2G Spectrum Scam| Supreme Court rejects ex-licensee’s refund demand of Rs 1454.94 crores Entry Fee, holding him faulty as a confederate of fraud

Supreme Court: The 3-Judge Bench comprising of Dr. Dhananjaya Y Chandrachud*, Surya Kant and Vikram Nath, JJ., affirmed the impugned order of the Telecom Disputes Settlement and Appellate Tribunal whereby the Tribunal had dismissed appellant’s claim for refund of Rs 1454.94 crores Entry Fee paid by it for 2G licences. The Bench stated,

“…as a beneficiary and confederate of fraud, the appellant could not be lent the assistance of this Court for obtaining the refund of the Entry Fee.”

The instant appeals were filed under Section 18 of the Telecom Regulatory Authority of India Act 1997 against the judgments of the Telecom Disputes Settlement and Appellate Tribunal (TDSAT). The appellant claimed a refund of Rs 1454.94 crores Entry Fee paid by it for 2G licences for twenty-one service areas.

Noticeably, the Supreme Court by its judgment in Centre for Public Interest Litigation v. Union of India, (2012) 3 SCC 1 (CPIL), had quashed 2G licences granted by the Union of India, including to the appellant. The Court had declared that the policy of the Union government for allocation of 2G spectrum on a ―First Come First Serve‖ basis was illegal.

Decision of TDSAT

As a consequence, the appellant approached the TDSAT to claim refund of its Entry Fee on the principles of civil, contractual and constitutional law which was dismissed by the TDSAT holding that the quashing of the appellant’s licences by the Supreme Court in its judgment in CPIL could not be equated with the Unified Access Service Licences (UASL) agreements becoming void within the meaning of Section 65 of the Indian Contract Act 1872.

The appellant then instituted another petition before the TDSAT7 raising the issue of a refund of the Entry Fee, on the ground that it had been exonerated by the Special Judge, CBI for charges under Section 120-B and 420 of the Indian Penal Code 1860 in a case relating to the grant of UASLs. However, it met with the same fate as the TDSAT dismissed the second petition noting that the appellant had made a second attempt for claiming the same relief which had been sought earlier in the First Telecom Petition.

Contention of the Appellant

It was against the impugned judgment of the TDSAT that the appellant had approached the Supreme Court contending that the fraud in the First Come First Serve policy for 2G spectrum allotment existed at the doorstep of the Union government alone and that the appellant was free from taint or wrong doing.

The CPIL Judgment

In CPIL, the Supreme Court had held that that the First Come First Serve policy was writ large with arbitrariness, and was intended to favour certain specific entities at a grave detriment to the public exchequer as the then Minister of Communications and Information Technology wanted to favour some companies and that as a matter of fact the entire process was stage-managed to favour those who had access to the nitty-gritties of the policy in advance. The Bench had observed,

“Undoubtedly, the authors of the ―First Come First Serve policy were the official actors comprised within the Union government. But equally, the decision did not exculpate the private business entities who obtained UASLs and became the beneficiaries of their decision.

Noticing that the appellant was amongst the four licensees who were directed to pay a cost of Rs 50 lakhs each because they too had been benefited by the wholly arbitrary and unconstitutional exercise undertaken by Department of Telecommunication (DoT) for grant of UASL and allocation of spectrum of 2G band, the Bench opined that the appellant was also complicit in the illegal exercise of obtaining favours by the indulgence of those in power. Thus, the the appellant was held to be in pari delicto along with the Union government.

Whether the Entry Fee was Refundable?

Clause 619 of the UASL Guidelines issued by the DoT required each applicant seeking a UASL for a given service area to deposit a non-refundable entry fee. Accordingly, the appellant paid paid the amount of Rs 1454.94 crores as entry fee and it was only upon the payment of Entry Fee the appellant became eligible to be issued UASLs in the twenty-one service areas. Additionally, Clause 18.121 of the UASL agreement acknowledged the payment of a onetime non-refundable entry fee prior to the signing of the agreement.

Thus, the Bench noted that the Entry Fee was a onetime non-refundable fee payable by an applicant for participating in the process of obtaining the UASL and was distinguishable from the licence fee under Clause 10.122, which was relatable to the actual operation of the licence.

Doctrine of frustration and restitution

The appellant had relied on the provisions of Sections 56 and 65 of the Contract Act to claim benefits of restitution and frustration contending that when a licence is granted under the proviso to Section (4)(1) of the Telegraph Act, the licence is in the nature of a contract between the government and licensee, thus bringing it within the ambit of the Indian Contract Act.

The Bench referred to Graham Virgo’s, “The Principles of Law of Restitution”, to observed that all claims for restitution are subject to a defence of illegality. The genesis of which is in the legal maxim ex turpi causa non oritur actio (no action can arise from a bad cause). Further, that a court will not assist those who aim to perpetuate illegality.

Thus, relying on the principle that when the party claiming restitution is equally or more responsible for the illegality of a contract, they are considered in pari delicto, the Bench held that unless the party claiming restitution participated in the illegal act involuntarily or the rule of law offers them protection against the defendant, they would be held to be in pari delicto and therefore, their claim for restitution will fail. The Bench expressed,

If the party claiming restitution was equally or more responsible for the illegality (in comparison to the defendant), there shall be no cause for restitution.”

Verdict

Consequently, the Bench concluded that the appellant was in pari delicto with DoT and the then officials of the Union government. Hence, as a beneficiary and confederate of fraud, the appellant could not be lent the assistance of this Court for obtaining the refund of the Entry Fee. Accordingly, the appeal was dismissed.

[Loop Telecom & Trading Ltd. v. Union of India, 2022 SCC OnLine SC 260, decided on 03-03-2022]


*Judgment by: Justice Dhananjaya Y Chandrachud


Appearance by:

For the Appellant: A M Singhvi and Huzefa A Ahmadi, Senior Advocates

For the Union of India: Vikramjit Banerjee, Additional Solicitor General


Kamini Sharma, Editorial Assistant has put this report together 

Join the discussion

Your email address will not be published.

This site uses Akismet to reduce spam. Learn how your comment data is processed.