Department of Telecommunication (DoT) – One-time Spectrum Charge (OTSC) – Levy of – Adjusted Gross Revenue (AGR) – Rights of the DoT to claim share on AGR – Non-telecom Activities Income – Held, levy of one-time spectrum charge (OTSC) is justified and enforceable – Petition dismissed.
Department of Telecommunication (DoT)
CORAM : THE HONOURABLE MR. JUSTICE HULUVADI G.RAMESH
THE HONOURABLE MR. JUSTICE M.V.MURALIDARAN
DATE : 11.08.2016
W.A. NOS. 1454 & 1455 OF 2014 W.P. NOS. 2165 TO 2167 OF 2013 W.P. NOS.585 TO 588 OF 2012 M.P. NOS. 1 TO 3 OF 2014 M.P. NOS. 1 OF 2012 AND M.P. NOS. 3 & 4 OF 2013
Aircel Cellular Ltd. 5th Floor, Spencer Plaza 769, Anna Salai, Chennai 600 002 rep. By Mr. Vijay Krishnan .. Appellant in WA 1454/2014 Aircel Ltd. 5th Floor, Spencer Plaza 769, Anna Salai, Chennai 600 002 rep. By Mr. Vijay Krishnan .. Appellant in WA 1455/2014 – Vs – Union of India Thro’ Secretary Department of Telecommunication Ministry of Communications Sanchar Bhavan, 20 Ashoka Road New Delhi 110 001. .. Respondent in both appeals Aircel Cellular Ltd. 5th Floor, Spencer Plaza 769, Anna Salai Chennai 600 002. .. Petitioner in WP 2165/2013 Aircel Ltd. 5th Floor, Spencer Plaza 769, Anna Salai Chennai 600 002. .. Petitioner in WP 2166/2013 Dishnet Wireless Ltd. 5th Floor, Spencer Plaza 769, Anna Salai Chennai 600 002. .. Petitioner in WP 2167/2013 – Vs – 1. The Union of India rep. By the Secretary to Govt. Ministry of Communications & IT Dept. of Telecommunication Sanchar Bhavan No.20, Ashoka Road New Delhi 110 001. 2. Assistant Wireless Advisor Ministry of Communications & IT Dept. of Telecommunication Sanchar Bhavan No.20, Ashoka Road New Delhi 110 001. .. Respondents in all the petitions Aircel Cellular Ltd. 5th Floor, Spencer Plaza 769, Anna Salai Chennai 600 002. .. Petitioner in WP 585 & 586/12 Aircel Ltd. 5th Floor, Spencer Plaza 769, Anna Salai Chennai 600 002. .. Petitioner in WP 587 & 588/12 – Vs – 1. The Union of India rep. By the Secretary to Govt. Ministry of Communications & IT Dept. of Telecommunication Sanchar Bhavan No.20, Ashoka Road New Delhi 110 001. 2. The Principal Controller of Communications Account Tamil Nadu Circle Ministry of Communications & IT Dept. of Telecommunications RK Nagar Telephone Exchange No.238, 7th Floor, RK Mutt Road Mandaveli, Chennai 600 028. .. Respondents in all the petitions
W.A. Nos.1454 & 1455 of 2014 filed under Clause 15 of the Letters Patent, against the order dated 10.10.2014 passed by the learned Single Judge in W.P. 9220 & 9221 of 2014.
W.P. Nos. 585 & 587 of 2012 have been filed praying this Court for the issuance of a Writ of Declaration declaring that the first proviso to Section 4 of the Indian Telegraph Act, 1885, insofar as and to the extent that it confers unguided power upon the Dept. of Telecommunications to claim a revenue share in respect of non-telecom activities of petitioner, as violative of Articles 14 and 19 (1) (g) of the Constitution of India.
W.P. Nos.586 & 588 of 2012 have been filed praying for the issuance of a Writ of Declaration declaring that the Department of the respondents can charge only License Fee/AGR (Adjusted Gross Revenue) from revenue earned from licensed activities.
