# 14 (ADDL.) S.C.R. 657 UNION OF INDIA AND ANR v. ASSOCIATION OF UNIFIED TELECOM SERVICE PROVIDERS OF INDIA AND ORS

- **Citation:** [2011] 14 S.C.R. 657
- **Court:** Supreme Court of India
- **Decided:** 2011-10-11
- **Case number:** Civil Appeal No. 5059 of 2007
- **Bench:** R.V. Raveendran, A.K. Patnaik
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/14-addl-s-c-r-657-union-of-india-and-anr-v-association-of-unified-telecom-27571
- **Pages:** 55

## Headnote

Telecom Regulatory Authority of India Act, 1997:
s. 14(a)(i) - Jurisdiction of Tribunal to decide the terms
and conditions of license finalised by the Central Government
and incorporated in the license agreement including the
definition of Adjusted Gross Revenue - Held: Tribunal has
A
B
c
no jurisdiction to decide upon the validity of the terms and 0
conditions incorporated in the license of a service provider,
but it will have jurisdiction to decide "any" dispute between the
licensor and the licensee on interpretation of the terms and
conditions of the license - Once the licensee had accepted
in the license agreement that the license fee would be a
E
percentage of gross revenue which would be the total revenue
of the licensee company and had also accepted that the
Government would take a final decision not only with regard
to the percentage of revenue share but also the definition of
revenue for this purpose, the licensee could not have
approached the Tribunal questioning the validity of the
definition of Adjusted Gross Revenue in license agreement
F
-
The incorporation of the definition of Adjusted Gross
Revenue in the license agreement was part of the terms
regarding payment which had been decided upon by the
Central Government as a consideration for parting with its
G
rights of exclusive privilege in respect of telecommunication
activities and having accepted the license and availed the
exclusive privilege of the Central Government to carry on
.657
H
658
SUPREME COURT REPORTS (2011) 14 (ADDL.) S.C.R.
A telecommunication activities, the licensees could not have
approached the Tribunal for an alteration of the definition of
Adjusted Gross Revenue in the license agreement - As the
Central Government has already considered the fresh
recommendations of the TRAI and has not accepted the
B same and is not agreeable to alter the definition of Adjusted
. Gross Revenue, the decision of the Central Government on
the point was final under the first proviso apd the fifth proviso
to s. 11 (1) of the Act - Telegraph Act, 1885.
C
s.11(1)(a)- Recommendations of the TRAI under- Held:
TRAI has been conferred with the statutory power to make
recommendations on the terms and conditions of the license
to a service provider and the Central Government is bound
to seek the recommendations of the TRAI on such terms and
conditions at different stages, but the recommendations of the
D TRAI are not binding on the Central Government and the final
decision on the terms and conditions of a license to a service
provider rested with the Central Government - If there is a
difference between the TRAI and the Central Government with
regard to a particular term or condition of a license, the
E recommendations of the TRAI will not prevail and instead the
decision of the Central Government will be final and binding.
s.11(1)(b), (c), (d)- Recommendations of the TRAI under
- Held: The functions of the TRAI under clause (b) of subF section (1) of s.11 of the TRAI Act are not recommendatory.
s.11(1)(a) and s.11(1)(b) -
Distinction between -
Discussed.
s.14(a)(i) - Stage when dispute can be raised regarding
G the computation of Adjusted Gross Revenue made by the
licensor - Held: The dispute can be raised by the licensee,
after the license agreement has been entered into and the
appropriate stage when the dispute can be raised is when a
particular demand is raised on the licensee by the licensor -
H When such a dispute is raised against a particular demand,
UNION OF INDIA v. ASSOCIATION OF UNIFIED TELECOM
659
SERVICE PROVIDERS OF l~JDIA
the Tribunal will have to go into the facts and materials on the
A
basis of which the demand is raised and decide whether the
demand is in accordance with the license agreement and in
particular the definition of Adjusted Gross Revenue in the
license agreement and can also interpret the terms and
conditions of the license agreement.
B
Appeal: Whether after dismissal of appeal of the Union
of India against the order of the Tribunal by

## Text

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(2011] 14 (ADDL.) S.C.R. 657
UNION OF INDIA AND ANR.
v.
ASSOCIATION OF UNIFIED TELECOM SERVICE
PROVIDERS OF INDIA AND ORS.
(Civil Appeal No. 5059 of 2007)
OCTOBER 11, 2011
[R.V. RAVEENDRAN AND A.K. PATNAIK, JJ.]
Telecom Regulatory Authority of India Act, 1997:
s. 14(a)(i) - Jurisdiction of Tribunal to decide the terms
and conditions of license finalised by the Central Government
and incorporated in the license agreement including the
definition of Adjusted Gross Revenue - Held: Tribunal has
A
B
c
no jurisdiction to decide upon the validity of the terms and 0
conditions incorporated in the license of a service provider,
but it will have jurisdiction to decide "any" dispute between the
licensor and the licensee on interpretation of the terms and
conditions of the license - Once the licensee had accepted
in the license agreement that the license fee would be a
E
percentage of gross revenue which would be the total revenue
of the licensee company and had also accepted that the
Government would take a final decision not only with regard
to the percentage of revenue share but also the definition of
revenue for this purpose, the licensee could not have
approached the Tribunal questioning the validity of the
definition of Adjusted Gross Revenue in license agreement
F
-
The incorporation of the definition of Adjusted Gross
Revenue in the license agreement was part of the terms
regarding payment which had been decided upon by the
Central Government as a consideration for parting with its
G
rights of exclusive privilege in respect of telecommunication
activities and having accepted the license and availed the
exclusive privilege of the Central Government to carry on
.657
H
658
SUPREME COURT REPORTS (2011) 14 (ADDL.) S.C.R.
