Delhi Science Fortum & Ors Vs. Union of India & Anr [1996] INSC 284 (19 February 1996)
Singh
N.P. (J) Singh N.P. (J) Ahmadi A.M. (Cj) Venkataswami K. (J)
CITATION:
1996 AIR 1356 1996 SCC (2) 405 JT 1996 (2) 295 1996 SCALE (2)218
ACT:
HEAD NOTE:
(With
W.P.(C) Nos. 716/95, 801/95, 818/95, 2/96, 3/96) WITH
(Arising out of Transfer Petition Nos. 304-307 of 1995) National Telecom
Federation of Telecom Emnloyees & Ors. V. Union of India & Ors.
N.P.
SINGH, J The petitioners in different writ petitions have questioned the power
of the Central Government to grant licences to different non-Government
Companies to establish and maintain Telecommunications System in the country
and the validity of the procedure adopted by the Central Government for the
said grant.
In
February 1993, the Finance Minister in his Budget speech announced Government's
intention to encourage private-sector involvement and participation in Telecom
to supplement efforts of Department of Telecommunications especially in
creation of internationally competitive industry. May 13, 1994 National Telecom
policy was announced which was placed in the Parliament saying that the aim of
the policy was to supplement the effort of the Department of Telecommunications
in providing telecommunications services.
Later,
guidelines for induction of private-sector into basic telephone services were
announced and a Committee was set up to draft the tender documents for basic
telephone services under the Chairmanship of G.S.S. Murthy. Ministry of
Communications published the 'Tender Documents for Provision of Telephone
Service'. It specified and prescribed the terms and conditions for the basic
services and it also conceived foreign participation but as a joint venture
prescribing a ceiling on total foreign equity so far the Indian Company was
concerned was not to exceed 49% of the total equity apart from other
conditions.
Pursuant
to the notice inviting tenders, tenders were submitted for different circles,
but before licences could be granted by the Central Government, writ petitions
were filed in different High Courts as well as before this Court.
All
writ petitions filed before different High Courts were transferred to this
Court to be heard together.
Telecommunications
has been internationally recognized as a public utility of strategic
importance. The variety of Telecommunications services that has become
available globally in the last decade is remarkable. It is being realized that
economy is increasingly related to the way this Telecom infrastructure
functions for purpose of processing and transmission of information, which has
acquired central stage in the economic world today. The special aspect about
Telecommunications is inter- connectivity which is known as 'any to any
requirement'.
Because
of the economic growth and commercial changes in different Parts of the world,
need for inter-connectivity means that communication systems have to be
compatible with each other and have to be actually inter-connected. Because of
this, there is a demand even in developing countries to have communication
system on international standards. Even after several decades of the invention
of the telephone system, in almost all countries Telecommunications was the
subject of monopoly supplied with the public network operator normally being
the State owned Corporation or Government Department. Then it was not thought
due to different considerations that such right could be granted to private
sectors denuding the right of the monopoly of the Government to maintain and
run the system of Telecommunications. The developed countries first took
decision in respect of privatization of Telecom which amounted to giving up the
claim of exclusive privilege over such system and this led to the transition
from monopoly to a duopoly policy in many countries. India, although a developing country also
faced a challenge in this sector. By and large it was realized that this sector
needed acceleration because of the adoption of liberalized economic policy for
the economic growth of the country. It appears that the policy makers were
faced with the implications for public welfare vis-a-vis the sector being
capital intensive.
How
the network is well maintained so as it reaches the largest number of people at
a price to be paid by such users which can be held as reasonable? This issue
was also inter- related with the defence and national security of the nation.
Different committees and bodies constituted from time to time examined the
Telecom policy which could be adopted by the nation from different aspects and
angles.
The
counsel appearing in some of the writ petitions questioned the validity and
propriety of the new Telecom Policy itself on the ground that it shall endanger
The national security of the country, and shall not serve the economic interest
of the nation. According to them, telecommunication being a sensitive service
should always be within the exclusive domain and control of the Central
Government and under no situation it should be parted with by way of grant of licences
to non-Government Companies and private bodies. The national policies in
respect of economy, finance, communications, trade, telecommunications and
others have to be decided by the Parliament and the representatives of the
people on the floor of the Parliament can challenge and question any such
policy adopted by the ruling Government. In the case of R.K. Garg etc. etc. v. Union
of India & Ors., (1982) S.C.R. 347 a Constitution Bench of this Court said:
"Another
rule of equal importance is that laws relating to economic activities should be
viewed with greater latitude than laws touching civil rights such as freedom of
speech, religion etc. It has been said by no less a person than Holmes, J. that
the legislature should be allowed some play in the joints, because it has to
deal with complex problems which do not admit of solution through any
doctrinaire or straight jacket formula and this is particularly true in case of
legislation dealing with economic matters, where, having regard to the nature
of the problems required to be dealt with, greater play in the joints has to be
allowed to the legislature. The court should feel more inclined to give
judicial deference to legislature judgment in the field of economic regulation
than in other areas where fundamental human rights are involved." In Morey
v. Dond, 354 US 457 Frankfurter, J said:
"In
the utilities, tax and economic regulation cases, there are good reasons for
judicial self- restraint if not judicial difference to legislative judgment.