W.P. Nos.2165 to 2167 of 2013 have been filed praying this Court to issue a writ of certiorarified mandamus to call for the records comprised in the impugned order bearing Reference P-11014/19/2008-PP (Pt-I) dated 28.12.2012 issued by the 2nd respondent and demand notice bearing Ref. No.1022/06/2011-WR dated 8.1.2013 issued in consequence thereof by the 2nd respondent and quash the same as being wholly illegal and unconstitutional and further directing the respondents to forbear from unilaterally imposing One Time Spectrum Fee or any levy of like nature upon the petitioners.
For Appellants/ : Mr. Gopal Subramaniam, SC & Petitioners Mr. Satish Parasaran, SC for Mr. R.Parthasarathy For Respondents : Mr. G.Rajagopalan, Addl. Solicitor General assisted by Mr. Su.Srinivasan Assistant Solicitor General
HULUVADI G.RAMESH, J.
While the writ appeals, W.A. Nos.1454 and 1455 of 2014 have been filed against the order passed by the learned single Judge directing the appellants to comply with the conditions imposed in the order of the respondent; W.P. Nos.585 to 588 of 2012 have been filed against the imposition of share on Adjusted Gross Revenue (for short ‘AGR’) even on income earned in relation to non-telecom activities and W.P. Nos. 2165 to 2167 of 2013 have been filed by the petitioners against the levy of One Time Spectrum Charge (for short ‘OTSC’). Since all the matters are intertwined with each other, they are taken up together and disposed of by this common judgment.
PRAYER IN W.P. NOS. 585 TO 588 OF 2012 :
2. While W.P. Nos.585 & 587 of 2012 have been filed by the petitioner to declare the first proviso to Section 4 of the Indian Telegraph Act, 1885 as violative of Articles 14 and 19 (1) (g) of the Constitution alleging that it confers unguided power upon the Dept. of Telecommunications to claim a revenue share in respect of non-telecom activities carried on by the petitioners; W.P. Nos.586 & 588 of 2012 have been filed for a declaration that the respondents can only charge License Fee/AGR from the revenue earned from licensed activities.
PRAYER IN W.P. NOS. 2165 TO 2167 OF 2013 :
3. W.P. Nos. 2165 to 2167 of 2013 have been filed by the petitioners against the demand notice issued by the respondents imposing One Time Spectrum Fee on the petitioners in respect of the licenses issued to them.
PRAYER IN W.A. NOS. 1454 & 1455 OF 2014 :
4. These writ appeals have been filed by the petitioners in W.P. Nos. 9220 and 9221 of 2014, wherein, the order dated 3rd Oct., 2013 and the consequential communication dated 23rd Jan., 2014, of the respondents directing the petitioner, Aircel Ltd., to give an undertaking to clear all the dues of Aircel Cellular Ltd., for the purpose of issuance of amendment of the Cellular Mobile Telephone Service, consequent upon the merger of Aircel Cellular Ltd., with Aircel Ltd., was challenged, wherein learned single Judge had directed the petitioners to comply with the conditions imposed in the order of the respondent dated 3.10.2013 without prejudice to their rights and contentions in the writ petitions already pending on the file of this Court, with further directions.
5. An overview of the entire factual matrix, which are intertwined with each other and necessary for the better understanding and disposal of the matter are culled out hereinbelow :-
(i) In pursuance of notification for grant of license for Cellular Mobile Telephone Service (for short ‘CMTS’), Aircel Cellular Limited (for short ‘ACL’) was granted CMTS License for Chennai Metro Service Area (for short ‘Chennai Area’), for a period of 10 years on 30.11.1994. Similarly, for the Rest of Tamil Nadu Circle (for short ‘RoTN Area’), CMTS licence was granted to Aircel Limited (for short ‘AL’) for a period of 10 years from 22.5.1998 and the effective date for the licence was changed from 24.4.98 to 31.12.98.
(ii) With the introduction of National Telecom Policy, 1999 (for short ‘NTP, 1999’), migration package for all the existing licensees of cellular and basic telecom services were proposed. By the said proposal, payment of one time entry fee and license fee as a percentage of gross revenue under the licence was imposed and that the period of license was to be 20 years from the effective date of the existing license agreement. Through various amendments to the licenses, annual license fee, AGR and spectrum charges on revenue share basis were ordered, including amendment relating to transfer/assignment of license. On 15.9.05, circular was issued by the Government for merger of Chennai Area and RoTN Area into Tamil Nadu Service Area (for short ‘TN Area’), wherein option was given to the licensees to apply for merger of both the licenses. Further, group companies having separate licenses were permitted to transfer their existing license to any one of the companies as a special case.
