Cellular Operators Association of India and Ors. Vs. Telecom Regulatory Authority of India And Ors., on 11th May, 2016; Supreme Court of India – Read Judgement

REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.  5017    OF 2016
(ARISING OUT OF S.L.P. (CIVIL) NO.6521 OF 2016)

CELLULAR OPERATORS ASSOCIATION
OF INDIA AND OTHERS                         ..APPELLANTS

VERSUS

TELECOM REGULATORY AUTHORITY
OF INDIA AND OTHERS                     ..RESPONDENTS

WITH

CIVIL APPEAL NO.  5018    OF 2016

(ARISING OUT OF S.L.P. (CIVIL) NO.6522 OF 2016)

J U D G M E N T

R.F. Nariman, J.

Leave granted.

This group of appeals before us is by various telecom  operators  who  offer
telecommunication services to the public generally.  Various writ  petitions
were filed in the Delhi High Court challenging the validity of  the  Telecom
Consumers  Protection  (Ninth  Amendment)  Regulations,  2015   (hereinafter
referred to as the “Impugned Regulation”), notified on 16.10.2015, (to  take
effect from 1.1.2016), by the Telecom Regulatory Authority  of  India.   The
aforesaid  amendment  was  made  purportedly  in  the  exercise  of   powers
conferred by Section 36 read with  Section  11  of  the  Telecom  Regulatory
Authority  of  India  Act,  1997.   By  the   aforesaid   amendment,   every
originating  service  provider  who  provides  cellular   mobile   telephone
services is made liable to credit only the calling  consumer  (and  not  the
receiving consumer) with one rupee for each call drop  (as  defined),  which
takes place within its network, upto a maximum of three call drops per  day.
Further, the service provider is also to  provide  details  of  the  amount
credited to the calling consumer within four hours of the  occurrence  of  a
call drop either through SMS/USSD message.  In  the  case  of  a  post  paid
consumer, such details of amount credited in  the  account  of  the  calling
consumer were to be provided in the next bill.

A brief background is necessary in order to appreciate  the  controversy  at
hand.  Under an Act of ancient vintage, namely, the  Indian  Telegraph  Act,
1885, the Central Government or the Telegraph  Authority  is  the  licensing
authority by which persons are licenced under Section 4(1) of the  said  Act
for providing specified public telecommunication services.  Given  the  fact
that it is the Central Government or the  Telegraph  Authority  who  is  the
licensor in all  these  cases,  the  said  licensor  enters  into  what  are
described  as  licence  agreements  for  the  provision  of  Unified  Access
Services in  the  specified  service  areas.   Various  standard  terms  and
conditions are laid down in these licences,  some  of  which  are  described
hereinbelow.  Vide  clause  2.1,  such  licences  are  granted  to   provide
telecommunication  services,  as  defined,  on  a  non-exclusive  basis   in
designated service areas. It is mandatory that the  licensee  provides  such
services of a good standard, by establishing a  state  of  the  art  digital
network.  Licences are usually given for a period of  20  years  at  a  time
with a 10 year extension if the licensor so deems expedient.   Under  clause
5 of the aforesaid licence agreement, the licensor  reserves  the  right  to
modify, at any time, the terms and conditions of license, if in its  opinion
it is necessary or expedient so to do in public interest,  in  the  interest
of security of the State, or for the proper conduct  of  telegraphs.   Under
condition 28, which is of some relevance to determine the question  involved
in these appeals, the licensee shall ensure  that  the  quality  of  service
standards as prescribed either by the licensor  or  the  Telecom  Regulatory
Authority of India shall be adhered to.  The licensee  is  made  responsible
for maintaining performance and quality of service standards and is to  keep
a record of the number of faults and rectification reports in respect  of  a
particular service which is to be produced before the licensor/TRAI  as  and
when desired.  It is also important  that  the  licensee  be  responsive  to
complaints lodged by its subscribers and rectify  the  same.   Under  clause
34, which deals with roll-out obligations, the licensee is  to  ensure  that
coverage of a district headquarters/town would mean that  at  least  90%  of
the area bounded by municipal limits should get the required street and  in-
building coverage. Interestingly, under clause 35,  liquidated  damages  are
also provided for, in case the licensee  does  not  commission  the  service
within 15 days of the expiry of  the  commissioning  date  and  for  certain
other delays relatable to commissioning of service.