The
legislature after all has the affirmative responsibility. The courts have only
the power to destroy, not to reconstruct. When these are added to the
complexity of economic regulation, the uncertainty, the liability to error, the
bewildering conflict of the experts, and the number of times the judges have
been overruled by events-self limitation can be seen to be the path to judicial
wisdom and institutional prestige and stability." What has been said in
respect of legislations is applicable even in respect of policies which have
been adopted by the Parliament. They cannot be tested in Court of Law. The
courts cannot express their opinion as to whether at a particular juncture or
under a particular situation prevailing in the country any such national policy
should have been adopted or not. There may be views and views, opinions and
opinions which may be shared and believed by citizens of the country including
the representatives of the people in the Parliament. But that has to be sorted
out in the Parliament which has to approve such policies.
Privatization
is a fundamental concept underlying the questions about the power to make
economic decisions. What should be the role of the State in the economic
development of the nation? How the resources of the country shall be used? How
the goals fixed shall be attained? What are to be the safeguards to prevent the
abuse of the economic power? What is the mechanism of accountability to ensure
that the decision regarding Privatization is in public interest? All these
questions have to be answered by a vigilant Parliament. Courts have their
limitations because these issues rest with the policy makers for the nation. No
direction can be given or is expected from the courts unless while implementing
such policies, there is violation or infringement of any of the Constitutional
or statutory provision. The new Telecom Policy was placed before the Parliament
and it shall be deemed that Parliament has approved the same. This Court cannot
review and examine as to whether said policy should have been adopted. Of course,
whether there is any legal or Constitutional bar in adopting such policy can
certainly be examined by the court.
The
primary ground of the challenge in respect of the legality of the
implementation of the policy is that Central Government which has the exclusive
privilege under Section 4 of the Indian Telegraph Act, 1885 (hereinafter
referred to as the 'Act') of establishing, maintaining and working telegraphs
which shall include telephones, has no authority to part with the said
privilege to non-Government Companies for the consideration to be paid by such
companies on basis of tenders submitted by them; this amounts to an out and out
sale of the said privilege.
The
expression 'telegraph' has been defined in Section 3(1):
"3(1)
"telegraph" means any appliance, instrument, material or apparatus
used or capable of use of transmission or reception of signs, signals, writing,
images and sounds or intelligence of any nature by wire, visual or other
electromagnetic emissions, Radio waves or Hertzian waves, galvanic, electric or
magnetic means.
Explanation
- "Radio waves" or "Hertzian waves" means electromagnetic
waves of frequencies lower than 3,000 giga- cycles per second propagated in
Space without artificial guide." Section 4 of the Act is as follows:
"4.
(1) Within India the Central Government shall have the exclusive privilege of
establishing, maintaining and working telegraphs:
Provided
that the Central Government may grant a licence, on such conditions and in
consideration of such payments as it thinks fit, to any person to establish,
maintain or work a telegraph within any part of India:
Provided
further that the Central Government may, by rules made under this Act and
published in the Official Gazette, permit, subject to such restrictions and
conditions as it thinks fit, the establishment, maintenance and working- (a) of
wireless telegraphs on ships within Indian territorial waters and on aircraft
within or above India, or Indian territorial waters and (b) of telegraphs other
than wireless telegraphs within any part of India.
(2)
The Central Government may, by notification in the Official Gazette, delegate
to the telegraph authority all or any of its powers under the first proviso to
sub- section (1).
The
exercise by the telegraph authority of any power so delegated shall be subject
to such restrictions and conditions the Central Government may, by the
notification, think fit to impose." There is no dispute that the
expression 'telegraph' as defined in the Act shall include telephones and
telecommunications services. Sub-section (1) of Section 4 on plain reading
vests the right of exclusive privilege of establishing, maintaining and working
telegraphs in the Central Government, but the proviso thereof enables the
Central Government to grant licence, on such conditions and in consideration of
such payments as it thinks fit, to any person to establish, maintain and work
telegraph within any part of India. It is true that the Act was enacted as
early as in the year 1885 and central Government exercised the exclusive
privilege of establishing, maintaining and working telegraphs for more than a
century. But the framers of the Act since the very beginning conceived and
contemplated that a situation may arise when the Central Government may have to
grant a licence to any Person to establish, maintain or work such telegraph
including telephone within any part of India. With that object in view, it was provided and prescribed that licence
may be granted to any person on such conditions and in consideration of such
payments as the Central Government may think fit. If proviso to sub-section (1)
of Section 4 itself provides for grant of licence on condition to be prescribed
and considerations to be paid to any person, then whenever such licence is
granted, such grantee can establish, maintain or work the telephone system in
that part of India. In view of the clear and unambiguous proviso to sub-section
(1) of Section 4, enabling the Central Government to grant licences for
establishment, maintenance or working of telegraphs including
telecommunications, how can it be held that the privilege which has been vested
by sub-section (1) of Section 4 of the Act in the Central Government cannot be
granted to others on conditions and for considerations regarding payments?
According to us the power and authority of the Central Government to grant licences
to private bodies including Companies subject to conditions and considerations
for payments cannot be questioned. That right flows from the same sub-section
(1) of Section 4 which vests that privilege and right in the Central
Government. Of course, there can be controversy in respect of the manner in
which such right and privilege which has been vested in the Central Government
has been parted with in favour of private bodies.
It
cannot be disputed that in respect of grant of any right or licence by the
Central Government or an authority which can be held to be State within the
meaning of Article 12 of the Constitution not only the source of the power has
to be traced, but it has also to be found that the procedure adopted for such
grant was reasonable, rational and inconfirmity with the conditions which had
been announced.
