# ASSOCIATION OF UNIFIED TELE SERVICES PROVIDERS & OTHERS v. UNION OF INDIA

- **Citation:** [2014] 9 S.C.R. 780
- **Court:** Supreme Court of India
- **Decided:** 2014-04-17
- **Case number:** Civil Appeal No. 4591 of 2014
- **Bench:** K.S. Radhakrishnan, Vikramajit Sen
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/association-of-unified-tele-services-providers-others-v-union-of-india-30228
- **Pages:** 58

## Headnote

Telecom Regulatory Authority of India, Service Providers
C (Maintenance of Books of Accounts and other Documents)
Rules, 2002 - r.3 and 5 - Telecom Regulatory Authority of
India Act, 1997 - Scope and ambit of the powers and duties
of the Comptroller and Auditor General of India (GAG), the
Telecom Regulatory Authority of India (TRAI) and the
D Department of Telecommunications (Do T) in relation to proper
computation and quantification of Revenue in determining the
licence fee and spectrum charges payable to Union of India
under Unified Access Services (UAS) Licences entered into
between Do T and the private service providers - Powers of
E the GAG to conduct the revenue audit of all accounts drawn
by the licensees - Accounts of the licensee, in relation to the
revenue receipts, if can be said to be the accounts of the
Central Government and, thus, subjl3ct to a revenue audit, as
per s. 16 of the 1971 Act -
Legal position explained -
F
Comptroller and Auditor General's (Duties, Powers and
Conditions of Service) Act, 1971 - ss. 13, 16 and 18 -
Constitution of India, 1950 - Arts. 148, 149 and 266.
Dismissing the appeals filed by the Service Providers
and allowing the appeals filed by the DoT and others, the
G Court
HELD:1. The licensee is obliged to maintain the
accounts relating to licence agreement and particularly the
revenue received by it because it has to share the revenue
H
780
ASSOCIATION OF UNIFIED TELE SERVICES PROVIDERS v. 781
UNION OF INDIA
with the Union, which has to be calculated with reference
A
to the Gross Revenue Receipts. [Para 29] [813-D]
2. Duties and powers conferred by the Constitution
on the CAG under Article 149 cannot be taken away by
the Parliament, being the basic structure of our
8
Constitution,
like
Parliamentary
democracy,
independence of judiciary, rule of law, judicial review,
unity and integrity of the country, secular and federal
character of the Constitution, and so on. [Para 34] [8178, C]
c
3. When the executive deals with the natural
resources, like spectrum, which belongs to the people of
this country, Parliament should know how the nation's
wealth has been dealt with by the executive and even by
the UAS Licence holders and the quantum of the
D
Revenue generated out of the use of the spectrum and
whether the same has been properly assessed, collected
and accounted for by the Union and the UAS Licence
holders. When nation's wealth, like spectrum, is being
dealt with either by the Union, State or its
E
instrumentalities or even the private parties, like service
providers, they are accountable to the people and to the
Parliament. Parliamentary democracy also envisages,
inter alia, the accountability of the Council of Ministers to
the Legislature. [Para 37] [818-E-G]
F
4. Parliament has an obligation to ascertain whether
the entire receipts by way of licence fee, spectrum
charges, have been realized by the Union of India and
credited to the Consolidated Fund of India (CFI). Article
266 says, all the public moneys received by or on behalf G
of the Government of India shall be credited to CFI. CAG
can carry out examination into the economy, efficacy and
effectiveness with which the Union of India has used its
resources, and whether it has realized the entire licencee
fee, spectrum charges and also whether the Union of H
782
SUPREME COURT REPORTS
(2014] 9 S.C.R.
A India has correctly carried out the audit under Clauses
22.5 and 22.6 of UAS Licence Agreement. CAG's
examination of the accounts of the Service Providers in
a Revenue Sharing Contract is extremely important to
ascertain whether there is an unlawful gain to the Service
B Provider and an unlawful loss to the Union of India,
because the revenue generated out of that has to be
credited to the Consolidated Fund of India. [Para 41] [820A-D]
5. "Spectrum", a natural resource, belongs to the
C people, therefore, people of this country, through
Parliament should know how its natural resources have
been dealt with by the Union, State or its instru

## Text

_Characters 0–39,723 of 102,981. This is a partial read: ask again with offset=39723 for what follows._

A
B
[2014] 9 S.C.R. 780
ASSOCIATION OF UNIFIED TELE SERVICES
PROVIDERS & OTHERS
V.
UNION OF INDIA
(Civil Appeal No. 4591 of 2014)
APRIL 17, 2014
[K.S. RADHAKRISHNAN AND VIKRAMAJIT SEN, JJ.]
Telecom Regulatory Authority of India, Service Providers
C (Maintenance of Books of Accounts and other Documents)
Rules, 2002 - r.3 and 5 - Telecom Regulatory Authority of
India Act, 1997 - Scope and ambit of the powers and duties
of the Comptroller and Auditor General of India (GAG), the
Telecom Regulatory Authority of India (TRAI) and the
D Department of Telecommunications (Do T) in relation to proper
computation and quantification of Revenue in determining the
licence fee and spectrum charges payable to Union of India
under Unified Access Services (UAS) Licences entered into
between Do T and the private service providers - Powers of
E the GAG to conduct the revenue audit of all accounts drawn
by the licensees - Accounts of the licensee, in relation to the
revenue receipts, if can be said to be the accounts of the
Central Government and, thus, subjl3ct to a revenue audit, as
per s. 16 of the 1971 Act -
Legal position explained -
F
Comptroller and Auditor General's (Duties, Powers and
Conditions of Service) Act, 1971 - ss. 13, 16 and 18 -
Constitution of India, 1950 - Arts. 148, 149 and 266.