A telecommunication activities, the licensees could not have
approached the Tribunal for an alteration of the definition of
Adjusted Gross Revenue in the license agreement - As the
Central Government has already considered the fresh
recommendations of the TRAI and has not accepted the
B same and is not agreeable to alter the definition of Adjusted
. Gross Revenue, the decision of the Central Government on
the point was final under the first proviso apd the fifth proviso
to s. 11 (1) of the Act - Telegraph Act, 1885.
C
s.11(1)(a)- Recommendations of the TRAI under- Held:
TRAI has been conferred with the statutory power to make
recommendations on the terms and conditions of the license
to a service provider and the Central Government is bound
to seek the recommendations of the TRAI on such terms and
conditions at different stages, but the recommendations of the
D TRAI are not binding on the Central Government and the final
decision on the terms and conditions of a license to a service
provider rested with the Central Government - If there is a
difference between the TRAI and the Central Government with
regard to a particular term or condition of a license, the
E recommendations of the TRAI will not prevail and instead the
decision of the Central Government will be final and binding.
s.11(1)(b), (c), (d)- Recommendations of the TRAI under
- Held: The functions of the TRAI under clause (b) of subF section (1) of s.11 of the TRAI Act are not recommendatory.
s.11(1)(a) and s.11(1)(b) -
Distinction between -
Discussed.
s.14(a)(i) - Stage when dispute can be raised regarding
G the computation of Adjusted Gross Revenue made by the
licensor - Held: The dispute can be raised by the licensee,
after the license agreement has been entered into and the
appropriate stage when the dispute can be raised is when a
particular demand is raised on the licensee by the licensor -
H When such a dispute is raised against a particular demand,
UNION OF INDIA v. ASSOCIATION OF UNIFIED TELECOM
659
SERVICE PROVIDERS OF l~JDIA
the Tribunal will have to go into the facts and materials on the
A
basis of which the demand is raised and decide whether the
demand is in accordance with the license agreement and in
particular the definition of Adjusted Gross Revenue in the
license agreement and can also interpret the terms and
conditions of the license agreement.
B
Appeal: Whether after dismissal of appeal of the Union
of India against the order of the Tribunal by Supreme Court,
Union of India could re-agitate the question decided in the
order of Tribunal that the Adjusted Gross Revenue will include
C
only revenue arising from licensed activities and not revenue
from activities outside the license of the licensee - Held:
While dismissing the appeal, express liberty was granted by
Supreme Court to the appellant that al' contentions raised
before it could be urged before the Tribunal -
Therefore,
appellant could urge before the Tribunal all the contentions
D
including the contention that the definition of Adjusted Gross
Revenue as given in the license could not be challenged by
the licensee before the Tribunal and will include all items of
revenue mentioned in the definition of Adjusted Gross
Revenue in the license - Telecom Regulatory Authority of E
India Act, 1997
Telegraph Act: s.4(1), proviso - Held: A license granted
in favour of any person under proviso to sub-section (1) of s.4
of the Act is in the nature of a contract between the Central
F
Government and the licensee - Consequently, th.e terms and
conditions of the license are part of a contract between the
licensor and the licensee - Telecom Regulatory Authority of
India Act, 1997
The National Telecom Policy 1994 provided for fixed
G
license fee which was payable by the service providers
every year. During the period 1994 to 1999, the telecom
licensees made ·representations to the Government. of
India, Ministry of Telecommunications for relief against
H
660 SUPREME COURT REPORTS (2011) 14 (ADDL.) S.C.R.
A the high license fee. The Government of India considered
the representations and offered a new package, known .
as the "National Telecom Policy 1999 - Regime" giving an
option to the licensees to migrate from fixed license fee
to revenue sharing fee. Accordingly, letters dated
s 22.07.1999 were sent to different licensees offering them
a change over to NTP-99 regime.
After receipt of the letter dated 22.07.1999, some of
the service providers took new licenses which provided
C that the licensee would have to pay a certain percentage
of the Gross Revenue as license fee annually. After the
Ministry of Telecommunications finally took the final
decision on the definition of Adjusted Gross Revenue, the
license agreement was amended and signed by the
licensees and the amended license agreement was
D effective from 01.08.1999.
In the year 2003, some of the licensees questioned
the validity of the definition of Adjusted Gross Revenue
'in the license agreement before the Telecom Disputes
E Settlement and Appellate Tribunal. In its order dated
07.07.2006, the Tribunal held that under Section 4 of the
Telegraph Act, the Central Government can take
percentage of the share of gross revenue of a licensee
realised from activities of the licensee under the license
F and, therefore, revenue received by licensee from
activities beyond licensed activities would be outside the
purview of Section 4 of the Telegraph Act; that Section
11 (1 )(a) of the TRAI Act mandates the Central Government
to seek recommendations from the Telecom Regulatory
G Authority (TRAI) on the license fee payable by the licensee
and as no effective constitution had been made by the
TRAI, the matter should be remanded to the TRAI and the
TRAI can consider the matter and send its
recommendations to the Tribunal.