Statutory
authorities have some times used their discretionary power to confer social or
economic benefits on a particular section or group of community. The plea
raised is that the Act vests power in them to be exercised as they 'think fit'.
This is a misconception. Such provisions while vesting powers in authorities
including the Central Government also enjoin a fiduciary duty to act with due
restrain, to avoid 'misplaced philanthropy or ideology'.
Reference
in this connection can be made to the cases:
Roberts
v. Hopewood, (1925) A.C. 578; Prescott v.Birmingham Corporation, (1954)3 All
E.R.698; Taylor & Ors. v. Munrow (1960) 1 All E.R. 455; Bromley London
Borough Council v. Greater London Council
and another, (1982) 1 All E.R. 129.
As
such Central Government while exercising its statutory power under first
proviso to Section 4(1) of the Act, of granting licences for establishment,
maintenance and working of Telecommunications has a fiduciary duty as well.
The
new experiment has to fulfill the tests laid down by courts for exercise of a
statutory discretion. It cannot be exercised in a manner which can be held to
be unlawful and which is now known in administrative law as Wednesbury
principle, stated in Associated Provincial Picture Houses Ltd. v. Wednesbury
Corp, (1947) 2 All E.R. 680. The aforesaid principle is attracted where it is
shown, that an authority exercising the discretion has taken a decision which
is devoid of any plausible justification and any authority having reasonable
persons could not have taken the said decision. In the case of Bromley LBC
(supra) it was said by Lord Diplock:- "Powers to direct or approve the
general level and structure of fares to be charged by the LTE for the carriage
of passengers on its transport system, although unqualified by any express
words in the Act. may none the less be subject to implied limitations when
expressed to be exercisable by a local authority such as the GLC ........ "
As such Central Government is expected to put such conditions while granting licences,
which shall safeguard the public interest and the interest of the nation. Such
conditions should be commensurate with the obligations that flow while parting
with the privilege which has been exclusively vested in the Central Government
by the Act.
A
stand was taken that even if it is assumed that because of the proviso to
sub-section (1) of Section 4, the Central Government can grant licences in
respect of establishing, maintaining or working of telecommunications to Indian
Companies registered under the Indian Companies Act, such power should have
been exercised only after framing of rules under Section 7 of the Act. In
support of this stand, attention was drawn to second proviso to sub- section
(1) of Section 4 which says that 'the Central Government may, by rules made
under this Act' permit subject to such restrictions and conditions as it thinks
fit, the establishment, maintenance and working - (a) of wireless telegraphs on
ships within Indian territorial waters and on aircraft within or above India,
or Indian territorial waters and (b) of telegraphs other than wireless
telegraphs within any part of India.
It was
pointed out that clause (b) of the second proviso to sub-section (1) of Section
4 shall govern the grant of the licence under the first provio to sub-section
(1) of Section 4 as well because both provisos contemplate grant of licence/permit
for telegraphs within any part of India to any person by the Central Gvoernment.
At first blush tghis argument appears to be attarctive, but on closer
examination, it appears that whereas the first proviso to sub-section (1) of
Section 4 contemplates the grant of a licence, second proviso to be same
sub-section (1) of Section 4 speaks about permitting establishment, maintenance
and working of telegraphs other than wireless telegraphs within any part of
India. It need not be pointed out that the concept of grant of licence to establish,
maintain or work a telegraph shall be different from granting Permission under
the second proviso to establish, maintain or to work a telegraph within any
part of India. They do not conceive and contemplate the same area of operation.
It may be relevant to point out that so far clause (b) of second proviso is concerned,
it excludes wireless telegraphs, which restriction has not been prescribed in
the first proviso.
The
second proviso was introduced by Act No.VII of 1914.
From a
copy of the Bill which was introduced in the Council of the Governor General of
India in respect of adding one more proviso to sub-section (1) of Section 4 of
the Act, it appears there was no clause (b). In the Statement of Objects and
Reasons of the said Amendment, it was said that the second proviso was being
introduced, for establishment, maintenance and working of the wireless
telegraphs on ships within Indian territorial waters. However, in the Amending
Act, clause (b) aforesaid was also introduced enabling the Central Government,
by rules to permit, subject to such restrictions and conditions, the
establishment, maintenance and working of telegraphs other than wireless
telegraphs within any part of India. According to us, there is no question of
clause (b) of the second proviso controlling or over-riding in any manner the
first proviso which does not speak of the grant of licence by any rules made
under the said Act.
Section
7 enables the Central Government to make rules consistent with the provisions
of the Act for the conduct of all or any telegraphs established, maintained or
worked by the Government or by persons licensed under the said Act.
