1. Claim for refund of non-refundable entry fee paid for telecom licenses quashed by the court due to an arbitrary allocation policy. (Para 1 , 2 , 3 )
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2022 Supreme(SC) 198
SUPREME COURT OF INDIA
DHANANJAYA Y. CHANDRACHUD, SURYA KANT, VIKRAM NATH, JJ.
Loop Telecom and Trading Limited – Appellant
Versus
Union of India and Another – Respondents
Civil Appeal Nos. 1447-1467 of 2016, Civil Appeal No. 893 of 2019
Decided On : 03-03-2022
Advocates:
Advocate Appeared:
For the Appellants : Dr. Abhishek Manu Singhvi, Mr. Huzefa Ahmadi, Mr. Prateek Gupta, Ms. Madhavi Agrawal, Ms. Anwesha Padhi, Ms. Parul Shukla.
For the Respondents: Mr. Vikramjit Banerjee, Mr. Nachiketa Joshi, Mr. Apoorv Kurup, Mr. Akshay Amritanshu, Mr. T.S. Sabarish, Mr. Mohd. Akhil, Mr. Saransh Kumar, Mr. Nring Chamwibo Zeliong, Mr. Siddhartha Sinha, Mr. Tathagat, Mr. Aditya Mishra, Mr. Gurmeet Singh Makker.
Advocate Appeared:
For the Appellants : Dr. Abhishek Manu Singhvi, Mr. Huzefa Ahmadi, Mr. Prateek Gupta, Ms. Madhavi Agrawal, Ms. Anwesha Padhi, Ms. Parul Shukla.
For the Respondents: Mr. Vikramjit Banerjee, Mr. Nachiketa Joshi, Mr. Apoorv Kurup, Mr. Akshay Amritanshu, Mr. T.S. Sabarish, Mr. Mohd. Akhil, Mr. Saransh Kumar, Mr. Nring Chamwibo Zeliong, Mr. Siddhartha Sinha, Mr. Tathagat, Mr. Aditya Mishra, Mr. Gurmeet Singh Makker.
Important Points
A party found to be in pari delicto (equally at fault) cannot claim restitution under Section 65 of the Indian Contract Act. The Court ruled that beneficiaries of an arbitrary and unconstitutional license allocation process are barred from recovering non-refundable entry fees.
Subject
Telecommunications - Regulatory Matters
Act Referred
CIVIL PROCEDURE CODE: S.11
CONSTITUTION OF INDIA: Art.14, Art.32
CONTRACT ACT: S.20, S.23, S.56, S.65
Hyderabad Contract Act: S.66
INDIAN PENAL CODE: S.120(b), S.420
MONOPOLIES AND RESTRICTIVE TRADE PRACTICES ACT: S.5
TELECOM REGULATORY AUTHORITY OF INDIA ACT: S.14, S.15, S.18
TELEGRAPH ACT: S.4, S.7(b)(1)
TRUSTS ACT: S.84
CONSTITUTION OF INDIA: Art.14, Art.32
CONTRACT ACT: S.20, S.23, S.56, S.65
Hyderabad Contract Act: S.66
INDIAN PENAL CODE: S.120(b), S.420
MONOPOLIES AND RESTRICTIVE TRADE PRACTICES ACT: S.5
TELECOM REGULATORY AUTHORITY OF INDIA ACT: S.14, S.15, S.18
TELEGRAPH ACT: S.4, S.7(b)(1)
TRUSTS ACT: S.84
Headnote
(A) Telecom Regulatory Authority of India Act, 1997 - Section 18 - Indian Contract Act, 1872 - Sections 56 and 65 - Claim for refund of Entry Fee following dismissal of licenses - Court held that the appellant was not entitled to the refund of Rs. 1454.94 crores as its licenses were quashed due to its complicity in the flawed 'First Come First Serve' policy - It was found that the appellant was in pari delicto, hence claims for restitution were precluded under Section 65. (Paras 8, 60-61)
(B) Jurisdiction of TDSAT - TDSAT lacked jurisdiction to entertain the claim since the grants were quashed within a context of public law and the issues had already been settled by the Supreme Court. (Paras 25, 36)
(C) Policy of set off - Set off granted by the Union government to other telecom licensees does not extend to the appellant, as it sought to circumvent the public interest and policy considerations endorsed by the government. (Paras 56-59)
Facts of the case:
The appellant claimed a refund of 2G spectrum Entry Fee after their licenses were quashed by the Supreme Court, which highlighted a policy that was arbitrary and unconstitutional. The appellant had been involved in obtaining favors under a flawed licensing policy, leading to the desire for refund post the quashing. (Paras 1-4, 12-20)
Findings of Court:
The Supreme Court upheld that the appellant was part of a problematic licensing process and thus not entitled to seek financial relief based on the purported illegality of the licensing mechanism. The principles regarding the non-refundability of fees when implicated in unlawful agreement hold in this case. (Paras 8, 60)
Issues: Whether the appellant could claim a refund of Entry Fees post-quashing of licenses, and the jurisdiction of TDSAT to adjudicate such claims post Supreme Court findings. (Paras 36, 60)
Ratio Decidendi: The Court concluded the appellant was in pari delicto, reinforcing public policy principles that do not favor parties involved in unlawful agreements. The judicial decisions underscored the necessity for transparency in the award logistics for public assets. (Paras 60-61)
Result: Appeals dismissed.