H
UNION OF INDIA v. ASSOCIATION OF UNIFIED TELECOM
·. 661
SERVICE PROVIDERS OF INDIA
The Union of India challenged the said order before A
the Supreme Court in Civil Appeal No. 84 of 2007 under
Section 18 of the TRAI Act. While this Civil Appeal was
pending before the Supreme Court, the TRAI sent its
recommendations on the incorporation of the Adjusted
Gross Revenue which was sought by the Tribunal by its B
order dated 07.07.2006. Accordingly, when Civil Appeal
No. 84 of 2007 came up for hearing before the Supreme
Court on 19.01.2007, the Court took the view that as the
. TRAI had already submitted its recommendations to the
Tribunal, there was no reason to interfere and dismissed c
·the appeal giving liberty to the Union of India to urge all
the contentio.ns raised in the Civil Appeal before the
Tribunal. In its fresh order dated 30.08.2007, the Tribunal
held that its earlier order dated 07.07.2006 having become
final, it cannot be re-opened after the dismissal of Civil 0
Appeal No.84 of 2007 by the Supreme Court and its
finding in the earlier order dated 07.07.2006 that Adjusted
Gross Revenue will include only revenue arising from
licensed activity and not revenue. from activities outside
•
the license cannot be re-agitated by the Union of India. E
The Tribunal in the impugned order considered the
recommendations of the TRAI regarding the heads of
revenue to be included/excluded from the Adjusted Gross
Revenue.
In the instant appeals, the questions which arose for F
consideration were: (i) Whether after dismissal of Civil
Appeal No.84 of 2007 of the Union of India against the
order dated 07.07.2006 of the Tribunal, by the Supreme
Court by order dated 19.01.2007, the Union of India could
re-agitate the question decided in the order dated G
07.Q7.2006 that the Adjusted Gross Reven'tle will include
only revenue arising from licensed activities and not
revenue from activities outside the license of the licensee;
(ii) Whether the TRAI and the Tribunal have jurisdiction
to decide whether the terms and conditions of license H
662
SUPREME COURT REPORTS [2011] 14 (ADDL.) S.C.R.
A which had been finalised by the Central Government and
incorporated in the license agreement including the
definition of Adjusted Gross Revenue; (iii) Whether as a
result of the Union of India not filing an appeal against
the order dated 07.07.2006 of the Tribunal passed in
B favour of some of the licensees, the said order dated
07.07.2006 had not become binding on the Union of India
with regard to the issue that revenue realised from
activities beyond the licensed activities cannot be
included in the Adjusted Gross Revenue; (iv) Whether the
C licensee can challenge the computation of Adjusted
Gross Revenue, and if so, at what stage and on what
grounds.
Disposing of the appeals, the Court
D
HELD: 1. It is clear from the language of the order
dated 19.01.2007 that while dismissing the appeal, the ·
Court gave liberty to the appellant, namely, Union of India,
to urge the contentions raised in Civil Appeal No.84 of
2007 before the Tribunal. Hence, even if it is held that the
E order dated 07.07.2006 of the Tribunal got merged with
the order dated 19.01.2007 of this Court passed in Civil
Appeal No.84 of 200.7, by the express liberty granted by
this Court in the order dated 19.01.2007, Union of India
could urge before the Tribunal all the contentions
F
including the contention that the definition of Adjusted
Gross Reven_ue as given in the license could not be
challenged by the licensee before the Tribunal and will
include all items of revenue mentioned in the definition
of Adjusted Gross Revenue in the license. [Paras 25-26)
G [691-B-D; 693-B]
2.1. A bare perusal of sub-section (1) of Section 4 of
the Telegraph Act shows that the Central Government has
the exclusive privilege of establishing, maintaining and
working telegraphs. This would mean that only the
H Central Government, and no other person, has the right
UNION OF INDIA v. ASSOCIATION OF UNIFIED TELECOM
663
SERVICE PROVIDERS C>F INDIA
·. to carry on telecommunication activities. The proviso to A
sub-section (1) of Section 4 of the Telegraph Act,
however, enables the Central Government to part with
this exclusive privilege in favour of any other person by
granting a license in his favour on such conditions and
in consideration of such payments as it thinks fit. A B
license granted in favour of any person under μroviso to
sub-section (1) of Section 4 of the Telegraph Act is in the
nature of a contract between the Central Government and
the licensee. Consequently, the terms and conditions of
the license including the definition of Adjusted Gross c
Revenue in the license agreement are part of a contract
between the licensor and the licensee. [Paras 28,·29] [697F-G; 698-D-G-H]
State of Orissa and Others v. Harinarayan Jaiswa/ and
Others (1972) 2 SCC 36: 1972 (3) SCR 784; Har Shankar & D
Ors. v. The Deputy Excise & Taxation Commissioner &
Others (1975) 1 SCC 737: 1975 (3) SCR 254; State of
Punjab & Anr. v. Devans Modern Breweries Ltd. & Ors. (2004)
11 SCC 26: 2003 (5) Suppl. SCR 930; Panna Lal v. State
of Rajasthan (1975) 2 SCC 633: 1976 (1) SCR 219 - relied
E
on.
