN. OF INDIA v. TELECOM
REGULATORY AUTHROITY OF INDIA
AIR 1941 FC 72 relied on Para33 A
1990 (1) Suppl. SCR 142 followed Para34
(19~2) 3 SCR 786 relied on Para 36
197~ (3) SCR 293 distinguished Para 41
1960 1 SCR 39 relied on Para 44 ··
B
(20~6) 3 sec 643 relied on Para 47
2015 (10) SCALE 249 distinguished Para 50
2911 (14) SCR 657 relied on Para 61
(2001) QB 213 referred to Para 65
1987_ (2) SCR 841 relied on Para 67 c
1998 (2) Suppl. SCR 632 relied on Para 68
2911 (13) SCR 505 relied on Para 71
2009 (9) SCR 22 relied on Para 72
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 5017
of2016. D
From the Judgment and Order dated 29.02.2016 of the High Court
of Delhi at New Delhi in Writ Petition (Civil) No. 11596 of2015
WITH
C. A. No. 5018 of2016. E
Kap ii Sibal, Dr. A. M. Singhvi, Gopal Jain, Sr. Advs., Manjul Bajpai,
Mahesh Agarwal, Rishi Agarwal, Ms. Shelly Bhasin, Lakshmeesh
Karnath, Paras Anand, Shashawat Bajwai, Ms. Vasudha Gupta,
Ms. Stephanie Sonwane, Avishkar Singhvi, Anusha, Nidhiram Sharma,
E. C. Agrawala, Advs., for the Appellants. F
P. S. Narasimha, ASG, Pinaki Mishra, Sr. Adv., Sanjay Kapur,
Amo) Chandan, Ms. Priyanka Das, Prabhash Kumar, Ajay Sharma, R. S.
Nagar, Vibhu Shankar Mishra, Shadman Ali, K. Permeshwar, R. K.
Rathod, Rajesh Mishra, Rishabh Jain, Ms. Kaanan Gupta, Akash Jindal,
S. S. Rawat, Ms. Sudha Mehra, Ushab Jain, D. S. Mabra, A. Deb Kumar, G
Surya Narayana Patro, Vakul Sharma, Vikas Kumar, Manish Paliwal,
Ms. Seema Sharma, Vivek Chib, Asif Ahmed, Ms. Ruchira Goel, Rishab
Kapoor, Vimal Kirti Singh, Siddharth, Ms. Pooja Dhar, Ms. Saumya
Sharma, K. Vaghen, Surya Prakash, V. Shyamohan, Advs., for the
Respondents.
H
14 SUPREME COURT REPORTS (2016] 9 S.C.R.
A The Judgment of the Court was delivered by
R. F. NARIMAN, J. 1. Leave granted.
2. This group of appeals before us is by various telecom operators
who offer telecommunication services to the public generally. Various
writ petitions were filed in the Delhi High Court challenging the validity
B of the Telecom Consumers Protection (Ninth Amendment) Regulations,
2015 (hereinafter referred to as the "Impugned Regulation"), notified on
16.10.2015, (to take effect from 1.1.2016), by the Telecom Regulatory
Authority oflndia. The aforesaid amendment was made purportedly in
the exercise of powers conferred by Section 36 read with Section 11 of
c the Telecom Regulatory Authority of India Act, 1997. By the aforesaid
amendment, every originating service provider who provides cellular
mobile telephone services is made liable to credit only the calling consumer
(and not the receiving consumer) with one rupee for each call drop (as
defined), which takes place within its network, upto a maximum of three
call drops per day. Further, the service provider is also to provide details
D of the amount credited to the calling consumer within four hours of the
occurrence of a call drop either through SMS/USSD message. In the
case of a post paid consumer, such details of amount credited in the
account of the calling consumer were to be provided in the next bill.
3. A brief background is necessary in order to appreciate the
E controversy at hand. Under an Act of ancient vintage, namely, the Indian
Telegraph Act, 1885, the Central Government or the Telegraph Authority
is the licensing authority by which persons are licenced under Section
4(1) of the said Act for providing specified public telecommunication
services. Given the fact that it is the Central Government or the Telegraph
F Authority who is the licensor in all these cases, the said licensor enters
into what are described as licence agreements for the provision of Unified
Access Services in the specified service areas. Various standard terms
and conditions are laid down in these licences, some of which are
described hereinbelow. Vide clause 2.1, such licences are grailted to
provide telecommunication services, as defined, on a non-exclusive basis
G in designated service areas. It is mandatory that the licensee provides
such services of a good standard, by establishing a state of the art digital
network. Licences are usually given for a period of 20 years at a time
with a 10 year extension if the licensor so deems expedient. Under
clause 5 of the aforesaid licence agreement, the licensor reserves the
H right to modify, at any time, the terms and conditions oflicense, if in its
CELLULAR OPERATORS ASSN. OF INDIA v. TELECOM 15
REGULATORY AUTHROITY OF INDIA [R. F. NARIMAN, J.]
opinion it is necessary or expedient so to do in public interest, in the A
interest of security of the State, or for the proper conduct of telegraphs.
Under condition 28, which is of some relevance to determine the question
involved in these appeals, the licensee shall ensure that the quality of
service standards as prescribed either by the licensor or the Telecom
Regulatory Authority oflndia shall be adhered to. The licensee is made
B
responsible for maintaining performance and quality of service standards
and is to keep a record of the number of faults and rectification reports
in respect of a particular service which is to be produced before the
licensor/TRAI as and when desired. It is also important that the licensee
be responsive to complaints lodged by its subscribers and rectify the
same. Under clause 34, which deals with roll-out obligations, the licensee c
is to ensure that coverage of a district headquarters/town would mean
that at least 90% of the area bounded by municipal limits should get the
required street and in-building coverage. Interestingly, under clause 35,
liquidated damages are also provided for, in case the licensee does not
commission the service within 1S days of the expiry of the commissioning
D
date and for certain other delays relatable to commissioning of service.
4. It may also be noted that right from September, 2005, TRAI
has been lamenting the shortage and consequent distance of mobile towers
from each other and both the Government as well as TRAI have been
writing to the Chief Secretaries of various State Governments to grant
timely permissions for establishing telecom towers. In this behalf, we E
have been shown guidelines issued by DOT to the Chief Secretaries
dated 1.8.2013. We have also been shown an amendment to the Quality
of Service Regulations dated 21.8.2014 by which TRAI has noticed
practical difficulties that are faced due to various reasons by which cable
breakdowns and indoor faults take place, with the Authority requiring F
the striking of a balance between the problems faced by the licensees
and the need to ensure quality of service to customers. We were also
shown a letter from the Ministry of Communications written to Ohief
Ministers of all the States to permit instaHation of towers on Government
buildings. This letter is dated 3.8.2015. Further, there is a constant
tussle between cell phone operators and municipal authorities, landing G
cell phone operators in court against municipal authorities, who seek to
restrict the setting up of cell phone towers, given the apprehension that
radiation from these towers has a direct causal link with cancer in human
beings. rt is also important to note that by a Quality of Service Regulation
dated 20.3.2009, issued under Section 11 read with Section 36 of the H
16 . SUPREME COURT REPORTS [2016] 9 S.C.R.
A · TRAI Act, TRAI has provided, insofar as cellular mobile phone services
are concerned, for a call drop rate of 2% averaged over a period of one
month. It has also provided for financial disincentives in case there is a
failure to meet this parameter by enacting a second amendment to the
Quality of Service Regulations dated 8.11.2012 by which a service
provider is liable to pay, by way of financial disincentive, an amount not
B
exceeding Rs.50,000/- per parameter that is contravened as the Authority
may by order direct, and in the case of second or subsequent
contravention, to pay an amount not exceeding Rs.1,00,000/- per
parameter for each such contravention as the Authority may by order
direct. One day before the Impugned Regulation, i.e., on 15.10.2015,
c this financial disincentive was raised from Rs.50,000/- to Rs. I ,00,000/-,
and Rs.1,00,000/- to Rs. I ,50,000/- for the second consecutive
contravention, and Rs.2,00,000/- for each subsequent consecutive
contravention.
5. It is in this background that the impugned Ninth Amendment to
D the Telecom Consumers Protection Regulations of2015 was made, on
16.10.2015. The Impugned Regulation reads as under:-
TELECOM CONSUMERS PROTECTION (NINTH
AMENDMENT) REGULATIONS, 2015
(9 OF 2015)
E No. 301/2015-F&EA - - In exercise of the powers conferred by
section 36, read with sub-clauses (i) and (v) of clause (b) of sub-section
(1) of section 11, of the Telecom Regulatory Authority of India Act,
1997 (24 of 1997), the Telecom Regulatory Authority of India hereby
makes the following regulations further to amend the Telecom Consumers
F Protection Regulations, 2012 (2 of2012), namely:-
I. (I) These regulations may be called the Telecom Consumers
Protection (Ninth Amendment) Regulations, 2015.
(2) They shall come into force from the !st January, 2016.
G
2. In regulation 2 of the Telecom Consumers Protection Regulations,
2012 (hereinafter referred to as the principal regulations), after clause
(ba), the following clauses shall be inserted, namely:-
H
CELLULAR OPERATORS ASSN. OF INDIA v. TELECOM 17
REGULATORY AUTHROITY OF INDIA [R. F. NARIMAN, J.]
A
"(bb) "call drop" means a voice call which, after being
successfully established, is in term pted prior to its norm al
completion; the cause of early termination is within the network of
the service provider;";
(be) "calliug consumer" means a consumer who initiates a
voice call;"' B
After Chapter IV of the principal regulations, the following chapter
shall be inse1ted, namely :-
"CHAPTER V"
c
RELIEF TO CONSUMERS FOR CALL DROPS
16. Measures to provide relief to consumefs.- Every originating
service provider providing Cellular Mobile Telephone Service shall,
D
for each call drop within its network,
(a) credit the accountofthe calling consumer by one rupee:
Provided that such credit in the account of the calling
consumer shall be limited to three dropped calls in a day (00:00:00
hours to 23 :59 :59 hours); · E
(b) provide the calling consumer, through SMS/USSD message,
within four hours of the occurrence of call drop, the details of
amount credited in his account; and
(c) in case of post-paid consumers, provide the details of the
credit in the next bill." F
6. The explanatory memorandum to the aforesaid amendment
makes interesting reading. In the first paragraph of the said memorandum,
the 2009 Quality of Service Regulation referred to hereinabove, granting
G
an allowance of an average of2% call drops per month, is specifically
referred to. Also, interestingly enough, the service providers have stated
that they are meeting this benchmark completely with one or two minor
exceptions. Despite this, the Authority has embarked on the Impugned
Regulation, stating that consumers, at various fora, have raised the issue
of call drops, complaining that in their experience, the quality of making H
18 SUPREME COURT REPORTS [2016) 9 S.C.R.
A voice calls has deteriorated. The Authority responded by issuing a
consultation paper marked "Compensation to the Consumers in the event
of dropped calls" dated 4.9.2015. Stakeholders :ll'ere given till 21.9.2015
to submit their comments in writing with counter comments thereto being
given one week thereafter, i.e., by 28.9.2015. The Authority records
that written comments were received from 4 industry associations, 11
B
Cellular Mobile Telephone Service Providers, 2 consumer advocacy
groups, 2 organizations, and 518 individual consumers. 5 counter
comments were also received. The Authority notes that an open house
discussion was held on I .I 0.2015 in New Delhi with the stakeholders.
According to the Authority, consumers wanted relief in the event of
c dropped calls under two broad heads - excess charging and
inconvenience caused to them. In paragraphs 6 and 7, the arguments of
service providers have been noted, in which service providers stated
their difficulties in the matter of sealing/closing down existing sites for
· towers by municipal authorities and other related issues together with
spectrum related issues. They specifically informed the Authority that a
D
large.proportion of call drops are beyond their control. In reply thereto,
consumers spoke of the inconvenience caused to them by.call drops.
Some consumers also contended that the financial disincentive levied
for failing to meet the benchmark for call drop rates should be revised
upwards. (This was in fact done, as we have seen, just one day before
E the Impugned Regulation itself, i.e., on 15.10.2015). The Explanatory
Memorandum then goes on to state:-
"18. Based on the above, it is clear that while all CMTSPs and
the industry associations have argued that question for
compensation to the consumers on call drops does not arise as it
F is neither justifiable nor practicable, most of the consumers and
consumer advocacy groups have insisted that they should be
compensated by the CMTSPs for the inconvenience caused to
them.
19. After a careful analysis. the Authority has come to the
conclusion that call drops are instances of deficiency in service
G
delivery on part of the CMTSPs which cause inconvenience to
the consumers. and hence it would be appropriate to put in place
a mechanism for compensating the consumers in the event of
dropped calls. The Authority is of the opinion that compensatory
mechanism should be kept simple for the ease of consumer
H understanding and its implementation by the CMTSPs. While one
CELLULAR OPERATORS ASSN. OF INDIA v. TELECOM 19
REGULATORY AUTHROITY OF INDIA [R. F. NARIMAN, J.]
may argue that amount of compensation should be commensurate A
to the loss I suffering caused due to an event but in case of a
dropped call it is difficult to quantity the loss/suffering/
inconvenience caused to the consumers as it may vary from one
consumer to another and also in accordance to their situations.
Accordingly, the Authority has decided to mandate originating
B
CMTSPs to credit on~ Ri;j:>ec for a dropped call to the calling
consumers as notional ;;ompensation. Similarly, the Authority has
decided that such ere;, it i.1 the account of the calling consumer
shall be limited to tl:ree dropped calls in a day (00:00:00 hours to
23 :59:59 hours). The Authority is of the view that such a mandate
would compensate the consumers for the inconvenience caused c
due to interruption in service by way of call drops, to a certain
extent.
20. The Authority is also aware that communication to the
consumers is important and therefore, the Authority has decided
to mandate that, each originating CMTSP, within four hours of D
the occurrence of call drop within its·netwcirk, inform the calling
consumer, through SMS/USSD message the details of amount
credited in his account forthe dropped call, ifapplicable.
