Bombay High Court quashes retrospective one-time spectrum levy on Airtel, Vodafone Idea

The Bombay High Court on Monday struck down the Central government’s decision to retrospectively levy a one-time spectrum charge on Bharti Airtel and Vodafone Idea for spectrum held above 6.2 MHz between July 1, 2008 and December 31, 2012. [Bharti Airtel, Vodafone Idea v. Union of India & Ors.].A bench of Justices Manish Pitale and Shreeram Shirsat held that the move was beyond the Union government’s contractual and statutory powers in its capacity as licensor.The Court held that the government could not step away from the contract terms or retrospectively add new financial burdens by citing 'public interest'.“We have come to a conclusion that Airtel and Vodafone have been able to make out a case in their favour seeking quashing and setting aside of the impugned decisions and consequent demand notices. The Union has not been able to justify the said decisions and its action of levying one-time spectrum charge retrospectively upon the petitioners. As a consequence, the writ petitions deserve to be allowed,” the Court held..In its judgment, the Court allowed the petitions filed by Bharti Airtel and Vodafone Idea and quashed two Union Cabinet decisions dated November 8 and December 28, 2012, and the demand notices that followed. Those notices sought a one-time spectrum charge linked to 2012 auction prices for spectrum above 6.2 MHz, applied with retrospective effect from July 1, 2008..The Bench also directed that any bank guarantees given by the operators be returned, and set aside all steps taken under the government's demands.The Court held that Section 4 of the Telegraph Act allows the Centre to fix terms and payments when granting telecom licences but does not allow it to unilaterally change the financial terms years later or to impose new charges with retrospective effect. .Once the licences were granted and then shifted to the National Telecom Policy, 1999 (NTP-99) revenue-share model, the arrangement became a contract whose price (entry fee and a share of adjusted gross revenue) was fixed and could not be changed mid-way without a fresh agreement and the licensees’ consent..After analysing the 1994 licences and the 2005 Unified Access Service (UAS) licences, the Court found that the government could raise recurring spectrum usage charges and no extra entry fee would be charged on migration. Instead it priced extra spectrum through higher revenue-share slabs up to 10 MHz. The Telecom Regulatory Authority of India (TRAI) had itself advised that any one-time spectrum charge, if at all, should apply only to spectrum beyond 10 MHz, while both Airtel and Vodafone Idea had spectrum only up to 10 MHz in the relevant circles..The Union government argued that spectrum is a scarce public resource and relied on the Madras High Court’s 2016 Aircel ruling that had upheld a similar levy. .However, the High Court held that the State could not retrospectively add new financial burdens by broadly invoking “public interest”, especially when NTP-99 stressed affordable and wide access, higher rural tele-density and efficient spectrum use rather than pure revenue collection.“We have found that before issuing the decisions, there was no ‘modification’ of the terms and conditions of the licence agreements and this was clearly not a case of novation. The Union unilaterally imposed the levy and that too, without any source of power identifiable in the terms and conditions of the contract or the relevant statutory provision,” the Bench observed..Senior advocates Harish Salve and Darius Khambata with advocates Fereshte Sethna, Anuradha Dutt, Suman Yadav, Nikhita Suri, Prakalathan Bathey, Mohit Tiwari, Naira Jejeebhoy, Payal Nayak, Gurudas Khurana, A. Das and Sushmita Singh Chauhan briefed by law firm DMD Advocates appeared for Bharti Airtel.Senior advocate Aspi Chinoy with advocates Sneha Jaisingh, Jaidhara Shah and Manan Parekh briefed by law firm Bharucha & Partners appeared for Vodafone Idea.Additional Solicitor General Anil Singh with advocates Aditya Thakkar, Gauraj Shah, DP Singh, Adarsh Vyas, Yugandhara Khanwilkar, Simantini Mohite, Siddha Pamecha, Krishnakant Deshmukh, Rama Gupta, Chaitanya Chavan and PSM Tripathi appeared for the Union government. [Read Judgment]