(iii) In the year 2010, the respondent issued Notice Inviting Applications (for short ‘NIA’) for the auction of 3G and Broadband Wireless Access (for shore ‘BWA’) Spectrum. In addition to other conditions, spectrum charge for 3G spectrum was made payable on total AGR of 2G and 3G services and further condition was imposed that in case of group bidding entity being successful in the auction for Tamil Nadu, they shall merge the licenses for Chennai Area and RoTN Area in accordance with the circular dated 15.09.2005. Consequent upon the said condition in the NIA, ACL and AL furnished undertakings. On the appellant being announced as one of the successful bidder in the 3G auction as well as BWA auction, the Department of Telecommunication (for short ‘DoT’) issued Letter of Intent to AL in respect of TN Area.
(iv) Further to the condition imposed in the circular dated 15.9.2005, the Boards of AL and ACL approved the scheme of amalgamation, wherein ACL was to amalgamate with AL. After communications between Aircel and DoT, AL addressed pre-intimation letter to DoT along with relevant undertakings and Board Resolutions in respect of the proposed amalgamation.
(v) Accordingly, a scheme of amalgamation was submitted before this Court by AL and ACL in Company Petition Nos.215 & 216 of 2010 under Sections 391 to 394 of the companies Act. In the interregnum, vide insertion of Condition 24.16 in the licence agreement of AL, authorisation was given to AL to use the 3G spectrum for a period of 20 years from 22.9.2010 and it was stated therein that the amendment was subject to all the terms and conditions of NIA and the Licensee shall comply with all the terms and conditions unless amended by the licensor by amending the licence agreement from time to time.
(vi) In the meantime, vide order dated 1.10.2010 in C.P. Nos.215 & 216 of 2010, this Court approved the scheme of amalgamation of the transferor company (ACL) with the tansferee company (AL) and directed that the transferor company shall stand dissolved without it being wound up.
(vii) Vide amendment dated 7.10.10, DoT issued license to ACL granting right to use BWA spectrum for a period of 20 years. Vide communication dated 13.10.2010, DoT was informed by Aircel about the approval given by the High Court for the Scheme of Amalgamation and, therefore, sought merger of the licenses. Reminders were also sent by Aircel for merger of the licenses on various dates. DoT, vide communication dated 8.4.2011, sought certain compliance certificates from AL for the purpose of merger of the licenses, which were duly furnished by AL.
(viii) In the meantime, certain company applications were filed in this Court for certain directions on which this Court had passed certain orders, which are not disputed by the parties. Further reminder letters were sent by AL seeking merger of the licences. To put it more clearly, since 23.11.2010, AL has been seeking for merger of the licenses till March, 2012.
(ix) Pursuant to certain charges levied by DoT, ACL and AL filed W.P. Nos.585 to 588 of 2012 praying to restrain DoT from charging AGR from revenue earned on non-telecom activities. This Court, vide order dated 22.6.2012, passed an interim order restraining DoT from taking any coercive steps to recover the license fee payable in respect of non-telecom activities.
(x) Vide amendment dated 25.6.2012, DoT modified the Annual License fee in respect of Tamil Nadu Service Area, wherein from 1st July, 2012 to 31st March, 2013, the Annual License Fee was fixed at 9% of AGR while from 1st April, 2013 onwards, it was fixed at 8% of AGR.
(xi) Since there was no positive response from DoT for the merger of the license pertaining to Chennai Area and RoTN Area, AL & ACL approached the Telcom Disputes Settlement & Appellate Tribunal (for short ‘TDSAT’) for a direction to DoT to transfer ACL’s Chennai license to AL by issuing a license for TN merged service area in accordance with the Merger Circular dated 15.9.2005 with a further prayer to restrain DoT from taking any coercive steps till the final disposal of the petition.