It may also be  noted  that  right  from  September,  2005,  TRAI  has  been
lamenting the shortage and consequent distance of mobile  towers  from  each
other and both the Government as well as  TRAI  have  been  writing  to  the
Chief Secretaries of various State Governments to grant  timely  permissions
for establishing  telecom  towers.  In  this  behalf,  we  have  been  shown
guidelines issued by DOT to the Chief Secretaries dated 1.8.2013.   We  have
also been shown an amendment to the Quality  of  Service  Regulations  dated
21.8.2014 by which TRAI has noticed practical difficulties  that  are  faced
due to various reasons by which cable  breakdowns  and  indoor  faults  take
place, with the Authority requiring the striking of a  balance  between  the
problems faced by the licensees and the need to ensure  quality  of  service
to  customers.  We  were  also  shown  a  letter  from   the   Ministry   of
Communications written to Chief  Ministers  of  all  the  States  to  permit
installation of towers  on  Government  buildings.   This  letter  is  dated
3.8.2015.  Further, there is a constant tussle between cell phone  operators
and municipal authorities, landing cell phone  operators  in  court  against
municipal authorities, who seek to restrict the setting  up  of  cell  phone
towers, given the  apprehension that  radiation  from  these  towers  has  a
direct causal link with cancer in human beings.  It  is  also  important  to
note that by a Quality of Service Regulation dated 20.3.2009,  issued  under
Section 11 read with Section 36 of the TRAI Act, TRAI has provided,  insofar
as cellular mobile phone services are concerned, for a call drop rate of  2%
averaged over a period of one month.  It has  also  provided  for  financial
disincentives in case there is a failure to meet this parameter by  enacting
a second amendment to the Quality of Service Regulations dated 8.11.2012  by
which  a  service  provider  is  liable  to  pay,  by   way   of   financial
disincentive, an amount not exceeding  Rs.50,000/-  per  parameter  that  is
contravened as the Authority may by order direct, and in the case of  second
or subsequent contravention, to pay an amount  not  exceeding  Rs.1,00,000/-
per parameter for each such contravention as  the  Authority  may  by  order
direct.  One day before the Impugned Regulation, i.e., on  15.10.2015,  this
financial disincentive was raised from  Rs.50,000/-  to  Rs.1,00,000/-,  and
Rs.1,00,000/- to Rs.1,50,000/- for  the  second  consecutive  contravention,
and Rs.2,00,000/- for each subsequent consecutive contravention.

It is in this background that the impugned Ninth Amendment  to  the  Telecom
Consumers Protection Regulations of  2015  was  made,  on  16.10.2015.   The
Impugned Regulation reads as under:-

TELECOM CONSUMERS PROTECTION (NINTH AMENDMENT) REGULATIONS, 2015
(9 OF 2015)

No. 301/2015-F&EA —– In exercise of the powers conferred by  section  36,
read with sub-clauses (i) and (v)  of  clause  (b)  of  sub-section  (1)  of
section 11, of the Telecom Regulatory Authority of India Act,  1997  (24  of
1997), the Telecom Regulatory Authority of India hereby makes the  following
regulations further to amend the Telecom Consumers  Protection  Regulations,
2012 (2 of 2012), namely:-

(1) These regulations may be called the Telecom Consumers Protection  (Ninth
Amendment) Regulations, 2015.

(2) They shall come into force from the 1st January, 2016.

2.   In regulation 2 of the Telecom Consumers Protection Regulations,  2012
(hereinafter referred to as the principal regulations), after  clause  (ba),
the following clauses shall be inserted, namely:–

“(bb)  “call drop” means a voice call which, after  being  successfully
established, is interrupted prior to its normal  completion;  the  cause  of
early termination is within the network of the service provider;”;

(bc) “calling  consumer”  means  a  consumer  who  initiates  a  voice
call;”;

After Chapter IV of the principal regulations, the following chapter  shall
be inserted, namely :-

|“CHAPTER V”                                                          |
|                                                                     |
|RELIEF TO CONSUMERS FOR CALL DROPS                                   |
|                                                                      |
|16. Measures to provide relief to consumers.- Every originating       |
|service provider providing Cellular Mobile Telephone Service shall,   |
|for each call drop within its network,                                |
|(a)           credit the account of the calling consumer by one rupee:|
|                                                                      |
|Provided that such credit in the account of the calling consumer shall|
|be limited to three dropped calls in a day (00:00:00 hours to 23:59:59|
|hours);                                                               |
|(b)       provide the calling consumer, through SMS/USSD message,     |
|within four hours of the occurrence of call drop, the details of      |
|amount credited in his account; and                                   |
|(c)            in case of post-paid consumers, provide the details of |
|the credit in the next bill.”                                         |