2.2. Section 11 (1 )(a)(ii) of the TRAI Act states that
notwithstanding anything contained in the Telegraph Act,
the
TRAI
shall
have
the
function
to
make F
recommendations, either suo motu or on a request from
a licensor on terms an:i conditions of license to a service
provider. The first proviso, however, states that the
recommendations of the TRAI shall not be binding upon
the Central Government. The second, third, fourth and G
fifth provisos deal with the procedure that has to be
followed by the TRAI and the Central Government with
regard to recommendations of the TRAI. At the end .of fifth
proviso, it is stated that after receipt of further
recommendation, if any, the Central Government shall
take the final decision. These provisions in the TRAI Act H
664
SUPREME COURT REPORTS (2011] 14 (ADDL.) S.C.R.
A show that notwithstanding sub-section (1) of Section 4
of the Telegraph Act vesting exclusive privilege on the
Central Government in respect of telecommunication
activities and notwithstanding the proviso to sub-section
(1) of Section 4 of the Telegraph Act vesting in the Central
B Government the power to decide on the conditions of
license including the payment to be paid by the licensee
for the license, the TRAI has been conferred with the
statutory power to make recommendations on the terms
and conditions of the license to a service provider and
c the Central .Government was bound to seek the
recommendations of the TRAI on such terms and
conditions at different stages, but the recommendations
of the TRAI are not binding on the Central Government
and the final decision on the terms and conditions of a
0
license to a service provider rested with the Central
Government. The legal consequence is that if there is a
difference between the TRAI and the Central Government
with regard to a particular term or condition of a license,
as in the present case, the recommendations of the TRAI
will not prevail and instead the decision of the Central
E Government will be final and binding. [Para 31] [699-E-H;
700-A-C]
2.3. In contrast to this recommendatory nature of the
functions of the TRAI under clause (a) of sub-section (1)
F of Section 11 of the TRAI Act, the functions of the TRAI
under clause (b) of sub-section (1) of Sectiqn 11 of the
TRAI Act are not recommendatory. This will be clear from
the very language of clause (b) of sub-section (1) of
Section 11 of the TRAI Act which states that the TRAI
G shall discharge the functions enumerated under subclauses (i), (ii) and (ix) under clause (b) of sub-section (1)
of Section 11 of the TRAI Act. Under clause (c) of subsection (.1) of Section 11 of.. the TRAI Act, the TRAI
performs the function of levying fees and other charges
H in respect of different services and under clause (d) of
UNION OF INDIA v. ASSOCIATION OF UNIFIED TELECOM
665
SERVICE PROVIDERS OF INDIA
sub-section (1) of Section 11, the Central Government can
A
entrust to the TRAI other f\Jnctions. These functions of
the TRAI under clauses (c) and (d) of sub-section (1) of
Section 11 of the TRAI Act are also not recommendatory
in nature. That the functions of the TRAI under clause (a)
are recommendatory while the fuactions of the TRAI
B
under clauses (b), (c) and (d) are npt recommendatory will
also be clear from the provisos 1st to 5th which refer to
the recommendations of the TRAI under clause (a) of subsection (1) of Section 11 of the TRAI Act and not to
clauses (b), (c) and (d) of sub-section (1) of Section 11 of c
the TRAI Act. The scheme of TRAI Act therefore is that
the
TRAI
being
an
expert
body
discharges
recommendatory functions under clause (a) of subsection (1) of Section 11 of the TRAI Act and discharges
regulatory and other functions under clauses (b), (c) and
D
· (d) of sub-section (1) of Section 11 of the TRAI Act. TRAI
being an expert body, the recommendations of the TRAI
under clause (a) of sub-section (1) of Section 11 of the
TRAI Act have to be given due weightage by the Central
Government but the recommendations of the TRAI are
not binding on the Central Government. On the· other E
hand, the regulatory and other functions under clauses
(b), (c) and (d) of sub-section (1) of Section 11 of the TRAI
Act have to be performed independent of the Central
Government and are binding on the licensee subject to
only appeal in accordance with the provisions of the TRAI
Act. [Para 32] [700-D-H; 701:.:A-O] --
F
2.4, A reading of Section 14 (a)(i) of the TRAI Act
would. show that the Tribunal has the power to adjudicate
any dispute between a licensor and a licensee. A licensor G
has been defined under Section 2(ea) of TRAI Act to mean
the Central Government or the Telegraph Authority who
grants a license under Section 4 of the Telegraph Act and
a licensee has been defined in Section 2(e) of the TRAI
Act to mean any person licensed under sub-section (1)
H
666
SUPREME COURT REPORTS [2011] 14 (ADDL.) S.C.R.
A of Section 4 of the Telegraph Act providing spe"cified
telecommunication services. The word 'means' in
Sections 2(e) and 2(ea) of the TRAI Act indicates that the
definitions of licensee and licensor in Sections 2(e) ard
2(ea) of the TRAI Act are exhaustive and therefore would
B not have any other meaning. A dispute between a
licensor and a licensee referred to in Section 14(a)(i) of
the TRAI Act, therefore, is a dispute after a person has
been granted a license by the Central Government or the
Telegraph Authority under sub-section (1) of Section 4 of
c the Telegraph Act and has become a licensee and not a
dispute before a person becomes a licensee under the
proviso to sub-section (1) of Section 4 of the Telegraph
Act. In other words, the Tribunal can adjudicate the
dispute between a licensor and a licensee only after a
0 person had entered into a license agreement and become
a licensee and the word "any" in Section 14(a) of the TRAI
Act cannot widen the jurisdiction of the Tribunal to decide
a dispute between a licensor and a person who had not
become a licensee. The result is that the Tribunal has no
E jurisdiction to decide upon the validity of the terms and
conditions incorporated in the license of a service
provider, but it will have jurisdiction to decide "any"
dispute between the licensor and the licensee on the
interpretation of the terms and conditions of the license.
