# DELHI SCIENCE FORUM AND ORS. ETC v. UNION OF INDIA AND ANR

- **Citation:** [1996] 2 S.C.R. 767
- **Court:** Supreme Court of India
- **Decided:** 1996-02-19
- **Bench:** Am. Ahmadi, N.P. Singh, K. Venkataswami
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/delhi-science-forum-and-ors-etc-v-union-of-india-and-anr-13789
- **Pages:** 28

## Headnote

•
Indian Telegraph Act, 1885-Section 4-Establishing, maintaining and
working telegraphs-Telegraphs-Includes telephones & telecommunication
se1vices-Power of Central Govemment to grant licences in favour of private
C
bodies-Fiduciary duty to act with restraint-Tests laid down for exercise of
statutory discretion Central Govemment expected to put such conditions which
shall safeguard public interest.
Administrative Latt--Award of contracts-Judicial Reviett--Scope
of-Test of reasonable man.
The present writ petitions and transferred cases have been filed
questioning the power of the Central Government to grant licences to
non-Government companies to establish and maintain Telecommunication
System in the country and the validity of the procedure adopted by the
Central Government for the said grant. The petitioners 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
D
E
that economic interest of the nation. The petitioners submitted that
telecommunication being a sensitive service should always be within the
exclusive domain and control of the Central Government and under no F
situation it should be parted with by way of grant of licences to nonGovernment Companies and private bodies; that Central Government
which has the exclusive privilege u/s. 4 of the Indian Telegraph Act, 1885
of establishing, maintaining and working telegraphs which shall include
telephones, has no authority to part with the said privilege to non-GovernG
ment Companies for the consideration to be paid by them as this amounts
to an out and out sale of the said privilege; that even though by virtue of
the proviso to sub section (1) of section 4 the Central Government can
grant such licences, the power should have been exercised only after
framing of rules u/s 7 of the Act and that clause (b) of the second proviso
to sub-section (1) of section 4 shall govern the grant of the licence under H
767
768
SUPREME COURT REPORTS
[1996] 2 S.C.R.
A
the first proviso to sub-section (1) of Section 4 as well because both
provisos contemplate grant of licence/permit for telegraphs; that the policy
of capping would not have been applied and no choice should have been
given to the bidder to select the circles and in respect thereof unilateral
decision should have been taken by the Central Government; that circle
B
'C' and North Eastern Regions had been neglected while implementing the
National Telecom Policy; that neither there was any justification nor any
rational basis for debarring the Government Company from ~ubmitting
their bids; that
there was non creation of a separate Telephone
Regulatory Authority and non delegation of the power by the Central
Government to such Authority to supervise the functioning of the new
C
Telecom policy in the country.
Dismissing the Petitions and Transferred cases, this Court.
HELD 1.1. The power and authority of the Central Government to
grant licences to private bodies including Companies subject to conditions
D and considerations for payments flows from sub-section (1) of Section 4 of
the Indian Telegraphs Act, 1885 which vests the privilege and right in the
Central Government. 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
E
power has to be traced, but it has also to be found that the procedure
adopted for such grant was reasonable, rational and in conformity with the
conditions which had been announced. 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'. (777-F-H, 778-A].
F
1.2. The Central Government while exercising its statutory Power
under first proviso to Section 4(1) of the Act, of granting licences for
establishment, maintenance and wor

## Text

_Characters 0–39,918 of 68,195. This is a partial read: ask again with offset=39918 for what follows._

DELHI SCIENCE FORUM AND ORS. ETC.
A
v.
UNION OF INDIA AND ANR.
FEBRUARY 19, 1996
B
[AM. AHMADI, CJ, N.P. SINGH AND K. VENKATASWAMI, JJ.]
•
Indian Telegraph Act, 1885-Section 4-Establishing, maintaining and
working telegraphs-Telegraphs-Includes telephones & telecommunication
se1vices-Power of Central Govemment to grant licences in favour of private
C
bodies-Fiduciary duty to act with restraint-Tests laid down for exercise of
statutory discretion Central Govemment expected to put such conditions which
shall safeguard public interest.