The explanatory memorandum to  the  aforesaid  amendment  makes  interesting
reading.  In the first paragraph of the said memorandum,  the  2009  Quality
of Service Regulation referred to hereinabove, granting an allowance  of  an
average of 2% call drops per month,  is  specifically  referred  to.   Also,
interestingly enough, the  service  providers  have  stated  that  they  are
meeting this benchmark completely with one or two minor exceptions.  Despite
this, the Authority has embarked on the Impugned  Regulation,  stating  that
consumers,  at  various  fora,  have  raised  the  issue  of   call   drops,
complaining that in their experience, the quality of making voice calls  has
deteriorated. The  Authority  responded  by  issuing  a  consultation  paper
marked “Compensation to the Consumers in the event of dropped  calls”  dated
4.9.2015.  Stakeholders were given till 21.9.2015 to submit  their  comments
in writing with counter comments thereto being given  one  week  thereafter,
i.e., by 28.9.2015.   The  Authority  records  that  written  comments  were
received from 4 industry associations, 11 Cellular Mobile Telephone  Service
Providers, 2 consumer advocacy groups, 2 organizations, and  518  individual
consumers.  5 counter comments were also received. The Authority notes  that
an open house discussion was  held  on  1.10.2015  in  New  Delhi  with  the
stakeholders.  According to the Authority, consumers wanted  relief  in  the
event of  dropped  calls  under  two  broad  heads  –  excess  charging  and
inconvenience caused to them. In  paragraphs  6  and  7,  the  arguments  of
service providers have been noted, in which service providers  stated  their
difficulties in the  matter  of  sealing/closing  down  existing  sites  for
towers by municipal authorities  and  other  related  issues  together  with
spectrum related issues. They specifically informed  the  Authority  that  a
large proportion of call drops are beyond their control.  In reply  thereto,
consumers spoke of the inconvenience caused to them  by  call  drops.   Some
consumers also contended that the financial disincentive levied for  failing
to meet the benchmark for call drop rates should be revised upwards.   (This
was in fact done, as  we  have  seen,  just  one  day  before  the  Impugned
Regulation itself, i.e., on 15.10.2015).  The  Explanatory  Memorandum  then
goes on to state:-

“18.  Based on the above,  it  is  clear  that  while  all  CMTSPs  and  the
industry associations have argued that  question  for  compensation  to  the
consumers on call drops does not arise as  it  is  neither  justifiable  nor
practicable, most  of  the  consumers  and  consumer  advocacy  groups  have
insisted  that  they  should  be  compensated  by   the   CMTSPs   for   the
inconvenience caused to them.

19.   After a careful analysis, the Authority has  come  to  the  conclusion
that call drops are instances of deficiency in service delivery on  part  of
the CMTSPs which cause inconvenience to the consumers, and  hence  it  would
be appropriate to put in place a mechanism for  compensating  the  consumers
in the event of dropped  calls.   The  Authority  is  of  the  opinion  that
compensatory mechanism should be  kept  simple  for  the  ease  of  consumer
understanding and its implementation by the  CMTSPs.  While  one  may  argue
that amount of compensation should be commensurate to  the  loss/  suffering
caused due to an event but in case of a dropped  call  it  is  difficult  to
quantity the loss/suffering/inconvenience caused to the consumers as it  may
vary  from  one  consumer  to  another  and  also  in  accordance  to  their
situations. Accordingly, the Authority has decided  to  mandate  originating
CMTSPs to credit one Rupee for a dropped call to the  calling  consumers  as
notional compensation.  Similarly,  the  Authority  has  decided  that  such
credit in the account of the calling consumer  shall  be  limited  to  three
dropped calls in a day (00:00:00 hours to 23:59:59 hours). The Authority  is
of the view that such a mandate  would  compensate  the  consumers  for  the
inconvenience caused due to interruption in service by way  of  call  drops,
to a certain extent.

20.   The Authority is also aware that communication  to  the  consumers  is
important and therefore, the Authority has decided  to  mandate  that,  each
originating CMTSP, within four hours of the occurrence of call  drop  within
its network, inform the  calling  consumer,  through  SMS/USSD  message  the
details of  amount  credited  in  his  account  for  the  dropped  call,  if
applicable.

21.   The Authority is conscious of the  fact  that  for  carrying  out  the
afore-mentioned mandate, the CMTSPs would have to make  suitable  provisions
in their systems, which would require time and  efforts.   Accordingly,  the
Authority  has  decided  that  the  afore-mentioned  mandate  would   become
applicable on the CMTSPs with effect from the 1st January, 2016.

22.   The Authority shall keep a close watch on the  implementation  of  the
mandate as well as the measures being initiated by the  CMTSPs  to  minimize
the problem of dropped calls  as  given  in  their  submissions  during  the
consultation process and may review after six months, if necessary.”