[para 33) [701-E-H; 702-A-D]
F
'Principles of Statutory Interpretation' 12th Edition -
referred to.
2.5. Clause (iii) of the letter dated 22.07.1999 of the
G Ministry of Communications to the licensees made it clear
that the license fee was payable with effect from
01.08.1999 as a percentage of gross revenue under the
license and the gross revenue for this purpose would be
total revenue of the licensee company excluding the
H PSTN related call charges paid to DOTIMTNL and service
UNION OF INDIA v. ASSOCIATION OF UNIFIED TELECOM
667
SERVICE PROVIDERS OF INDIA
tax calculated by the licensee on behalf of the A
Government from the subscribers. It was also made clear
in the said clause (iii) that the Government was to take a
final decision after receipt of the TRAl's recommendation
on not only the percentage of revenue share but also the
definition of revenue, In accordance with this clause (iii)
B
the Government took the final decision on the definition
of Adjusted Gross Revenue and incorporated the same
in the license agreement. Once the licensee had accepted
clause (iii} of the letter dated 22.07.1999 that the license
fee would be a percentage of gross revenue which would c
be the total revenue of the licensee company and had
also accepted that the Government would take a fin~:il
decision not only with regard to the percentage of
revenue share but also the definition of revenue for this
purpose, the licensee could not have approached the
0
Tribunal questioning the validity of the definition of
Adjusted Gross Revenue in license agreement on the
ground that Adjusted Gross Revenue cannot include
revenue from activities beyond the license. If th.e wide
definition of Adjusted Gross Revenue so as to include
E
revenue beyond the license was in any way going to
affect the licensee, it was open for the licensees not to
undertake activities for which they do not require license
under clause (4) of the Telegraph Act and transfer these
activities to any other person or firm or company. The
incorporation of the definition of Adjusted Gross Revenue
F
in the license agreement was part of the terms regarding
payment which had been· decided upon by the Central
Government as a consideration for parting with its rights
of exclusive privilege in respect of telecommunication
activities and having accepted the license and availed the
G
exclusive privilege of the Central Government to carry on
telecommunication activities, the licensees could not
have approached the Tribunal for an alteration of the
definition of Adjusted Gross Revenue in the license
agreement. [para 34] [702-E-H; 703-A-E]
H
668
SUPREME COURT REPORTS [2011} 14 (ADDL.) S.C.R.
A
2.5. Regarding the recommendations of the TRAI
under Section 11 (1 )(~)(i) of the TRAI Act, the Tribunal in
its order dated 01.01:2006 has held that the opinion of the
renowned. expert in the accountancy that any other
definition of Adjust~d Gross Revenue woul~ lead to
B reduction of license f~ liability by way of accounting
jugglery was not placed before'the TRAI and as a result
there was no proper and effective consultation with the
TRAI and
th~ weightage that was due to the
recommendations of the TRAI was not given effect to. If
c the Tribunal found that there was no effective
consultation with the TRAI on the opinion of the expert
on accountancy, the Tribunal could have at best, if it had
the jurisdiction to decide the dispute, directed the TRAI
to consider the opinion of the expert on accountancy and
send its recommendations to the Central Government
D and directed the Central Government to consider such
fresh recommendations of the TRAI as provided in the
provisos to section 11 (1) of the TRAI Act. Instead the
Tribunal has .considered the recommendations of the
TRAI and passed the fresh impugned order dated
E 30.08.2007 contrary to the very provisions of Section
11(1)(a) of the TRAI Act and the provisos thereto. At any
rate, as the Central Government has already considered
the fresh recommendations of the TRAI and has not
accepted the same and is not agreeable to alter the
F definition of Adjusted Gross Revenue, the decision of the
Central Government on the point was final under the first
proviso and the fifth proviso to Section 11(1) of the TRAI
Act, 1997. Once a licensee has accepted the terms and
conditions of a license, he cannot question the validity
G of the terms and conditions of the license before the
Court. The TRAI and the Tribunal had no jurisdiction to
decide on the validity of the definition of Adjusted Gross
Revenue in the license agreement and to· exclude certain
items of revenue which were included in the definition of
H Adjusted Gross Revenue in the license agreement
UNION OF INDIA v. ASSOCIATION OF UNIFIED TELECOM
669
SERVICE PROVIDERS OF INDIA
between the licensor and the licensee. [Paras 34, 35] [702A
G-H; 703-A-H; 704-A-C]
Government of A. P. vs. Mis Anabeshahi Wine &
Distilleries Pvt. Ltd (1988) 2 SCC 25; Assistant Excise
Commissioner & Anr. vs. Issac Peter & Ors. (1994) 4 SCC
104: 1994 (2) SCR 67; State of M.P. & Ors. vs. KCT Drinks· B
Ltd. (2003) 4 SCC 748: 2003 (2) SCR 574 - relied on.