Clause
(e) of sub-section (2) of Section 7 prescribes that rules under the said
Section may provide for conditions and restrictions subject to which any
telegraph line, appliance or apparatus for telegraphic communication shall be
established, maintained, worked, repaired, transferred, shifted, withdrawn or
disconnected. there is no dispute that no such rules have been framed as contemplated
by Section 7(2)(e) of the Act. But in that event, it cannot be held that unless
such rules are framed, the Power under sub- section (1) of Section 4 cannot be
exercised by the Central Government. The power has been granted to the Central
Government by the Act itself, and the exercise of that right, by the Central
Government, cannot be circumscribed, limited or restricted on any subordinate
legislation to be framed under Section 7 of the Act. No doubt, it was advisable
on the part of the Central Government to frame such rules when it was so
desired by the Parliament. Clause (e) to subsection (2) of Section 7 was
introduced by Amending Act 47 of 1957. If the conditions and restrictions
subject to which any telegraph - telephone line is to be established,
maintained or worked had been prescribed by the rules, there would have been
less chances of abuse or arbitrary exercise of the said power. That is why by
the Amending Act 47 of 1957 the Parliament required the rules to be framed. But
the question is as to whether specifically vested in it by first proviso to
Section 4(1) of the Act? Even in absence of rules the power to grant licence on
such conditions and for such considerations can be exercised by the Central
Government but then such power should be exercised on well settled principles
and norms which can satisfy the test of Article 14 of the Constitution. If
necessary for the purpose of satisfying as to whether,the grant of the licence
has been made strictly in terms of the proviso complying and fulfilling the
conditions prescribed, which can be held not only reasonable, rational, but
also in the public interest can be examined by courts. It need not be impressed
that an authority which has been empowered to attach such conditions, as it
thinks fit, must have regard to the relevant considerations and has to
disregard the irrelevant ones. The authority has to genuinely examine the
applications on its individual merit and not to promote a purpose alien to the
spirit of the Act. In this background, the courts have applied the test of a
reasonable man i.e. the decision should not be taken or discretion should not
be exercised in a manner, as no reasonable man could have ever exercised. Many
administrative decisions including decisions relating to awarding of contracts
are vested in a statutory authority or a body constituted under an
administrative order. Any decision taken by such authority or a body can be
questioned primarily on the grounds:
(i) decision
has been taken in bad faith;
(ii) decision
is based on irrational or irrelevant considerations;
(iii) decision
has been taken without following the prescribed procedure which is imperative
in nature.
While
exercising the power of judicial review even in respect of contracts entered on
behalf of the Government or authority, which can be held to be State within
meaning of Article 12 of the constitution courts have to address while
examining the grievance of any petitioner as to whether the decision has been
vitiated on one ground or the other. It is well settled that the onus to
demonstrate that such decision has been vitiated because of adopting a
procedure not sanctioned by law, or because of bad faith or taking into
consideration factors which are irrelevant, is on the person who questions the
validity thereof. This onus is not discharged only by raising a doubt in the
mind of the court, but by satisfying the court that the authority or the body
which had been vested with the power to take decision has adopted a procedure
which does not satisfy the test of Article 14 of the Constitution or which is
against the provisions of the statute in question or has acted with oblique
motive or has failed in its function to examine each claim on its own merit on
relevant considerations. Under the changed scenarios and circumstances
prevailing in the society, courts are not following the rule of judicial
self-restraint. But at the same time all decisions which are to be taken by an
authority vested with such power cannot be tested and examined by the court.
The situation is all the more difficult so far the commercial contracts are
concerned. The Parliament has adopted and resolved a national policy towards
liberalization and opening of the national gates for foreign investors. The
question of awarding licences and contracts does not depend merely on the
competitive rates offered; several factors have to be taken into consideration
by an expert body which is more familiar with the intricacies of that
particular trade. While granting licences a statutory authority or the body so
constituted, should have latitude to select the best offers on terms and
conditions to be prescribed taking into account the economic and social
interest of the nation. Unless any party aggrieved satisfies the court that the
ultimate decision in respect of the selection has been vitiated, normally
courts should be reluctant to interfere with the same.
Tender
documents for provision of telephone service were issued inviting tenders in
respect following Telecom Territorial Circles:
(1)
Andhra Pradesh,
(2)
Andaman & Nicobar
Islands,
(3) Assam,
(4) Bihar,
(5) Gujarat,
(6) Haryana,
(7) Himachal
Pradesh,
(8) Jammu & Kashmir,
(9)
Karnataka,
(10) Kerala,
(11)
Madhya Pradesh,
(12) Maharashtra (including MTNL Bombay),
(13)
North East,
(14) Orissa,
(15) Punjab,
(16)
Rajasthan,
(17) Tamilnadu
(including Madras Metro Distt.),
(18)
Uttar Pradesh,
(19)
West Bengal (including Calcutta Metro Distt.),
(20) Delhi (MTNL Delhi).
In the
Tender Documents the aforesaid Telecom Territorial Circles were put under three
categories as Category A, Category B and Category C service areas. In category
A - A.P. Circle, Delhi (MTNL), Gujarat Circle, Karnataka Circle, Maharashtra
Circle (including Bombay MTNL), T.N. Circle (including Madras Metro District);
in Category B - Haryana Circle, Kerala Circle, M.P. Circle, Punjab Circle,
Rajasthan Circle, U.P. West Circle, U.P. East Circle, W.B. Circle (Including
Calcutta Metro District); and in Category C - Andaman & Nicobar Islands
Circle, Assam Circle, Bihar Circle, H.P. Circle, J&K Circle, N.E. Circle, Orissa
Circle were specified. It was said the DOT/MTNL shall continue to operate
telephone service in the Service Areas mentioned aforesaid. It was further said
that in respect of International, National and Inter-service Areas, Telephone
Traffic will be routed through the Long Distance Network of DOT (Department of
Telecommunications). The eligibility conditions for bidders which were
specified in Clause 2.1 Part I Section II of the Tender Documents:
"2.1
ELIGIBILITY CONDITIONS FOR BIDDERS:
i)
Indian Company: The bidder must be an Indian Company registered, before the
date of submission of bid, under the Indian Companies Act, 1956. However, the
bidder must not be a Government Company as defined in the Indian Companies Act,
1956.( 19 )
ii)
Foreign Equity : Total foreign equity in the bidding Company must not exceed
49% of the total equity.