At this stage, it is necessary to refer to a technical paper issued  by  the
very  same  Authority  a  few  days  after  the  Impugned  Regulation.    On
13.11.2015, TRAI issued a paper called “Technical Paper  on  call  drops  in
cellular network”.  TRAI noticed that the consumer base in  the  country  is
growing very fast and that the mobile telecom infrastructure is not  growing
at the same pace. This leads to a dip in the quality  of  service  provided.
It is interesting to notice that TRAI specifically adverts to the fact  that
call drops can take place due to a variety of reasons.  It pointed out  that
one of the reasons is due to the consumer’s own fault,  and  that  36.9%  of
call drops are attributable to  consumer  faults.  It  further  went  on  to
notice that the benchmark set for call drops is 2%,  and  it  is  seen  that
only 3 out of 12 licensees are not adhering to the said  benchmark  –  2  of
them being BSNL, who is not an appellant before  us,  the  other  one  being
Aircel. The Authority ultimately concluded:-

“5.27. In light of the reasons discussed above about the  increase  in  call
drops, it must be realized that mobile  towers  do  not  have  an  unlimited
capacity for handling the current network load. There is an urgent  need  to
increase the number of the towers so  as  to  cater  to  the  demands  of  a
growing subscriber base. At the same time, problems like removal  of  towers
from certain areas by Authorities  should  be  adequately  addressed.   This
problem  is  particularly  evident  in  urban  areas.   Moreover,  with  the
increase in the usage of 3G networks,  the  growth  rate  of  mobile  towers
supporting 2G networks has reduced. This must be addressed.

5.28.  The previous sections highlighted some important  countermeasures  at
the TSPs’ end. Measures  like  Dynamic  Channel  Allocation,  multiple  call
routing and optimized resource management  can  be  employed  by  the  TSP’s
besides  usage  of  mobile  signal  boosters  through  the  TSPs  at  users’
buildings or premises.  Some prioritization schemes like  MBPS,  CAC,  Guard
Channels, Handoff Queuing and Auxiliary  Stations  essentially  need  to  be
incorporated by TSPs to reduce call drops.”

8.    A Writ Petition, being Writ Petition (Civil)  No.11596  of  2015,  was
filed before the Delhi High Court, together with  various  other  petitions,
in  which  the  Ninth  Amendment,  being  the  Impugned  Amendment  to   the
Regulation  pointed  out  hereinabove,  was  challenged.  By  the   impugned
judgment  dated  29.2.2016,  the  Delhi  High  Court  noticed  the   various
arguments addressed on behalf of the various appellants, together  with  the
reply given by Shri P.S. Narasimha, learned Additional Solicitor General  of
India appearing on behalf of TRAI.  The High Court then went on  to  discuss
the validity of the Impugned Regulation under two grounds –  the  ground  of
being ultra vires  the parent Act, and the ground that  the  Regulation  was
otherwise unreasonable and manifestly arbitrary.  The  High  Court  repelled
the challenge of the appellants on both the  aforesaid  grounds.   The  High
Court first referred to BSNL  v.  Telecom  Regulatory  Authority  of  India,
(2014) 3 SCC 222 in some detail, and then went on to hold  that  the   power
vested  in  TRAI  under  Section    36(1) to make regulations is  wide  and
pervasive, and that as there can be no dispute that the Impugned  Regulation
has been made to ensure quality of service extended to the consumer  by  the
service provider, it would fall  within  Section  36(1)  read  with  Section
11(1)(b)(v).  The High Court further  held  that  the  contention  that  the
compensation provided under the Impugned Regulation  amounts  to  imposition
of penalty is liable to be rejected, since compensation  as  provided  under
the Impugned Regulation is only notional compensation to consumers who  have
suffered as a result of call drops.  The High Court  then  went  on  to  say
that a transparent consultative process was followed by TRAI in  making  the
Impugned Regulation, and that the technical paper on call  drops  issued  on
13.11.2015 addressed all issues  that  were  sought  to  be  raised  in  the
present petitions.  The contention that 100% performance is  demanded  under
the Impugned Regulation  was  rejected  as  being  factually  incorrect  and
without  any  basis.   It  was  further  added  that  the  impossibility  of
identification of the reason for the call drop  was  incorrect  inasmuch  as
these reasons are network related, and that is something that has  not  been
disputed by  telecom  equipment  manufacturers  like  M/s.  Nokia  and  M/s.
Ericsson.  It was further held that the  Impugned  Regulation  attempted  to
balance the interest of consumers with the interest of service providers  by
limiting call drops that are to be compensated to only 3 and also  mandating
that only the calling consumer and not the receiving consumer was liable  to
be so compensated.  In dealing with manifest arbitrariness, the  High  Court
held that the 2% standard imposed by the Quality of Service  Regulations  is
distinct and different from compensation provided to consumers  for  dropped
calls.  The  High  Court  sought  to  make  a  distinction  between  the  2%
tolerance limit as being a quality parameter for the  entire  network  area,
as against compensation provided which  specifies  an  individual  standard.
On the plea that the difficulties faced by service providers in  setting  up
mobile towers being something beyond their control, the High Court  declined
to enter into the said controversy since the High Court does  not  have  the
expertise to adjudicate on such rival claims.  The validity of the  Impugned
Regulation was upheld and the Writ Petitions were dismissed.