Cellular Operators Association of India & Ors. v. Union
of India & Ors. (2003) 3 SCC 186: 2002 (5) Suppl. SCR 222;
Delhi Science Forum and Others v. Union of india (1996) 2 c
SCC 405: 1996 (2) SCR 767; State of UP. v. Devi Dayal
Singh (2000) 3 SCC 5: 2000 (1) SCR 1205; Union of India
v. Tata Teleservices (Mahrashtra) Ltd. (2007) 7 SCC 517:
2007 (9) SCR 285 - held inapplicable.
3. The Tribunal in its order dated 07.07.2006 has not D
just decided a dispute on the interpretation of Adjusted
Gross Revenue in the license, but has decided on the
validity of the definition of Adjusted Gross Revenue in the
license. The Tribunal had no jurisdiction to decide on the
validity of the terms and conditions of the license
E
including the definition of Adjusted Gross Re.venue
incorporated in the license agreement. Hence, the order
dated 07.07.2006 of the Tribunal in so far as it decides that
revenue realized by the licensee from activities beyond
the license will be excluded from Adjusted Gross
F
Revenue dehors the definition of Adjusted Gross
Revenue in the license agreement is without jurisdiction
and is a nullity and the principle of res judicata will not
apply. The order dated 07.07.2006 of the Tribunal was not
binding on the Union of India even in those cases in G
which the Union of India did not file any appeal against
the order dated 07.07.2006 before this Court. [Para 41]
[709-A-F]
Chandrabhai K. Bhoir and Others v. Krishna Arjun Bhoir
and Others (2009) 2 SCC 315: 2008 (15) SCR 652; Chief H
670
SUPREME COURT REPORTS [2011] 14 (ADDL.) S.C.R.
A Justice of A.P. v. L. V.A. Dixitulu (1979) 2 SCC 34: 1979 (1)
SCR 26; Union of India v. Pramod Gupta (2005) 12 SCC 1:
2005 (3) Suppl. SCR 48; National Institute of Technology v.
Niraj Kumar Singh (2007) 2 SCC 481: 2007 (2) SCR 184 -
relied on.
B
4. Section 14(a)(i) of the TRAI Act provides that the
Tribunal can adjudicate any dispute between the licensor
and the licensee. One such dispute can be that the
computation of Adjusted Gross Revenue made by the
licensor and the demand raised on the basis of such
C computation is not in accordance with the license
agreement. This dispute however can be raised by the
licensee, after the license agreement has been entered
into and the appropriate stage when the dispute can be
raised is when a particular demand is raised on the
D licensee by the licensor. When such a dispute is raised
against a particular demand, the Tribunal will have to go
into the facts and materials on the basis of which the
demand is raised and decide whether the demand is in ,'
accordance with the license agreement and in particular
E the definition of Adjusted Gross Revenue in the license
agreement and can also interpret the terms and
conditions of the license agreement. It is apparent from
the order dated 07.07.2006 that instead of challenging any
demands made on them, the licensees have questioned
F the validity of the definition of Adjusted Gross Revenue
in the licenses given to them and the Tribunal has finally
decided in its order dated 30.08.2007 as to what items of
revenue would be part of Adjusted Gross Revenue and
what items of revenue would not be part of Adjusted
G Gross Revenue without going into the facts and materials
relating to the demand on a particular licensee. [para 42)
[709-G-H; 710-A-D]
Isabella Johnson vs. M.A. Susai (Dead) by LRs. (1991)
1 SCC 494: 1990 (2) Suppl. SCR 213; Shyam Tele/ink
H Limited vs. Union of India (2010) 10 SCC 165: 2010 (12) SCR
UNION OF INDIA v. ASSOCIATION OF UNIFIED TELECOM
671
SERVICE PROVIDERS OF INDIA
927; Bharti Cellular Limited vs. Union of India & Ors. (2010) A
10 SCC 174: 2010 (12) SCR 725; K. Vidya Sagar v. State
of UP. and Others (2005) 5 SCC 581; Indian Oil Corporation
Limited v. Collector of Central Excise, Baroda (2007) 13 SCC
803; Kam/a Bakshi v. Khairati Lal (2000) 3 SCC 681: 2000
(2) SCR 773; P. V. George v. State of Kera/a (2007) 3 SCC
B
557: 2007 (1) SCR 1198; Kunhay Ahmed & Ors. v. State of
Kera/a & Anr. (2000) 6 SCC 359: 2000 (1) Suppl. SCR 538;
Supreme Court Employees' Welfare Association v. Union of
India & Anr. (1989) 4 SCC 187: 1989 (3) SCR 488; State of
Manipur v. Thingujam Brojen Meetei (1996) 9 SCC 29: 1996 c
(2) Suppl. SCR 738; Medley Pharmaceuticals Limited v.
Commissioner of Central Excise and Customs (2011) 2 SCC
601: 2011 (1) SCR 7 41 - referred to.
Case Law Reference:
D
1990 (2) Suppl. SCR 213
referred to
Para 8
2008 (15 ) SCR 652
relied on
Para 8
1975 (3) SCR 254
(1988) 2 sec 25
1994 (2) SCR 67
2003 (2) SCR 574
relied on
relied on
relied on
relied on
2003 (5) Suppl. SCR 930
relied on
2010 (12) SCR 927
referred to
2010 (12) SCR 725
referred to
(2005) 5 sec 581
referred to
Para 9,
28,40,
E
Para 9,
40,
Para 9,40
Para 9,40 F
Para 9,
29,40
Para 10,
40
Para 10,
40
Para 12
G
H
672
SUPREME COURT REPORTS [2011] 14 (ADDL.) S.C.R.