. ~ t -
21. The Authority is conscious of the fact that for carrying out the
afore-mentioned mandate, the CMTSPs would have to make E
suitable provisions in their systems, which would require time and
efforts. Accordingly, the Authority has decided that the afore-
mentioned mandate would become applicable on the CMTSPs
with effect from the I" January, 2016.
22. The Authority shall keep a close watch on the implementation F
of the mandate as well as the measures be.ing initiated by the
CMTSPs to minimize the problem of dropped calls as given in
their submissions during the consultation process and may review
after six months, ifnecessiiry."
7. At this stage, it is necessary to refer to a technical.paper issued
G
by the very same Authority a few days after the Impugned Regulation.
On 13.11.2015, TRAlissued a paper called "Technical Paper on call
drops in cellular network". TRAI noticed that the consumer base in the
country is growing very fast and that the mobile telecom infrastructure
is not growing at the same pace. This leads to a dip in the quality of
service provided. It is interesting to notice that TRAI specifically adverts H
.20 SUPREME COURT REPORTS [2016] 9 S.C.R.
A to the fact that call drops can take place due to a variety of reasons. It
pointed out that one of the reasons is due to the consumer's own fault,
and that 36.9% of call drops are attributable to consumer faults. It further
went on to notice that the benchmark set for call drops is 2%, and it is
seen that only 3 out of 12 Iicensees are not adhering to the said
B benchmark- 2 of them being BSNL, who is not an appellant before us,
'the other one being Aircel. The Authority ultimately concluded:-
"5 .27. In light of the reasons discussed above about the increase
in call drops, it must be realized that mobile towers do not have an.
uni imited capacity for handling the current network load. There is
an urgent need to increase the number of the towers so as to
c cater to the demands of a growing subscriber base. At the same
time, problems like removal of towers from certain areas by
Authorities should be adequately addressed. ·This problem is
particularly evident in urban areas. Moreover, with the increase
in the usage of 3G networks, the growth rate of mobile towers
D supporting 2G networks has reduced. This must be addressed.
5 .28. The previous sections highlighted some important
countermeasures at the TSPs' end. Measures like Dynamic
Channel Allocation, multiple call routing and optimized resource
management can be employed by the TSP's besides usage of
E mobile signal boosters through the TSPs at users' buildings or
premises. Some prioritization schemes like MBPS, CAC, Guard
Channels, Handoff Queuing and Auxiliary Stations essentially need
to be incorporated by TSPs to reduce call drops."
8. A Writ Petition, being Writ Petition (Civil) No.11596 of 2015,
F was filed before the Delhi High Court, together with various other
petitions, in which the Ninth Amendment, being the Impugned Amendment
to the Regulation pointed out hereinabove, was challenged. By the
impugned judgment dated 29.2.2016, the Delhi High Court noticed the
various arguments addressed on behalf of the various appellants, together
with the reply given by Shri P.S. Narasimha, learned Additional Solicitor
G General of India appearing on behalf of TRAl. The High Court then
went on to discuss the validity of the Impugned Regulation under two
grounds - the ground of being ultra vires the parent Act, and the ground
that the Regulation· was otherwise unreasonable and manifestly arbitrary.
The High Court repelled the challenge of the appellants on both the
H aforesaid grounds .. The High Court first referred to BSNL v. Telecom
CELLULAR OPERATORS ASSN. OF INDIA v. TELECOM 21
REGULATORY AUTHROITY OF INDIA (R. F. NARIMAN, J.]
Regulatory Authority oflndia, (2014) 3 SCC 222 in some detail, and A
then went on to hold that the power vested in TRA I under Section
36( I) to make regulations is wide and pervasive, and that as there can
be no dispute that the Impugned Regulation has been made to ensure
· quality of service exten.ded to the consumcr·by the service provider, it .
would fall within Section 36(1) read with Section l l(l)(b)(v). The High
B
Court further held that the contention that the compensation provided
under the Impugned Regulation amounts to imposition of penalty is liable
to be rejected, since compensation as provided under the Impugned
Regulation is only notional compensation to consumers who have suffered
as a result of call drops. The High Court then went on to say that a
transparent consultative process was followed by TRAI in making the c
Impugned Regulation, and that the techi1ical paper on call drops issued
on 13.11.2015 addressed all issues that were sought to be raised in the
present petitions. The contention that 100% performance is demanded
under the Impugned Regulation was rejected as being factually incorrect
and without any basis. It was further added that the impossibility of
D
identification of the reason for the call drop was incorrect inasmuch as
these reasons are network related; and that is something that has not
been disputed by telecom equipment mani1facturers like M/s. Nokia and
M/s. Ericsson. It was further held that the Impugned Regulation
attempted to balance the interest of consumers with the interest of service
providers by limiting call drops that are to be compensated to only 3 and E
also 11iandating that only the calling consumer and not the receiving
co1)S11111er was liable to be so compensated. In dealing with man.ifest
arbitrariness, the High Court held. that the 2% standard irnposed by the
Quality of Service Regulations is distinct and different from compensation
provided to consumers for droplled calls. The High Court sought to
F
make a distinction between the 2% tolerance limit as being a quality
parameter for the entire network area, as against compensation provided
which specifies an individual standard. On the plea that the difficulties
faced by service providers in setting up mobile towers being something
beyond their control, the High Court declined to enter into the said
controversy since the High Court does not have the expertise to adjudicate G
on such rival claims .. The validity of the Impugned Regulation was upheld
and the Writ Petitions were dismissed.
9. At this stage, it would be important to notice.the arguments
made on behalf of th,e various appellants before us. We have heard
learned senior advocates Shri Kapil Sibal, Dr. Abhishek Manu Singhvi, H
22 SUPREME COURT REPORTS [2016] 9 S.C.R.
A and Shri Gopal Jain. The arguments that were made by them can fall
· into four neat logical compartments. First and foremost, they argued
that the Ninth Amendment to the Telecom Consumers Protection
Regulations, 2015, is ultra vires Section 36 read with Section 11 of the
Telecom Regulatory Authority of India Act, 1997. They argued that, in
any event, these Regulations, being in the nature of subordinate legislation,
B
were manifestly arbitrary and unreasonable; and therefore affected their
fundamental rights under Article 14 and Article 19(1 )(g) of the
· Constitution. They further went on to state that there was no power in
the TRAI to interfere with their licencti conditions which are contract
conditions between the licensor and the licensee, and that the said
c Regulations in seeking to impose a penalty not provided for by the licence
should be struck down as such. Fourthly, they argued that Section 11(4)
of the said Act requires the Authority to be transparent in its dealings
with the various stakeholders, and it has miserably failed in this also.
I 0. Under the broad head "ultra vires" l'earned counsel have
D argued that Regulations can only be made under Section 36(1) of the
TRAI Act if they are consistent with and carry out the purposes of the
Act. The present Regulations having purportedly been made under
Section 11 (I )(b )(i) and (v) of the Act are in fact de hors Section
11 (I )(b)(i) and (v), and contrary to the.Quality of Service Regulations
already made by the same Authority under the self-same provision. They
E
argued that the present Impugned Regulation has nothing to do with
ensuring compliance of the terms and conditions of licence inasmuch as
none of such terms and conditions empowers the Authority to levy a
penalty based on No Fault Liability. They also argued that no standard
of quality of service is prescribed by the Regulation at all, and therefore
F the so-called protection of the consumers is without laying down a
standard of quality of service and is also directly contrary to the 2%
standard already laid down. It was argued by them that as all of them
met the 2% standard laid down by the 2009 standard of qua! ity regulation,
they could not be penalized as that would then amount to substituting
98% with I 00% as even one call drop would lead to a payment of penalty
G
ofrupee one. They also argued that such penalty was not authorized by
either Section 36 or by Section 11; and, unlike Section 29 of the Act, no
such authority is to be found in the said Sections.
11. Under the broad head "manifestly arbitrary", and "unreasonable
restrictions" learned counsel for the appellants argued that without there
H
CELLULAR OPERATORS ASSN. OF INDIA v. TELECOM 23
REGULATORY AUTHROITY OF INDIA [R. F. NARIMAN, J.]
being any fault on their part, they were foisted with a penal liability. This A
is not only contrary to any norm oflaw or justice, but directly contrary to
Section 14 ofthe Act which speaks of adjudication taking place between
a service provider and a group of consumers. The complaint of an
individual consumer before a Consumer Disputes Redressal Forum would
be dismissed on the ground that penal damages cannot be awarded
B
without the establishment of fault in any adjudication for "inconvenience"
as opposed to "loss caused". To lay down by way of subordinate
legislation, a strict no fault penal liability would go contrary to the scheme
of the TRAI Act, particularly when it is contrasted with the Electricity
Act, 2003. We were shown Section 57 and certain other Sections of the
said Act in which the Central and State Commissions for Electricity, c
unlike the TRAI, also have adjudicatory functions. If, as a result of the
adjudicatory function, compensation for loss is decreed, the Commission
under the. Electricity Act could do so, but not TRAI, as it has no
adjudicatory functions but only recommendatory, administrative, and
legislative functions. It was argued by them that Se.ctions 73 and 74 of
D
the Contract Act were also breached as damages by way of penalty,
· which are not a genuine pre-estimate of loss, ,have been laid down by
the Impugned Regulation, as it is admitted that no loss but only
inconvenience has been caused to the consumers. It was further argued,
based on the amended Preamble to the TRAI Act, that the Impugned
Regulation only protects the interest of the consumers ofthe telecom E
sector, whereas a balancing of the interests of service providers and
consumers is required by the said Preamble. Further, orderly growth of
the telecom sector would also.be directly affected if arbitrary penalties
of this nature were to be inflicted upon service providers. It was also
argued that having made the financial disincentive for a breach of the
F
2% benchmark even higher just one day before the Impugned Regulation,
the Impugned Regulations were wholly uncalled for. Further, one hand
of TRAI does not seem to know ~hat the other hand is doing. A few
days after the Impugned Regulation, the TRAI's own technical paper
makes it clear that the TRAI has itself admitted that call drops are caused
in many ways, most of which are not attributable to service providers. G
That being so, the impugned amendment is wholly arbitrary in that tlte
assumption on which it is based, namely, that the service provider is at
fault every time a call drop takes place, is wholly unfounded, as has
been found by TRAI itself in the said technical paper.
12. The learned Counsel have also argued, based on Section 402 H
24 SUPREME COURT REPORTS [2016] 9 S.C.R.
A of the Companies Act, 1956 and Section 27(d) of the Competition Act,
2002, that no power is given by the TRAI Act for interference with
licence conditions, which amcunt to '.t c::mtract between licensor and
licensee. They also referred to SectiDn 11 (l )(b){ii) which uses the familiar
"notwithstanding anything contained in the terms and conditions of the
licence .......... "which is missing from the other provisions of the TRAI
B
Act. The argument, therefore, being that when the licence conditions/
contract itself makes it clear that a no fault liability for call drops cannot
be made, the impugned amendment would follow the terms and conditions
of the licence between licensor and licensee and would be bad as a
result.
c 13. Finally, it was argued that Section 11(4)ofthe Act was.breached
inasmuch as the transparency mandated by the Act in the framing of the
regulations was wholly missing as no reason whatsoever has been given
for negativing the objections of the serdce providers and laying down a
no fault strict penal liability on them:
D 14. The learned Attorney General, appearing on behalf of the
Telecom Regulatory Authority oflndia, has countered these submissions
and sought to defend the High Court judgment. According to the learned
Attorney General, it is first necessary to see the Statement of Objects
and Reasons of the Telecom Regulatory Authority of India Act, 1997.
E Paragraph one of the said statement was referred to in order to emphasize
that the National Telecom Policy of 1994 provided for the meeting of
customer's demands at a. reasonable price, and the promotion of consumer
interest by ensuring fair competition. When read in light of the Statement
of Objects and Reasons, it is clear. that .the Impugned Regulation has
been made bearing this object in mind. According to the learned Attorney
F General, Section 36 of the Act has to be read in a wide and expaiisive
manner, as has been done in BSNL'sjudgment, and \vhen so read, it is
clear that the Impugned Regulation conforms to Section 11 (I )(b )(i) and
(v) and is otherwise not ultra vires the Act. Countering the submission
as to arbitrariness and unreasonableness of the Impugned Regulation,
o he argued that the said Regulation was really framed keeping the small
man in mind, and told us that 96% of consumers are pre-paid customers
who recharge their account balance for an average of Rs. I 0/- at a time.
The Impugned Regulation seeks to provide some solace to these persons
for dropped calls. He further argued that members of the appellants
have made huge profits from the aforesaid business and have pumped in
H
CELLULAR OPERATORS ASSN. OF INDIA v. TELECOM 25
REGULATORY AUTHROITY OF INDIA [R. F. NARIMAN, J.]
very little funds for infrastructural development. He referred to funds A
pumped in in China, for example, which were ten times more than the
funds in this country. He, therefore, submitted that if the revenues of
service providers were computed at a rough average of approximately
Rs.96,560 crores per annum, payments that they would have to make,
according to a calculation made by him, for call drops under the Impugned
B
Regulation, would amount to a sum of roughly only Rs.280 crores per
annum, which would not therefore really affect the appellants' right to
carry on business. He further argued that the Impugned Regulation is
only an experimental measure and was liable to be revisited in six months.