9.    At this stage, it would be important to notice the arguments  made  on
behalf of the various appellants before us. We  have  heard  learned  senior
advocates Shri Kapil Sibal, Dr. Abhishek Manu Singhvi, and Shri Gopal  Jain.
The arguments that were made by  them  can  fall  into  four  neat  logical
compartments.  First and foremost, they argued that the Ninth  Amendment  to
the Telecom Consumers Protection Regulations, 2015, is ultra  vires  Section
36 read with Section 11 of the Telecom Regulatory Authority  of  India  Act,
1997.  They argued that, in any  event,  these  Regulations,  being  in  the
nature  of  subordinate   legislation,   were   manifestly   arbitrary   and
unreasonable, and therefore affected their fundamental rights under  Article
14 and Article 19(1)(g) of the Constitution.  They further went on to  state
that there was no  power  in  the  TRAI  to  interfere  with  their  licence
conditions which are  contract  conditions  between  the  licensor  and  the
licensee, and that the said Regulations in seeking to impose a  penalty  not
provided for by the licence should be struck down as such.   Fourthly,  they
argued that Section 11(4) of the said  Act  requires  the  Authority  to  be
transparent in its dealings  with  the  various  stakeholders,  and  it  has
miserably failed in this also.

10.   Under the broad head “ultra vires” learned counsel  have  argued  that
Regulations can only be made under Section 36(1) of the  TRAI  Act  if  they
are consistent with and carry out the purposes  of  the  Act.   The  present
Regulations having purportedly been made under Section 11(1)(b)(i)  and  (v)
of the Act are in fact de hors Section 11(1)(b)(i) and (v), and contrary  to
the Quality of Service Regulations already made by the same Authority  under
the self-same provision.  They argued that the present  Impugned  Regulation
has nothing to do with ensuring compliance of the terms  and  conditions  of
licence  inasmuch  as  none  of  such  terms  and  conditions  empowers  the
Authority to levy a penalty based on No Fault Liability.  They  also  argued
that no standard of quality of service is prescribed by  the  Regulation  at
all, and therefore the so-called protection  of  the  consumers  is  without
laying down a standard of quality of service and is also  directly  contrary
to the 2% standard already laid down.  It was argued by them that as all  of
them met the  2%  standard  laid  down  by  the  2009  standard  of  quality
regulation, they could not  be  penalized  as  that  would  then  amount  to
substituting 98% with 100% as even one call drop would lead to a payment  of
penalty  of  rupee  one.   They  also  argued  that  such  penalty  was  not
authorized by either Section 36 or by Section 11, and, unlike Section 29  of
the Act, no such authority is to be found in the said Sections.

11.    Under  the  broad  head  “manifestly  arbitrary”,  and  “unreasonable
restrictions” learned counsel for the appellants argued that  without  there
being any fault on their part, they were foisted  with  a  penal  liability.
This is not only contrary to any  norm  of  law  or  justice,  but  directly
contrary to Section 14 of the Act which speaks of adjudication taking  place
between a service provider and a group of consumers.  The  complaint  of  an
individual consumer before a Consumer  Disputes  Redressal  Forum  would  be
dismissed on the ground that penal damages cannot  be  awarded  without  the
establishment of fault in any adjudication for  “inconvenience”  as  opposed
to “loss caused”.  To lay down by way of subordinate legislation,  a  strict
no fault penal liability would go contrary to the scheme of  the  TRAI  Act,
particularly when it is contrasted with the Electricity Act, 2003.  We  were
shown Section 57 and certain other Sections of the said  Act  in  which  the
Central and State Commissions for Electricity, unlike the  TRAI,  also  have
adjudicatory functions.  If, as  a  result  of  the  adjudicatory  function,
compensation for loss is decreed, the Commission under the  Electricity  Act
could do so, but not TRAI, as it has  no  adjudicatory  functions  but  only
recommendatory, administrative, and legislative functions.   It  was  argued
by them that Sections 73 and 74 of the Contract Act were  also  breached  as
damages by way of penalty, which are not a  genuine  pre-estimate  of  loss,
have been laid down by the Impugned Regulation, as it is  admitted  that  no
loss but only inconvenience has  been  caused  to  the  consumers.   It  was
further argued, based on the amended Preamble to  the  TRAI  Act,  that  the
Impugned Regulation only protects the  interest  of  the  consumers  of  the
telecom sector, whereas a balancing of the interests  of  service  providers
and consumers is required by the said Preamble.  Further, orderly growth  of
the telecom sector would also be directly affected  if  arbitrary  penalties
of this nature were to be inflicted upon service  providers.   It  was  also
argued that having made the financial disincentive for a breach  of  the  2%
benchmark even higher just one  day  before  the  Impugned  Regulation,  the
Impugned Regulations were wholly uncalled for. Further,  one  hand  of  TRAI
does not seem to know what the other hand is doing.  A few  days  after  the
Impugned Regulation, the TRAI’s own technical paper makes it clear that  the
TRAI has itself admitted that call drops are caused in many  ways,  most  of
which are not  attributable  to  service  providers.   That  being  so,  the
impugned amendment is wholly arbitrary in that the assumption  on  which  it
is based, namely, that the service provider is at fault every  time  a  call
drop takes place, is wholly unfounded, as has been found by TRAI  itself  in
the said technical paper.