(xii) DoT, pending the adjudication, vide show cause notice dated 12.10.2012, while alleging violation of Clause 9 and Condition 15.7 of the License Agreement as well as conditions of license amendment regarding transfer/assignment dated 2.6.03, called upon ACL to show cause within 60 days as to why penalty of Rs.10 Crore should not be imposed and/or the license should not be terminated by invocation of Condition 15.1 of the License.
(xiii) TDSAT, while taking cognizance of the above show cause notice issued by DoT, passed an order dated 31.10.12 directing ACL to file reply to the show cause notice and further directing DoT to dispose of the same after giving opportunity of personal hearing to the petitioner. Further direction was also given to DoT to pass orders on the merger of licenses within three weeks from the date of passing orders on the show cause notice.
(xiv) Pursuant to the above direction, ACL filed reply dated 7.11.12 to the show cause notice and personal hearing was also afforded to ACL by DoT.
(xv) In the meantime, the respondent issued circular dated 28.12.12 for payment of ‘One Time Spectrum Charge’ for GSM/CDMA spectrum holders and the appellants were served with demand letter for payment of OTSC.
(xvi) ACL and AL approached this Court by filing W.P. Nos.2165 and 2166 of 2013 challenging the order dated 28.12.12 passed by the DoT and the consequent demand dated 8.1.13 and this Court, vide order dated 28.1.13 restrained DoT from proceeding further. In furtherance of the order of TDSAT, DoT, pursuant to the show cause notice dated 12.10.12 and subsequent personal hearing, passed order dated 26.4.13, holding that ACL was in contravention of Clause 9 and Condition 15.7 of the License Agreement as pointed out in the show cause notice and, accordingly, imposed a penalty of Rs.10 Crores payable within 15 days from the receipt of the notice. However, no order was passed on the merger of the license as ordered by TDSAT.
(xvii) Without prejudice to its rights and contentions, ACL deposited the penalty amount on 6.5.13, while reminding DoT of the order of TDSAT, wherein direction was issued to pass necessary orders on the merger of licenses within three weeks of DoT’s order on the show cause notice.
(xviii) Subsequently, by order dated 3.10.13, DoT conveyed an in-principle approval to amend AL’s RoTN License dated 22.5.98 to include ACL’s Chennai License dated 30.11.94. While granting the said in-principle approval, certain conditions were put forth as under :-
a) All spectrum allocation and numbering resources under Chennai License shall stand transferred to AL and the extension of spectrum held in Chennai Area and its terms and conditions will be subject to the decision of the Government on the opinion of the learned Attorney General.
b) Chennai License will be cancelled simultaneously and all liabilities shall stand transferred to AL’s RoTN License.
c) The above will be subject to AL clearing all dues in respect of both licenses.
d) The above is further subject to clearance of demands to be issued by WPC/WPF wing relating to payment of One Time Spectrum Charges for the spectrum held for the erstwhile two service areas by the licensees and also payment for the spectrum holding of the erstwhile Chennai Area license for extended period from 29.11.2014 to 29.11.2018, as per the decision of the government.
e) AL shall furnish unconditional and unequivocal undertaking in the prescribed format to pay all the demand with respect to extension of spectrum for Chennai Area from 2014 to 2018.
f) Spectrum Usage Charges in terms of rates applicable at present shall be payable by AL at the rates of slab corresponding to 9.8 MHz from the date of transfer of license.
(xix) AL, inter alia responded vide letter dated 25.10.2013 that it was entitled to an unconditional approval and that no new conditions could be imposed once the companies had complied with the circular dated 15.9.05 and the NIA dated 25.2.2010 and that AL was conferred with the right of an unconditional merger with ACL. AL also submitted that it could not be imposed with penalties and other adverse consequences on account of the delay on the part of DoT and highlighted that the conditions being vague and onerous could not be accepted. AL, vide letter dated 31.10.2013 also brought to the notice of DoT the interim order of stay granted by the Madras High Court and, therefore, urged DoT to drop the said condition relating to levy of OTSC.
