CELLULAR OPERATORS ASSOCIATION OF INDIA & ORS.versusTELECOM REGULATORY AUTHORITY OF INDLA & ORS.

                     [2015) 11S.C.R.1063


   CELLULAR OPERATORSASSOCIATION OF INDIA&                            A
                    ORS.    .      .

                                v.
 TELECOM REGULATORY AUTHORITY OF INDl.A &ORS.
                (Civil Appeal No.1563 of 2007)                        B

                      JANUARY 30, 2015
       [SUDHANSU JYOTI MUKHOPADHAYA 'AND
                  PRAFULLA C. PANT, JJ.]                              c
      Telecommunications - Cellular mobile telephone
services/unified access services-Appellants-private mobile
service providers levying differential tariff of calls from private
operator to another private operator vis-a-vis calls made from
private operator to BSNUMTNL aetwork on ground that direct            D
connectivity could be achieved between networks of private
operators but not between private operators and BSNL
network - If justified - Held: Action of appellants amounted
to discrimination between the same class of subscribers -
                                                                      E
Appellant could have made use of the similar leased lines
as they had between their networks and asked for Ps of I from
the BSNL for the MSCs which was not done - No effort was
made by the appellants to create direct connectivity and they
took recourse to the easier way of handing the traffic to the         F
BSNL as National Long Distance Operator and continued
charging the consumers higher tariffs - Access providers
have option to continue with the existing inter-connected
routing of the class of service areas but that cannot be a
ground to discriminate, in any manner, between subscribers            G
of the same class - Appellants -service pro'(iders
discriminated between subscribers of the same class; one
on the ground that the call ends with the private parties and
another on the ground that the call ends with BSNUMTNL -
                                                                      H
                              1063
1064        SUPREME COURT REPORTS               (2015]11 S.C.R.


 A Classification of the subscribers into two categories on the
   basis of calls made by them from private network to another
   private network and from private network .to BSNUMTNL
   network is arbitrary as it fails to satisfy the twin test for
   reasonable classification - Telecom Regulatory Authority of
 B India Act, 1997 - s.3-·Jndian Telegraph Act, 1885- s.11.

            State of West Bengal v. Anwar Ali Sarkar & Anr.
            AIR 1952 SC 75- referred to.

 c                         Case Law Reference

       AIR 1952 SC 75                 referred to     Para 23

            CIVIL APPELLATE JURISDICTION: Civil Appeal No.
       1563 of 2007
 D
            From the Judgment and Order dated 22.12.2006 of the
       Telecom Disputes· Settlement and Appellate Tribunal, New
       Delhi in Appeal No. 2 of 2006

 E          Amarendra Sharan, Navin Chawla, Arpit Maheshwari,
       Aprajita for the Appellants.

              Pinky Anand, ASG, Maneesha Dhir, K. P. S. Kohli,
       Prashant Jain, Gagan Gupta, Sanjay Kapur, Lekha
 F     Vishwanath, Mo hit Paul, Amit Bansal, Gaurav Goyal, Madhu
       Sikri for the Respondents.

            The Judgment of the Court was delivered by

         SUDHANSU JYOTI MUKHOPADHAYA, J. 1. This
 G appeal has been preferred by the appellants against the order
   dated 22nd December, 2006 passed by the Telecom Disputes
   Settlement & Appellate Tribunal, New Delhi (hereinafter
   referred to as the 'Tribunal') in Appeal No.2 of2006 (with M.A.
   No.58 of 2006). By the impugned order, the Tribunal while
 H
  CELLULAR OPERATORS ASSN. OF INDIA v. TELECOM REGULATORY           1065
     AUTHORITY OF INDIA [SUDHANSU JYOTI MUKHOPADHAYA, J.]


dismissing the appeal disposed of the M,A.No.58 of 2006 with         A
certain observations.