12.   The learned Counsel have also argued, based  on  Section  402  of  the
Companies Act, 1956 and Section 27(d) of the Competition Act, 2002, that  no
power is given by the TRAI Act for  interference  with  licence  conditions,
which amount to  a  contract  between  licensor  and  licensee.   They  also
referred to Section 11(1)(b)(ii) which uses  the  familiar  “notwithstanding
anything contained in the terms and conditions of the  licence  ……….”  which
is missing from the  other  provisions  of  the  TRAI  Act.   The  argument,
therefore, being that when the licence conditions/contract itself  makes  it
clear that a no fault liability for call drops cannot be made, the  impugned
amendment would follow the terms  and  conditions  of  the  licence  between
licensor and licensee and would be bad as a result.

13. Finally, it was argued that  Section  11(4)  of  the  Act  was  breached
inasmuch as the transparency mandated by the  Act  in  the  framing  of  the
regulations was wholly missing as no reason whatsoever has  been  given  for
negativing the objections of the service providers  and  laying  down  a  no
fault strict penal liability on them.

14.   The learned Attorney General,  appearing  on  behalf  of  the  Telecom
Regulatory Authority of India, has countered these  submissions  and  sought
to defend the  High  Court  judgment.  According  to  the  learned  Attorney
General, it is first necessary to see the Statement of Objects  and  Reasons
of the Telecom Regulatory Authority of India Act, 1997.   Paragraph  one  of
the said statement was referred to in order to emphasize that  the  National
Telecom Policy of 1994 provided for the meeting of customer’s demands  at  a
reasonable price, and the promotion of consumer interest  by  ensuring  fair
competition.  When read in light of the Statement of  Objects  and  Reasons,
it is clear that the Impugned Regulation has been made bearing  this  object
in mind.  According to the learned Attorney General, Section 36 of  the  Act
has to be read in a wide and expansive manner, as has been  done  in  BSNL’s
judgment, and when so  read,  it  is  clear  that  the  Impugned  Regulation
conforms to Section 11(1)(b)(i) and (v) and is  otherwise  not  ultra  vires
the   Act.    Countering   the   submission   as   to   arbitrariness    and
unreasonableness of  the  Impugned  Regulation,  he  argued  that  the  said
Regulation was really framed keeping the small man  in  mind,  and  told  us
that 96% of consumers are pre-paid  customers  who  recharge  their  account
balance for an average of Rs.10/- at a time.  The Impugned Regulation  seeks
to provide some solace to these  persons  for  dropped  calls.   He  further
argued that members of the  appellants  have  made  huge  profits  from  the
aforesaid  business   and   have   pumped   in   very   little   funds   for
infrastructural development. He referred to funds pumped in  in  China,  for
example, which were ten times more than the  funds  in  this  country.   He,
therefore,  submitted  that  if  the  revenues  of  service  providers  were
computed at a rough average of approximately  Rs.96,560  crores  per  annum,
payments that they would have to make, according to a  calculation  made  by
him, for call drops under the Impugned Regulation, would amount to a sum  of
roughly only Rs.280 crores per  annum,  which  would  not  therefore  really
affect the appellants’ right to carry on business.  He further  argued  that
the Impugned Regulation is only an experimental measure and  was  liable  to
be revisited in six months. This being so, the appellants  should  not  have
rushed to court, but allowed the regulation to work, and if there  were  any
shortfalls, these could be  ironed  out  in  the  working  of  the  Impugned
Regulation.  He countered the argument made  on  behalf  of  the  appellants
that it is not possible, technically speaking, to arrive at the cause  of  a
call drop, and read manuals from some of the service providers to show  that
this was, in fact, possible, and that the reason for  the  call  drop  could
ultimately be pinpointed to the service providers when they are   at  fault.
He also refuted the submission made on behalf of the appellants that  there
were four broad reasons for call drops, three of which  cannot  be  laid  at
the appellants door.  He referred to the technical paper  dated  13.11.2015,
in particular, and to various other  documents,  to  show  that  call  drops
occurred basically due to two reasons alone – those that can be said  to  be
due to the fault of the service providers, and those that can be said to  be
due to the fault of the  consumers.   In  particular,  he  referred  to  and
relied upon a statistic showing that an average of 36.9% of call drops  take
place owing to the fault of the consumer – the rest take  place  because  of
the fault of the service provider, or the fact that it  has  not  pumped  in
enough funds for technical advancements to prevent the cause for  such  call
drops.  According  to  him,  with  the  provision  of  equipment,  including
boosters, call drops need not take place inside buildings with  thick  walls
and/or lifts.  In any case, the number of call drops that take  place  owing
to such reasons  is  itself  minimal.   According  to  him,  therefore,  the
Impugned Regulation should be read down so that service providers  are  made
to pay only for faults attributable to them, which would  come  to  a  rough
figure of 63% of what is charged,  for  amounts  payable  to  the  consumers
under the Impugned Regulation.  The learned Attorney General has assured  us
that, in point  of  fact,  the  authorities  will  administer  the  Impugned
Regulation in such a manner  that  service  providers  would  only  be  made
liable to pay for call drops owing to their own  fault.  He  further  argued
that three documents, if  read  together,  would  make  it  clear  that  the
Impugned  Regulation  cannot  be  said  to  be   manifestly   arbitrary   or
unreasonable, and that the consultation paper dated 4.9.2015,  the  Impugned
Regulation dated 16.10.2015,  and  the  technical  paper  dated  13.11.2015,
should all be  read  together  as  being  part  of  one  joint  exercise  to
alleviate the small consumers’ inconvenience  because  of  call  drops.   He
further went on to argue that it  is  not  correct  to  say  that  TRAI  has
contradicted itself in the technical paper of 13.11.2015, when  compared  to
the Impugned Regulation, and stated that the Quality of  Service  Regulation
which allowed a 2% average per month for call drops should not  be  confused
with the Impugned Regulation.  They are, according to him,  a  parallel  set
of regulations which have to be read separately, both having been framed  by
TRAI, in order to protect consumer interest. He also added that  guess  work
is inherent in framing a regulation  of  the  sort  that  is  impugned,  and
further stated that three call drops per day mitigated the rigour of  having
to pay for more than 3 call drops per day, and that rupee one per call  drop
would really be payment or  recompense  for  call  drops  which  take  place
because the consumer has to incur  an  extra  charge  to  connect  with  the
person whose call dropped yet again and spend  more  money  for  the  second
call.  He also added that only the consumer who dials  the  call  which  has
dropped is paid and not the receiving  consumer,  thereby  again  mitigating
the rigour of what could amount to a double payment for one call.  He  cited
a number of judgments to buttress the aforesaid  submissions,  stating  that
the said judgments would show that  the  Court  should  not  substitute  its
wisdom for that of the wisdom of legislative policy, and that TRAI being  an
active trustee for the common good has  framed  this  regulation  acting  as
such.  He also refuted the  submission  that  the  licence  conditions  were
illegally  modified  by  the  Impugned  Regulation,  and  stated  that   the
Explanatory Memorandum to  the  Impugned  Regulation  would  show  that  the
transparency  required  under  Section  11(4)  of  the  Act  was  duly   and
faithfully observed by TRAI.

