Centre Moves Supreme Court Against HC Order Quashing One-Time Spectrum Charges On Airtel, Vodafone Idea

The Union of India has moved the Supreme Court challenging the Bombay High Court's judgment quashing the Department of Telecommunications' (DoT) decision and demand notices imposing one-time spectrum charges on Bharti Airtel and Vodafone Idea.

The High Court had held that the retrospective levy lacked contractual and statutory basis.

The charges were related to the spectrum held beyond 6.2 MHz from July 1, 2008 to December 31, 2012, with the levy to be computed at 2012 auction-determined prices. The High Court had allowed writ petitions filed by the two telecom operators against the DoT's December 28, 2012 decision.

The special leave petition filed by the Union is yet to be listed before the Supreme Court.

The dispute traces back to the National Telecom Policy, 1999 under which telecom operators migrated from a fixed licence fee regime to a revenue-sharing model. Between 2001 and 2007, the DoT and TRAI issued various communications providing for recurring spectrum usage charges. In May 2010, TRAI for the first time recommended a one-time spectrum charge on spectrum held beyond 6.2 MHz.

On November 8, 2012, the Union Cabinet approved levy of a one time charge on existing operators for spectrum beyond 4.4 MHz and directed that spectrum held beyond 6.2 MHz would attract a one-time charge from July 2008. Acting on this decision, the DoT issued its December 28, 2012 order and subsequent demand notices, prompting Bharti Airtel and Vodafone Idea to approach the High Court in January 2013.

Holding that the levy lacked contractual and statutory basis, the High Court observed:

“Such a contract in the form of license, must have a definite price and clearly discernible consideration in terms of the position of law noted hereinabove. The terms of contract are the determining factors and the source of power for the respondent – Union of India to justify its impugned decisions, must have its source in the terms of contract. The respondent obviously cannot claim statutory power under Section 4 of the Telegraph Act to act as per its own whim, notwithstanding the terms of contract/license executed as per the power available under the said provision,”

The Court held that although spectrum is a scarce natural resource held by the State in public trust, the Government remained bound by the terms of the licence agreements executed under Section 4 of the Telegraph Act and could not unilaterally impose retrospective financial liabilities not contemplated by those contracts.

It accordingly quashed the impugned decisions and demand notices.