This being so, the appellants should not have rushed to court, but allowed
the regulation to work; and if there were any shortfalls, these could be c
ironed out in the workilig of the Impugned Regulation. He countered the
argument made on behalfof the appellants that it is not possible, technically
speaking, to arrive at the cause of a call drop, and read manuals from
some of the service providers to show that this was, in fact, possible,
and that the reason for the call drop could ultimately be pinpointed to the
D
service providers when they ar~ at fault. He also refuted the submission
made on behalf of the appellants that there were four broad reasons for
call drops, three of which cannot be laid at the appel Iants door. He referred
to the technical paper dated 13.11.2015, in particular, and to various
other documents, to show that call drops occurred basically due to two
reasons alone - those that can be said to be due to the fault of the E
service providers, and those that can be said to be due to the fault of the
consumers. In particular, he referred to and relied upon a statistic showing
that an average of 36.9% of call drops take place owing to the fault of
the consumer - the rest take place because of the fault of the service
provider, or the fact that it has not pumped in enough funds for technical
F
advancements to prevent the cause for such call drops. According to
him, with the provision of equipment, including boosters, call drops need
not take place inside buildings with thick walls and/or lifts. In any case,
the number of call drops that take place owing to such reasons is itself
minimal. According to him, therefore, the Impugned Regulation should
be read down so that service providers are made to pay only for faults G
attributable to them, which would come to a rough figure of 63% of
what is charged, for amounts payable to the consumers under the
Impugned Regulation. The learned Attorney General has assured us
that, in point of fact, the authorities will administer the Impugned
Regulation in such a manner that service providers would only be made
H
26 SUPREME COURT REPORTS [2016) 9 S.C.R.
A liable to pay for call drops owing to their own fault. He further argued
that three documents, if read together, would make it clear that the
Impugned Regulation cannot be said to be manifestly arbitrary or
unreasonable, and that the consultation paper dated 4.9.2015, the
Impugned Regulation dated 16.10.2015, and the technical paper dated
13.11.2015, should all be read together as being,part of one joint exercise
B
to alleviate the small consumers' inconvenience because of call drops.
He further went on to argue that it is not correct to say that TRAI has
contradicted itselfin the technical paper of 13.11.2015, when compared
to the Impugned Regulation, and stated that the Quality of Service
Regulation which allowed a 2% average per month for call drops should
c not be confused with .the Impugned Regulation. They are, according to
him, a parallel set of regulations which have to be read separately, both
having been framed by TRAI, in order to protect consumer interest. He
also added that guess work is inherent in framing a regulation of the sort
that is impugned, and further stated that three call drops per day mitigated
D the rigour of having to pay for more than 3 call drops per day, and that
rupee one per call drop would really be payment or recompense for call
drops which take place because the consumer has to incur an extra
charge to connect with the person whose call dropped yet again and
spend more money for the second call. He also added that only the
consumer who dials the call which has dropped is paid and .not the
E receiving consumer, thereby again mitigating the rigour of what could
amount to a double payment for one call. He cited a number ofjudgments
to buttress the aforesaid submissions, stating that the said judgments
would show that the Court should not substitute its wisdom for that of
the wisdom of legislative policy, and that TRAI being an active trustee
for the common good has framed this regulation acting as such. He also
F
refuted the submission that the licence conditions were illegally modified
by the Impugned Regulation, and stated that the Explanatory
Memorandum to the Impugned Regulation would show that the
transparency required under Section 11(4) of the Act was duly and
faithfully observed by TRAI.
G 15. In rejoinder, learned senior counsel for the appellants stoutly
resisted the factual statements made by the learned Attorney General.
They pointed out that the net debt of the various telecom operators before
us, as on 31.12.2015, ran into approximately Rs.3,80,000/- crores and
that this was because huge amounts had to be borrowed from banks in
H order to pay for both spectrum and infrastructure. They were at pains
CELLULAR OPERATORS ASSN. OF INDIA v. TELECOM 27
REGULATORY AUTHROITY OF INDIA [R. F. NARIMAN, J.]
to point out that though service providers in India contributed to 13% of A
the world's telecommunication services, the revenue earned by them
was only 2.7%, and even this was fast decreasing. According to the
learned counsel, they have covered over 500,000 villages in India
contributing to 6% of India's GDP, thus being amongst the highest
contributors in foreign direct investment in this country in the last decade.
B
They have also made the second large private sector investment in
infrastructure amounting to Rs. 800,000/- crores despite the return on
investment being only 1%. Contrary to what the learned Attorney General
had to say, a vast number of towers have been set up - more than two
lac sites in the last 15 months alone. When viewed with the gigantic net
debt and return on investment, the figure of gross revenue given by the c
learned Attorney General is said to be a highly misleading figure. Also,
the comparison with infrastructure investment in China is wholly misplaced
inasmuch as -the Chinese Government has unlimited funds to pour into '
its telecom companies, over 70% of their share capital being held by the
Government. Spectrum allocation to Chinese operators is at almost no
D
cost, whereas in India, thousands of crores of rupees have to be spent
as spectrum is now auctioned to the highest bidder. Also, the revenue of
the top three Chinese telecom operators is more than six times the
revenue of the top three Indian operators. In addition, it was argued that
the facts and figures reeled out by the learned Attorney General are not
based on the record of the case, and, in any case, have very little E
connection with the challenge to the Impugned Regulation in the present
case.
16. We have also heard learned counsel appearing for various
consumer groups. They supported the arguments of the learned Attorney
General and went on to state that since the focus of the TRAI Act and F
the Impugned Regulation was for the small and impoverished consumers
in India, this Court would be loathe to strike down the Impugned
Regulation. They further argued that the doctrine of public trust would
apply to the Impugned Regulation, as the Regulation was part of the
overall social responsibility that the regulator TRAI has cast upon the
service providers in favour of consumers. They also cited a few G
judgments .dealing with the vires of subordinate legislation and with
transparency in the context of the Impugned Regulation.
17. Having heard learned counsel for all the parties, it is first
necessary to set out the relevant provisions of the Telecom Regulatory
Authority oflndiaAct, 1997. H
28 SUPREME COURT REPORTS [2016] 9 S.C.R.
A 18. The Statement of.Objects and Reasons for the said Act is as -
follows:
"I. In the context ofthe_Na:ioi::·:J,l 'felccom Policy, 1994, which
amongst other things, stresses on achieving the universal service,
bringing the quality of telecom services to world standards,
B provisions of wide range or" servil:es to meetthc customers demand
at reasonable price, and participation of the companies registered
in India in the areaofbasic as well as value added telecom services
as also making arrangements for protection and promotion of
consumer interest and ensuring fair competition, there is a felt
need to separate regulatory functions from service providing
c functions which will be in keeping with the general trend in the
world. In the multi-operator situation arising out of opening of
0
basic as well as value added services in which private operator
will be competing with Government operators, ~here is a pressing
need for an independent telecom regulatory body for regulation
D of telecom services for orderly and healthy growth of
telecommunication infrastructure apart from protection of
consumer interest."
The Preamble of the Telecom Regulatory Authority Act of 1997
reads as under:
E "Preamble -An actto provide for the establishment of the Telecom
Regulatory Authority of.India to regulate the telecommunication
services, and for matters connected therewith or incidental
thereto."
Section 11 (n) read as under:-
F
Functions of Authority-( 1) Notwithstanding anything contained
in the Indian Telegraph Act, I 885, the functions of the Authority
shall be to -
(n) settle disputes between service providers"
G 19. In 2000, the Act was amended. By the Amended Act, the
adjudicatory function of the TRAI was taken away from it and was
vested in an Appellate Tribunal. The relevant provisions of the Act as
amended in 2000 are as follows:-
"Preamble-An Act to provide for the establishment of the Telecom
- H Regulatory Authority of India and the Telecom Disputes Settlement
CELLULAR OPERATORS ASSN. OF INDIA v. TELECOM 29
REGULATORY AUTHROITY OF JNDIA [R. F. NARIMAN, J.]
and Appellate Tribunal to regulate the telecommunication services, A
adjudicate disputes, dispose of appeals and to protect the interests
of service providers and consumers of the telecom sector, to
promote and ensure orderly growth of the telecom sector and for
matters connected therewith or inciden~al thereto"
11. Functions ofAuthority. (I) Notwithstanding anything contained B
in the Indian Telegraph Act, 1885, the functions of the Authority
shall be to-
(b) discharge the foll.owing functions, namely:-
(i) ensure compliance of terms and conditions oflicense;
c
(ii) notwithstanding anything contained in the terms and conditions
of the license granted befi:i~e the commencement of the Telecom
Regulatory Authority (Amendment) Ordinance,2000, fix the terms
and conditions of inter-connectivity between the service providers;
xx D
(v) lay down the standards of quality of service to be provided by
the service providers and ensure 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 se..Vices;
E
11. (4) The Authority shall ensure transparency while exercising
its powers and discharging its functions. ,
12. Powers of Authority to call for information, conduct
investigations, etc. -
(4) The Authority shall have the power to issue such directions to F
service providers as it may consider necessary for proper
functioning by service providers.
13. Power of Authority to issue directions.-The Authority
may, for the discharge of its.functions under sub-section (I) of
Section 11, issue such directions from time to time to the service G
providers, as it may consider necessary:
Provided that no direction under sub-sectio11 (4) of Section 12 or
under this section shall be issued except on the matters specified
in clause (b) of sub-section(!) of Section II.
H
30 SUPREME COURT REPORTS (2016] 9 S.C.R.
A 14. Establishment of Appellate Tribunal.-The Central
Government shall, by notification, establish an Appellate Tribunal
to be known as the Telecom Disputes Settlement and Appellate
Tribunal to--
(a) adjudicate any dispute-
B (i) between a licensor and a licensee;
(ii) between two or more service providers;
(iii) between a service provider and a group of consumers:
Provided that nothing in this clause shall apply in respect of matters
C relatingto--
(A) the monopolistic trade practice, restrictive trade practice and
unfair trade practice whid1 ;.re subject to the jurisdiction of the
Monopolies and Restri~tive Trade Practices Commission
established under sub-section (1) of Section 5 of the Monopolies
D and Restrictive Trade Practices Act,.1969 (54of1969);
(B) the complaint of an individual consumer maintainable before
a Consumer Disputes Redressal forum or a Consumer Disputes
Redressal Commission or the National Consumer Redressal
Commission established under Section 9 of the Consumer
E Protection Act, 1986 (68 of I 986);
(C) the dispute between telegraph authority and any other person
referred to in sub-section (I) of Section 7-B of the Indian Telegraph
Act, 1885 (13 of 1885,); · ·
( b) hear and dispose of appeals against any direction, 'decision or
F order of the Authority under this Act.
15. Civil Court not to have jurisdiction.-No civil court shall
have jurisdiction to entertain any suit or proceeding in respect of
any matter which the Appellate Trfbuna 1is empowered by or under
this Act to determine and no injunction shall be granted by any
G court or other authority in respect of any action taken or to be
taken in pursuance of any power conferred by or under this Act.
25. Power of Central Government to issue directions.-( I)
The Central Government may, from time to time, issue to the
Authority such directions as it may think necessary in the interest
H
CELLULAR OPERATORS ASSN. OF INDIA v. TELECOM 31
REGULATORY AUTHROITY OF INDIA [R. F. NARIMAN, J.]
of the sovereignty and integrity oflndia, the security of the State, A
friendly relations with foreign States, public order, decency or
morality.
(2) Without prejudice to the foregoing provisions, the Authority
shall, in exercise of its powers or the performance of its functions,
be bound by such directions on questions of policy as the Central B
Government may give in writing to it from time to time:
Provided that the Authority shall, as far as practicable, be given
an opportunity to express its views before any direction is given
under this sub-section.
(3) The decision of the Central Government whether a question is c
one of policy or not shall be final.
29. Penalty for contravention of directions of Authority.-
If a person violates directions of the Authority, such person shall
be punishable with fine which may extend to one lakh rupees and
in case of second or subsequent offence with fine which may D
extend to two lakh rupees and .in the case of continuing
contravention with additional fine which may extend to two lakh
rupees for every day during which the default continues.
36. Power to make regulations.-{ I) The Authority may, by
notification, make regulations consistent with this Act and the rules E
made thereunder to carry out the purposes of this Act.
(2) In particular, and without prejudice to the generality of the
foregoing power, such regulations may provide for all or any of
the following matters, namely:-
F
(a) the times and places of meetings of the Authority and the
procedure to be followed at such meetings under sub-section (I)
of Section 8, including quorum necessary for the transaction of
business;
(b) the transaction of business at the meetings of the Authority
G
under sub-section (4) of Section 8;
. (c) ......
(d) matters in respect of which register is to be maintained by the
.Authority under sub-clause (vii) of clause (b) of sub-section (I)
ofSection 11; H
32 SUPREME COURT REPORTS [2016) 9 S.C.R.
A (e) levy offee and lay down such other requirements on fulfillment
of which a copy of register may be obtained under sub-clause
(viii) of clause (b) of sub-section (I) of Section 11;
(f) levy offees and other charges under clause (c) of sub-section
(I) of Section 11.
B 37. Rules and regulations to be laid before Parliament.-
Every rule and every regulations made under this Act shall be
paid, as soon as may be after it is made, before each House of
Parliament, while it is in session, for a total period of thirty days
which may be comprised in one session or in tow or more
c successive sessions, and if, before the expiry of the session
immediately following the session or the successive sessions
aforesaid, both Houses agree in making any modification in the
rule or regulation or both Houses agree thatthe rule or regulation
should not be made, the rule or regulation shall thereafter have
effect only in such modified form or be of no effect, as the case
D may be; so, however, that any such modification or annulment
shall be withoµt prejudice to the validity of anything previously
done under that rule or regulation."
Parameters of Judicial Review of Subordinate Legislation
E 20. In State of Tamil Nadu v. P. Krishnamoorthy, (2006) 4
SCC 517, this Court after adverting to the relevant case law on the
subject, laid down the parameters of judicial review of subordinate
legislation generally thus:-
"There is a presumption in favour of constitutionality or validity of
a subordinate legislation and the burden is upon him who attacks
F
it to show that it is invalid. It is also well recognised that a
subor~inate legislation can be challenged under any ofthe following
grounds:
(a) Lack of legislative competence to make the subordinate
legislation.
G
(b) Violation of fundamental rights guaranteed under the
Constitution oflndia.
( c) Violation of any provision of the Constitution oflndia:
(d) Failure to conform to the statute under which it is made or
exceeding the limits ofauthority conferred by the enabling Act.
H
,
CELLULAR OPERATORS ASSN. OF INDIA v. TELECOM 33
REGULATORY AUTHROITY OF INDIA [R. F. NARIMAN, J.]
(e) Repugnancy to the laws of the land, that is, any enactment. A
(t) Manifest arbitrariness/unreasonableness (to an extent where
the court might well say that the legislature never int!'lnded to give ·
authority to make such rules).