      2. The factual matrix of the case is as follows:

       Appellant Nos.2 to 10 are private GSM cellular                B
operators and the first appellant is their Association. They have
been issued licences by the Central Government, Department
of Telecommunication (hereinafter referred to as 'DoT') under
Section 4 of Indian Telegraph Act, 1885 to establish, maintain
and operate cellular mobile telephone services/unified access        c
services in their respective service areas. The first respondent
is Regulatory Authority established under Section 3 of the
Telecom Regulatory Authority of India Act, 1997 (hereinafter
referred to as 'TRAI Act').
                                                                      D
        3. The first respondent-Authority issued a directive dated
 27'h Februal)'., 2006 wherein appellants - private mobile service
 providers in the four States of Maharashtra, West Bengal, Tamil
 Nadu and Uttar Pradesh were directed to discontinue
 differential tariffs levied in the aforesaid four States for calls E
 terminating in the network of Bharat Sanchar Nigam Limited
 (hereinafter referred to as 'BSNL')/Mahanagar Telephone
 Ni9am Limited (hereinafter referred to as 'MTNL') as compared
to calls terminating in the network of other private operators in
 another citing it to be discriminatory and inconsistent with the· F
 amended licence condition notified by the DoTon 20'h May,
2005. The appellants complied with the directive dated 271h
February, 2006 and submitted compliance report to the
Authority.
                                                                      G
        4. Subsequently, by its directive dated 22nd March, 2007,
the' first respondent-Authority, inter alia, directed the appellants-
service providers to assess the total excess amount charged
from the subscribers; keep the entire amount in a separate
 Bank Account and intimate the Authority the names of the H
1066         SUPREME COURT REPORTS                   [2015] 11 S.C.R.


 A Banks in which such amount has been kept. After receipt of
   such notice dated 22"" March, 2007 the appellants preferred
   an appeal under Section 14 read with Section 14Aofthe TRAI
   Act challenging the direction dated 271h February, 2006. The
   challenge was made on the ground that the direction was
 B discriminatory and .inconsistent with the amended licence
   conditions notified by the DoT on 201h May, 2005. The main
   plea raised by the appellants justifying the differential half of
   calls from private operator to another private operator vis-a-
   vis calls from private operator to BSNL network was that direct
 C connectivity could be achieved between networks of private
   operators but it could not be achieved between private
   operators and BSNL network.

         5. Initially, BSNUMTNL was not party to the said appeal.
 D The Tribunal having noticed that the appeal pertains to the
   differential tariff of calls from private operator to another private
   operator vis-a-vis calls made from private opercitor to BSNU
   MTNL network directed the appellants to implead the BSNU
   MTNL as respondent. After hearing the parties, the Tribunal
 E passed the impugned order dated 22nd December, 2006
   dismissing the appeal and disposing of the M.A.No. 58 of2006
   with the observations and directions as quoted above.

             6. In appreciation of the case, it is relevantto notice the
 F     following facts:

           For grant of licences, India was divided into four metro
   service areas of Delhi, Mumbai, Kolkata and Chennai and
   various telecom circles which were roughly contiguous to the
 G State of India. In the first phase, licences were granted for the
   four metro service areas in 1994 and thereafter in the Circles/
   States in 1995 defining the geographical limits within which
   the licensee may operate and offer the services. For Mumbai,
   Chennai, Kolkata and Delhi, in the aforesaid manner, separate
 H licences were issued by the DoT. Separate and distinct
  CELLULAR OPERATORS ASSN. OF INDIA v. TELECOM REGULATORY           1067
     AUTHORITY OF INDIA [SUDHANSU JYOTI MUKHOPADHAYA, J.]


licences were issued for the States of Maharashtra, Tamil Nadu A
and West Bengal excluding the three metropolitan cities of
Mumbai, Chennai and Kolkata respectivelyforwhich licences
were given to MTNL. As far as State of Uttar Pradesh is
concerned, it was divided into two Telecom circles, i.e., U.P.
(East) and U.P.(West) with separate licences for U.P.(East) B
and U.P.(West).