Dismissing the appeals filed by the Service Providers
and allowing the appeals filed by the DoT and others, the
G Court
HELD:1. The licensee is obliged to maintain the
accounts relating to licence agreement and particularly the
revenue received by it because it has to share the revenue
H
780
ASSOCIATION OF UNIFIED TELE SERVICES PROVIDERS v. 781
UNION OF INDIA
with the Union, which has to be calculated with reference
A
to the Gross Revenue Receipts. [Para 29] [813-D]
2. Duties and powers conferred by the Constitution
on the CAG under Article 149 cannot be taken away by
the Parliament, being the basic structure of our
8
Constitution,
like
Parliamentary
democracy,
independence of judiciary, rule of law, judicial review,
unity and integrity of the country, secular and federal
character of the Constitution, and so on. [Para 34] [8178, C]
c
3. When the executive deals with the natural
resources, like spectrum, which belongs to the people of
this country, Parliament should know how the nation's
wealth has been dealt with by the executive and even by
the UAS Licence holders and the quantum of the
D
Revenue generated out of the use of the spectrum and
whether the same has been properly assessed, collected
and accounted for by the Union and the UAS Licence
holders. When nation's wealth, like spectrum, is being
dealt with either by the Union, State or its
E
instrumentalities or even the private parties, like service
providers, they are accountable to the people and to the
Parliament. Parliamentary democracy also envisages,
inter alia, the accountability of the Council of Ministers to
the Legislature. [Para 37] [818-E-G]
F
4. Parliament has an obligation to ascertain whether
the entire receipts by way of licence fee, spectrum
charges, have been realized by the Union of India and
credited to the Consolidated Fund of India (CFI). Article
266 says, all the public moneys received by or on behalf G
of the Government of India shall be credited to CFI. CAG
can carry out examination into the economy, efficacy and
effectiveness with which the Union of India has used its
resources, and whether it has realized the entire licencee
fee, spectrum charges and also whether the Union of H
782
SUPREME COURT REPORTS
(2014] 9 S.C.R.
A India has correctly carried out the audit under Clauses
22.5 and 22.6 of UAS Licence Agreement. CAG's
examination of the accounts of the Service Providers in
a Revenue Sharing Contract is extremely important to
ascertain whether there is an unlawful gain to the Service
B Provider and an unlawful loss to the Union of India,
because the revenue generated out of that has to be
credited to the Consolidated Fund of India. [Para 41] [820A-D]
5. "Spectrum", a natural resource, belongs to the
C people, therefore, people of this country, through
Parliament should know how its natural resources have
been dealt with by the Union, State or its instrumentalities
or even by UAS licence holders. Instances are not rare,
where even the Executive, at times, acts hand in glove
D with licence holders, who deal with the natural resources,
hence, necessity of proper parliamentary control over the
resources. [Para 42] [820-E, F]
6. Section 16 of the Act of 1971 deals with audit of
E receipts of Union or States. The expression "to audit all
receipts" therein does not distinguish the revenue
receipts and non-revenue receipts. For the purpose of
audit of receipts, the duty of the CAG extends "to such
examination of the accounts as it thinks fit and report
F thereon". Section 13 read along with Section 16 makes
it clear that the expression "to audit all transactions" so
also "audit of all receipts", payable into Consolidated
Fund of India would take in not only the accounts of the
Union and of the State and of any other authority or body
G as may be prescribed or under any law made by the
Parliament but also to audit all transactions which Union
and State have entered into which has a nexus with
Consolidated Fund, especially when the receipts have
direct connection with Revenue Sharing. [Paras 44 & 45]
H [821-G; 822-C-E]
ASSOCIATION OF UNIFIED TELE SERVICES PROVIDERS v. 783
UNION OF INDIA
7. Revenue share receivable by the Union being a
A
receipt payable into the Consolidated Fund" by virtue of
Section 16 and 18(1 )(b) of 1971 Act, in relation to such
receipts, the CAG is entitled to seek the records
maintained in terms of Rule 3 of Rules of 2002 and the
records maintained under clauses 22.1 and 22.2 of the
B
licence agreement. Unless the underlying records which
are in the exclusive custody of the Service Providers are
examined, it would not be possible to ascertain whether
the Union of India, as per the agreement, has received its
full and complete share of Revenue, by way of licence fee c
and spectrum charges. [Para 48] [824-A-C]
8. Section 13, 16 and 18 of the 1971 Act have to be
read along with Article 149 of the Constitution and
Sections 3 and 5 of the TRAI Act, 1997 and, if so read, CAG
is entitled to seek the records in terms of Rule 3 of TRAI
D
Rules 2002 read with Clause 22 of the Licence
Agreement. CAG, in that process, is not actually auditing
the accounts of the UAS Service providers as such, but
examining all the receipts to ascertain whether the Union
is getting its due share by way of licence fee and
E
spectrum charges, which it is legitimately entitled to, by
way of Revenue Sharing. By adopting that process, CAG
is not carrying out any statutory audit of the accounts of
the service providers, but for the limited purpose of
ascertaining whether the Union is getting its legitimate
F
share by way of "Revenue Sharing". Service providers
are, therefore, bound to provide all the records and
documents called for by the CAG. [Para 50} [824-H; 825A-D]
9. CAG has a duty to examine and satisfy himself that
all the rules and procedures in that behalf are being met
not only by the Union but also the service providers as
a whole, since both, the Union, as well as the service
providers, are dealing with the natural resources. CAG's
G
H
784
SUPREME COURT REPORTS
[2014] 9 S.C.R.