The court considering the validity of a subordinate legislation, will
have to consider the nature, object and scheme of the enabling B
Act, and also the area over which power has been delegated
under the Act and then decide whether the subordinate legislation
conforms to the parent statute. Where a rule is directly inconsistent
with a mandatory provision of the statute, then, of course, the
task of the court is simple and easy. · c
But where the contention is that the inconsistency or non-
conformity of the rule is not with reference to any specific provision
of the enabling Act, but with the object and scheme of the parent
Act, the court should proceed with caution before declaring
invalidity." [paras 15 and 16] D
21. In the present case, the appellants have raised pleas under
paragraphs (b), (d) and (f) of paragraph 15 of the said judgment. We
now move on to consider their arguments.
Ultra vires
E
22. The power to make the Impugned Regulation is traceable to
Section 36(1) of the Telecom Regulatory Authority oflndia Act, 1997.
This Court in BSNL v. Telecom Regulatory Authority oflndia, (2014)
3 sec 222, after analyzing the aforesaid provision in the backdrop of
the Act held as follows:-
"We may now advert to Section 36. Under sub-section (!)thereof·· F
TRAI can make regulations to carry out the purposes of the TRAI
Act specified in various provisions of the TRAI Act including
Sections 11, 12 and 13. The exercise of power under Section
36( I) is hedged with the condition that the regulations must be
consistent with the TRAI Act and the rules made thereunder. G
There is no other restriction on the power of TRAI to make
regulations. In terms of Section 37, the regulations are required to
be laid before Parliament which can either approve, modify or
annul the same. Section 36(2), which begins with the words
"without prejudice to the generality of the power under sub-section
H
34 SUPREME COURT REPORTS [2016) 9 S.C.R.
A (1 )"specifies various topics on which regulations can be made by
TRAI. Three of these topics relate to meetings of TRAI, the
procedure to be followed at such meetings, the transaction of
business at the meetings and the register to be maintained by
TRAI. The remaining two topics specified in clauses (e) and (t)
of Section 36(2) are directly referable to Sections 1l(l)(b)(viii)
B
and 11 (I)( c). These are substantive functions ofTRAI. However,
there is nothing in the language of Section 36(2) from which it can
be inferred that the provisions contained therein control the
exercise of power by TRAI under Section 36(1) or that Section
36(2) restricts the scope of Section 36(1) ...
c Before parting with this aspect of the matter, we may notice
Sections 33 and 37. A reading of the plain language of Section 33
makes it clear that TRAI can, by general or special order, delegate
to any member or officer ofTRAI or any other person such of its
powers and functions under the TRAI Act except the power to
D settle disputes under Chapter IV or make regulations under Section
36. This means that the power to make regulations under Section
36 is non-delegable. The reason for excluding Section 36 from
the purview of Section 33 is simple.The power under Section 36
is legislative as opposed to administrative. By virtue of Section
3 7, the regulations made under the TRAI Act are placed on a par
E with the rules which can be framed by the Central Government
under Section 3 5 and being in the nature of subordinate legislations,
the rules and regulations have to be laid before both the Houses
of Parliament which can annul or modify the same. Thus, the
regulations framed by TRAI can be made ineffective or modified
F by Parliament and by no other body.
In view of the above discussion and the propositions laid down in
the judgments referred to in the preceding paragraphs, we hold
that the power vested in TRAI under Section 36(1) to make
regulations is wide and pervasive: The exercise of this' power is
only subject to the provisions of the TRAI Act and the rules framed
G under Section 35 thereof. There is no other limitation on the
exercise of power by TRAI under Section 36(1 ). It is not controlled
or limited by Section36(2)or Sections 11, 12 and 13." [paras 89,
98- 100)
23. It will thus be seen that though the Regulation making power
H under the said Act is wide and pervasive, and is not trammeled by the
CELLULAR OPERATORS ASSN. OF INDIA v. TELECOM 35
REGULATORY AUTHROITY OF INDIA [R. F. NARIMAN, J.]
provisions of Section 11, 12(4) and 13, it is a power that is non-delegable A
and, therefore, legislative in nature. The exercise of this power is hedged
in with the condition that it must be exercised consistently with the Act
and the Rules thereunder in order to carry out the purposes of the Act.
Since the regulation making power has first to be consistent with the
Act, it is necessary that it not be inconsistent with Section 11 oftheAct,
B
and in particular Section 11 ( 1)(b) thereof. This is for the reason that the
functions of the Authority are laid down by this Section, and that the
Impugned Regulation itself refers to Section 1l(l)(b)(i) and (v) as the
source of power under which the Impugned Regulation has been framed.
Since .ensuring compliance with the terms and conditions of Iicence is
the first thing that has been argued on behalf of the respondents, it is c
important to advert to the provisions of the licence between the service
provider and the consumer. As has been mentioned above, two very
important clauses of this licence refer to (i) the power to modify the
licence conditions which is contained in clause 5 and (ii) the ensuring by
the licensee that the quality of service shall be as prescribed by the
D
licensor or TRAI by clause 28 thereof. Under clause 5, the licensor
reserves the right to modify the terms and conditions of the licence if in
the opinion of the licensor it is necessary or expedient so to do in public
interest or in the interest of security of the State or for the proper conduct
of telegraphs. It may be stated that no modification of the licence has in
fact been attempted or has taken place in the facts of the present case. E
Therefore clause 5 need not detain us further. Clause 28 reads as follows: ·
"28. Quality of Performance:
28.1 The LICENSEE shall ensure the Quality of Service (QoS)
as prescribed by the LICENSOR or TRAI. The LICENSEE
shall adhere to such QoS standards and provide timely information F
as required therein.
28.2 The LICENSEE shall be responsible for:-
i) · Maintaining the performance and quality of service standards.
iO Maintaining the MTTR (Mean Time To Restore) within the G
specified limits of the quality of
service.
iii) The LICENSEE will keep a record of number of faults and
rectification reports in respect of the service, which will be
H
36 SUPREME COURT REPORTS [20 I 6] 9 S.C.R.
A produced before the LICENSOR/TRAI as and when and in
whatever form desired.
28.3 The LICENSEE shall be responsive to the complaints lodged
by his subscribers. The Licensee shall rectify the anomalies within
the MTTR specified and maintain the history sheets for each
B installation, statistics and analysis on the overall maintenance status.
28.4 The LICENSOR or TRAI may carry out performance tests
on LICENSEE's network and also evaluate Quality of Service
parameters in LICENSEE's network prior to grant of permission
for commercial launch of the service after successful completion
c of interconnection tests and/or at any time during the currency of
the License to ascertain that the network meets the specified
standards on Quality of Service (QoS). The LICENSEE shall
provide ingress and other support including instruments, equipments
etc., for such tests.
D 28.5 The LICENSEE shall enforce and ensure QOS, as
prescribed by the LICENSOR/TRAI, from the
lNFRASTRUCTURE PROVIDER(s) with whom it may enter
into agreement/contract for leasing/hiring/buying or any such
instrument for provision ofinfrastructure or provision of bandwidth.
The responsibility of ensuring QOS shall be that of LICENSEE."
E
24. Under clause 28 it is a condition that the licensee shall ensure
the quality of service as prescribed by the licensor or TRAI, and shall
adhere to such ~tand.ards as are provided. Another important thing to
notice is that under clause 28.2 the licensee has to keep a record of the
number of faults and rectification reports in respect of its service, which
F will be .produced before the licens&r/TRAI as and when desired. This
being the case, it is clear that the Impugned Regulation cannot be said to
fall under Section 11 (I )(b)(i) at all inasmuch as it does not seek to enforce
any term or condition of the licence between the service provider and
the consumer. Coming to sub-para (v) of Section 11 (I )(b ), the Impugned
G Regulation would again have no reference to the said paragraph,
inasmuch as it does not lay down any standard of quality of service to be
provided by the service provider. In order that clause (v) be attracted,
not only do standards of quality of service to be provided by"the service
providers have to be laid down, but standards have to be adhered to by
the service providers so as to protect the interests of the consumers.
H We find that the Impugned Regulation is not referable to Section
CELLULAR OPERATORS ASSN. OF INDIA v. TELECOM 37
REGULATORY AUTHROITY OF INDIA [R. F. NARIMAN, J.]
1l(l)(b)(i) and (v) of the Act inasmuch as it has not been made to ensure A
compliance of the terms and conditions of the licence nor has it been
made to lay down any standard of quality of service that needs
compliance. This being the case, the Impugned Regulation is de hors
Section 11 but cannot be said to be inconsistent with Section 11 of the
Act. This Court has categorically held in the BSNL judgment that the
B
power under Section 36 is not trammeled by Section 11. This being so,
the Impugned Regulation cannot be said to be inconsistent with Section
11 of the Act. However, what has also to be seen is whether the said
Regulation carries out the purpose of the Act which, as has been pointed
out hereinabove, under the amended Preamble to the Act, is to protect
the interests of service providers as well as consumers of the telecom c
sector so as to promote and ensure orderly growth of the telecom sector.
Under Section 36, not only does the Authority have to make regulations
consistent with the Act and the Rules made thereunder, but it also has to
carry out the purposes of the Act, as can be discerned from the Preamble
to the Act. If, far from carrying out the purposes of the Act, a Regulation
D
is made contrary to such purposes, such Regulation cannot be said to be
consistent with the Act, for it must be consistent with both the letter of
the Act and the purposes for which the Act has been enacted. In
attempting to protect the interest of the consumer of the telecom sector
at the cost of the interest of a service provider who complies with the
leeway of an average of 2% of call drops per month given to it by E
another Regulation, framed under Section J l(l)(b)(v), the balance that
is sought to be achieved by the Act for the orderly growth of the telecom
sector has been violated. Therefore we hold that the Impugned Regulation
does not carry out the purpose of the Act and must be held to be ultra
vires the Act on this score.
Violation of Fundamental Rights
25. We have already seen that one of the tests for challenging the
constitutionality of subordinate legislation is that subordinate legislation
should not be manifestly arbitrary. Also, it is settled law that subordinate
legislation can be challenged on any of the grounds available for challenge G
against plenary legislation - [See: Indian Express Newspapers v.
Union of India, ( 1985) I SCC 641 at Para 75].
26. The test of "manifest arbitrariness" is well explained in two
judgments of this ·court. In Khoday Distilleries Ltd. v. State of
Karnataka, ( 1996) I 0 SCC 304, this Court held: H
38 SUPREME COURT REPORTS (2016] 9 S.C.R.
A "It is next submitted before us thatthe amended Rules are arbitrary,
unreasonable and cause undue hardship and, therefore, violate
Article 14 of the Constitution. Although the protection of Article
19(1 )(g) may not be available to the appellants, the rules must,
undoubtedly, satisfy the test of Article 14, which is a guarantee
against arbitrary action. However, one must bear in mind that
B
what is being challenged here under Article 14 is not executive
action but delegated legislation. The tests of arbitrary action which
apply to executive actions do not necessarily apply to delegated
legislation. In order that delegated legislation can be struck down,
such legislation must be manifestly arbitrary; a law which could
c not be reasonably expected to emanate from an authority delegated
with the lawmaking power. In the case of Indian Express
Newspapers (Bombay) Pvt. Ltd. and Ors .. v. Union of India and
Ors. [(1985) 1 sec 641 : 1985 sec (Tax) 121 : (1985) 2 SCR
287], this Court said that a piece of subordinate legislation does
not carry the same degree of immunity which is enjoyed by a
D statute passed by a competent legislature. A subordinate legislation
may be questioned under Article. 14 on the ground that it is
unreasonable: "unreasonable not in the sense of not being
reasonable, but in the sense that it is manifestly arbitrary". Drawing
a comparison between the law in England and in India, the Court
E further observed that in England the Judges would say, "Parliament
never intended the authority to make such Rules; they are
unreasonable and ultra vires". In India. arbitrariness is not a
separate ground since it will come within the embargo of Article
14 of the Constitution. But subordinate legislation must be so
arbitrary that it could not be said to be in conformity with the
F
statute or that it offends Article 14 of the Constitution." [para 13]
27. Also, in Sharma Transport v. Government of Andhra
Pradesh, (2002) 2 SCC 188, this Court held:
" ... The tests of arbitrary action applicable to executive action do
G not necessarily apply to delegated legislation. In order to strike
down a delegated legislation as arbitrary it has to be established
that there is manifest arbitrariness. In order to be described as
arbitrary, it must be shown that it was not reasonable and manifestly
arbitrary. The expression "arbitrarily" means: in an unreasonable
manner, as fixed or done. capriciously or at pleasure, without
H
CELLULAR OPERATORS ASSN. OF INDIA v. TELECOM 39
REGULATORY AUTHROITY OF INDIA [R. F. NARIMAN, J.]
adequate detennining principle, not founded in the nature of things, A
non-rational, not done or acting according to reason or judgment,
depending on the will alone .... "
28. When we come to Article 19( l )(g) of the Constitution, the
tests for challenge to plenary legislation are wel~ settled. First and
foremost, a sea change took place with the.11-Judge Bench judgment in B
Rustom Cavasjee Cooper (Banks Nationalisation) v. Union of
India, (1970) l SCC 248, in which the impact of State action upon
fundamental rights was stated thus:
"We have carefully considered the weighty pronouncements of
the eminent Judges who gave shape to the concept_ that the extent c
of protection of important guarantees, such as the liberty of person,
and right to property, depends upon the form and object of the
State action, and not upon its direct operation upon the individual's
freedom. But it is not the object of the authority making the law
impairing the right ·of a citizen, nor the form_of action taken that
determines the protection he can claim: it is the effect of the law D
and of the action upon the right which attracts the jurisdiction of
the Court to grant relief. If this be the true view and we think it is,
in determining the impact of State action upon constitutional
guarantees which are fundamental, it follows that the extent of
protection against impainnent of a fundamental right is detennined E
not by the object of the Legislature nor by the form of the action,
but by its direct operation upon the individual's rights." [para 49]
29. Under Article 19(6) of the Constitution, the State has to conform
to two separate and independent tests ifit is to pass constitutional muster-
the restriction on the appellants' fundamental right must first be a F
reasonable restriction, and secondly, it should also be in the interest of
the general public. Perhaps the best exposition of what the expression
"reasonable restriction" connotes was laid down in Chintaman Rao v.