A
(2007) 13 sec so3
referred to
Para 12
2002 (5) Suppl. SCR 222 held inappli~able Para
13,24,36
2000 (1) SCR 1205
held inapplicable Para 13,
B
38
·1996 (2) SCR 767
held inapplicable
Para 14,
37
2000 (2) SCR 773
referred to
Para 15
c
2007 (9) SCR 285
held inapplicable
Para 17,
39
2007 (1) SCR 1198
referred to
Para 22
2000 (1) Suppl. SCR 538
referred to
Para 23
D
1989 (3) SCR 488
referred to
Para 23
1996 (2) Suppl. SCR 738
referred to
Para 23
2011 (1) SCR 741
referred to
Para 23
E
1972 (3) SCR 784
relied on
Para 28
1976 (1) SCR 219
relied on
Para 29
1979 (1) SCR 26
relied on
Para 41
F
2005 (3) Suppl. SCR 48
relied on
Para 41
2007 (2) SCR 184
relied on
Para 41
CIVIL APPELLATE JURISDICTION : Civil Appeal No.
5059 of 2007.
G
From the Judgment & Order dated 30.8.2007 of the
Telecom Disputes Settlement & Appellate Tribunal, New Delhi
in Petition No. 7 of 2003.
H
UNION OF INDIA v. ASSOCIATION OF UNIFIED TELECOM 673
SERVICE PROVIDERS OF INDIA
WITH
A
Civil Appeal Nos. 179-180, 363, 1229-1230, 2065, 2479, 311314 & 317-318 of 2008, 1552, 3868 of 2009, 7049, 7062,
7063-7064, 7443, 7446, 7126, 7444, 7445, 9646-9661 of
2010, 2030,2031, 2270, 3245, 5450-5451, 8627-8628, 8625~
8626 of 2011.
B
Meet Malhotra, D.S. Mahra, Abhijat P. Medh, Meenakshi
Arora, Rajiv Mehta, B.V. Bairam Das, Lawyer's Knit & C0, Bina
Gupta, Shiraz Contr(ictor Patodia, Anil Katiyar, B. Krishna
Prasad, Binu Tamta, Arvind Kumar Sharma, Naveen, Arun c
Kumar Beriwal, Sunil Kumar Jain, Sumita Hazarika, Rajan
Narain, Gaurav Kejriwal for the appearing parties.
The Judgment of the Court was delivered by
A.K. PATNAIK, J.
Civil Appeal Nos. 5059 of 2007, 179-180 of 2008. 311-314,
317-318 of 2008, 363 of 2008, 2065 of 2008, 1229-1230 of
. 2008 and 3868 of 2009:
1. These are appeals under Section 18 of the Telecom
Regulatory Authority of India Act, 1997 (for short "the TRAI Act")
against the common judgment and order dated 30.08.2007 of
the Telecom Disputes Settlement and Appellate Tribunal, New
Delhi (for short "the Tribunal") in Petition No. 7 of 2003.
2. The relevant facts very briefly are that with the
introduction of the National Telecom Policy, 1994 liberalizing
D
E
F
the Telecom Sector, telecom licenses were issued to different
service providers. The licenses granted to the service providers
stipulated a fixed license fee, which was payable by the service
G
providers every year. During the period 1994 to 1999, the
licensees defaulted in payment of license fee and made a
representation to the Government of India, Ministry of
Telecommunications for relief against the high license fee for
the survival of the telecom industry. The Government of India
H
674
SUPREME COURT REPORTS [2011) 14 (ADDL.) S.C.R.
A considered the representations and after a number of
deliberations with the licensees offered a new package, known
as the "National Telecom Policy 1999 - Regime" giving an
option to the licensees to migrate from fixed license fee to
revenue sharing fee. Accordingly, letters dated 22.07.1999 were
s sent to different licensees offering them a change over to NTP99 regime, which inter alia stated:
c
D
E
F
G
H
"(i) The cut off date for change over to NTP-99 regime will
be 01.08.1999.
(ii) The licensee will be required to pay one time Entry Fee
and License Fee as a percentage share of gross revenue
under the license. The Entry Fee chargeable will be the
license fee dues payable by existing licensees upto
31.07.1999, calculated upto this date duly adjusted
consequent upon notional extension of effective date as in
para (ix) below, as per the conditions of existing license.
(iii) The license fee as percentage of gross revenue under
the license shall be payable w.e.f. 01.08.1999. The
Government will take a final decision about the quantum
of the revenue share to be charged as license fee after
obtaining recommendations of the Telecom Regulatory
Authority of India (TRAI). In the meanwhile, Government
have decided to fix 15% of the gross revenue of the
Licensee as provisional license fee. The gross revenue for
this purpose would be the total revenue of the licensee
company excluding the PSTN related call charges paid to
DOT/MTNL and service tax collected by the licensee on
behalf of the Government from their subscribers. On receipt
of TRAl's recommendation and Government's final
decision, final adjustment of provisional dues will be
effected depending upon the percentage of revenue share
and the definition of revenue for this purpose as may be
finally decided."
UNION OF INDIA v. ASSOCIATION OF UNIFIED TELECOM
675
SERVICE PROVIDERS OF INDIA [AK. PATNAIK, J.]