iii) Networth
: Networth of the bidder Company and its promoters, both Indian and Foreign, as
reflected in the latest audited balance sheet, must not be less than the amount
mentioned in Table I for each category of Service Areas provided that the networth
of a Foreign promoter shall not be taken into account for this purpose if its
share in the equity capital of the bidder Company is less than 10%. A bidder
Company which meets the minimum requirement of networth for a Service Area of
one category may bid for any number of Service Areas of that or lower category.
___________________________________
Total Category of Service Networth of Areas (one or more the Bidder Service
Area) for which bid can be Company submitted.
___________________________________
Rs. 50 Crores C Rs.200 Crores B and C Rs.300 Crores A, B and C
----------------------------------- Networth in foreign currency shall be converted
into Indian Rupees at rates valid for 16.01.1995 as declared by the Reserve
Bank of India.
Networth
is defined as the total in Rupees of paid up equity capital and free reserves.
iv)
Experience : The bidder must have experience as a service provider and a
network operator of a public switched telephone network with a minimum
subscriber base in terms of DELs served (excluding ISDN lines and mobile
telephone lines) as on 01.01.1995 of not less than 500,000 (5 Lakh) lines.
For
the purpose of eligibility with regard to experience of a promoter Company
which has an equity of 10% or more in the bidder Company and which is a service
provider and a network operator of a public switched telephone network, Will
also be added to the experience of the bidder Company.
NOTE:
1.
Subscriber base refers to the Subscriber who are being provided telephone
service.
2.
Telephone service - see Section IV.
V) Any
number of Indian Companies as well as foreign Companies can combine to promote
the bidder Company, However, an Indian, Company cannot be part of more than one
such joint venture. The same restriction applies to a foreign Company.
Clause
2.2 required the bidder company to submit apart from other documents mentioned
therein:
(i)
Copy of Certificate of incorporation of the bidder company from the Registrar
of Campanies.
(ii)
Memorandum and Articles of Association of the bidder company.
(iii)Networth
and experience calculation sheet as per Annexure 1.
(iv)
Annual reports for the last five financial years of the bidder Company as well
as all the promoter Companies which have to be taken into consideration for the
purpose of evaluating networth and experience.
(v) A
comprehensive detailed document containing Company profile, a five year
perspective network plan, a five year financial plan with funding mechanism. Details
of management and technical expertise etc.
(vi)
Copy of the agreement between Indian and foreign Company.
(vii)Approval
of the Government of India for the terms of foreign participation, if already
taken, otherwise copy of the application submitted to the competent authority
of Government of India, in this regard together with proof of submission.
(viii)Certificate
from the competent authority in the Government of India to the effect that the
total foreign equity in the bidder company does not exceed 49%.
(ix)
Documentary evidence in support of the experience claimed and other items
quoted in the bid.
Clause
12 provided for the award of tenders. The relevant part is as follows:
"The
maximum number of Service Areas, a successful bidder can be licensed for, is
dependent upon the total networth of the bidder. A successful bidder can be
awarded X, Y, Z numbers of category A B and C areas respectively if the total networth
calculated as ; per Clause
2.1
(iii) above equals or exceeds Rs.(300X + 200Y + 50Z) Crores.............................
...................................
..................................
TELECOM
AUTHORITY is free to restrict the number of service areas for which any one
Company can be licensed to provide the SERVICE." (emphasis supplied)
Section III contained different conditions including in respect of Security in
Clause 16. Section IV provided the condition relating to technical service. In
the same Tender Documents service tariff was also specified.
Pursuant
to the invitation of tenders aforesaid different Indian Companies including
Indian Companies with foreign equities submitted their tenders.
The
Tender Evaluation Committee comprised of the following members for evaluation
of the bids for basic telephone service:
Shri
B.S. Karandikar, Member (Production).. Chairman Shri S.D. Chaturvedi, Jt.
Secretary (T).. Member Smt. Runu Ghosh, DDG (LF).. Member Shri S.K. Jain, DDG
(TX).. Member Shri M.K. Garg, DDG (VAS).. Member Shri O.P. Choudhary, DDG (BS)...
Member & Convenor All the tenders were placed before the said Committee
which after evaluating all the bids received submitted its report. We are not
concerned with the details of the said report, but it shall be proper to refer
to some salient features which have bearing on some of the issues raised in
these writ petitions. As one of the tenderers M/s HFCL - Bezeq had emerged as
the highest bidder in nine circles, the Committee reported.
"Multiple
H1 Bids from a Single Bidder:
(1)
The Committee observed that in nine Circles, only one bidder viz.
M/s
HFCL Bezeq have emerged as the highest bidder. If all the nine Circles are
awarded to this bidder, it would result in a kind of private monopoly with M/s
HFCL emerging as the single largest dominant Private undertaking in this sector
with over 75% share of additional DELs over a period of three years.