Administrative Latt--Award of contracts-Judicial Reviett--Scope
of-Test of reasonable man.
The present writ petitions and transferred cases have been filed
questioning the power of the Central Government to grant licences to
non-Government companies to establish and maintain Telecommunication
System in the country and the validity of the procedure adopted by the
Central Government for the said grant. The petitioners 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
D
E
that economic interest of the nation. The petitioners submitted that
telecommunication being a sensitive service should always be within the
exclusive domain and control of the Central Government and under no F
situation it should be parted with by way of grant of licences to nonGovernment Companies and private bodies; that Central Government
which has the exclusive privilege u/s. 4 of the Indian Telegraph Act, 1885
of establishing, maintaining and working telegraphs which shall include
telephones, has no authority to part with the said privilege to non-GovernG
ment Companies for the consideration to be paid by them as this amounts
to an out and out sale of the said privilege; that even though by virtue of
the proviso to sub section (1) of section 4 the Central Government can
grant such licences, the power should have been exercised only after
framing of rules u/s 7 of the Act and that clause (b) of the second proviso
to sub-section (1) of section 4 shall govern the grant of the licence under H
767
768
SUPREME COURT REPORTS
[1996] 2 S.C.R.
A
the first proviso to sub-section (1) of Section 4 as well because both
provisos contemplate grant of licence/permit for telegraphs; that the policy
of capping would not have been applied and no choice should have been
given to the bidder to select the circles and in respect thereof unilateral
decision should have been taken by the Central Government; that circle
B
'C' and North Eastern Regions had been neglected while implementing the
National Telecom Policy; that neither there was any justification nor any
rational basis for debarring the Government Company from ~ubmitting
their bids; that
there was non creation of a separate Telephone
Regulatory Authority and non delegation of the power by the Central
Government to such Authority to supervise the functioning of the new
C
Telecom policy in the country.
Dismissing the Petitions and Transferred cases, this Court.
HELD 1.1. The power and authority of the Central Government to
grant licences to private bodies including Companies subject to conditions
D and considerations for payments flows from sub-section (1) of Section 4 of
the Indian Telegraphs Act, 1885 which vests the privilege and right in the
Central Government. 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
E
power has to be traced, but it has also to be found that the procedure
adopted for such grant was reasonable, rational and in conformity with the
conditions which had been announced. 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'. (777-F-H, 778-A].
F
1.2. The 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 of granting licences to private
)
G bodies has to fulfil the tests laid down by courts for exercise of statutory
L
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, which 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
H taken the said decision. (778-C-E]
DELHI SCIENCE FORUM v. U.0.1.
769
1.3. The Central Government is expected to put such conditions A
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. whereas the first
proviso to sub-section (1) of Section 4 contemplates the grant of a licence, B
second proviso to the 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. The concept of grant of
licence to establish, maintain or work a telegraph shalJ 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 conC
template the same area of operation. 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. The power has been granted to the Central Government
by the Act itself, and the exercise of that right, by the Central Government, D
cannot be circumscribed, limited or restricted on any subordinate legislation to be framed under Section 7 of the Act. However it was advisable on
the part of the Central Government to frame such rules when it was so
desired by the Parliament. 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 fulfilng the conditions prescribed, which can be held not only
reasonable, rational, but also in the public interest can be examined by
courts. 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
application on its individual merit and not to promote a purpose alien to
E
F
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 G
not be exercised in a manner, as no reasonable man could have ever exercised. 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 H
770
SUPREME COURT REPORTS
[1996] 2 S.C.R.
A
is all the more difficult so far as the commercial contracts are concerned.
B
c
The Parliament has adopted and resolved a national policy towards
liberalisation 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.