State of Madhya Pradesh, 1950 SCR 759, as follows:-
"The phrase "reasonable restriction" connotes that the limitation G
imposed on a person in enjoyment of the right should not be
arbitrary or of an excessive nature, beyond what is required in the
interests of the public. The word "reasonable" implies intelligent
care and deliberation, that is, the choice of a course which reason
dictates. Legislation which arbitrarily or excessively invades the
right cannot be said to contai_n the quality ofreasonableness and H
40 SUPREME COURT REPORTS [2016] 9 S.C.R.
A unless it strikes a proper balance between the freedom guaranteed
in article 19(l)(g) and the social control permitted by clause (6) of
miicle 19, it must be hefd to be wanting in that quality." [at p.763]
- .
30. It is interesting to note that the original Constitution, while
enumerating various rights under Article 19( 1), when it referred to the
B right of freedom of speech in Article 19(1)(a), laid down in Article 19(2)
that any law abridging the right to freedom of speech could only pass
constitutional muster if it related to any of the subjects laid down in
clause (2). What was conspicuous by its absence was the phrase
"reasonable restriction", which was only brought in by the first amendment
to the Constitution.
c
31. Similarly, the first amendment to the Constitution also amended
Article 19(6), with which we are directly concerned, to provide for a
State monopoly, which would not have to be tested on the ground of
reasonable restrictions. Therefore, the first amendment to the Constitution
oflndia has made it clear that reasonable restrictions, added in Article
D 19(2) and subtracted from Article 19(6) (insofar as State monopolies
are concerned), point to the fact that ;this test is a test separate and
distinct from the test of the law being in the interest of the general public.
Why we are at pains to point this out ls because the learned Attorney
General's argument focused primarily on the Impugned Regulation being
E . in the public interest. He referred to Delhi Science Forum v. Union
oflndia, (1996) 2 SCC 405, for the proposition that TRAI, as an active
trustee, has framed this Regulation for the common good. While accepting
that TRAI may have done so, yet it is important to note that, 'apart from
the common good in the form of consumer interest, the Regulation must
also pass a separate and independent test of not being manifestly arbitrary
F or unreasonable. We cannot forget that when viewed from the angle of
manifest arbitrariness or reasonable restriction, sounding in Article 14
and Article 19(1 )(g) respectively, the Regulation must, in order to pass
constitutional muster, be as a result of intelligent care and deliberation,
that is, the choice of a course which reason dictates. Any arbitrary
G invasion of a fundamental right cannot be said to contain this quality. A
proper balance between the freedoms guaranteed and the control
permitted under A1ticle 19(6) must be struck in all cases before the
impugned law can be said to be a reasonable restriction in the public
interest.
H 32. We find that it is not necessary to go in detail into many of the
CELLULAR OPERATORS ASSN. OF INDIA v. TELECOM 41
REGULATORY AUTHROITY OF INDIA [R. F. NARIMAN, J.]
submissions made on either side as to the technical difficulties which A
may or may not lead to call drops. This is for the reason that even if we
accept the demarcation of the cause of call drops to be what the learned
Attorney General says it is, the Impugned Regulation must be held to be
manifestly arbitrary and an unreasonable restriction on the appellants'
fundamental rights to carry on business. According to the learned Attorney
B
General, the cause for cal I drops is twofold - one owing to the fault of
the consumer, and the other owing to the fault of the service provider.
And, for this dichotomy, he has referred to the technical paper dated
13.11.2015, which shows that an average of 36.9% can be call drops
owing to the fault of the consumer. Ifthis is so, the Impugned Regulation's
very basis is destroyed: the Regulation is based on the fact that the c
service provider is I 00% at fault. This becomes clear from a reading of
the text of the said Regulation together with the Explanatory Memorandum
set out hereinabove. This being the case, it is clear that the service
provider is made to pay for call drops that may not be attributable to his
fault, and the consumer receives compensation for a call drop that may
D
be attributable to the fault of the consumer himself, and that makes the
Impugned Regulation a regulation framed.without intelligent care and
deliberation.
33. But it was said that the aforesaid Regulation should be read
down to mean that it would apply only when the fault is that of the
service provider. We are afraid that such a course is not open to us in E
law, for it is well settled that the doctrine of reading down would apply
only when general words used in a statute or regulation can be confined
in a particular manner so as not to infringe a constitutional right. This
was best exemplified in one of the earliest judgments dealing with the
doctrine of reading down, namely the judgment of the Federal Court in F
In Re: Hindu Women's Rights to Property Act, 1937, AIR 1941
FC 72. In that judgment, the word "property" in Section 3 of the Hindu
Women's Rights to Property Act was read down so as not to include
agricultural land, which would be outside the central legislature's powers
under the Government of India Act, 1935. This is done because it is
presumed that the legislature did not intend to transgress constitutional G
limitations. While so reading down the word "property", the Federal
Court held:
"If the restriction of the general words to purposes within the
power of the Legislature would be to leave an Act with nothing or
H
42 SUPREME COURT REPORTS [2016] 9 S.C.R.
A next to nothing in it, or an Act different in kind. and not merely in
degree, from an Act in which the general words were given the
wider meaning, then it is plain that the Act as a whole must be
held invalid, because in such circumstances it is impossible to assert
with any confidence that the Legislature intended the general words
which it has used to be construed only in the narrower sense:
B
Owners of SS. Kalibia v. Wilson (1910) 11CLR689, Vacuum Oil
Company Ltd. v. State of Queensland (1934) 51CLR677, R. v.
Commonwealth Court of Conciliation and Arbitration ( 1910) 11
CLR 1 and British Imperial Oil Co. Ltd. v. Federal Commissioner
of Taxation ( 1925) 35 CLR 422."
c 34. This judgment was followed by a Constitution Bench of this
Court in Delhi Transport Corpn. v. D.T.C. Mazdoor Congress,
1991 Supp (I) SCC 600. In that case, a question arose as to whether a
particular regulation which conferred power on an authority to terminate
the services ofa permanent and confirmed employee by issuing a notice
D terminating his services, or by making payment in lieu of such notice
without assigning any reasons and without any opportunity of hearing to
the employee, could be said to be violative of the appellants' fundamental
rights. Four of the learned Judges who heard the case, the Chief Justice
alone dissenting on this aspect, decided that the regulation cannot be
read down, and must, therefore, be held to be unconstitutional. In the
E lead judgment on this aspect by Sawant,J., this Court stated:
"It is thus clear that the doctrine of reading down or of recasting
the statute can be applied in limited situations. It is essentially
used, firstly, for saving a statute from being struck down on account
of its unconstitutionality. It is an extension of the principle that
F when two interpretations are possible - one rendering it
constitutional and the other making it unconstitutional, the former
should be preferred. The unconstitutionality may spring from either
the incompetence of the legislature to enact the statute or from its
violation of any of the provisions of the Constitution. The second
G situation which summons its aid is where the provisions of the
statute are vague and ambiguous and it is possible to gather the
intentions of the legislature from the object of the statute, the
context in which the provision occurs and the purpose for which it
is made. However, when the provision is cast in a definite and
unambiguous language and its intention is clear, it is not permissible
H
CELLULAR OPERATORS ASSN. OF INDIA v. TELECOM 43
REGULATORY AUTHROITY OF INDIA [R. F. NARIMAN, J.]
either to mend or bend it even if such recasting is in accord with A
good reason and conscience. In such circumstances, it is not
possible for the court to remake the statute. Its only duty is to
strike it down and leave it to the legislature if it so desires, to
amend it. What is further, if the remaking of the statute by the
courts is to lead to its distortion that course is to be scrupulously
s·
avoided. One of the situations further where the doctrine can
never be called into play is where the statute requires extensive
additions and deletions. Not only it is no part of the court's duty to
undertake such exercise, but it is beyond its jurisdiction to do so."
[para 255]
35. Applying the aforesaid test to the Impugned Regulation, it is c
clear that the language of the Regulation is definite and unambiguous -
every service provider has to credit the account of the calling consumer
by one rupee for every single cal I drop which occurs within its network.
The Explanatory Memorandum to the aforesaid Regulation further makes
it clear, in paragraph 19 thereof, that the Authority has come to the D
conclusion that call drops are instances of deficiency in service delivery
on the part of the service provider. It is thus unambiguously clear that
the Impugned Regulation is based on the fact that the service provider js
alone at fault and must pay for that fault. In these circumstances, to
read a proviso into the Regulation that it will not apply to consumers who .
are at fault themselves is not to restrict general words to a particular E
meaning, but to add something to the provision which does not exist,
which would be nothing short of the court itself legislating. For this
reason, it is not possible to accept the learned Attorney General's
contention that the Impugned Regulation be read down in the manner
suggested by him. F
36. The other string to the bow ofthis argument is that the Impugned
Regulation would be worked in such a manner that the service provider
would be liable to pay only when it is found that it is at fault. This again
falls foul of constitutional doctrine. In Collector of Customs v. Nathella
Sampath-'1 Chetty, ( 1962) 3 SCR 786, this Court held: G
"The possibility of abuse of a statute otherwise valid does not
impart to it any element of invalidity. The converse must also
follow that a statute which is otherwise invalid as being
unreasonable cannot be saved by its being administered in a
reasonable manner. The constitutional validity of the statute would H
44 SUPREME COURT REPORTS [2016) 9 S.C.R.
A have to be determined on the basis of its provisions and on the
ambit of its operation as reasonably construed. If so judged it
passes the test of reasonableness, possibility of the powers
conferred being improperly used is no ground for pronouncing the
law itself invalid and similarly ifthe law properly interpreted and
tested in the light of the requirements set out in Part III of the
B
Constitution does not pass the test it cannot be pronounced valid
merely because it is administered in a manner which might not
conflict with the constitutional requirements." [at pp.825 -826)
37. This statement of the law applies on all fours to the facts of
the present case, and is a complete answer to the Attorney General's
c contention that the Impugned Regulation would be administered so that
the service provider would be liable under it only when it is at fault for
call drops.
38. The learned Attorney General has argued that the Impugned
Regulation accords with the Statement of Objects and Reasons of the
D TRAI Act, 1997. As has been pointed out by us, the original Act was
amended in the year 2000, in which its Preamble was substituted. The
substitution indicates that the policy of the 1997 Act, as amended by the
2000 Act, is to protect the interests of service providers and consumers
of the telecom sector together, so that the orderly growth of the telecom
E sector is ensured thereby. We are afraid that the orderly growth of the
telecom sector cannot be ensured or promoted by a manifestly arbitrary
or unreasonable regulation which makes a service provider pay a penalty
without it being necessarily at fault.
39. We were then told that the Impugned Regulation was framed
F keeping in mind the small consumer, that is, a person who has a pre-paid
SIM Card with an average balance of Rs. I 0/- at a time, and that the
Regulation goes a long way to compensate such person. The motive for
the Regulation may well be what the Attorney General says it is, but that
does i10t make it immune from Article 14 and the twin tests of Article
19( 6). The Authority framing the Regulation must ensure that its means
G are as pure as its ends - only then will regulations made by it pass
constitutional muster. ·
40. We were also told that huge profits were made by the service
providers, and that the amount they would have to pay would not even
be a flea bite compared to the profits they make, viewed in the background
H that they are not pouring in enough funds for infrastructure development.
CELLULAR OPERATORS ASSN. OF INDIA v. TELECOM 45
REGULATORY AUTHROITY OF INDIA [R. F. NARIMAN, J.]
This was stoutly resisted by the appellants, pointing out that the so called A
huge profits earned is misleading, as the figure of net debt is far greater
than that of revenue earned, and that huge sums had been pumped in for
infrastructure development. Without going into the factual controversy
thus presented, there are two answers to this submission. First and
foremost, whether the service providers make profits or losses cannot
B
be said to be relevant for determining whether the Impugned Regulation
is otherwise arbitrary or unreasonable. If the Attorney General were
correct, then the converse proposition would also be true - namely, that
even if all the service providers were suffering huge losses, then such
regulation, since it makes them fork out crores of rupees and add to their
losses, would have to be held to be unconstitutional. Assuming that six c
out of the twelve service providers make profits, and the other six make
losses, the Impugned Regulation cannot be held to be constitutional so
far as those making a profit, and unconstitutional qua those making losses.
And what ifthe same service provider makes a profit in one year and a
loss in the succeeding year. Is the Impugned Regulation unconstitutional
D
in the first year and constitutional in the succeeding year? Obviously
not. Secondly, it is always open to the Authority, with the vast powers
given to it under the TRAI Act, to. ensure, in a reasonable and non-
arbitrary manner, that service providers provide the necessary funds for
infrastructure development and deal with them so as to protect the interest
of the consumer. Consequently, this submission is also without substance. E
41. The learned Attorney General strongly relied upon a passage
from a Constitution Bench judgment in Prag Ice & Oil Mills v. Union
oflndia, (1978) 3 sec 459, to the following effect:-
"The Parliament having entrusted the fixation of prices to the
expert judgment of the Government, it would be wrong for this F
Court, as was done by common consent in Premier
Automobiles [20 L Ed 2d 312] to examine each and every minute
detail pertaining to the Governmental decision. The Government,
as was said in Permian Basin Area Rate cases, is entitled to
make pragmatic adjustments which may be called for by particular G
circumstances and the price control can be declared
unconstitutional only if it is patently arbitrary, discriminatory or
demonstrably irrelevant to the pol icy which the legislature is free
to adopt. The interest of the producer and the investor is only one
of the variables in the "constitutional calculus ofreasonableness"
H
46 SUPREME COURT REPORTS [2016] 9 S.C.R.
A and courts ought not to interfere so long as the exercise of
Governmental power to fix fair prices is broadly within a "zone of
reasonableness". lfwe were to embark upon an examination of
the disparate contentions raised before us on behalf of the
contending parties, we have no doubt that we shall have exceeded
our narrow and circumscribed authority.