A function is, therefore, separate and independent, which
is not similar to the audit conducted by the DoT under
Clause 22.5 or special audit under Clause 22.6. CAG's
function is only to ascertain whether the Union of India
I
is getting its due share, while parting with the right to deal
B with its exclusive privilege to the Service Providers, who
are dealing with a national wealth, to that extent, Rule
5(1 )(ii) has to be read down, but the service providers are
bound to make available all the books of accounts and
other documents maintained by them under Rule 3, so
c as to ascertain whether the Union of India is getting its
full share of revenue. [Para 51] [825-D-G]
10. The impugned communications dated 16.3.2010
and 10.5.2010 were issued by DoT and the Director General
of Audit, Post & Telecommunications respectively, to the
D UAS license holders. Both the communications would
indicate that they were sent for seeking cooperation for the
Audit of Telecom service providers by the CAG, which is
neither an audit by the department within the meaning of
Clause 22.5, nor a special audit under Clause 22.6 of UAS
E Licence Agreement. Both the communications dated
16.3.2010 and 10.5.2010 clearly indicate that CAG intends
to conduct the Audit, since there is "revenue sharing"
between the Union of India and the UAS licence holders
and the revenue generated will have to be credited to the
F Consolidated Fund of India. [Paras 62, 66] [831-C, D; 835E]
11. An audit to be conducted by CAG would not
depend upon the "formation of opinion" by the DoT that
G the statements or accounts submitted to it were
inaccurate or misleading, which would deprive the
statutory and constitutional powers conferred on the CAG
to conduct the audit or enquiry or inspection. The
impugned order of the Tribunal was an encroachment
upon the constitutional and statutory power conferred on
H CAG under Articles 148, 149 of the Constitution as well
ASSOCIATION OF UNIFIED TELE SERVICES PROVIDERS v. 785
UNION OF INDIA
as Section 16 of the 1971 Act read with Rule 5 of the TRAI
A
Rules 2002 and the licensing provisions. Clauses 22.5 and
22.6 of the UAS Licence Agreement are not meant for an
audit to be conducted by CAG or TRAI, but meant for an
audit by the DoT. The Tribunal also committed an error
in holding that the "formation of opinion" under clause . B
22.5, that the statements or accounts submitted by the
Licensee are inaccurate or misleading, is jurisdictional
fact, referring to the jurisdiction of DoTICAG to conduct
audit under clause 22.5 or a special audit under clause
22.6. 'Formation of opinion' under clause 22.5 is a c
subjective opinion of Licensor or els.e the power to
conduct any form of audit under clause 22.5 and 22.6
would be lost and Licensor has to go on convincing the
licensee that the statements or accounts submitted by the
Licensee are inaccurate and misleading. [Paras 67, 69]
0
[836-D-F; 837-D-F]
Centre· for Public Interest Litigation and others v. Union
of India and others (2012) 3 SCC 1: 2012 (3) SCR 147;
Natural Resources Allocation, in Re: Special Reference No. 1
of 2012, 2012 (2012) 10 sec 1: 2012 (9) SCR 311;
E
Secretary, Ministry of Information and Broadcasting,
Government of India and others v. Cricket Association of
Bengal and others 1995 (2) SCC 161: 1995 (1) SCR 1036;
Reliance Natural Resources Limited v. Reliance Industries
Limited (2010) 7 sec 1: 2010 (5) SCR 704; M.K.
F
Ranganathan v. Government of Madras (1955) 2 SCR 374;
Rohit Pulp and Paper Mills v. Collector of Central Excise,
Baroda (1990) 3 SCC 447: 1990 (2) SCR 797; Ahmedabad
Pvt. Primary Teachers' Association v. Administrative Officer
and others (2004) 1 SCC 755: 2004 (1) SCR 470; S.R.
G
Chaudhuri v. State of Punjab and others (2001) 7 SCC 126:
2001 (1 ) Suppl. SCR 621; Kihoto Hollohan v. Zachilfhu and
others (1992) Suppl. 2 SCC 651: 1992 (1) SCR 686; S.
Subramaniam Balaji v. State of Tamil Nadu and others (2013)
9 SCC 659; Arvind Gupta v. Union of India and others (2013)
H
786
SUPREME COURT REPORTS
(2014] 9 S.C.R.
A 1 SCC 393: 2012 (8 ) SCR 1058; Arun Kumar Agrawal v.