(2)
The main purpose of allowing the private sector to enter into Basic Service was
to complement the efforts of DOT in reaching the target of 'telephone-on-demand'
situation by 1997, covering all villages as early as possible and providing
telecom services of world standard. If we entrust the development of telecom in
so many major Circles to only one bidder and that bidder is not able to deliver
the number of lines promised due to inability in a short time to mobilize the
very large resources required for providing services in so many Circles, then
development of Telecom in the country will be stunted.
(3)
Further, Telecom being a very sensitive sector from the point of view of
national security, private foreign investment should be more evenly distributed
and the predominance of any one foreign country (which would result from one
bidder with a specific foreign partner getting a majority of Circles) should be
avoided.
(4)
Taking all these factors into consideration, imposition of a limit on the
maximum number of Circles to be allotted in 'A' & 'B' category circles,
seems to be called for. The restriction can be as follows:
(i)
Out of category 'A' & `B' circles bid, not more than three circles should
be allotted to any single bidder. This restriction need not apply to category
'C' circles which have evoked poor response from the bidders.
(ii)
Subject to this restriction, the H1 bidder should be given an option to choose
the Circles.
(iii)
The Circles which are vacated by H1 bidder after exercising the above option
will need to be offered to the rest of the bidders in the descending order of
their ranking for matching the package offered by the H1 bidder.
(5)
The Committee felt that the gap between H1 and the H2 bids in such Circles
referred to in para B 4(iii) above is so wide that there appears to be remote
possibility of any of the bidders matching the H1 package. In such a situation,
the Department may have to go in for retendering for these Circles.
However,
the Committee noted that if we invite fresh bids through an open tender for
both technical/commercial as well as financial bids, this process would take a
very long time and the main purpose of allowing the private sector to
participate in the operation of Basic Service, which was to meet the objectives
of the National Telecom Policy would be defeated. The Committee, therefore,
felt that the purpose will be served by inviting fresh financial bids only,
from among those bidders except H1 who have already participated in the
original tender and whose bids have been found technically and commercially
compliant. The Committee observed that for this purpose, an important issue
will be fixation of Reserve Price below which no offer would be accepted. The
normal procedure would have been to keep the levy quoted by the highest bidder
as the reserve price, since the highest bidder has not withdrawn his offer but
would be prevented from accepting these Circles on account of the proposed
restriction placed on the number of Circles to be allotted to any single
bidder. But since all bidders for a particular Circle would have already
refused to match the highest levy before calling for fresh financial bids, no
purpose would be served by keeping that levy as a reserve price." From the
aforesaid recommendations of the Committee it appears that it recommended that
out of category 'A' and 'B' service areas not more than three service areas be
allotted to any bidder; no such restriction was to be applied to category 'b'
service areas which had evoked poor response from the bidders. It also
recommended that while applying the above restrictions the H1 bidder may be
given an option to choose from the service areas where he had offered the
package with highest ranking. It is no doubt little surprising as to how and
why M/s HFCL - Bezeq offered such high bids in nine circles. But it is an
admitted position that in view of the recommendations of the Tender Evaluation
Committee capping system was introduced and aforesaid M/s HFCL - Bezeq was
allotted only three circles i.e. Delhi, U.P. (West) and Haryana so far
categories 'A' and 'B' circles are concerned. In respect of the other 'A' and
'B' circles although the said M/s HFCL - Bezeq was the highest. bidder, the
offer was not accepted because in that event it would have led to a virtual
monopoly, the said M/s HFCL Bezeq having emerged as a single largest dominant
private undertaking.
The
learned counsel appearing in different writ petitions have attacked this policy
of capping. However, in spite of repeated queries, none of them could satisfy
as to how in this process the said M/s HFCL - Bezeq had been a gainer or the
nation has been a loser. It was pointed out that if this capping system would
not have been applied, then a much higher amount would have been received
because of the high tenders submitted by said M/s HFCL - Bezeq for other
circles which on principle of capping was denied to the said Company. It was
also Submitted that in any event, no choice should have been given to the
bidders to select the circles and in respect thereof unilateral decision should
have been taken by the Central Government. As pointed out above, the decision
regarding capping and putting a limit in respect of category 'A' and 'B'
circles bid to not more than three was recommended by the Tender Evaluation
Committee which appears to have been accepted by the Central Government. Unless
it is alleged and proved that the Tender Evaluation Committee's decision in respect
of capping was because of any bad faith or due to some irrational
consideration, according to us the Central Government cannot be held
responsible for that decision. It may be mentioned at the outset that in none
of the writ petitions there is any whisper much less any allegation of malafide
against the members of the Tender Evaluation Committee stating any one of them
had a bias in favour of one bidder or the other or that they have acted on
dictate of any higher authority, abdicating their functions entrusted to them.
Some
of the petitioners urged that policy of capping was applied after receipt of
the tenders. This is not correct. In the Tender Documents as quoted above it
had been clearly stated that 'Telecom Authority is free to restrict the number of
the service areas for which one Company can be licensed to provide the
service'. As such, it cannot be urged that the decision regarding capping
restricting the award of licence in category 'A' and 'B' circles to one biddar
to three was taken with some ulterior motive or purpose, not being one of the
terms specified and prescribed in the tender documents.
It was
also pointed out in respect of M/s HFCL- Bezeq that its networth was shown at
Rs.4,622 crores, but the break up of the networth of different Companies which
are the partner Companies thereof, it shall appear that one foreign Company
holding only 26% equity share has shown networth of Rs.4,1116 crores i.e.