B
Before closing, we would like to mention that the petitioners rushed
to this Court too precipitately on the heels of the Price Control
Order. Thereby they deprived themselves of an oppo11unity to
show that in actual fact, the Order causes them irreparable
prejudice. Instead, they were driven through their ill-thought haste
c to rely on speculative hypothesis in order to buttress their grievance
that their right to property and the right to do trade was gone or
was substantially affected. A little more patience, which could
have been utilised to observe how the experiment functioned, might
have paid better dividends." (para 71 ).
D 42. The observations made in the aforesaid judgment are wholly
distinguishable. In the present case, if the appellants had not gone to
cou1t when they did, the Regulation would have affected their fundamental
rights on and from 1.1.2016. Fu1ther, they would have been denied interim
and/or other relief on the ground 'that they have not moved the Court
E without undue delay. Also, to say that the Impugned Regulation is only
an experimental measure that would last in its present form for six.months
is again wholly incorrect. The Impugned Regulation begins to tick on
and from 1.1.2016, in which case three rupees per day, for call drops
made not exclusively owing to the fault of the service provider, would
have to be paid. Further, it is only the Explanatory Memorandum which
F says that the Authority may review the aforesaid Regulation after working
of the said Regulation after six months; and that too only if found to be
necessary. Obviously, this would not mean that the aforesaid Regulation
would necessarily be reviewed at all, even after six months. We are,
therefore, unable to subscribe to the aforesaid submission.
G 43. We now come to a very important part of the submissions
made on behalf of the appellants. The appellants have strongly contended
that a 2% allowance of call drops on the basis of averaging call drops
per month has been allowed to them by the Quality of Service Regulations
already referred to hereinabove. This would amount to the Authority
H penalizing the service provider even when it complies with another
CELLULAR OPERATORS ASSN. OF INDIA v. TELECOM 47
REGULATORY AUTHROITY OF INDIA [R. F. NARIMAN, J.]
regulation made under the same source of power, and for this reason A
alone, the Impugned Regulation must be held to be bad as being manifestly
arbitrary. The learned Attorney General refuted this submission in two
ways. First, he argued that Quality of Service Regulations and regulations
made to benefit consumer~ must be viewed separately, as they are distinct
regulations in parallel streams. He also argued that the 2% average
8
allowance for call drops is different and distinct from paying compensation
for call drops inasmuch as, conceivably, in a given set of facts, call drops
may take place extensively in a given sector but not in other sectors so
that an average of 2% per month is yet maintained, but the service
provider would be penalized as it has not been able to maintain a 3%
standard laid down qua deficiency of service in individual towers leading c
to call drops. However, the persons who suffer in the sector in which
call drops are many and frequent would then have no protection. We are
afraid neither of these reasons avails the Authority. First and foremost,
the 2009 Quality of Service Regulation is made under Section 11 (I )(b)(v),
which is the very Section which is claimed to be the source of the
D
Impugned Regulation. Secondly, both regulations deal with the same
subject matter- namely, call drops, and both regulations are made in the
interest of the consumer. !fan average of2% per month is allowable to
every service provider for call drops, and it is the admitted position that
all service providers before us, short of Aircel, and that too in a very
small way, have complied with the standard, penalizing a service provider E
who complies with another Regulation framed with reference to the
same source of power would itself be manifestly arbitrary and would
render the Regulation to be at odds with both Articles 14 and 19( I )(g).
44. In this regard, it would be of assistance to note what this
Court held in The Lord Krishna Sugar Mills Ltd. and Anr. v. Union F
of India and Anr., [ 1960) I SCR 39:
"It is, however, contended that though one can look at the
surrounding circumstances, it is not open to the Court to examine
other laws on the subject, unless those laws be incorporated by
reference. In our opinion, this is a fallacious argument. The Court G
in judging the reasonableness of a law, will necessarily see, not
only the surrounding circumstances but all contemporaneous
legislation passed as part of a single scheme. The reasonableness
of the restriction and not of the law has to be found out, and if
restriction is under one law but countervailing advantages are
H
48 SUPREME COURT REPORTS [2016] 9 S.C.R.
A created by another law passed as part of the same legislative
plan, the Court should not refuse to take that other law into
account." [at para 56]
45. In view of the aforesaid, it is clear that the Quality of Service
Regulations and the Consumer Regulations must be read together as
B part of a single scheme in order to test the reasonableness thereof. The
countervailing advantage to service providers by way of the allowance
of 2% average call drops per month, which has been granted under the
2009 Quality of Service Regulations, could not have been ignored by the
Impugned Regulation so as to affect the fundamental rights of the
appellants, and having been so ignored, would render the Impugned
c Regulation manifestly arbitrary and unreasonable.
46. Secondly, no facts have been shown to us which would indicate
that a particular area would be filled with call drops thanks to the fault
on the part of the service providers in which consumers would be severely
inconvenienced. The mere ipse dixit of the learned Attorney General,
D without any facts being pleaded to this effect, cannot possibly make an
unconstitutional regulation constitutional. We, therefore, hold that a strict
penal liability laid down on the erroneous basis that the fault is entirely
with the service provider is manifestly arbitrary and unreasonable. Also,
the payment of such penalty to a consumer who may himself be at fault,
E and which gives an unjustifiable windfall to such consumer, is also
manifestly arbitrary and unreasonable. In the circumstances, it is not
necessary to go into the appellants' submissions that call drops take
place because of four reasons, three of which are not attributable to the
fault of the service provider, which includes sealing and shutting down
towers by municipal authorities over upon they have no control, or whether
F they are attributable to only two causes, as suggested by the Attorney
General, being network related causes or user related causes. Equally,
it is not necessary to determine finally as to whether the reason for a call
drop can technologically be found out and whether it is a network related
reason or a user related reason.
G 47. In Shree Bhagwati Steel Rolling Mills v. Commissioner
of Central Excise, (2016) 3 SCC 643, Rules 96 -ZO, ZP and ZQ of
the Central Excise Rules, 1994, which consisted inter alia of penalty
provisions, were struck down by this Court. One of the reasons for
striking down the aforesaid Rules is that a mandatory penalty became
H leviable despite the fact that fault on the part of assessee could not be
CELLULAR OPERATORS ASSN. OF INDIA v. TELECOM 49
REGULATORY AUTHROITY OF INDIA [R. F. NARIMAN, J.]
established. This Court held: A
"It is also correct in saying that there may be circumstances of
force majeure which may prevent a bona fide assessee from paying
the duty in time, and on certain given factual circumstances, despite
there being no fault on the part of the assessee in making the
deposit of duty in time, a mandatory penalty of an equivalent B
amount of duty would be compulsorily leviable and recoverable
from such assessee. This would be extremely arbitrary and violative
of Article 14 for this reason as well. Further, we agree with the
High Court in stating that this would also be violative of'the
appellant's fundamental rights under Article 19(1 )(g) and would
not be saved by Article 19(6), being an unreasonable restriction c
on the right to carry on trade or business. Clearly the levy of
penalty in these cases of a mandatory nature for even one day's
delay, which may be beyond the control of the assessee, would be
arbitrary and excessive." [at para 35]
48. Jn the present case, also, a mandatory penalty is payable by D
the service provider for call drops that may take place which are not due
to its fault, and may be due to the fault of the recipient of the penalty,
which is violative ofArticles 14 and 19( I )(g).
49. The reason given in the Explanatory Memorandum for
compensating the consumer is that the compensation given is only notional. E
The very notion that only notional compensation is awarded, is also entirely
without basis. A consumer may well suffer a call drop after 3 or 4 seconds
in a voice call. Whereas the consumer is charged only 4 or 5 paise for
such dropped call, the service provider has to pay a sum of rupee one to
the said consumer. This cannot be called notional at all. It is also not F
clear as to why the Authority decided to limit compensation to three call
drops per day or how it arrived at the figure of Re. I to compensate
inconvenience caused to the consumer. It is equally unclear as to why
the calling party alone is provided compensation because, according to
the Explanatory Memorandum, inconvenience is suffered due to the
interruption of a call, and such inconvenience is suffered both by the G
calling party and the person who receives the call. The receiving party
can legitimately claim that his inconvenience when a call drops, is as
great as that of the calling party. And the receiving party may need to
make the second call, in which case he receives nothing, and the calling
party receives Re.I for the additional expense made by the receiving H
50 SUPREME COURT REPORTS [2016] 9 S.C.R.
A party. All this betrays a complete lack ofintelligent care and deliberation
in framing such a regulation by the Authority, rendering the Impugned
Regulation manifestly arbitrary and unreasonable.
50. However, the learned Attorney General referred to a recent
judgment being DSC-Viacon Ventures Pvt. Ltd. (Now Known as
B DSC Ventures Pvt. Ltd) v. Lal Manohar Pandey and Ors., (Civil
Appeal Nos. 6781-6782 of2015, decided on August 27, 2015). He
referred to paragraph 21 in order to show that a certain amount of guess
work is unavoidable in matters of this nature.
51 . The context in which this statement occurs in paragraph 21 is
c very different from the present context. This Court held that a toll can
only be collected for maintaining a road. The patches in which the road
is not properly maintained should reduce proportionately the amount of
toll that is to be paid. As there was no data in that case to indicate the
extent of road length and the resultant inconvenience to users of the
road, a certain amount of guess work was said to be unavoidable. The
D present is a case in which we are not informed as to how rupee one is
computed, how three call drops per day has been arrived at, or why the
calling party alone is provided compensation. These matters go out of
mere guess work, and into the realm of unreasonableness, as obviously,
as has been held by us, there was no intelligent care and deliberation
E before any of these parameters have been fixed.
52. We have already seen that the Impugned Regulation is dated
16.10.2015, which was to come into force only on 1.1.2016. We have
been shown a technical paper issued by the same Authority on 13.11.2015
i.e. a few days after the Impugned Regulation, in which the Authority
F has itself recognised that 36.9% of call drops take place because of the
fault at the consumer's end. Instead of having a re look at the problem in
the light of the said technical paper, the Authority has gone ahead with
the Impugned Regulation, which states that the said Regulation has been
brought into force because of deficiency of service in service providers
leading to call drops. The very basis of this statement contained in the
G Explanatory Memorandum to the Impugned Regulation is found by the
self-same Authority to be incorrect only a few days after publishing the
Impugned Regulation. This itself shows the manifest arbitrariness on
the part of the TRAI, which has not bothered to have a relook into the
said problem. For all the aforesaid reasons, we find that the Impugned
H Regulation is manifestly arbitrary and therefore violative of Article 14,
CELLULAR OPERATORS ASSN. OF INDIA v. TELECOM 51
REGULATORY AUTHROITY OF INDIA [R. F. NARIMAN, J.]
and is an unreasonable restriction on the right of the appellants' A
fundamental right under Article 19( 1)(g) to carry on business, and is
therefore struck down as such.
53. Viewed at from a slightly different angle it is clear that if an
individual consumer were to go to the consumer forum for compensation
for call drops, he would have to prove that the call drop took place due to B
the fault of the service provider. He would further have to prove that he
has suffered a monetary loss for which he has to be compensated, which
the Explanatory Memorandum itself says is impossible to compute. Thus,
the Impugned Regulation completely avoids the adjudicatory process,
and legislatively lays down a penal consequence to a service provider
for a call drop taking place without the consumer being able to prove c
that he is not himself responsible for such call drop and without proof of
any actual monetary loss. Whereas individual consumers, either before
the Consumer Forum, or in a dispute as a group with service providers
before the TRAI, would fail in an action to recover compensation for
call drops, yet a statutory penalty is laid down, applicable legislatively, D
and without any adjudication. This again makes the Impugned Regulation
manifestly arbitrary and unreasonable.
54. We have seen that the 2000 Amendment has taken 'away
adjudicatory functions from the TRAI, leaving it with administrative and
legislative functions. By Section 14 of the Act, adjudicatory functions E
have been vested in an Appellate Tribunal, where disputes between a
group of consumers and the service providers are to be adjudicated by
the Appellate Tribunal. In stark contrast, under the scheme of the
Electricity Act, 2003, the Central Electricity Regulatory Commission and
the various State Electricity Regulatory Commissions have to discharge
legislative, administrative, and quasi-judicial functions. This is clear on a F
reading of Section 79(l)(f) and Section 86(l)(f) of the Electricity Act,
which are set out hereinbelow:-
"Section 79. Functions of Central Commission: - (I) The
Central Commission shall discharge the following functions,
namely:- G
(f) to adjudicate upon disputes involving generating companies or
transmission licensee in regard to matters connected with clauses
(a) to (d) above and to refer any dispute for arbitration;
Section 86. Functions of State Commission: - (I) The State
H
52 SUPREME COURT REPORTS [2016] 9 S.C.R.
A Commission shall discharge the following functions, namely: -
(f) adjudicate upon the disputes between the licensees, and
generating companies and to refer any dispute for arbitration."
55. Secondly, as part of the adjudicatory process, compensation
can be paid to an affected person if a licensee fails to meet standards
B prescribed without prejudice to any penalty which may be imposed or
prosecution which may be initiated. This takes place under Section 57 of
the said Act, which reads as under:-
"Section 57. Consumer Protection: Standards of
performance of licensee: ( 1) T~e Appropriate Commission may,
c after consultation with the licensees and persons likely to be
affected, specify standards of performance of a licensee or a
class of licensees.
(2) If a licensee fails to meet the standards specified under sub-
section ( 1), without prejudice to any penalty which may be imposed
D or prosecution be initiated, he shall be liable to pay such
compensation to the person affected as may be determined by
the Appropriate Commission: Provided that before determination
of compensation, the concerned licensee shall be given a
reasonable opportunity of being heard.
E (3) The compensation determined under sub~section (2) shall be
paid by the concerned licensee within ninety days of such
determination."