Union of India and others (2013) 7 sec 1: 2013 (3) SCR 508;
People's 'Union For Civil Liberties (PUCL) and another v.
Union of India and another (2003) 4 sec 399: 2003 (2) SCR
1136; Rajesh Kumar and Others v. Deputy CIT and Others
~ (2007) 2 SCC 181: 2006 (8) Suppl. SCR 284; Sahara India
(Firm) Lucknow v. Commissioner of Income Tax, Central-I and
Another (2008) 14 SCC 151: 2008 (6) SCR 427; Anisminic
Ltd. v. Foreign Compensation Commission 1969 (1) All ER
208 - referred to.
c
Case Law Reference:
2012 (3) SCR 147
referred to
Para 3
2012 (9) SCR 311
referred to
Para 3
D
1995 (1) SCR 1036
referred to
Para 5
2010 (5) SCR 704
referred to
Para 5
(1955) 2 SCR 374
referred to
Para 15
E
1990 (2) SCR 797
referred to
Para 15
2004 (1) SCR 470
referred to
Para 15
2001 (1) Sl!ppl. SCR 621 referred to
Para 18
1992 (1) SCR 686
referred to
Para 18
F
(2013) 9 sec 659
referred to
Para 35
2012 (8) SCR 1058
referred to
Para 36
2013 (3) SCR 508
referred to
Para 36
G
2003 (2) SCR 1136
referred to
Para 40
2006 (8) Suppl. SCR 284 referred to
Para 59
2008 (6) SCR 427
referred to
Para 59
H
1969 (1) All ER 208
referred to
Para 59
ASSOCIATION OF UNIFIED TELE SERVICES PROVIDERS v. 787
UNION OF INDIA
CIVIL APPELLATE JURISDICTION :Civil Appeal No.
A
4591 of 2014.
From the Judgment and Order dated 06.01.2014 of the
High Court of Delhi at New Delhi in Civil Writ Petition No. 3673
of 2010.
WITH
C. A. No. 4592 of 2014 and
C. A. Nos. 10748 & 10749 of 2011
Harish N. Salve, Gopal Jain, Bina Gupta, Kaushik Laik,
Abhay A. Jena, Anuj Dhir, Shally Bhasin, Lakshmeesh S.
Karnath, Paras Anand, Chantanya Safaya (for E. C. Agrawala)
for the Appellants.
Paras Kuhad, ASG, Jitin Chaturvedi, Sarfaraj Ahmed, N.
K. Jha, Abhik Chimni, Swati Vijaywargiya, Gaurang Kanth,
Rahul Kumar, Savyasachi Sahai (for D. S. Mahra), Sanjay
Kapur, Anmol Chandan, Priyanka Das, Lekha Vishwanath for
B
c
D
the Respondents.
E
The Judgment of the Court was delivered by
K.S. RADHAKRISHNAN, J.
CIVIL APPEAL NO. 4591 OF 2014
[Arising out of SLP (C) No. 1804 of 20141
AND
CIVIL APPEAL NO. 4592 OF 2014
[Arising out of SLP (C) No. 2925 of 20141
1 . Leave granted.
F
G
2. We are in these appeals concerned with the scope and
H
788
SUPREME COURT REPORTS
[2014] 9 S.C.R.
A ambit of the powers and duties of the Comptroller and Auditor
General of India (CAG), the Telecom Regulatory Authority of
India (TRAI) and the Department of Telecommunications (DoT)
in relation to the proper computation and quantification of
Revenue in determining the licence fee and spectrum charges
B payable to Union of India under Unified Access Services (UAS)
Licences entered into between DoT and the private service
providers.
3. We have to examine the above-mentioned issue in the
light of the various constitutional, statutory and licensing
C provisions, bearing in mind the fact that we are dealing with
"spectrum", which is universally treated as a scarce finite and
renewable natural resource, the intrinsic utility of that natural
resource has been elaborately considered by this Court in
Centre for Public Interest Litigation and others v. Union of
D India and others (2012) 3 SCC 1 and in the Presidential
Reference, the opinion of which has been expressed in Natural
Resources Allocation, in Re: Special Reference No.1 of 2012
decided on September 27, 2012, reported in (2012) 10 SCC
1. This Court reiterated that the spectrum as a natural resource
E belongs to the people, though State legally owns it on behalf
of its people because State benefits immensely from its value.
This Court in Centre for Public Interest Litigation and others
(supra) referring to the intrinsic worth of spectrum stated as
follows:
F
G
H
"75. The State is empowered to distribute natural
resources. However, as they constitute public property/
national asset, while distributing natural resources the
State is bound to act in consonance with the principles of
equality and public trust and ensure that no action is taken
which may be detrimental to public interest. Like any other
State action, constitutionalism must be reflected at every
stage of the distribution of natural resources. In Article
39(b) of the Constitution it has been provided that the
ownership and control of the material resources of the
ASSOCIATION OF UNIFIED TELE SERVICES PROVIDERS v. 789
UNION OF INDIA [K.S. RADHAKRISHNAN, J.]
community should be so distributed so as to best subserve
A
the common good, but no comprehensive legislation has
been enacted to generally define natural resources and a
framework for their protection. Of course, environment laws
enacted by Parliament and State Legislatures deal with
specific natural resources i.e. forest, air, water, coastal
B
zones, etc.