(B) Jurisdiction of TDSAT - TDSAT lacked jurisdiction to entertain the claim since the grants were quashed within a context of public law and the issues had already been settled by the Supreme Court. (Paras 25, 36)
(C) Policy of set off - Set off granted by the Union government to other telecom licensees does not extend to the appellant, as it sought to circumvent the public interest and policy considerations endorsed by the government. (Paras 56-59)
Facts of the case:
The appellant claimed a refund of 2G spectrum Entry Fee after their licenses were quashed by the Supreme Court, which highlighted a policy that was arbitrary and unconstitutional. The appellant had been involved in obtaining favors under a flawed licensing policy, leading to the desire for refund post the quashing. (Paras 1-4, 12-20)
Findings of Court:
The Supreme Court upheld that the appellant was part of a problematic licensing process and thus not entitled to seek financial relief based on the purported illegality of the licensing mechanism. The principles regarding the non-refundability of fees when implicated in unlawful agreement hold in this case. (Paras 8, 60)
Issues: Whether the appellant could claim a refund of Entry Fees post-quashing of licenses, and the jurisdiction of TDSAT to adjudicate such claims post Supreme Court findings. (Paras 36, 60)
Ratio Decidendi: The Court concluded the appellant was in pari delicto, reinforcing public policy principles that do not favor parties involved in unlawful agreements. The judicial decisions underscored the necessity for transparency in the award logistics for public assets. (Paras 60-61)
Result: Appeals dismissed.
Legal Category Hierarchy
- administrative law
- contract law
- constitutional law
- practice and procedure
Table of Contents
2. Claim for restitution under the Indian Contract Act versus the plea that the fee was non-refundable and the claimant was in pari delicto. (Para 8 , 9 )
3. The claimant was a beneficiary of a stage-managed, arbitrary policy and thus in pari delicto, precluding restitution under Section 65 of the Indian Contract Act. (Para 18 , 19 , 20 , 46 , 47 , 54 )
4. Restitution under Section 65 of the Indian Contract Act is unavailable to a party who is in pari delicto with the other party. (Para 46 , 47 , 49 , 52 , 54 )
5. Appeals dismissed. (Para 61 )
6. When does a claim for refund of fees for quashed licenses fall outside the jurisdiction of the TDSAT?
When licenses are quashed by the Supreme Court on grounds of mala fides and arbitrariness, the subsequent enquiry into the viability of a refund must be agitated before the same Court. (Para 35 )
7. Does Section 65 of the Indian Contract Act allow restitution if both parties are equally at fault?
No. Section 65 does not operate in derogation of the maxim in pari delicto potior est conditio possidentis; restitution is denied when the claiming party is equally or more responsible for the illegality. (Para 46 , 47 , 49 , 52 )
8. Does an acquittal in a criminal trial erase a finding of being a beneficiary of an arbitrary process for the purpose of civil restitution?