(xx) While AL, vide letter dated 18.12.2013, offered to execute an undertaking in terms of Conditions (d) (i) and (ii) stipulated in the Merger Order dated 3.10.2010 regarding clearance of demands, which included One Time Spectrum Charges, subject to its final determination by this Court, DoT rejected all submissions made by AL and reiterated the conditions stated in the Merger Order dated 3.10.2013. On receipt of the said letter, AL, vide letter dated 4.3.2014, withdrew the concessions made by it in the letter dated 18.12.2013.
(xxi) Subsequently, AL and ACL approached this Court by filing W.P. Nos. 9220 and 9221 of 2014 challenging the conditions imposed in the merger order dated 3.10.2013. In the meanwhile, on 23.4.2014, in respect of renewal of ISP License for Dishnet Wireless Ltd., one of the group companies of AL, DoT clarified that the dues/demands, which had been stayed by Tribunals/Courts of competent jurisdiction will not be counted as enforceable demands.
(xxii) Learned single Judge, vide common order dated 10.10.2014, while directed AL to comply with the conditions as imposed in the order of DoT dated 3.10.13, without prejudice to their rights and contentions in the pending writ petitions relating to OTSC and non-telecom activities, further held that in the event of the petitioners succeeding in the writ petitions, the undertaking given by them will automatically lapse and that the compliance of the conditions by the petitioners will not preclude the petitioners from taking recourse to legal remedies available under law.
(xxiii) The above sequence of facts, starting from 30.11.1994 till the culmination of the order of the learned single Judge dated 10.10.2014, as has been detailed above, are not in dispute. Further, insofar as the petitions relating to AGR for non-telecom related activities and the petitions relating to levy of OTSC, the facts, as narrated above, covers the entire issue.
6. In the backdrop of the facts as narrated above, while direction to maintain status quo as on 5th Nov., 2014 was granted in the writ appeals, further interim directions were issued regarding the compliance of the conditions as mentioned in the order dated 3rd Oct., 2013. Further, this Court had directed the tagging of all the issues covered in the various writ petitions along with the writ appeals for a comprehensive hearing and to give a quietus to the issues and, accordingly, all the writ petitions and writ appeals are heard and disposed of by this common judgment.
CONTENTIONS ADVANCED IN W.P. NOS. 2165 TO 2167 OF 2012
7. Mr.Gopal Subramaniam, learned senior counsel appearing for the appellants/petitioners submitted that as per NTP 1994, ACL and AL were granted CMTS licenses dated 30.11.94 and 22.5.98 for Chennai Area and RoTN Area, the license fee was on fixed basis and spectrum fee was charged as per a stipulated formula. However, due to various issues, NTP 1999 was promulgated, which introduced the the revenue share concept in respect of payment of licence fee. It is further submitted that NTP 1999 provided for payment of (i) Entry Fee and (ii) Licence fee on revenue share basis, which is a percentage of revenue of the operator agreed upon. On the promulgation of NTP 1999, migration package was given to the service operators, which provided for payment of entry fee and licence fee on revenue share basis with a further option that on such condition being accepted, the period of license shall be 20 years from the effective date of the existing license agreement.
8. It is also submitted by the learned senior counsel for the appellants/petitioners that when the term of license was extended for a period from 10 years to 20 years from the effective date of the existing license agreement, on account of NTP 1999, the same was agreed upon mutually by the service providers as well as DoT on the condition that such extension will be on the basis of the entry fee and licence fee on revenue share basis and no other tags or conditions other than the above were laid. When such being the case, imposition of OTSC, that too with retrospective effect from 2008, after a lapse of more than 9 years, is totally untenable.
9. It is the further submission of the learned senior counsel for the appellants/petitioners that at the time of entering into the contract for grant of license, spectrum was allocated to AL and ACL for which requisite entry fee was paid and that no separate fee/charge needs to be paid by AL and ACL for getting the spectrum as the spectrum was bundled with the license. Learned senior counsel drew the attention of this Court to the letter of DoT dated 22.7.99, more particularly, clause (ii) of the said letter, wherein it is mentioned that the licensee will be required to pay one time Entry Fee and License Fee as percentage share of gross revenue.