76 ................ The ownership regime relating to natural
resources can also be ascertained from international
conventions and customary international law, common law
C
and national constitutions. In international law, it rests upon
the concept of sovereignty and seeks to respect the
principle of permanent sovereignty (of peoples and
nations) over (their) natural resources as asserted in the
17th Session of the United Nations General Assembly and
then affirmed as a customary international norm by the
International Court of Justice in the case of Democratic
Republic of Congo v. Uganda .... ....... .
D
77. Spectrum has been internationally accepted as a
scarce, finite and renewable natural resource which is
E
susceptible to degradation in case of inefficient utilisation.
It has a high economic value in the light of the demand for
it on account of the tremendous growth in the telecom
sector. Although it does not belong to a particular State,
right of use has been granted to the States as per
F
international norms.
78. In India, the courts have given an expansive
interpretation to the concept of natural resources and have
from time to time issued directions, by relying upon the
provisions contained in Articles 38, 39, 48, 48-A and 51G
A(g) for protection and proper allocation/distribution of
natural resources and have repeatedly insisted on
compliance with the constitutional principles in the process
of distribution, transfer and alienation to private persons.
H
790
SUPREME COURT REPORTS
[2014] 9 S.C.R.
A
85. As natural resources are public goods, the doctrine of
equality, which emerges from the concepts of justice and
fairness, must guide the State in determining the actual
mechanism for distribution of natural resources. In this
regard, the doctrine of equality has two aspects: first, it
B
regulates the rights and obligations of the State vis-a-vis
its people and demands that the people be granted
equitable access to natural resources and/or its products
and that they are adequately compensated for the transfer
of the resource to the private domain; and second, it
c
regulates the rights and obligations of the State vis-a-vis
private parties seeking to acquire/use the resource and
demands that the procedure adopted for distribution is just,
non-arbitrary and transparent and that it does not
discriminate between similarly placed private parties."
D
4. We have indicated, the worth of spectrum to impress
upon the fact that the State actions and actions of its agencies/
instrumentalities/licensees must be for the public good to
achieve the object for which it exits, the object being to serve
public good by resorting to fair and reasonable methods. State
E is also bound to protect the resources for the enjoyment of
general public rather than permit their use for purely commercial
purposes. Public trust doctrine, it is well established, puts an
implicit embargo on the right of the State to transfer public
properties to private party if such transfer affects public interest.
F
Further it mandates affirmative State action for effective
management of natural resources and empowers the citizens
to question ineffective management.
5. UAS license holders have an obligation to use such
G resources in a manner as not to impair or diminish the people's
right and people's long term interest in that property or resource.
In Secretary, Ministry of Information and Broadcasting,
Government of India and others v. Cricket Association of
Bengal and others 1995 (2) SCC 161, this Court held "there
is no doubt since air waive frequencies are public property and
H
ASSOCIATION OF UNIFIED TELE SERVICES PROVIDERS v. 791
UNION OF INDIA [K.S. RADHAKRISHNAN, J.]
are also limited, they have to be used in the best interest of
A
the society and this can be done either by the Central Authority
by establishing its own broadcasting network or regulating the
grant of licenses to other agencies, including the private
agencies." In Reliance Natural Resources Limited v. Reliance
Industries Limited (2010) 7 SCC 1, this Court held that the
constitutional mandate is that the natural resources belong to
the people of this country. This Court in several decisions took
the view that the natural resources are vested with the
Government as a matter of trust to the people of India and it is
B
the solemn duty of the State to protect the national interest and c
natural resources must always be used in the interest of the
country and not in private interest. In short, State is the legal
owner of spectrum as a trustee of the people and even though
it is empowered to distribute the same, the process of
distribution must be guided by constitutional provisions,
including the doctrine of equality and larger public good.
Bearing in mind the above constitutional principles, we may
proceed further.
D
6. We have the Indian Telegraph Act, 1885 in force, which
gives the "exclusive privilege" to the Central Government of
E
establishing, maintaining and working of telegraph to the
Central Government and the Government is empowered to give
licences on such conditions and in consideration of such
payment, as it thinks fit, to any person to establish, maintain or
work a telegraph in any part of India. The Indian Wireless
F
Telegraphy Act, 1933, regulates the possession of wireless
telegraph apparatus. The National Policy of 1994 was the first
major step towards deregularisation, liberalization and private
sector participation for providing certain basic telecom services
on affordable and reasonable prices to all people covering all
G
villages and also to achieve various other objectives. Following
the New Telecom Policy of 1999 (NTP), licenses were granted
to various cellular mobile telephone service operators in various
cities and circles to make available affordable and effective·
communication for citizens, considering the fact that accE:SS to
H
792
SUPREME COURT REPORTS
[2014] 9 S.C.R.
A telecommunication was of utmost importance to achieve the
country's social and economic growth. NTP also attempted to
provide universal service to all uncovered areas, including the
rural areas and also provided high level services capable of
meeting the needs of the country's economy by striking a
B balance between the two. The NTP of 1999 specifically refers
to spectrum management which highlights the following aspects:
c
D
E
F
G
H.