89.05% whereas the Indian Company Consortium Leader HFCL having equity share of
44% has shown its networth was Rs.62 crores i.e. 1.34%. As already pointed out
above clause 2.2 of Section II of Part I of tender documents required the
bidder Company to produce the copy of the agreement between the Indian and
Foreign Company including the approval of the Government of India for the terms
of foreign participation and certificate from the competent authority in
Government of India to the effect that total foreign equity in the bidder
Company does not exceed 49%. It was stated during the hearing of writ petitions
on behalf of the aforesaid M/s HFCL - Bezeq that it had produced the copy of
certificate of incorporation of the said Company from the Registrar of
Companies including Memorandum and Articles of Association. The terms and
conditions of tender documents restricted the bidder Company that it shall not
have total foreign equity in excess of 49%. In the instant case, the foreign
Company admittedly does not have foreign equity in excess of 49%. It was also
pointed out on behalf of the respondents that when the tender document
prescribed about the networth of the bidder Company, it did not mean the actual
investment of that amount. If a foreign Company having equity less than 49% has
networth to fulfill the requirement of the bidder Company, its bid had to be
examined by the Tender Evaluation Committee as has been done in the present
case. Counsel appearing for writ petitioners and M/s HFCL - Bezeq were heard on
the question as to whether clauses 2.1 and 2.2 of Section II of the Tender
Documents in respect of Eligibility Conditions had been complied with by
aforesaid M/s HFCL Bezeq. Mr. Venugopal, the learned counsel appearing for the
said respondent pointed out that 30.3.1995 was the date fixed for submission of
the tenders which was later extended to 23.6.1995. He further stated that the
said respondent submitted different documents specified in clause 2.2 of
Section II of the Tender Documents along with the bid and as such there has
been full compliance of clauses 2.1 and 2.2.
None
of the counsel appearing in different writ petitions challenged this statement.
The counsel for writ petitioners did not allege any bias against the Tender
Evaluation Committee suggesting that it has favoured the said M/s HFCL - Bezeq
so far the grant of licence in the three circles mentioned above are concerned.
It can be said that the petitioners in different writ Petitions have primarily
questioned the right and propriety of the Central Government to grant licences
to non-Government Companies. No direct attack was made in respect of procedure
for selection adopted by the Tender Evaluation Committee.
On
behalf of petitioners it was urged that Circle 'C' and North Easter Regions
have been neglected while implementing the National Telecom Policy. Objections
were also raised in respect of rates of charges for I.S.D. and S.T.D. It is not
possible for this Court to issue specific directions on those questions. It
need not be pointed out that whenever a new policy is implemented there are
teething problems. But they have to be sorted out.
On
behalf of the petitioners, it was also submitted that neither-there was any
justification nor any national basis for debarring the Government Company from
submitting their bids. Although it is not necessary for this Court to express
any opinion on that question because according to us that shall amount to a
policy matter, but it can be said that the new Telecom Policy is based on
privatization with foreign participation. Government undertakings like MTNL
were already functioning in Delhi and Bombay and in spite of that it was felt
that telecommunication should be handled by non-Government undertakings with
foreign participation to improve the quality of service and to cover larger
areas. In this background, there is no question of Government undertaking being
ignored or discriminated while awarding the licences in different service
circles.
The
counsel appearing in some of the writ petitions laid great stress on
nor-creation of a separate Telephone Regulatory Authority after amending the
Act and non delegation of the power by the Central Government to such Authority
to supervise the functioning of the new Telecom Policy in the country.
It
appears that almost all the countries of the world who have privatized the
telecommunications, have constituted Regulatory Authorities under she different
enactments. In United Kingdom under the Telecommunications Act, 1984 a
Regulatory Authority has been constituted to secure that the telecommunications
services are provided throughout the United Kingdom and to supervise the
connected issues. Such Authority has to promote the interests of the consumers,
purchasers and other users in the United Kingdom (including in particular those
who are disabled or of pensionable age) in respect of prices charged for and
the quality and variety of, telecommunications services provided. It also
maintains and promotes effective competition between persons engaged in
commercial activities connected with telecommunications in the United Kingdom.
The Authority is also responsible to encourage persons providing
telecommunication services and telecommunication apparatus in the United
Kingdom to compete effectively in the provision of such services and supply of
such apparatus outside the United Kingdom. In United States the Federal Communication
Commission- created by the Communication Act, 1934 is a primary federal
regulator of the communication industry. The Federal Communication Commission
is currently organized into six bureaus. As a general rule the operating
bureaus are authorized to enforce existing Commission decisions and policies.
Wireless Telecommunication Bureau has the responsibility to supervise all
wireless technologies including Cellular services. In Canada the
Telecommunication Act which is the primary statute relating to telecommunication
came into force in 1993 replacing variety of statutes. It contains different
provisions to review the functioning of the telecommunications and vests power
in authorities in respect of supervision and implementation of the said policy.
In Australia, AUSTEL is responsible for regulation of telecommunication
services, equipment and cabling under Telecoms Act, 1991. AUSTEL determines
standards relating to network integrity and safety, compliance with recognized
international standards and end-to-end quality of service.