[779-E-F, 780-B, E-G, 781-A, G-H, 782-A·B]
1.4. 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, the Central government cannot
D be held responsible for that decision. In none of the writ petitions there is
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 the functions entrusted to them. [788-G-H]
E
F
1.5. The new Telecom Policy is based on privatisation 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- G~vernment undertakings
with foreign participation to improve the quality of service and to cover
larger areas. There is no question of Government undertakings being
ignored or discriminated while awarding the licences in different service
circles. 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 licences should not be left to implement
G the said Telecom Policy according to their perception. 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
H century. Since the private sector will have to contribute more to the
-
DELHISCIENCEFORUMv. U.0.1.
771
development of the telecom network than DOT/MTNL in the next few A
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. [790-F-G,794-C-D]
B
2. 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)
C
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 D
meaning of Article 12 of the C~nstitution 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 E
the validity thereof. This onus is not dischargd 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 F
with oblique motive or has failed in its function to examine each claim on
its own merit on relevant considerations. [781-C-F]
Robe1ts v. Hopewood, (1925) AC 578; Prescott v. Bcnncngham Corporation, [1954] 3 All ER 698; Taylor & Ors. v. Munrow,, (1960] All ER 455;
Bronley London Borough Council v. Greater London Council & Anr., (1982] G
All ER 129 and Associated Provincial Picture Houses Ltd. v. Wedncsbwy
Corp., [1947] Z All ER 680, referred to.
CIVIL ORIGINAL JURISDICTION : Writ petition (C) No. 691 of
1995 Etc. Etc.
H
772
SUPREME COURT REPORTS
[1996] 2 S.C.R.
A
(Under Article 32 of the Constitution of India.)
Altaf Ahmad, Additional Solicitor General, C.S. Vaidyanathan, P.R.
Kumaramangalam, Shanti Bhushan, Arnn Mohan, M.H. Baig, SJ. Sorabjee, A.H. Desai, Gopal Subramaniam, K. Parasaran, P.P.Malhotra, Arnn
Jaitley, K.K. Venugopal, Kapil Sibal, Anil B. Divan, DR. Rajeev Dhawan,
B
R.F. Nariman, Ms. Nandita Haksar, Ms. Kamini Jaiswal, Ms. l.M.A. Chari,
Ms. V. Mohana, Shivam, Ms. Kitty Kumaramangalam, S.K.' Bhattacharya,
Prashant Bhushan, A.K. Panda, P.H. Parekh, N.K. Sahoo, Ranjit Kumar,
Yatish _Mohan, Ms. Anu Mohla, Rajiv Duta, S.J. Kathawala, Y.P. Dandiwala, Manoj Wad, Ms. J.S. Wad, A.K. Aggrawal, P.N. Gupta, P.P. Singh,
C Hemant S}).arma, C.V.S. Rao, W.A. Quadri, Praveen Swarup, S.A. Mattoo
(Ms. P.S. Shroff, Sunil Dogra, A. Das, S.S. Shroff) for S.A. Shroff & Co.,
R. Santhana Krishnan, Sunil Kumar, S.R. Bhat, L.R. Singh, Gautam Mitra,
Ranjan Devi and Ms. Indra Swahney for the appearing parties.
D
The Judgment of the Court was delivered by
N.P. SINGH, J. The petitioners in different writ petitions have questioned the power of the Central Government to grant licences to different
non-Governmel).t companies to establish and maintain Telecommunications System in the country and the validity of the procedure adopted by
E
the Central GovP,rnment 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
F
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
G 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
H to exceed 49% of the total equity apart from other conditions.
•
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DELHISCIENCEFORUMv. U.0.1. [N.P.SINGHJ.]
773
Pursuant to the notice inviting tenders, tenders were submitted for A
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 recognised as a public
utility of strategic importance. The variety or Telecommunications services
B
that has become available globally in the last decade is remarkable. It is
being realised that economy is increasingly related to the way this Telecom
infrastructure functions for purpose of processing and transmission of C
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 D
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 E
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 Ttilecommunications. The
developed countries first took decision in respect of privatisation of
Telecom which amounted to giving up the claim of exclusive privilege over F
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 realised that this sector
needed acceleration because of the adoption of liberalised 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 G
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 H
B
c
D
E
F
G
774
SUPREME COURT REPORTS
(1996] 2 S.C.R.
could be adopted by the nation from different aspects and ~ngles.