"10. The policy on spectrum management as enumerated
in NTP, 1999 was as under:
(i) Proliferation of new technologies and the growing
demand for telecommunication services has led to
manifold increase in demand for spectrum and
consequently it is essential that the spectrum is utilised
efficiently, economically, rationally and optimally.
(ii) There is a need for a transparent process of a/location
of frequency spectrum for use by a service provider and
making it available to various users under specific
conditions.
(iii) With the proliferation of new technologies it is essential
to revise the National Frequency Allocation Plan (NFAP)
in its entirety so that it becomes the basis for development,
manufacturing and spectrum utilisation activities in the
country amongst all users. NFAP was under review and the
revised NFAP was to be made public by the end of 1999
detailing information regarding allocation of frequency
bands for various services, without including security
information.
(iv) NFAP would be reviewed no later than every two years
and would be in line with the Radio Regulations of the
lnternationai Telecommunication Union (ITU).
(v) Adequate spectrum is to be made available to meet
the growing need of telecommunication services. Efforts
would be made for relocating frequency bands assigned
ASSOCIATION OF UNIFIED TELE SERVICES PROVIDERS v. 793
UNION OF INDIA [K.S. RADHAKRISHNAN, J.]
earlier to defence and others. Compensation for relocation
A
may be provided out of spectrum fee and revenue share.
(v1) There is a need to review the spectrum allocation in a
planned manner so that required frequency bands are
available to the service providers.
8
(vii) There is a need to have a transparent process of
allocation of frequency spectrum which is effective and
efficient and the same would be further examined in the
light of ITU guidelines. In this regard the following course
of action shall be adopted viz.:
C
(a)
spectrum usage fee shall be charged;
(b)
an Inter-Ministerial Group to be called the Wireless
Planning Coordination Committee, as a part of the
0
Ministry of Communications for periodical review of
spectrum availability and broad allocation policy,
should be set up; anCI
(c)
massive computerisation in WPC wing would be
started in the next three months so as to achieve
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the objective of making all operations completely
computerised by the end of the year 2000."
7. Parliament, in the year 1997, enacted the Telecom
Regulatory Authority of India (TRAI) Act to provide for the
establishment of TRAI and the Authority has been entrusted with
various regulatory functions on unified licensing. The Act and
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the recommendations made by TRAI emphasized on efficient
utilization of spectrum to all the service providers and indicated
that it would make further recommendations on efficient
utilization of spectrum, spectrum pricing, availability and
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spectrum allocation procedure, and DoT has to issue spectrum
related guidelines, based on its recommendations.
8. Let us now examine the facts which gave rise to these
appeals. On 28.01..201 O; the TRAI issued a communication to
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A one of the service providers for furnishing books of accounts
to the Branch Audit Office of the Director General of Audit, Post
and Telecommunication, operative portion of the said
communication reads as follows:
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"In terms of Rule 5 of the Telecom Regulatory
Authority of India, Service Providers (Maintenance of
Books of Accounts and other Documents) Rule, 2002,
every service provider shall produce all such books of
accounts and documents referred to in sub rule (1) of rule
3 thereof that has a bearing on the verification of the
Revenue, to Telecom Regulatory Authority of India (the
authority);
(ii)
to furnish to the Comptroller and Auditor General of
India the statement or information, relating thereto,
which the Comptroller and Auditor General of India
may require to be produced before him and the
Comptroller and Auditor General of India may audit
the same in accordance with the provisions of
Section 16 of the Comptroller and Auditor
General's (Duties, Powers and Conditions of
Service) Act, 1971.
2.
The Comptroller and Auditor General of India
(through Director General of Audit, Post &
Telecommunications) has decided to audit the
books of accounts of your company for the period
of three years commencing from 2006-2007
onwards to assess the government share out of the
revenues carried by your company in terms of the
licence agreement with DoT.
3.
Therefore in terms of the rule 5 of the TRAI, Service
Providers (Maintenance of Books of Accounts and
other Documents) Rules, 2002, it is requested that
all necessary records/books of accounts circle/
area-wise, on the Maintenance of Books of
ASSOCIATION OF UNIFIED TELE SERVICES PROVIDERS v. 795
UNION OF INDIA [K.S. RADHAKRISHNAN, J.)
Accounts and other relevant matters during the last
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week of January, 2010 in the office of DO Audit,
P&T, New Delhi, which would facilitate the audit
work.
4.
It is, therefore, requested that all necessary co8
operation may be extended to the Branch Audit
Officers and Delhi office of DG Audit P& T for
completion of the above audit work besides
providing all necessary records/information/
documents required in connection with this audit
work.
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This issues with the approval of the Authority."
9. The DoT later wrote a communication dated 16.03.2010
to one of the service providers, the subject matter of which
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reads "Audit and Telecom Service Providers by Comptroller &
Auditor General", the operative portion of the said
communication reads as under:
"In exercise of power conferred on the Licensor under
clause 22.3 of Unified Access Service (UAS) Licence, it
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is requested to provide the following accounting records,
for three years commencing from 2006-07, consisting of
books of accounts and other documents for all the services
offered under the above referred UAs licences issued to
reflect:
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(i)
Total cost and breakup of original and current cost
i.e. cost after depreciation under separate heads
for different category of fixed assets;
(ii)
Cost and breakup of operational expenses;
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(iii)
Service wise revenue;
(iv)
Income from other sources;
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[2014] 9.S.C.R.
