India's Supreme Court cancels 122 2G spectrum licences granted under former Telecom Minister

New Delhi, Feb 2 (PTI) In a huge embarrassment to the Indian Government and a jolt to the telecom sector, the Supreme Court today cancelled 122 2G licences granted during the tenure of former telecom minister A Raja declaring it as "illegal" and blamed the government's flawed first-come-first served policy. Bringing the curtains down on the controversial allocation by Raja in 2008, the court strongly indicted him over the manner in which he handled the issue of licenses and ordered that the licenses in 22 circles be sold by auction for which the TRAI will make fresh recommendations. A two-judge bench of the apex court comprising justices G S Singhvi and A K Ganguly allowed the impugned licenses to run for four months after which the cancellation order will become operative. The court imposed heavy costs of Rupees 50 million (USD 1.0 mn) on Etisalat DB Telecom Pvt Ltd (Swan Telecom Ltd), Unitech Wireless Group and Tata Teleservices Ltd, who were benefited by a "wholly arbitrary and unconstitutional" action of award of licenses to them and for off-loading their stakes for many thousand crores (One Crore is equal to 10 million) in the name of fresh infusion of equity or transfer of equity. It ordered Loop Telecom Pvt Ltd, S-Tel, Allianz Infratech and Sistema Shyam Tele Services Ltd, who were also beneficiary of the decision, to pay a cost of Rs 5.0 million each (USD 100,000). The apex court said the allocation of of the 2G spectrum under Raja was "wholly arbitrary, capricious and contrary to public interest apart from being violative of the doctrine of equality" to "favour some companies at the cost of the public exchequer". The bench, while pointing out serious lapses by the Department of Telecommunications slammed it and Raja for not heeding to the Prime Minister's advise that "transparency" and "fairness" should be adopted in the allocation of scarce spectrum. It also criticised the TRAI's role in the entire episode saying that the regulator's approach was "lopsided" and "contrary to the decision taken by the Council of Ministers" and its recommendations became a "handle" for Raja who "virtually gifted away the important national asset at throw away prices". Rejecting the Attorney General's arguments that the government's policy decision for private sector participation cannot be scrutinised by the court, the bench cited earlier judgements including the Reliance gas dispute and said that it is the solemn duty of the state to protect the national interest. "National resources must always be used in the interest of the country, and not private interests," it said. The court said that it cannot be denied that TRAI is an expert body but in view of the facts that have emerged in the case "we have no hesitation to record a finding that the recommendations made by TRAI were flawed in many respects and implementation thereof by the DoT resulted in gross violation of the objectives of national policy on telecom, 1999." The Centre adopted a wrong policy of first-come-first served in allocating the "scarce" resource at a "throw away price" to "favour" some corporates, it said. The court said that it had no doubt that if the method of auction had been adopted for grant of licence, which could be the only rational transparent method for distribution of national wealth, the nation would have been enriched by "many thousand crores". "The exercise undertaken by the officers of the DoT between September, 2007 and March 2008, under the leadership of the then telecom minister A Raja was wholly arbitrary, capricious and contrary to public interest apart from being violative of the doctrine of equality," the court said. Detailing the way Raja issued licenses, the court said "Not only this, within few hours of the receipt of the suggestion made by the Prime Minister in his November 2, 2007 letter that keeping in view the inadequacy of spectrum, transparency and fairness should be maintained in the matter of allocation of the spectrum, the Minister rejected the same by saying that it will be unfair, discriminatory, arbitrary and capricious to auction the spectrum to new applicants because it will not give them level playing field". It said Raja took an arbitrary action of advancing the cut off date from October 1, 2007 to September 25, 2007, which was "actually intended to benefit some of the real estate companies who did not have any experience in dealing with telecom services". "He (Raja) simultaneously introduced cut off date as 25.9.2007 for consideration of the applications received for grant of licence despite the fact that only one day prior to this, press release was issued by the DoT fixing 1.10.2007 as the last date for receipt of the applications. "This arbitrary action of the Minister of C&IT (Communication & Information Technology) though appears to be innocuous was actually intended to benefit some of the real estate companies who did not have any experience in dealing with telecom services and who had made applications only on 24.9.2007, i.e. one day before the cut off date fixed by the Minister of C&IT on his own," the bench said. The order came on petitions filed by NGO CPIL and Janata Party President Subramanian Swamy alleging scam in the allocation of spectrum licences by Raja in January, 2008, on which the country's Comptroller and Auditor General (CAG) had assumed a presumptive loss of upto Rs 1,760 billion (USD 35.2 bn). The 122 licences were given by Raja for over Rs 90.0 billion (USD 1.8 billion), while 3G auctions for a smaller number of licences had fetched the government a sum of Rs 690.0 billion (USD 13.8 bn). The companies that are set to lose on account of the cancellation of the licences are Uninor (joint venture between Unitech and Telenor of Norway), Loop Telecom, Sistema Shyam (joint venture between Shyam and Sistema of Russia), Etisalat DB (joint venture between Swan and Etisalat of UAE), S Tel, Videocon, Tatas and Idea. Among the 122 licences issued by Raja in January 2008 on first-come first-served basis, Uninor was alloted 22 pan India licences, Loop 21, Sistema-Shyam 21, Etisalat-DB 15, S Tel 6, Videocon 21, Idea 9 and Tatas 3. PTI