        7. The first respondent-Authority has laid down Inter
Connection Usage Charges (hereinafter referred to as 'IUC')
with respect to the changing for the use of network elements        C
of other operators which include termination charges, carriage
charges and access deficit charge for use of network elements
of other operators. These charges for inter-circle calls are
different from those for intra-circle calls. On 20'h May, 2005,
the Government of India notified that inter-service area            D
connectivity between access providers within Mumbai Metro.
and Maharasthra Telecom Circle, Chennai Metro and Tamil
Nadu Telecom Circle, Kolkata Metro and West Bengal Telecom
Circle and U.P.(East) and U.P.(West) Telecom Circle service
areas respectively, is permitted subject to condition that the      E
access provider will operate within the existing licensed service
area and shall not be permitted to create infrastructure outside
their licensed service area for the purpose of inter-service area
connectivity. It was further provided that the access provider      F
may take leased lines for such connectivity. With the above
arrangement, calls within a State in the above mentioned four
states would be treated as intra-service area calls for the
purposes of routing as well as ADC.

      8. The final result of the above said notification was that   G
the metros were merged with the respective State.circles and
the calls from metros to the remaining areas of the respective
States and in case ofU.P.(East) and U.P.(West) circles from
one to the other, were to be treated as intra-circle calls.
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1068         SUPREME COURT REPORTS                    [2015] 11 S.C.R.


 A            9. The appellants were charging higher tariff for calls
       made from appellant's network in the metros to the BSNL and
       MTNL networks in the remaining areas of the State compared
       to calls made from appellant's network in the metros to another
       appellant's network in the remaining areas of the State. For
 B     example, a subscriber on a private operator's network calling
       from Mumbai to another private operator's subscriber at Nasik
       was being charged at low rate as compared to a call made by
       the same subscriber from the same place to BSNL subscriber
       at the other place. In this background. the first respondent by
 C     Circular dated 27'h February, 2006 observed that this
       differential tariff was discriminatory and inconsistent with the
       amended licence condition notified by the Do Ton 20'h May,
       2005 and, therefore, directed the appellants to immediately
       discontinue such differential tariff and asked for compliance
 0
       of the same within 15 days.

             10. As noticed above, the first respondent-authority vide
       Circular dated No.101-15/2005-MN dated 27'" February, 2006
       observed that differential tariff was discriminatory and
 E     inconsistent with the amended licence conditions notiffed by
       the DoT on 20'h May, 2005 and, therefore, directed the
       appellants to immediately discontinue such differential tariff
       and ask for compliance within 15 days.

 F            11. The aforesaid direction was challenged by the
       appellants before the Tribunal with a prayer to set aside the
       directions issued by the Circular No.101-15/2005-MN dated
       27'" February, 2006. The appellants also sought for an interim
       relief granting ex-parte stay of operation of the said circular.
 G
             12.The Tribunal having not granted any interim relief, the
       appellants moved before the High Court in a Writ Petition, being
       W.P.(C) No.5428 of 2006. The High Court observed that no
       punitive or coercive action shall be taken by the first respondent
 H
  CELLULAR OPERATORS ASSN. OF INDIA v. TELECOM REGULATORY         ·1069
     AUTHORITY OF INDIA [SUDHANSU JYOTI MUKHOPADHAYA, J.]

Authority at least till the next date of hearing before the Tribunal A
and disposed of the writ petition. The Tribunal by the impugned
order dated 22"d December, 2006 held as follows:

      "26. Having gone through the documents produced by
      both the parties and having heard arguments we are of B
      the view that the appellants did not make adequate effort
      to prpvide direct connectivity between the appellants'
      MS Cs and the BSNUMTNL's MSCs which would have ·
      brought tariffs at part for calls made within the appellants'
      network. We are also left with the impression that Do T c
      and BSNL could have taken a more pro-active
      approach to ensure that the requisite leased lines and
      Ps of I were made available for establishing direct
      connectivity in a time bound manner which would have
      helped achieving the transition sought to be brought D
      about by the Do T notification of 20-5-2005 in a more
      smooth manner. Be that as it may, we do not agree witlJ
      the argument put forth by the appellants about the
      protection to them for charging higher tariff under the
      clause of forbearance. The clause of non-discrimination E
      is very clear and self-explanatory which has been defied
      by the appellants. Wedo not find any merit in the appeal
      and the same is dismissed. M.A. No. 58 of 2006 also                 \
      stands disposed."
                                                                    F
      13. Learned counsel appearing on behalf of the
appellants submitted that the differential tariffs are because of
the difference in the cost elements involved in the two natures
of calls. Insofar as calls terminating in the network of BSNU
 MTNL are concerned, as direct connectivity had not been G
established between the appellant's network and BSNUMTNL
network, the appellants were obliged to pay carriage charges
to BSNL and MTNL (respondent nos. 2 and 3) for calls
terminating on their networks. But in case of a call terminating
                                                                  H
1070         SUPREME COURT REPORTS                   [2015] 11 S.C.R.


 A in the network of the private operator these charges were not
   applicable as direct connectivity had been. established
   between the private operators. Therefore, the cost elements
   involved in the two calls were different leading to a difference
   in tariffs charged by the service provider for such calls from its
 B subscribers. The above position is explained with the help of
   a Diagram to show that in the case of a call from a metro like
   Mumbai to another place like Pune, the call between two
   subscribes of private networks is connected directly, which in
   the case of a call to BSNL subscriber is treated as a STD call
 C as it is first connected to Nagpur and then to Pune, which is
   the routing plan for STD calls. According to appellants, in STD
   arrangement, BSNL as the National Long Distance Operator
   was able to recover carriage charges which were as high as
 D Rs.1.10 per minute, which charges would no longer be payable
   once direct connectivity was established.

             14. Thus the reason for the differential tariffs as per the
       appellant was that the call between subscribers of private
       operators was routed directly and costed· as a local call while
 E     the call to a BSNUMTNL subscriber was routed through another
       place and costed as an STD call.

           15. It was further contended that the aforesaid position
   had continued right from July, 2005 in the knowledge of the
 F first respondent and now in sudden turn around, the first
   respondent chose to disregard the compulsions under which
   the private operators were constrained to offer differential tariffs
   and directed the private operators to discontinue the differential
   tariff. Its net effect was to force the operators to increase their
 G tariffs for calls terminating on the network of other private
   operator or alternatively reduce the tariff for calls to BSNUMTNL
   subscribers and pay the difference from their own pocket.
   Either of these alternatives would be against the fundamental
 H duties and responsibilities of the first respondent under the
     CELLULAR OPERATORS ASSN. OF INDIA v. TELECOM REGULATORY    1071
       AUTHORITY OF INDIA [SUDHANSU JYOTI MUKHOPADHAYA, J.]


Act and the impugned action was not only against the public A
interest but would also have put the private operators in a highly
disadvantageous position.

       16. Learned counsel for the appellantfurthersubmitted
that the Tribunal erred in law in not appreciating that simply B
prescribing differential tariff does not violate the mandate of
Article 14 of !tie Constitution or result in discrimination; the
same class has to be determined in accordance with the
similarity of features of its constituents. According to the
appellants, the costs involved in the nature of the two calls are C
different and, therefore, though the subscribers belong to the
appellants, they form a distinct class when they make a call to
the BSNL Cell one number. It is also submitted that the Tribunal
failed to notice that the DoT decision of 20'h May, 2005 explicitly
stated that the tariffs which were under forbearance would D
continue to be regulated by market forces.

        17. Learned counsel appearing on behalf of first
  respondent submitted that it was the duty of the appellants to
  arrange the leased lines for establishing direct connectivity E
 with the BSNL network as they had done to connect each other's
. network. The appellants no where pleaded that the second
  respondent denied the provision of Points of Interconnect
  (hereinaft~r referred to as 'Ps of I') and the only pleading was
 with respect to non-grant of leased lines by BSNL. In fact, the F
 appellants never approached the BSNL for provision of Ps of
I.