15.    In rejoinder, learned  senior  counsel  for  the  appellants  stoutly
resisted the factual statements made by the learned Attorney General.   They
pointed out that the net debt of the various telecom  operators  before  us,
as on 31.12.2015, ran into approximately Rs.3,80,000/- crores and that  this
was because huge amounts had to be borrowed from banks in order to  pay  for
both spectrum and infrastructure.  They were at  pains  to  point  out  that
though service  providers  in  India  contributed  to  13%  of  the  world’s
telecommunication services, the revenue earned by them was  only  2.7%,  and
even this was fast decreasing.  According to the learned counsel, they  have
covered over 500,000 villages in India contributing to 6%  of  India’s  GDP,
thus being amongst the highest contributors in foreign direct investment  in
this country in the last decade.  They  have  also  made  the  second  large
private sector investment  in  infrastructure  amounting  to  Rs.  800,000/-
crores despite the return on investment being only  1%.   Contrary  to  what
the learned Attorney General had to say, a vast number of towers  have  been
set up – more than two lac sites in the last 15 months  alone.  When  viewed
with the gigantic net debt and return on investment,  the  figure  of  gross
revenue given by the learned  Attorney  General  is  said  to  be  a  highly
misleading figure.  Also, the comparison with infrastructure  investment  in
China is wholly misplaced inasmuch as the Chinese Government  has  unlimited
funds to pour into its telecom companies, over 70% of  their  share  capital
being held by the Government.  Spectrum allocation to Chinese  operators  is
at almost no cost, whereas in India, thousands of crores of rupees  have  to
be spent as spectrum is now auctioned to  the  highest  bidder.   Also,  the
revenue of the top three Chinese telecom operators is more  than  six  times
the revenue of the top three Indian operators.  In addition, it  was  argued
that the facts and  figures reeled out by the learned Attorney  General  are
not based on the record of the case, and, in  any  case,  have  very  little
connection with the challenge to the  Impugned  Regulation  in  the  present
case.