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 endnager 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. 947 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 then
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 mat-.
ters, 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
_l
DELHISCIENCEFORUMv. U.0.1. [N.P.SINGHJ.]
775
been overruled by events- self-limitation can be seen to be the path A
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 B
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 vie~s 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 thafhas to be sorted out in the Parliament
which has to approve such policies. Privatisation is a fundamental concept C
underlying the question 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 ab~se
of the economic power? What is the mechanism of accountability to ensure D
that the decision regarding privatisation 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 of infringement of any of the
Constitutional or statutory provision. The new Telecom Policy was placed E
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.
F
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 G
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) :
H
776
A
B
c
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E
F
G
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SUPREME COURT REPORTS
[1996] 2 S.C.R.
"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 electro- magnetic 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 ticence, 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."
J_
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DELHISCIENCEFORUMv. U.0.1. [N.P.SINGHJ.]
777
There is no dispute that the expression 'telegraph' as defined in the A
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 B
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 C
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 n·
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 E
telecommunications, how can it be held that the privilege which has been
vested by su_b-section (1) of Section 4 of the Act in the Central Government
cannot be granted to others on conditions an:d 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 G
any right or licence by the Central Government or an authority which can
F
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 in confirmity with the conditions which had been announced. Statutory
authorities have some times used their discretionary power to confer social H
778
SUPREME COURT REPORTS
[1996] 2 S.C.R.
A
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.
B Hopewood, (1925) AC. 578; Prescott v. Bimiingham C01poration, [1954) 3
All E.R. 698; Taylor & Ors. v. Munrow, [1960) 1 All E.R. 455 and Bromley
London Borough Council v. Greater London Council and anotlw; [1982) 1
All E.R. 129.
C As such Centr,al 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 eiperiment has to fulfill the tests laid down by courts
for exercise of a statutory discretion. It cannot be exercised in a maimer
which can be held to be unlawful and which is now known in administrative
D law as Wednesbury principl~, stated inAssociated Provincial Picture Houses
Ltd. v. Wednesbury Co1p., [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.
E In the case of Bromley LBC (supra) it was said by Lord Diplock :-
F
"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 nonetheless be subject td implied limitations when
expressed to be exercisable by a local authority such as the
GLC .....................
11
As such Central Government is expected to put such conditions while
granting licences, which shall safeguard the public interest and the interest
G 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-sectic~n (1) of Section 4, the Central Government can grant
H licences in respect of establishing, maintaining or working of telecomJ_
.....
..
DELHI SCIENCE FORUM v. U.0.1. [N.P. SINGH J.]
779
munications to Indian Companies registered under the Indian Companies A
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
(b) of telegraphs other than wireless telegraphs within any part of C
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 proviso to
sub-section (1) of Section 4 as well because both provisos contemplate D
grant of licence/permit for telegraphs within any part of India to any person
by the Central Government. At first blush this argument appears to be
attractive, 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 the 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
E
F
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 G
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 H
780
SUPREME COURT REPORTS
[1996) 2 S.C.R.
A 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
B 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
C 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
D 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,
E 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 sub-section (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
F
G
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 the framed. But the question is as to whether it can
be held that till such rules are framed Central Government cannot exercise
the power which has been 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
H fulfilling the conditions prescribed, which cai.i be held not only reasonable,
J __
DELHI SCIENCE FORUM v. U.0.1. [N.P. SINGH J.)
781
rational, but also in the public interest can be examined by courts. It need A
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 B
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 C
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 D
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 E
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 F
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 exG
amined 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 liberalisation 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 H
782
SUPREME COURT REPORTS
[1996] 2 S.C.R.
A 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 ot tu1., nation. Unless any party
B
c
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
D Distt.), (18) Uttar Pradesh, (19) West Bengal (including Calcutta Metro
Distr.), {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
E C service areas. In Category A - AP.