      18. It was brought to the notice of the Court that
immediatei,i on issue of letter by the DoTwhen the metro circles G
were merged with the respective state circles, BSNL had
issued a Circular on 24th.May, 2005 asking the appellants to
sign addenda to the existing interconnect agreements for
provision of Ps of l. However, no effort was made by the
                                                                 H
1072         SUPREME COURT REPORTS                  [2015) 11 S.C.R.


 A     appellants to this effect. In another case before the Tribunal,
       respondent No.2 had stated on affidavit that wherever the
       payments have been made, the Ps of I were being provided
       within 90 days. In these four service areas, no demand was
       ever placed on BSNL.
 B
         19. Similar was the stand taken by the appellants and
   respondents before the Tribunal. The Tribunal observed that
   some demands for Ps of l/E-1 connectivity were placed by the
   appellants on BSNL but as late as in December 2005, January
 C 2006 and February 2006. The Tribunal held that there was no
   reason that in case infrastructure for directconnectivity could
   be created for connecting amongst themselves the networks
   of the appellants, the same could not be done for connecting
   the MSCs of appellants' networks to those of BSNUMTNL
 D networks in the four service areas in question.

               The Tribunal rightly held that the appellant could have
       made use of the similar leased lines as they had between their
       networks and asked for Ps of I from the BSNL for the MSCs
 E     located in these four service areas which was not done. No
       effort was made by the appellants to create this direct
       connectivity and they took recourse to the easier way of handing ·
       the traffic to the BSNL as National Long Distance Operator
       and continued charging the consumers higher tariffs.
 F
         20. The respondent has prescribed the tariffs for various
   calls/telecom services under the Telecommunication Tariff
   Order 1999 as amended from time to time. As a general
   condition clause 6 of the Tariff Order prescribes that no service
 G provider shall, in any manner, discriminate between subscribers
   of the same class and such classification shall not be arbitrary.
   Further, clause 2(k) of the Tariff Order defines "Non-
   discrimination" to mean that service provider shall not, in the
   matter of application of tariffs, discriminate between subscribes
 H
  CELLULAR OPERATORS ASSN. OF INDIA v. TELECOM REGULATORY              1073
    AUTHORITY OF INDIA [SUDHANSU JYOTI MUKHOPADHAYA, J.]


of the same class and such classification of subscribes shall A
not be arbitrary. Clause 2(k) and Clause 6 of the Tariff Order
are reproduced herein under:

     "2(k)_    Non-discrimination means that service provider
     shall not in the matter of application of tariffs, discriminate   B
     between subscribers of the same class and such
     classification of subscribers shall not be arbitrary.

     Clause 6. Non-discrimination:No service provider
     shall, in any manner, discriminate between subscribers            C
     of the same class and such classification shall not be
     arbitrary."

         In terms of the above Tariff Order, the first respondent
in September 2002, introduced forbearance in prescribing
                                                                    0
tariffs as far as Cellular calls are concerned and in taking this ·
decision the first respondent took note of the emerging market
scenario and came to the conclusion that a stage had been
reached, when market forces could effectively regulate the
cellular tariff.
                                                                    E
       21. The question whether the non-discrimination clause
 is applicable to the class of subscribers making call to another
 private network from a private network as compared to the
 class making call from a private network to BSNL/MTNL F
 network was raised by both the parties. The appellants'
 contention was that they were two different classes since the
 routing of the call was different and BSNL was charging higher
amount for the latter category of calls. In reply to the same, it
 has been rightly contended on behalf of the respondents that G
the same subscriber or two subscribers from the same house
making calls from the same network to another private network
or to BSNL network located at the same destination form the
same class. The interpretation of the respondents being more
logical was also accepted by the Tribunal. For the said reason H


              .·
1074         SUPREME COURT REPORTS                  [2015) 11 S.C R.


 A     the Tribunal rightly held thatthe action of appellants amount to
       discrimination betweeri the same class of subscribers which
       is against the basic definition laid down in Clause 2(k) of the
       Tariff Order.