3. After receipt of the letter dated 22.07.1999, some of the A
service providers applied and took new licenses which
provided that the licensee will have to pay a certain percentage
of the Gross Revenue as license fee annually. After the
Government of India, Ministry of Telecommunications finally took
the final decision on the definition of Adjusted Gross Revenue,
B
the license agreement was amended and signed by the
licensees and the amend~d license agreement was effective
from 01.08.1999. Clause 19 of the amended license
agreement, which defines Adjusted Gross Revenue, is extracted
he rain~~:
c
"19. D~finition of 'Adjusted Gross Revenue':
19.1 Gross Revenue:
The Gross Revenue shall be inclusive of installation D
charges, late fees, sale proceeds of handsets [or any other
terminal equipment etc.', revenue on account of interest,
dividend, value added services, supplementary services,
access or interconnection charges, roaming charges,
revenue from permissible sharing of infrastructure and any E
other miscellaneous revenue, without any setoff for related
item of expense, etc.
19.2 For the purpose of arriving at the 'Adjusted Gross
Revenue [AGR]' the following shall be excluded from the
Gross Revenue to arrive at the AGR:
F
I.
PSTN related call charges [Access Charges]
actually paid to other eligible/ entitled
telecommunication service providers within
India;
G
II.
· Roaming revenues actually passed on to
other eligible/ entitled telecommunication
service providers and;
H
A
B
c
D
E
F
676
SUPREME COURT REPORTS [2011] 14 (ADDL.) S.C.R.
Ill.
Service Tax on provision of service and
Sales Tax actually paid to the Government if -
gross revenue had included as component
of Sales Tax and Service Tax."
4. In the year 2003, some of the licensees questioned the
validity of the definition of Adjusted Gross Revenue in the
license agreement before the Tribunal and contended that
Adjusted Gross Revenue can only relate to the revenue directly
arising out of telecom operations licensed under Section 4 of
the Indian Telegraph Act, 1885 (for short "the Telegraph Act")
after adjustment of expenses and write offs and revenues
directly not attributable to the licensed telecom activities. They
also contended that miscellaneous and other items including
interest income, and dividend income, value of rebates,
discounts, free calls and reimbursement from USO fund etc.
ought not to be included in the Adjusted Gross Revenue for the
purpose of computation of license fee. The Union of India filed
its reply before the Tribunal contending that the licensees having
unconditionally accepted the migration package and having
taken the benefit of the same are bound by the terms and
conditions of the license agreement and cannot be permitted
to resile from the same. In its order dated 07.07.2006, the
Tribunal rejected the contentions of the Union of India and held
that under Section 4 of the Telegraph Act, the Central
Government can take percentage of the share of gross revenue
of a licensee realised from activities of the licensee under the
license and therefore revenue received by a licensee from
activities beyond licensed activities would be outside the
purview of Section 4 of the Telegraph Act. The Tribunal further
held that Section 11 (1) (a) of the TRAI Act mandates the
G
Central Government to seek recommendations from the
Telecom Regulatory Authority (for short 'the TRAI') on the license
fee payable by the licensee and as no effective constitution had
been made by the TRAI, t.he matter should be remanded to the
i:RAI and the TRAI can consider the matter and send its
H
recommendations to the Tribunal. The Tribunal however made
UNION OF INDIA v. ASSOCIATION OF UNIFIED TELECOM
677
SERVICE PROVIDERS OF INDIA [AK. PATNAIK, J.]
it clear that theTRAI will bear in mind the findings of the Tribunal
A
that revenue of the licensee derived from non-license activities
will not be included in the Adjusted Gross Revenue for the
purpose of determining the license fee p::iyable by the licensee.
'
5. The Union of India, challenged the order dated
8
07.07.2006 of the Tribunal before this Court in Civil Appeal No.
84 of 2007 under Section 18 of the TRAI Act. While this Civil
Appeal was pending before this Court, the TRAI sent its
recommendations on the incorporation of the Adjusted Gross
Revenue which had been sought by the Tribunal by its order
C
dated 07.07.2006. Accordingly, when Civil Appeal No. 84 of
2007 came up for hearing before this Court on 19.01.2007, this
Court took the view that as the TRAI had already submitted its
recommendations to the Tribunal, there was no reason to
interfere and dismissed the appeal giving liberty to the Union
0
of India to urge all the contentions raised in the Civil Appeal
before the Tribunal.
6. When the Tribunal heard the parties on the
recommendations of the TRAI, the Union of India contended
that as this Court had given liberty to urge all the contentions
E
raised in the Civil Appeal before the Tribunal, the Union of India
was entitled to re-open the issue whether the validity of the
definition of Adjusted Gross .Revenue in the license agreement
could be quoestioned before the Tribunal. The licensees, on the
other hand, contended before the Tribunal that as the Civil
F
Appeal;of Union of India has been dismissed by this Court, the
Union of India was not entitled to argue the matter de novo and
the earlier order dated 07.07.2006 of the Tribunal had become
final. In its fresh order dated 30.08.2007 (for short 'the impugned
order') the Tribunal held that its earlier order dated 07.07.2006
G
having become final, it cannot be re-opened after the dismissal
of Civil Appeal No.84 of 2007 by this Court. The Tribunal held
that its finding in the earlier order dated 07.07.2006 that
Adjusted Gross Revenue will include only revenue arising from
licensed activity and not revenue from activities outside the
H
678
SUPREME COURT REPORTS [2011] 14 (ADDL.) S.C.R.
A license cannot be re-agitated by the Union of India.
7.