(v)
Supporting books of accounts other documents
(a)
Fixed assets register
(b)
Stores and spares/Inventory register
(c)
Register showing service-wise particulars of
subscribers
(d)
Register showing deposits from customers
(e)
Cash books
(f)
Journals
(g)
Ledger
(h)
Copies of bills and counterfoils of all
receipts.
2. The above mentioned information should be sent
directly
to
DOG
(Accounts),
Department
of
. Telecommunications, Room No.701, Sanchar Bhavan, 20,
Ashoka Road, New Delhi - 110001 within 15 days from
date of issue of this letter.
Sd/- (16.3.2010)
(Shashi Mohan)
Director (AS-IV)
Tele:23372063/Fax-23372404"
10. One of the service providers replied to the abovementioned letter on 15.04.2010, the operative portion of the
same reads as under:
"We appreciate that DoT in terms of Clause 22.3 of UASL
can call for Licensee's books of accounts or go further and
direct for a special audit by independent auditor in terms
of Clause 22.6 and we have been complying and are
committed to complying with direction/s that may be
issued by DoT in this regard. However, we should like to
ASSOCIATION OF UNIFIED TELE SERVICES PROVIDERS v. 797
UNION OF INDIA [K.S. RADHAKRISHNAN, J.]
mention here that we are currently undergoing the
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extensive special audit of our books of accounts by an
independent auditor Mis S.K. Mittal & Co. appointed by
DoT for the same period i.e. FY 2006-07 and 2007-08.
In the light of the above, the recent communication of DoT
8
asking us to provide our accounting records for period of
three years starting from 2006-07 for an audit by the C&AG
is a matter of surprise and concern for us. We submit that
a fresh audit so closely on the heels of the special audit
by DoT appointed independent auditor is unwarranted and
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will result in duplication of efforts, time and waste of
resources. However, as a good corporate citizen, we have
provided to DoT the total cost and breakup of original and
current cost, cost and breakup of operational expenses,
service wise revenue, and income from other sources for
the year 2006-07, 2007-08 and 2008-09 vide our letters
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dated 1st April, 2010 and 12th April 2010 though this
information provided to DoT is very sensitive from
competitive point of view.
We ·would also like to submit that the provisions of the
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C&AG Act, 1971, which set out the duties and powers of
the C&AG pertain only to the audit of accounts of the Union
or the States or Government Companies or Corporations.
The audit of accounts of private companies such as ours
is not a part of duties and powers of the C&AG.
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It is, therefore, requested that while DoT can call for our
books of accounts, the audit of those does not fall within
the purview of the C&AG.
We submit that the information sought through the letter like
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operational expenses, total cost and break up of original
and current cost etc. is not only sensitive from competitive
point of view but has no direct linkages to the revenues of
the company and thus falls beyond our licence obligations.
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[2014] 9 S.C.R.
We submit once again that we have already provided to
DoT the desired information and are ready and be willing
to provide any further specific information or data which
is required by DoT in accordance with the provisions of
the UAs licence.
We look forward to your kind consideration and support
on the matter."
11. The Director General of Audit, Post and
Telecommunications, later, with specific reference to "Audit of
C Telecom Service Providers by C&AG" sent a communication
dated 10.05.2010 to one of the service providers, the operative
portion of the same reads as under:
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"OFFICE OF THE
DIRECTOR GENERAL OF AUDIT, POST &
TELECOMMUNICATIONS
SHAM NATH MARG (NEAR OLD SECRETARIAT), DELHI
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R.P. Singh
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Director General
Dated : 10.5.2010
Sub: Audit of Telecom Service Providers by C&AGReg.
Ref : 1) DoT Letter No.842-1086/2010-AS-IV dt.
16.03.2010.
(2)
Your office letter No.RTL/09-10/4433 Dt.
31.3.2010.
Dear Shri Singh,
Kindly refer to your office letter cited on the above subject
extending cooperation in conduct of the audit of revenue
share by C&AG. Certain difficulty has been expressed by
ASSOCIATION OF UNIFIED TELE SERVICES PROVIDERS v. 799
UNION OF INDIA [K.S. RADHAKRISHNAN, J.]
your Company in providing the books of accounts in
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physical form as they are being maintained in electronic
form in SAP R3. Further, it has been stated, the same
could be viewed in the concerned IT Systems which would
be made available at your headquarters at DAKC, Navi
Mumbai. In this connection, it is requested that on 20th
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May, 2010, a presentation may be given covering your
business activities, accounting policies, Accounting, billing
and financial systems and all other issues relating to
revenue share, followed by brief interface meeting with my
Audit team which would start the process of audit. The time c
and venue of the presentation is given in Annexure-1. Shri
Subu R. Director (Report) of my office has been nominated
as Nodal Officer who would be overseeing and
coordinating the Audit.