 B         22.0n 20'h May, 2005, the Government of India
   announced that inter service area connectivity between Access
   Providers within four States - Mumbai Metro & Maharashtra
   Telecom Circle, Chennai Metro &Tamil Nadu Telecom Circle,
   Kolkata Metro & West Bengal Telecom Circle· and U.P. (l~ast)
 C & U.P.(West) Telecom Circle Service areas is permitted.
   subject to the condition that the Access provider will operate
   within their existing licensed service area and shall not be
   permitted to create infrastructure outside their licensed service
   area for the purpose of inter-service area connectivity. The
 D access providers may take lease lines for such connectivity.
   Th is inter-service area connectivity shall be only for terminating
   traffic. Relevant extracts from Clause 5.2 and 6. 0 of the Circular
   dated 24'h May, 2005 are reproduced hereunder:

 E          "5.2. The traffic organized by mobile subscribers
            belonging to one service area but located in another
            service area within same state shall be treated as home
            network traffic instead of national roaming traffic. This
            principle shall be applicable for both charging at POI
 F          as well as traffic certificates for ADC billing. Further,
            since the traffic between two service areas within same
            state shall be treated as intra-service area traffic,
            therefore, such traffic shall not be handed over by
            NLDOs to BSNL.                         ·::>
 G
            6.0. The access service providers of these four states
            shall be permitted to seek POis with BSNL switches in
            the complete state irrespective of their service areas in
            which they can provide their services. Concerned
 H          access provider shall have to sign separate Addenda
  CELLULAR OPERATORS ASSN. OF INDIA v. TELECOM REGULATORY             1075
     AUTHORITY OF INDIA [SUDHANSU JYOTI MUKHOPADHAYA, J.]


      to existing Interconnect Agreements with BSNL for· A
       establishing these new POis with BSNL. Till the time
      these Addendas are signed and new POis established
       the existing arrangements shall continue including
      handover of such calls to BSNL through NLDOs treating .
     .the traffic as inter circle and charging /UC accordingly. E
       All the traffic within a state (in these four States only
       and in case of State of UP it also includes State of
       Uttaranchal) shall be treated as intra circle traffic and
       /UC charged accordingly .at POI (except the traffic
       handed over at POis of NLDOs) as well as for the C
       purpose of traffic certificates for ADC billing. These new
     . POis, as above, shall be commissioned after concerned
       access providers sign theseAddendas to their existing
       Interconnect Agreement with BSNL. These instructions
                                                                  0
       are to be implemented w.e.f 0000 hours of 25'" May,.
       2005."

           The net effect of the aforesaid Circular was that the
  appellants were to sign theAddenda agreements with BSNL
· and then apply for new Ps of I and till such time that the new Ps   E
  of I are established the existing arrangements were to continue.

       23. We have noticed that the appellants took advantage
 of the aforesaid provision. But they did not apply before the
 BSNL/MTNL to apply new Ps of I and treating thetariff as inter F
 service charges differently from same sets of consumers. The
 access providers have option to continue with the existing inter-
 connected routing of the class of service areas but that cannot
 be a ground to discriminate, in any manner, between the
 subscribers of the same class. The Tribunal rightly held that G
 the appellants - service providers discriminated between
 subscribers of the same class; one on the ground that the call
 ends with the private parties and another on the ground that
'the call ends with BSNL/MTNL. The classification of the H
1076         SUPREME COURT REPORTS               [2015] 11 S.C.R.


 A subscribers into two categories on the basis of calls made by
   them from private network to another private network and from
   private network to BSNL/MTNL network is arbitrary as it fails
   to satisfy the twin test for reasonable classificatioh laid down
   by this Court in State of West Bengal v. Anwar Ali Sarkar &
 B Anr.AIR 1952 SC 75. Therefore, the Tribunal rightly dismissed
   the appeal.

            24.We find no merit in this appeal, it is accordin!;,:y
       dismissed. No costs.
 c
       Bibhuti Bhushan Bose                         Appeal dismissed.