No. An acquittal based on failure to prove specific criminal charges does not obliterate findings that a party benefited from a wholly arbitrary and unconstitutional exercise. (Para 60 )
9. Does a government policy allowing set-off of fees for successful auction bidders constitute an admission of liability for all quashed license holders?
No. Such a policy is a concession to encourage participation and price discovery in auctions and is a matter of economic policy, not an admission of liability for refund. (Para 58 )
JUDGMENT :
DHANANJAYA Y. CHANDRACHUD, J.
| (A) | The Appeals | 3 |
| (B) | Submissions of Counsel | 7 |
| (C) | The CPIL judgment | 22 |
| (D) | The claim for refund of Entry Fee | 31 |
| (E) | Jurisdiction of TDSAT | 34 |
| (F) | The claim founded on frustration and restitution | 50 |
| (G) | The policy of set off | 65 |
| (H) | Conclusion | 69 |
(A) The Appeals
1. These appeals under Section 18 of the Telecom Regulatory Authority of India Act 19971 [“TRAI Act”] arise from the judgments dated 16 September 2015 and 11 December 2018 of the Telecom Disputes Settlement and Appellate Tribunal2 [“TDSAT”]. The appellant claimed a refund of Rs. 1454.94 crores representing the Entry Fee (together with interest) paid by it for 2G licences for twenty-one service areas. By the judgment of this Court in Centre for Public Interest Litigation v. Union of India , (2012) 3 SCC 1 (“CPIL”), the 2G licences which were granted by the Union of India, including to the appellant, were quashed. The appellant claims to be entitled to the refund of its Entry Fee on, as it contends, “well settled principles of civil, contractual and constitutional law.”
2. The appellant applied for the grant of Unified Access Service Licences3 [“UASL”] or twenty-one service areas on 3 September 2007. A Letter of Intent was issued. The appellant paid the circle wise Entry Fee of Rs. 1.1 crores and furnished a Performance Bank Guarantee and Financial Bank Guarantee for the twenty-one areas. The appellant entered into UASL agreements on 3 March 2008 for the twenty-one service areas with the respondent, which came into effect from 25 January 2008. Among the conditions which were stipulated in the UASL agreements, those governing the duration of the licence and the Entry Fee were in the following terms:
“3. Duration of License
3.1 This LICENCE shall be valid for a period of 20 years from the effective date unless revoked earlier for reasons as specified elsewhere in the document.
[...]
18. FEES PAYABLE
18.1 Entry Fee:
One Time non-refundable Entry Fee of Rs. 1.1 crore has been paid by the LICENSEE prior to signing of this License agreement.”
3. On 2 February 2012, this Court by its judgment in CPIL (supra) declared that the policy of the Union government for allocation of 2G spectrum on a “First Come First Serve” basis was illegal. As a consequence, the UASLs which were granted by the Union government were quashed. On 25 May 2012, the appellant instituted a petition4 [Petition No. 329 of 2012 (“First Telecom Petition”)] before the TDSAT seeking, among other things, a refund of the Entry Fee of Rs. 1454.94 crores, inclusive of interest. The appellant has stated that on 1 June 2012 it shut down its operations after porting out all its subscribers.
4. By its judgment dated 16 September 2015, the TDSAT dismissed the First Telecom Petition holding, inter-alia, that:
(i) The quashing of the appellant's licences by this Court in its judgment in CPIL (supra) cannot be equated with the UASL agreements becoming void within the meaning of Section 65 of the Indian Contract Act 18725 [“Indian Contract Act”]. This Court quashed the UASLs since it found the Union government's policy of “First Come First Serve” to be illegal and arbitrary. Hence, the appellant cannot claim restitution under Section 65.
(ii) The quashing of the appellant's licences by this Court in its judgment in CPIL (supra) cannot be brought under the Indian CONTRACT ACT , since the UASL agreements had not become void under Sections 23 and 56 of the Indian CONTRACT ACT .
(iii) Even assuming that the appellant's UASL agreements became void under the Indian CONTRACT ACT , its claim for restitution under Section 65 would be governed by the principle of in pan delicto potio rest condition defendentis (in equal fault, better is the condition of the possessor). A refund of the Entry Fee could not be made until the possibility of the appellant being in pan delicto was completely effaced. When the TDSAT delivered its judgment, the ap