10. Learned senior counsel appearing for the appellants/petitioners submitted that after initial allotment of spectrum of 4.4 MHz, additional spectrum was allotted to ACL, AL and DWL starting from 1.3.00 to 1.12.06. From the above, it is evident that the licensee has been paying spectrum usage charges under the terms of the license agreement without fail.
11. Learned senior counsel, adverting to the letter of DoT dated 15.9.05, submitted that as per the said letter, Chennai Area and RoTN Area were proposed to be merged into a single area, viz., the Tamil Nadu Service Area and that the licensees, who were having licenses in both the service areas of Tamil Nadu were permitted to apply for issuance of a single license for the Tamil Nadu Service Area in lieu of two licenses without payment of any additional entry fee. Thus, it clear that the appellants/petitioners were not required to pay any additional fee for the purpose of getting the two licenses merged into a single license and, anything to the contrary, would be against the letter issued by the respondent.
12. It is the further submission of the learned senior counsel for the appellants/petitioners that vide NIA dated 25.2.2010, applications were invited for the auctioning of 3G and BWA spectrum. Reliance was placed on Clause 3.5 of the said NIA, wherein ‘Spectrum Usage Charges’ have been mentioned, wherein it is found that the spectrum usage charge shall be payable by the successful bidders, which is to be calculated as a percentage of the AGR and the said charge will be over and above the spectrum auction price and the applicable licence fees. In the above backdrop, it is submitted by the learned senior counsel, when a spectrum usage charge has been levied by the respondent coupled with the fact that vide letter dated 22.7.99, the respondent having mentioned that the licensee will be required to pay an entry fee and license fee as a percentage of AGR, the stand of the respondent that OTSC can be levied retrospectively does not have legs to stand.
13. It is the further submission of the learned senior counsel appearing for the appellants/petitioners that only in the year 2007, at or about the time of filing of the 2G Spectrum Scam cases before the Supreme Court, the issue of OTSC was raised for the first time by TRAI . TRAI had, suo motu, without any consultation with the service providers and in violation of the contractual understanding that the spectrum charges will be exclusively on revenue share basis, recommended imposition of additional acquisition fee, which is impermissible and against the terms of the contract. Learned senior counsel stressed that even if the recommendations of TRAI is being accepted by the Government, the said OTSC can only be imposed for future allocations beyond 10 Mhz. To substantiate the said submission, learned senior counsel placed reliance on the recommendations of TRAI, as found in Page-107 of the typed set in furtherance to the consideration of the proposal forwarded by DoT vide its letter dated 9.7.08, wherein TRAI has noted enhanced spectrum usage charge has already been implemented for 6.2 MHz and 5 MHz for GSM and CDMA licences and since higher levels of usage charges have already been agreed to and are being collected by the Government, charging OTSC for spectrum below 10 MHz may not be feasible.
14. Learned senior counsel also submitted that since inception of the licenses, charge towards spectrum usage has been charged for by DoT and being paid by the licensees in the form of spectrum usage charges under the terms of the licence agreement, which is binding on both the parties. That being the case, levy of OTSC constitutes a double levy by DoT, which is impermissible in law. Reliance is placed upon the counter affidavit filed by the respondent to drive home the point that OTSC and spectrum usage charge are one and the same and that the appellants/petitioners are already paying spectrum usage charges and, therefore, charging OTSC is untenable.
15. It is further submitted by the learned senior counsel that when DoT itself has, by its letter dated 22.7.99, in clause (ii) has prescribed the entry fee and licence fee, which is a percentage share of the gross revenue and has further stated that the terms and conditions for the migration to NTP 1999 has to be accepted as a package in its entirety, it is not open to the respondents/DoT to levy OTSC, that too, belatedly, after a period of 13 years from the date of grant of the original license.
16. It is further submitted by the learned senior counsel for the appellants/petitioners that ACL and AL having acted upon the licence entered into between AL and ACL and DoT, more particularly in terms of the migration package offered and licence fee and spectrum charges based on the said licence and having organised their commercial operations accordingly, the arbitrary action of the respondent/DoT in levying OTSC detriment to the interests of the petitioners/appellants is against the well settled principles of Promissory Estoppel. In this regard, reliance was placed on the judgment of the Supreme Court in