In
France, General Directorate for Post and Telecommunications, 'DCPT' has the
responsibilities of determining and adapting the economic and technical
framework for post and telecommunications activities, ensuring the conditions
of fair competition among the various competitors in the telecommunications
field. There are other supervisory and advisory bodies assisting the regulation
of the telecommunications. In Japan the Telecommunications Technology Council
has over all responsibility to coordinate the services, with outside
administrative bodies and various manufacturers, users, institutes and other
organizations in establishing the standards for Japan. Similar is the position
in many other countries developed as well as under-developed.
It
appears that the Telecom Regulatory Authority of India Ordinance, 1996 has been
promulgated after the hearing of the writ petitions concluded. From the
preamble of the said Ordinance it appears that object thereof is to establish
the Telecom Regulatory Authority of India tn regulate the telecommunication
services, and for matters connected therewith or incidental thereto. Section 2(i)
defines 'telecommunication service'. Chapter II contains provisions in respect
of the establishment of the Telecom Regulatory Authority of India and
conditions of service in respect of Chairperson and members thereof. The
Chairperson shall be a person who is or has been a Judge of the Supreme Court
or who is or has been the Chief Justice of a High Court. A Member shall be a
person who is holding the post of Secretary or Additional Secretary to the
Government of India or to any equivalent post in the Central Government or the
State Government for a period of three years. The term of the Chairperson has
been fixed at five years from the date on which he enters upon his office. So
far the Member is concerned, he has to hold office for a term of five years
from the date on which he enters upon his office or until he attains the age of
62 years, whichever is earlier. The other conditions have been prescribed in
the said Chapter. Chapter III prescribes the powers and functions of the said
Authority. Section 11 opens with a non-obstante clause saying that
notwithstanding anything contained in the Indian Telegraph Act, 1885, the functions
of the Authority shall be as specified in the said Section including to ensure
technical compatibility and effective inter-relationship between different
service providers, to ensures compliance of licence conditions by all service
providers, to facilitate competition and promote efficiency in the operation of
telecommunication services, to protect the interest of the consumers of the
telecommunication services, to levy fees at such rates and in respect of such
services as may be determined by regulations. Sub-section (2) of Section 11
says:
"Notwithstanding
anything contained in the Indian Telegraph Act, 1885, the Authority may, from
time to time, by order, notify the rates at which the telecommunication. services
within India and outside India shall be provided under this
Ordinance including rates at which messages shall be transmitted to any country
outside India." Sub-section (2) of Section
11 has also a non-obstante clause giving over-riding effects to said
sub-section over anything contained in the Indian Telegraph Act,'1885. In view
of the aforesaid sub-section, the Authority may from time to time by order
notify the rate at which telecommunication services within India and outside India shall be provided. Sub- section (3)
of Section 11 enjoins the Authority not to act against the interest. of the
sovereignty, integrity of India, the
security of the State, friendly relations with foreign States, public order,
decency or morality. In view of Section 12 if the Authority considers it
expedient so to do, it may by order in writing call upon any service provider
at any time to furnish in writing such information or explanation relating to
its affairs as the Authority may require. It can also appoint one or more
persons to make enquiry in relation to the affairs of any service provider.
The
Authority can also direct any of its officers or employees to inspect the books
of accounts or other documents of any service provider. The Authority has been
vested with the powers to issue such directions to service providers 'as it may
consider necessary', for proper functioning by the service provider. Section 13
also reiterates the said power of the Authority by saying that for its
functions under sub-section (1) of Section 11, the Authority can issue such directions
from time to time to service provider as it may consider necessary. Chapter IV
contains provision tn respect of settlement of disputes.
Section
29 provides for penalty if any person violates the directions of the Authority
and Section 30 prescribes for punishment if the offence is alleged to have been
committed by a Company. With the establishment of the Telecom Regulatory
Authority of India, it can be said that an independent telecom Regulatory
Authority is to supervise the functioning of different Telecom service
providers and their activities can be regulated in accordance with the
provisions of the said Ordinance.
Section
V of Tender Documents contains financial Conditions.
Clause
2.0 thereof says:
"TARIFF:
Tariff for the SERVICE provided by the LICENSEE shall not be more than DOT's
Tariff. Tariff is subject to regulation by Telecom Regulatory Authority of
India, as and when such an authority is set up by the Government of
India." The aforesaid condition provides that licensee shall not charge
tariff for service more than DOT's tariff and such tariff shall be subject to
regulation by Telecom Regulatory Authority of India. This condition shall
safeguard the interest of the persons to whom services are provided by the
licensees.
The
new Telecom Policy is not only a commercial venture of the Central Government,
but the object of the policy is also to improve the service so that the said
service should reach the common man and should be within his reach. The
different licensees should not be left to implement the said Telecom Policy
according to their perception. It has rightly been urged that while
implementing the Telecom Policy the security aspect cannot be overlooked. The
existence of a Telecom Regulatory Authority with the appropriate powers is essential
for introduction of plurality in the Telecom Sector. The National Telecom
Policy is a historic departure from the practice followed during the past
century. Since the private sector will have to contribute more to the
development of the telecom network than DOT/MTNL in the next few years, the
role of an independent Telecom Regulatory Authority with appropriate powers
need not be impressed, which can harness the individual appetite for private
gains, for social ends. The Central Government and the Telecom Regulatory
Authority have not to behave like sleeping trustees, but have to function as
active trustees for the public good.
Subject
to the directions given above, the writ and Transferred Cases petitions are
dismissed. However, there shall be no orders as to costs.
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