Regards,
Yours sincerely,
R.P. Singh"
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12. The TRAI on 21.05.2010 sent yet another
communication to one of the service providers with specific
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reference to "Furnishing of Books of Accounts to the Branch
Audit Offices of the Director General of Audit, Post and
Telecommunications", the operative portion of the same reads
as under:
"Telecom Regulatory Authority of India
Mahanagar Doorsanchar Bhawan,
Jawahar Lal Nehru Marg, Old Minto Road
. New Delhi - 110 002
F.No.1.tl-21/2009-FA
Dated 21st May, 2010
Mr. Anand Dalal
Addi. Vice President (Regulatory Affairs)
M/s Tata Group of Companies
lndicom Building
2A, Old lshwar Nagar
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(2014) 9 S.C.R.
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Main Mathura Road
New Delhi - 110 065
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Subject : Furnishing of Books of Accounts to the
Branch Audit Offices of the Director General of
Audit, Post & Telecommunication.
Kindly refer to TRAl's letter No.14-21/2009-FA dated 28th
January, 2010, in which your company has been asked to
make available for audit all necessary records/books of
accounts circle/area-wise, to the corresponding Branch
Audit Offices (as indicated in the list) and to submit
consolidated accounts to the Delhi office of the DG Audit,
P&T. Your company was also requested to make a
presentation on the maintenance of books of accounts and
other relevant matters in the office of DG Audit P&T, New
Delhi.
2. We have been informed by the C&AG that your
company has not responded to these instructions so far.
3. In this connection, TRAI had received representations
from the industry associates indicating that the scope of
the C&AG's audit is similar to the scope of the exercise
that is being done by the special auditor appointed by the
DoT and that this exercise would be a duplication of work.
The concerns expressed by the industry associations were
brought to the notice of the C&AG. However, the C&AG
(through Director General Audit (P&T) has informed us that
the audit by the C&AG of India under Section 16 of the
C&A (DPC) Act is in exercise of the provisions of TRAI
Rules, 2002 and has no relation with the special audit
undertaken by the CAs appointed by DoT.
4. In view of the above, you are requested to make
available all necessary records/books of accounts circle/
area wise, to the corresponding Branch Audit Offices (as
indicated in the letter dated 28th January, 2010) and to
submit consolidated accounts to the Delhi Office of the DG
ASSOCIATION OF UNIFIED TELE SERVICES PROVIDERS v. 801
UNION OF INDIA [K.S. RADHAKRISHNAN, J.]
Audit, P& T within 15 days of the receipt of this letter. You
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are also informed that non-compliance of this letter may
attract appropriate action under the TRAI Act.
This issues with the approval of the Authority.
Yours faithfully,
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Sd/-
(Anuradha Mitra)
Pr. Advisor (FA)"
13. The TRAI also apprised the Service Providers that the
audit sought to be conducted by CAG was separate and
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independent of the audit or special audit conducted by DoT,
and therefore, directed the Service Providers to make available
all the records for audit by CAG or else appropriate action
would be taken against them under the TRAI Act. Service
providers, aggrieved by the stand of DoT and TRAI, filed Civil
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Writ Petition 3673 of 2010, challenging the legality of the abovementioned notices before the Delhi High Court, seeking
following reliefs:
II i.
ii.
iii.
iv.
Pass a writ, order or direction to hold and declare
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that Rule 5 of the Telecom Regulatory Authority of
India, Service Providers (Maintenance of Books of
Accounts and other Documents) Rules, 2002 for
being ultra vires of Section 16 of the C&AG Act and
Article 149 of the Constitution of India;
Set aside/quash all actions taken/purported to be
taken by the Respondent No.1 and/or Respondent
No.2;
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Set aside/quash Respondent No.2's letters dated
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10.5.2010 and 21.5.2010 and the directions
contained therein;
Set aside/quash Respondent No.3's letter dated
28.1.2010 and the directions contained therein;
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[2014) 9 $.C.R.
v.
pass any order(s) as the Court may deem fit in the
interest of justice, equity and good conscience."
14. The Division Bench of the Delhi High Court examined
the legality of the above-mentioned communications in the light
of Rule 5 of the TRAI Rules, 2002;Section 16 of the CAG Act,
8
1971 and Article 149 ofthe Constitution of India read with UAS
licence conditions and took the view that the CAG has the
powers to conduct the revenue audit of all accounts drawn by
the licensees and expressed the view that the accounts of the
C licensee, in relation to the revenue receipts can be said to be
the accounts of the Central Government and, thus, subject to a
revenue audit, as per Section 16 of the CAG (Duties, Powers
and Conditions) Act, 1971. Holding so, the writ petitions were
dismissed against which these civil appeals have been
preferred by way of special leave.
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15. Shri Harish N. Salve, learned senior counsel appearing
for the appellants, submitted that the High Court has not properly
appreciated the scope of Article 149 of the Constitution of India,
particularly the phrase "accounts of the Union and States and
E any other authority or body". Learned senior counsel submitted
that a composite interpretation would reveal that the term 'body'
is to be construed in the light of the continuing term "Union",
"States" and "authority" all of which connote some form of State
control. Learned senior counsel also made reference to the
F principle of "nocitar a cociis." Learned senior counsel made
reference to the Judgment of this Court in M.K. Ranganatharr
v. Government of Madras (1955) 2 SCR 374, Rohit Pulp and
Paper Mills v. Collector of Central Excise, Baroda (1990) 3
SCC 447, Ahmedabad Pvt. Primary Teachers' Association v.
G Administrative Officer and others (2004) 1 SCC 755.