56. Obviously, when such compensation is to be paid to a person
who is affected by breach of a standard of quality required under the
F Act, such compensation can only be for actual loss suffered, and only as
a result of fault of the service provider being established before a quasi
judicial Tribunal. This may be notwithstanding the fact that the service
provider otherwise meets the average of2% call drops per month allowed
to him by the 2009 Quality of Service Regulation. This is for the reason
G that once fault and actual loss suffered are established before a quasi
judicial Tribunal, it would not be open to plead, on the facts of an individual
case, that an overall standard of performance has been met. For this
reason also, a legislatively pre determined penalty, without fault or loss
being established by evidence before a quasi judicial authority, and where
the cause of a call drop may be because of the consumer himself, renders
H the Impugned Regulation manifestly arbitrary and unreasonable.
CELLULAR OPERATORS ASSN. OF INDIA v. TELECOM 53
REGULATORY AUTHROITY OF INDIA [R. F. NARIMAN, J.]
Modification of licence condition by Impugned Regulation A
57. The appellants have also argued that the Impugned Regulation
seeks to modify the licence conditions, and the licence conditions being
a contract between the service provider and the consumer, such
conditions can be modified only where the statute contains language by
which an Authority is empowered to disregard an agreementbetween B
the parties. It will be seen that Section 11 (I )(b )(ii), which has been set
out hereinabove, expressly contains such language and therefore states
that terms and conditions of interconnectivity between the service
providers may be fixed notwithstanding anything contained in the terms
and conditions of the licence granted before the commencement of the
TRAI Amendment Act, 2000.
c
58. The same kind oflanguage is contained in Section 402(d) of
the Companies Act, 1956, which reads as follows:-
"Section 402. POWERS OF TRIBUNAL ON APPLICATION
UNDER SECTION 397 OR 398. D
Without prejudice to the generality of the powers of the Tribunal
under section 397 or 398, any order under either section may
provide for -
(d) the termination, setting aside or modification of any agreement,
howsoever arrived at, between the company on the one hand, E
and any of the following persons, on the other, namely:
(i) the managing director,
(ii) any other director,
(iii) and (iv)[***] F
(v) the manager, upon such terms and conditions as may, in the
opinion of the Tribunal be just and equitable in all the
circumstances of the case."
59. The said Section is now contained in Section 242(2)(e)ofthe
Companies Act, 2013. G
"242. Powers of the Tribunal.
(2) Without prejudice to the generality of the powers under sub-
section (1), an order under that sub-section may provide for-
(e) the termination, setting aside or modification, of any agreement, H
54 SUPREME COURT REPORTS [2016] 9 S.C.R.
A howsoever arrived at, between the company and the managing
director, any other director or manager, upon such terms and
conditions as may, in the opinion ofthe Tribunal, be just and equitable
in the circumstances of the case."
60. We were also referred to Section 27(d) of the Competition
B Act, 2002, in this behalf which reads as follows:
"27. Orders by Commission after inquiry into agreements or abuse
of dominant position. Where after inquiry the Commission finds
that any agreement referred to in section 3 or action of an enterprise
in a dominant position, is in contravention of section 3 or section 4,
c as the case may be, it may pass all or any of the following orders,
namely:-
( d) direct that the agreements shall stand modified to the extent
and in the manner as may be specified in the order by the
Commission;."
D 61. In Union of India v. Assn. of Unified Telecom Service
Providers oflndia, (2011) I0 SCC 543, this Court held:
"A Constitution Bench of this Court in State ofPunjab v. Devans
Modem Breweries Ltd. [(2004) 11 SCC 26] relying on Har
Shankar case [( 1975) I SCC 73 7] and Panna Lal v. State of
E Rajasthan [(1975) 2 SCC 633] has held in para 121 at p. I 06 that
issuance ofliquor licence constitutes a contract between the parties.
Thus, once a licence is issued under the proviso to sub-section (1)
of Section 4 of the Telegraph Act, the licence becomes a contract
between the licensor and the licensee." (para 40).
F 62. Having regard to the above, it is clear that the licence conditions,
whh:h are a contract between the service providers and consumers,
have been amended to the farmer's disadvantage by making the service
provider pay a penalty for call drops despite there being no fault which
can be traceable exclusively to the service provider, and despite the
service provider maintaining the necessary standard of quality required
0
of it- namely, adhering to the limit ofan average of2% of call drops per
month. We have already seen that condition 28 of the licence requires
the licensee to ensure that the quality of service standards, as prescribed
by TRAI, are adhered to, and that the Impugned Regulation does not lay
down quality of service standards. This being so, it is clear that the
H laying down of a penalty de hors condition 28, which, as we have seen,
CELLULAR OPERATORS ASSN. OF INDIA v. TELECOM 55
REGULATORY AUTHROITY OF INDIA [R. F. NARJMAN, J.]
also requires establishing of fault of the service provider when it does A
not conform to a quality of service standard laid down by TRAI, would
amount to interference with the licence conditions of the service providers
without authority of law. On this ground also, therefore, the Impugned
Regulation deserves to be struck down.
Transparency B
63. Section 11 (4) of the Act requires that the Authority shall ensure
transparency while exercising its powers and discharging its functions.
"Transparency" has not been defined anywhere in the Act. However,
we find, in a later Parliamentary Enactment, namely, the Airports
Economic Regulatory Authority oflndiaAct, 2008, that Section 13 deals c
with the functions of the Airports Economic Regulatory Authority, (which
is an Authority which has legislative and administrative functions).
"Transparency" is defined, by sub-section (4), as follows:-
"THE AIRPORTS ECONOMIC REGULATORY
AUTHORITY OF INDIA ACT, 200R D
13. Functions of Authority.
(4) The Authority shall ensure transparency while exercising its
powers and discharging its functions, inter alia,-
(a) by holding due consultations with all stake-holders with the
E
airport;
(b) by allowing all stake-holders to make their submissions to the
authority; and
(c) by making all decisions of the authority fully documented and
explained." F
64. This definition of "transparency" p·rovides a good working
test of 'transparency' referred to in Section 11(4) of the TRAI Act.
65. In fact, a judgment of the Court of Appeal in England, being
Regina v. North and East Devon Health Authority, Ex parte
Coughlan, [2001] QB 213, puts the meaning of "consultation" rather G
well as follows:-
"It is common ground that, whether or not consultation ofinterested
parties and the public is a legal requirement, if it is embarked upon
it must be carried out properly. To be proper, consultation must be
undertaken at a time when proposals are still at a formative stage; H
56 SUPREME COURT REPORTS [2016) 9 S.C.R.
A it must include sufficient reasons for particular proposals to allow
those consulted to give intelligent consideration and an intelligent
response; adequate time must be given for this purpose; and the
product of consultation must be conscientiously taken into account
when the ultimate decision is taken."
B 66. No doubt in the facts of the present case, the Authority did
hold due consultations with all stakeholders and did allow all stakeholders
to make their submissions to the Authority. However, we find no discussion
or reasoning dealing with the arguments put forward by the service
providers, that call drops take place for a variety of reasons, some of
which are beyond the control of the service provider and are because of
C the consumer himself. Consequently, we find that the conclusion that
service providers are alone to blame and are consequently deficient in •
service when it comes to call drops is not a conclusion which a reasonable
person can reasonably arrive at. We are cognizant of the fact that
ordinarily legislative functions do not require that natural justice be
D followed. However, it has been recognised in some of the judgments
dealing with this aspect that natural justice need not be followed except
where the statute so provides.
67. In Union of India v. Cynamide India Ltd., (1987) 2 SCC
720, this Court held:
E "The second observation we wish to makl;j_s._ legislative action,
plenary or subordinate, is not subject to rules ofnaturaljustice. In
the case of Parliamentary legislation, the proposition is self-evident.
In the case ofsubordinate legislation, it may happen that Parliament
may itself provide for a notice and for a hearing - there are
F several instances of the legislature requiring the subordinate
legislating authority to give public notice and a public hearing before_
say, for example, levying a municipal rate - in which case the
substantial non-observance of the statutorily prescribed mode of
observing natural justice may have the effect of invalidating the
subordinate legislation. The right here given to rate payers orothers
G is in the nature of a concession which is not to detract from the
character of the activity as legislative and not quasi-judicial. But,
where the legislature has not chosen to provide for any notice or
· hearing, no one can insist upon it and it will not be permissible to
read natural justice into such legislative activity." [para 5)
H
CELLULAR OPERATORS ASSN. OF INDIA v. TELECOM 57
REGULATORY AUTHROITY OF INDIA [R. F. NARIMAN, J.]
68. Similarly, in M.R.F. Ltd. v. Inspector Kerala Govt., ( 1998) A
8 SCC 227, this Court held:
"Learned counsel for the appellants contended that before raising
the national and festival holidays from their original number under
the Parent Act to the number of days contemplated by the
Amending Act, the industries or their representatives should have B
been given an opportunity of a hearing. This argument is wholly
untenable. The principles of natural justice cannot be imported in
the matter oflegislative action. If the legislature in exercise of its
plenary power under Article 245 of the Constitution, proceeds to
enact a law, those who would be affected by that law cannot
legally raise a grievance that before the law was made, they should c
have been given an opportunity of a hearing.
This principle may, in limited cases, be invoked in the case of
subordinate legislation specially where the main legislation itself
lays down that before the subordinate legislation is made, a public
notice shall be given and objections shall be invited as is usually D
the case, for example, in the making of municipal bye-laws. But
the principle ofnaturaljustice, including the right of hearing, cannot
be invoked in the making of law either by Parliament or by the
State Legislature." [paras 23 - 24]
69. The question of transparency raises a more fundamental E
question, namely, that of openness in governance. We find that the
Right to Information Act of 2005 has gone a long way to strengthen
democracy by requiring that the Government be transparent in its actions,
so that an informed citizenry.is able then to contain corruption, and hold
Governments and their instrumentalities accountable to the people of F
India. The preamble to the said Act, in ringing terms, states:-
"WHEREAS the Constitution oflndia has established democratic
Republic;
AND WHEREAS democracy requires an informed citizenty and
transparency of information which are vital to its functioning and G
also to contain corruption and to hold Governments and their
instrumentalities accountable to the governed;
AND WHEREAS revelation of information in actual practice is
likely to conflict with other public interests including efficient
H
58 SUPREME COURT REPORTS [2016] 9 S.C.R.
A operations of the Governments, optimum use of limited fiscal
resources and the preservation of confidentiality of sensitive
information;
AND WHEREAS it is necessary to harmonise these conflicting
interests while preserving the paramountcy of the democratic ideal;
B Now, THEREFORE, it is expedient to provide for furnishing
certain information to citizens who desire to have it."
70. We find that under Section 4(1) every public authority is not
only to maintain all its records duly catalogued and indexed but is to
pub Iish, with in I 20 days from the enactment of the said Act, the procedure
c followed by it in its decision making process, which includes channels of
supervision and accountability. Section 4( I )(b )(iii) states:
"4. Obligations of public authorities. -(I) Every public
authority shall-
(b) publish within one hundred and twenty days from the enactment
D of this Act,-
(iii) the procedure followed in the decision making process, including
channels of supervision and accountability."
7 I. Under Section 8, there is no obligation to give to any citizen
information disclosure of which would prejudicially affect the sovereignty
E and integrity oflndia, the security of the State etc. Subject, therefore, to
well-defined exceptions, openness in governance is now a legislatively
establishedfact. In fact, in Chieflnformation Commissionerv. State
of Mani put; (2011) 15 SCC page l, this Court had occasion to deal with·
the aforesaid Act in the following terms:
F "Before dealing with the controversy in this case, let us consider
the object and purpose of the Act and the evolving mosaic of
jurisprudential thinking which virtually led to its enactment in 2005.
As its Preamble shows, the Act was enacted to promote
tra1isparency and accountability in the working of every public
G authority in order to strengthen the core constitutional values of a
democratic republic. It is clear that Parliament enacted the said
Act keeping in mind the rights of an informed citizenry in which
transparency of information is vital in curbing corruption and
making the Government and its instrumentalities accountable. The
H
Act is meant to harmonise the conflicting interests of the
CELLULAR OPERATORS ASSN. OF INDIA v. TELECOM 59
REGULATORY AUTHROITY OF INDIA [R. F. NARIMAN, J.]
Government to preserve the confidentiality of sensitive information A
with the right of citizens to know the functioning of the
governmental process in such a way as to preserve the
paramountcy of the democratic ideal. The Preamble would
obviously show that the Act is based on the concept of an open
society.
B
On the emerging concept of an "open Government'', about more
than three decades ago, the Constitution Bench of this Court
in State ofU.P. v. Raj Narain [(1975) 4 SCC 428: AIR 1975 SC
865) speaking through Mathew, J. held: (SCC p. 453, para 74)
"74 . ... The people of this country have a right to know every c
public act,. everything that is done in a public way, by their public
functionaries. They are entitled to know the particulars of every
public transaction in all its bearing.The right to knoll\ which is
derived from the concept of freedom of speech, though not
absolute, is a factor which should make one wary, when
secrecy is claimed for transactions which can, at any rate, D
have no repercussion on public security. [Ed.: See New York
Times Co. v. United States, 29 L Ed 2d 822 : 403 US 713 ( 1971 ).]
To cover with veil of secrecy, the common routine business, is not
in the interest of the public. Such secrecy can seldom be
legitimately desired." (AIR p. 884, para 74) E
(emphasis supplied)
Another Constitution Bench in S.P. Gupta v. Union of
India [ 1981 Supp SCC 87 : AIR 1982 SC 149) relying on the ratio
in Raj Narain [( 1975) 4 SCC 428: AIR 1975 SC 865] held: (S.P.
Gupta case [ 1981 Supp SCC 87 : AIR 1982 SC 149] , SCC p. F
275, para 67)
"67 . ... The concept of an open Government is the direct
emanation from the right to know which seems to be implicit in
the right of free speech and expression guaranteed under
Article 19(1){a). Therefore, disclosure of information in regard G
to the functioning of Government must be the rule and secrecy
an exception justified only where the strictest requirement of
public interest so demands. The approach of the court must be
to attenuate the area of secrecy as much as possible consistently
with the requirement of public interest, bearing in mind all the
H
60 SUPREME COURT REPORTS [2016] 9 S.C.R.
A time that disclosure also serves an important aspect of public
interest." (AIR p. 234, para 66) (emphasis supplied)
It is, therefore, clear from the ratio in the above decisions of the
Constitution Bench of this Court that the right to information, which
is basically founded on the right to know, is an intrinsic part of the
B fundamental right to free speech and expression guaranteed under
Article 19(1)(a) of the Constitution. The said Act was, thus,
enacted to consolidate the fundamental right of free speech.
