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Supreme Court of India Cancels All 2G Spectrum Licenses Issued in 2008
IT News Online Staff
2012-02-02

The Supreme Court of India has issued a judgment cancelling all second-generation (2G) spectrum licenses issued in 2008. The court ruled that the first-come-first-served policy adopted by the Department of Telecommunication (DoT) was flawed and the whole process was aimed at benefiting certain companies.


In its ruling the Supreme Court said, "The exercise undertaken by the officers of the DoT between September, 2007 and March 2008, under the leadership of the then Minister of C&IT was wholly arbitrary, capricious and contrary to public interest apart from being violative of the doctrine of equality. The material produced before the Court shows that the Minister of C&IT wanted to favor some companies at the cost of the Public Exchequer and for this purpose."

The Court blamed TRAI for its poor approach and faulty advice and highlighted the role of A. Raja, the then Minister of Communication & IT, in the 2G scam.
"To say the least, the entire approach adopted by TRAI was lopsided and contrary to the decision taken by the Council of Ministers and its recommendations became a handle for the then the Minister of C&IT and the officers of the DoT who virtually gifted away the important national asset at throw away prices by willfully ignoring the concerns raised from various quarters including the Prime Minister, Ministry of Finance and also some of its own officers. This becomes clear from the fact that soon after obtaining the licenses, some of the beneficiaries off-loaded their stakes to others, in the name of transfer of equity or infusion of fresh capital by foreign companies, and thereby made huge profits. We have no doubt that if the method of auction had been adopted for grant of license which could be the only rational transparent method for distribution of national wealth, the nation would have been enriched by many thousand crores."

"Being an expert body, it was incumbent upon the TRAI to make suitable recommendations even for the 2G bands especially in light of the deficiencies of the present system which it had itself pointed out. We do not find merit in the reasoning of TRAI that the consideration of maintaining a level playing field prevented a realistic reassessment of the entry fee."

Attacking the first-come-first-served policy adopted by the DoT, the Court said, "There is a fundamental flaw in the first-come-first-served policy inasmuch as it involves an element of pure chance or accident. In matters involving award of contracts or grant of license or permission to use public property, the invocation of first-come-first-served policy has inherently dangerous implications. Any person who has access to the power corridor at the highest or the lowest level may be able to obtain information from the Government files or the files of the agency/instrumentality of the State that a particular public property or asset is likely to be disposed of or a contract is likely to be awarded or a license or permission is likely to be given, he would immediately make an application and would become entitled to stand first in the queue at the cost of all others who may have a better claim."

The Supreme Court ruled that:
(i) The licenses granted to the private respondents on or after 10.1.2008 pursuant to two press releases issued on 10.1.2008 and subsequent allocation of spectrum to the licensees are declared illegal and are quashed.

(ii) The above direction shall become operative after four months.

(iii) Keeping in view the decision taken by the Central Government in 2011, TRAI shall make fresh recommendations for grant of licence and allocation of spectrum in 2G band in 22 Service Areas by auction, as was done for allocation of spectrum in 3G band.

(iv) The Central Government shall consider the recommendations of TRAI and take appropriate decision within next one month and fresh licenses be granted by auction.

(v) The companies who have been benefited at the cost of Public Exchequer by a wholly arbitrary and unconstitutional action taken by the DoT for grant of UAS Licenses and allocation of spectrum in 2G band and who off-loaded their stakes for many thousand crores in the name of fresh infusion of equity or transfer of equity shall pay cost of Rs.5 crores each.

Swan Telecom Capital Pvt. Ltd. (now known as Etisalat DB Telecom Pvt. Ltd.) transferred around 45% of its equity in favor of Etisalat Mauritius Ltd., a unit of Emirates Telecommunications Corp. of UAE for over Rs. 3,544 crores. Unitech transferred 60% of its equity in favor of Telenor Asia Pte. Ltd., a part of Telenor Group (Norway) for Rs. 6120 crores between March, 2009 and February, 2010. Tata Tele Services transferred 27.31% of equity worth Rs. 12,924 crores in favor of NTT DOCOMO. Tata Tele Services (Maharashtra) transferred 20.25% of equity worth Rs. 949 crores in favor of NTT DOCOMO.

The other firms shall pay a cost of Rs. 50 lakhs each because they too had been benefited by the wholly arbitrary and unconstitutional exercise undertaken by the DoT for grant of UAS Licenses and allocation of spectrum in 2G band. The Court has not imposed cost on the respondents who had submitted their applications in 2004 and 2006 and whose applications were kept pending till 2007.

(vi) Within four months, 50% of the cost shall be deposited with the Supreme Court Legal Services Committee for being used for providing legal aid to poor and indigent litigants. The remaining 50% cost shall be deposited in the funds created for Resettlement and Welfare Schemes of the Ministry of Defense.

Acknowledging the role of those who brought the 2G scam to light the Supreme Court said, "Before concluding, we consider it imperative to observe that but for the vigilance of some enlightened citizens who held important constitutional and other positions and discharged their duties in larger public interest and Non Governmental Organizations who have been constantly fighting for clean governance and accountability of the constitutional institutions, unsuspecting citizens and the Nation would never have known how the scarce natural resource spared by Army has been grabbed by those who enjoy money power and who have been able to manipulate the system."



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