In Ministry of Information & Broadcasting, Govt. of India
v. Crick_et As~7. of Benf{al [(1995) 2 SCC 161] this Court also
c held that right to acquire information and to disseminate it is an
intrinsic component of freedom of speech and expression. (See
p. 213, para 43 of the Report.)
Again in Reliance Petrochemicals Ltd. v. Indian Express
Newspapers Bombay (P) Ltd. [( 1988) 4 SCC 592] this Court
D recognised that the right to information is a fundamental right under
A11icle 21 of the Constitution. This Court speaking through
Sabyasachi Mukharj i, J ., as His Lordship then was, held: (SCC p.
613, para 34)
"34 . ... We must remember that the people at large have a right
E to know in order to be able to take part in a participatory
development in the industrial life and democracy. Right to know is
a basic right which citizens ofa free country aspire in the broader
horizon of the right to live in this age in our land under Article 21
of our Constitution. That right has reached new dimensions and
urgency. That right puts greater responsibility upon those who
F take upon themselves the responsibility to inform."
In Peoples Union for Civil Liberties v. Union of India [(2004)
2 SCC 476] this Court reiterated, relying on the aforesaid judgments,
that right to information is a facet of the right to freedom of"speech
and expression" as contained in Article 19( I)( a) of the Constitution
G of India and also held that right to information is definitely a
fundamental right. In coming to this conclusion, this Court traced
the origin of the said right from the Universal Declaration of Human
Rights, 1948 and also Article 19 of the International Covenant on
Civil and Political Rights, which was ratified by India in 1978.
This Court also found a similar enunciation of principle in the
H
CELLULAR OPERATORS ASSN. OF INDIA v. TELECOM 61
REGULATORY AUTHROITY OF INDIA [R. F. NARIMAN, J.]
Declaration of European Convention for the Protection of Human A
Rights (1950) and found that the spirit of the Universal Declaration
of 1948 is echoed in Article 19(1 )(a) of the Constitution. (See
paras 45, 46 and 47 at pp. 494-95 of the Report.)
The exercise ofjudicial discretion in favour of free speech is not
only peculiar to our jurisprudence, the same is a part of the B
jurisprudence in all the countries which are governed by the rule
of law with an independent judiciary. In this connection, if we
may quote what Lord Acton said in one of his speeches:
"Everything secret degenerates, even the administration ofjustice;
nothing is safe that does not show how it can bear discussion and C
publicity."
It is, therefore. clear that a society which adopts openness as a
value of overarching significance not only permits its citizens a
wide range of freedom of expression, it also goes further in actually
opening up the deliberative process of the Government itself to D
the sunlight of public scrutiny.
Frankfurter, J. also opined:
"The ultimate foundation of a free society is the binding tie of
cohesive sentiment. Such a sentiment is fostered by all those
agencies of the mind and spirit which may serve to gather up the E
traditions of a people, transmit them from generation to generation,
and thereby create that continuity of a treasured common life
which constitutes a civilisation. 'We live by symbols.'The flag is
the symbol of our national unity, transcending all internal
differences, however large, within the framework of the
F
Constitution."
Actually the concept of active liberty, which is structured on free
speech, means sharing of a nation's sovereign authority among its
people. Sovereignty involves the legitimacy of governmental
action. And a sharing of sovereign authority suggests intimate
G
correlation between the functioning of the Government and
common man's knowledge of such functioning. (Active Liberty by
Stephen Breyer, p. I 5.)" [paras S - 16]
72. In another context also this Court has emphasized the
importance of openness of governance. In Global Energy Ltd. V.
H
62 SUPREME COURT REPORTS [2016] 9 S.C.R.
A Central Electricity Regulatory Commission, (2009) 15 SCC 570 at
589, this Court stated:
"The Jaw sometimes can be written in such a subjective manner
that it affects the efficiency and transparent function of the
Government. If the statute provides for pointless discretion to
B agency, it is in essence demolishing the accountability strand within
the administrative process as the agency is not under obligation
from an objective norm, which can enforce accountability in
decision-making process. All law-making, be it in the context of
delegated legislation or primary legislation, has to conform to the
fundamental tenets of transparency and openness on one hand
c and responsiveness and accountability on the other. These are
fundamental tenets flowing from due process requirement under
Article 21, equal protection clause embodied in Article 14 and
fundamental freedoms clause ingrained under Article 19. A modern
deliberative democracy cannot function without these attributes."
D 73. We have been referred to the U.S. Administrative Procedure
Act, Section 553 of which states as follows:-
5 USCA § 553
§ 553 - Rule making
E (a)This section applies, according to the provisions thereof, except
to the extent that there is involved-
( 1) a military or foreign affairs function of the United States; or
(2) a matter relating to agency management or personnel or to
public prope11y, loans, grants, benefits, or contracts.
F
(b )General notice of proposed rule making shall be published in
the Federal Register, unless persons subject thereto are named
and either personally served or otherwise have actual notice thereof
in accordance with law. The notice shall include-
(I) a statement of the time, place, and nature of public rule making
G proceedings;
(2) reference to the legal authority under which the rule is proposed;
and
(3) either the terms or substance of the proposed rule or a
H description of the subjects and issues involved.
CELLULAR OPERATORS ASSN. OF INDIA v. TELECOM 63
REGULATORY AUTHROITY OF INDIA [R. F. NARIMAN, J.]
Except when notice or hearing is required by statute, this subsection A
does not apply-
(A) to interpretative rules, general statements of policy, or rules
of agency organization, procedure, or practice; or
(B) when the agency for good cause finds (and incorporates the
finding and a brief statement of reasons therefor in the rules issued) B
that notice and public procedure thereon are impracticable,
unnecessary, or contrary to the public interest.
(c) After notice required by this section, the agency shall give
interested persons an opportunity to participate in the rule making
through submission of written data, views, or arguments with or c
without opportunity for oral presentation. After consideration of
the relevant matter presented, the agency shall incorporate in the
rules adopted a concise general statement of their basis and
purpose. When rules are required by statute to be made on the
record after opportunity for an agency hearing, sections 556 and D
557 of this title apply instead of this subsection.
(d)The required publication or service of a substantive rule shall
be made not less than 30 days before its effective date, except-
( I) a substantive rule which grants or recognizes an exemption or
relieves a restriction; E
(2) interpretative rules and statements of policy; or
(3) as otherwise provided by the agency for good cause found
and published with the rule.
(e) Each agency shall give an interested person the right to petition · F
for the issuance, amendment, or repeal of a rule."
In Corpus Juris Secundum (March 2016 Update) it is stated:
"Under the informal rulemaking requirements of the Federal
Administrative Procedure Act, after a federal administrative
agency considers the relevant matter presented, it must incorporate G
in the rules adopted a concise general statement of their basis and
purpose. The purpose of the requirement is to enable courts, which
have the duty to exercise review, to be aware of the legal and
factual framework underlying the agency's actions. The
requirement is a means of holding an agency accountable for H
64 SUPREME COURT REPORTS [2016) 9 S.C.R.
A administering the laws in a responsible manner, free from arbitrary
conduct. The statement is not intended to be an abstract
explanation addressed to an imaginary complaint but is intended,
rather, to respond in a reasoned manner to the comments received,
to explain how the agency resolved the significant problems raised
by the comments, and to show how that resolution led the agency
8
to the ultimate rule. The statement must identify what major issues
of policy were ventilated and why the agency reacted to them as
it did and should enable a reviewing court to ascertain such
matters. The statement must respond to the major comments
received, explain how they affected the regulation, and, where an
c old regulation is being replaced, explain why the old regulation is
no longer desirable.
Agencies have a good deal of discretion in expressing the basis of
a rule. The requirement is not to be interpreted over literally, but
it should not be stretched into a mandate to refer to all specific
D issues raised in the comments on the proposed regulations.
Although an agency must genuinely consider comments it receives
from interested parties, there is no requirement that an agency
discuss in great detail all comments, especially those which are
frivolous or repetitive. Although the agency need not address
every comm-ent received, it must respond in a reasoned manner
E to those that raise significant problems, to explain how the agency
resolved any significant problems raised by the comments, and to
show how that resolution led the agency to the ultimate rule.
Conclusory statements will not fulfill the administrative agency's
duty to incorporate in adopted rules a concise general statement
F of their basis and purpose. The agency must articulate a
satisfactory explanation for its action. including a rational
connection between the facts it found and the choices it made.
Under some circumstance, agencies must identify specific studies
or data that they rely upon in arriving at their decision to adopt a
rule.
G
Regulations which lack a statement of basis and purpose may be
upheld ifthe basis and purpose and obvious. Moreover, the failure
of an agency to incorporate the statement does not render a rule
ineffective as to parties to litigation who had knowledge of the
rule.
H
CELLULAR OPERATORS ASSN. OF INDIA v. TELECOM 65
REGULATORY AUTHROITY OF INDIA [R. F. NARIMAN, J.]
Despite the statutory language mandating that the statement of A
basis of purposes be "incorporate[d] in the rules adopted," the
statement of basis and purpose does not have to be published at
precisely the same moment as the rules. Rather, the rules and
statement need only be published close enough together in time
so that there is no doubt that the statement accompanies, rather
B
than rationalizes, the rules."
74. We find that, subject to certain well defined exceptions, it
would be a healthy functioning of our democracy if all subordinate
legislation were to be "transparent" in the manner pointed out above.
Since it is beyond the scope of this judgment to deal with subordinate
legislation generally, and in particular with statutes which provide for c
rule making and regulation making without any added requirement of
transparency, we would exhort Parliament to take up this issue and frame
a legislation along the lines of the U.S. Administrative Procedure Act
(with ce11ain well defined exceptions) by which all subordinate legislation
is subject to a transparent process by which due consultations with all D
stakeholders are held, and the rule or regulation making power is
exercised after due consideration of all stakeholders' submissions,
together with an explanatory memorandum which broadly takes into
account what they have said and the reasons for agreeing or disagreeing
with them. Not only would such legislation reduce arbitrariness in
subordinate legislation making, but it would also conduce to openness in E
governance. It would also ensure the redressal, partial or otherwise, of
grievances of the concerned stakeholders prior to the making of
subordinate legislation. This would obviate, in many cases, the need for
persons to approach courts to strike down subordinate legislation on the
ground of such legislation being manifestly arbitrary or unreasonable. F
75. In the present case, we find that the High Court judgment is
flawed for several reasons. The judgment is not correct when it says
that there can be no dispute that the Impugned Regulation has been
made to ensure quality of service extended to consumers by service
providers. As has been pointed out hereinabove, the Impugned Regulation G
does not lay down any quality of service - what it does is to penalise
service providers even though they conform to the 2% standard laid
down by the Quality of Service Regulations, 2009. In holding that the
Impugned Regulation therefore conforms to Section l l(l)(b)(v), the
judgment is plainly incorrect. Similarly, the finding that notional
H
0
66 SUPREME COURT REPORTS [2016] 9 S.C.R.
A compensation is given, and that therefore no penalty is imposed, is also
wrong and set aside for the reasons given by us hereinabove. The finding
that a transparent process was followed by TRAI in making the Impugned
Regulation is only partly correct. While it is true that all stakeholders
were consulted, but unfortunately nothing is disclosed as to why service
providers were incorrect when they said that call drops were due to
B
various reasons, some of which cannot be said to be because of the fault
of the service provider. Indeed, the Regulation, in assuming that every
call drop is a deficiency of service on the part of the service provider, is
plainly incorrect. Further, the High Court judgment, when it speaks of
the technical paper of 13.11.2015, seems to have mixed it up with the
c consultation paper dated 4.9.2015 referred to in the Explanatory
Memorandum to the Impugned Regulation. The judgment has entirely
missed the fact that the technical paper of 13.11.2015 unequivocally
states that the causes for call drops are many and are often beyond the
control of service providers and attributable to the extent of 36.9% to
the consumers themselves. The judgment is also incorrect when it says
0
that 100% performance is not demanded from service providers when
call drops are made. We have already pointed out that the 2% standard
has admittedly been met by almost all the service providers, and this
being so, even if the very first call drop and all other subsequent call
drops are made within the network of a service provider and are within
E the parameters of 2%, yet the penal consequence of the amended
regulation must follow. The judgment is also incorrect in stating that the
Impugned Regulation has attempted to balance the interest of service
providers by limiting call drops to be compensated to only three and by
Iimiting compensation to only the calling and not the receiving consumer.
We have already pointed out that a penalty that is imposed without any
F
reason either as to the number of call drops made being three, and only
to the calling consumer, far from balancing the interest of consumers
and service providers, is manifestly arbitrary, not being based on any
factual data or reason. We also find that when the service provider
argued that it was being penalised despite being within the tolerance
G limit of2%, the answer given by the High Court is disingenuous, to say
the least, when the High Court says that 2% is a quality parameter for
the entire network as opposed to payment of compensation to an individual
consumer. We are unable to appreciate the aforesaid reasoning. As has
been held by us above, the two sets of Regulations have to be considered
together when the Impugned Regulation is being tested on the ground of
H
CELLULAR OPERATORS ASSN. OF INDIA v. TELECOM 67
REGULATORY AUTHROITY OF INDIA [R. F. NARIMAN, J.]
violation of fundamental rights. Also, the High Court did not advert to a A
large number of other submissions made by the appellants before them
and/or answer them correctly in law. As a result, therefore, we set aside
the judgment of the High Court and allow these appeals, declaring that
the Impugned Regulation is ultra vires the TRAI Act and violative of
the appellant's fundamental rights under Articles 14 and 19(1 )(g) of the
B
Constitution.
Kalpana K. Tripathy Appeals allowed.
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