16.   We have also heard learned  counsel  appearing  for  various  consumer
groups.  They supported the arguments of the learned  Attorney  General  and
went on to state that since the focus of  the  TRAI  Act  and  the  Impugned
Regulation was for the small  and  impoverished  consumers  in  India,  this
Court would be loathe to strike down the Impugned Regulation.  They  further
argued that the doctrine  of  public  trust  would  apply  to  the  Impugned
Regulation, as the Regulation was part of the overall social  responsibility
that the regulator TRAI has cast upon the service  providers  in  favour  of
consumers.  They also cited a  few  judgments  dealing  with  the  vires  of
subordinate  legislation  and  with  transparency  in  the  context  of  the
Impugned Regulation.

17.   Having heard  learned  counsel  for  all  the  parties,  it  is  first
necessary to set out the  relevant  provisions  of  the  Telecom  Regulatory
Authority of India Act, 1997.

18.   The Statement of Objects and Reasons for the said Act is  as  follows:

“1.   In the context of the National Telecom  Policy,  1994,  which  amongst
other things, stresses on achieving  the  universal  service,  bringing  the
quality of telecom services to world standards, provisions of wide range  of
services  to  meet  the  customers   demand   at   reasonable   price,   and
participation of the companies registered in India in the area of  basic  as
well as value  added  telecom  services  as  also  making  arrangements  for
protection  and  promotion  of   consumer   interest   and   ensuring   fair
competition, there is a felt need  to  separate  regulatory  functions  from
service providing functions which will be in keeping with the general  trend
in the world.  In the multi-operator situation arising  out  of  opening  of
basic as well as value added services in  which  private  operator  will  be
competing with Government  operators,  there  is  a  pressing  need  for  an
independent telecom regulatory body for regulation of telecom  services  for
orderly and healthy growth of telecommunication  infrastructure  apart  from
protection of consumer interest.”

The Preamble of the Telecom  Regulatory  Authority  Act  of  1997  reads  as
under:

“Preamble –  An  act  to  provide  for  the  establishment  of  the  Telecom
Regulatory Authority of India to regulate  the  telecommunication  services,
and for matters connected therewith or incidental thereto.”

Section 11(n) read as under:-

Functions of Authority –  (1)  Notwithstanding  anything  contained  in  the
Indian Telegraph Act, 1885, the functions of the Authority shall be to –

(n)   settle disputes between service providers”

19.   In 2000, the Act was amended.  By the Amended  Act,  the  adjudicatory
function of the TRAI was taken away from it and was vested in  an  Appellate
Tribunal.  The relevant provisions of the Act as  amended  in  2000  are  as
follows:-

“Preamble-  An  Act  to  provide  for  the  establishment   of   the Telecom
Regulatory Authority of  India  and  the  Telecom  Disputes  Settlement  and
Appellate Tribunal to regulate the  telecommunication  services,  adjudicate
disputes, dispose of  appeals  and  to  protect  the  interests  of  service
providers and consumers  of  the  telecom  sector,  to  promote  and  ensure
orderly growth of the telecom sector and for matters connected therewith  or
incidental thereto”

11. Functions of Authority. (1) Notwithstanding anything  contained  in  the
Indian Telegraph Act, 1885, the functions of the Authority shall be to-

(b) discharge the following functions, namely:-

(i) ensure compliance of terms and conditions of license;

(ii) notwithstanding anything contained in the terms and conditions  of  the
license granted before the commencement of the Telecom Regulatory  Authority
(Amendment)  Ordinance,2000,  fix  the  terms  and  conditions   of   inter-
connectivity between the service providers;

xx

(v) lay down the standards of quality of  service  to  be  provided  by  the
service  providers and  ensure  the  quality  of  service  and  conduct  the
periodical survey of such service provided by the service  providers  so  as
to protect interest of the consumers of telecommunication services;

11. (4) The Authority shall ensure transparency while exercising its  powers
and discharging its functions.

12. Powers of Authority to call  for  information,  conduct  investigations,
etc. —

(4) The Authority shall have the power to issue such directions  to  service
providers as it may consider necessary for  proper  functioning  by  service
providers.

13. Power of Authority to  issue  directions.—The  Authority  may,  for  the
discharge of its functions under sub-section (1) of Section 11,  issue  such
directions from time to time to the service providers, as  it  may  consider
necessary:

Provided that no direction under sub-section (4)  of  Section  12  or  under
this section shall be issued except on the matters specified in  clause  (b)
of sub-section (1) of Section 11.

14. Establishment of Appellate Tribunal.—The Central  Government  shall,  by
notification, establish an Appellate Tribunal to be  known  as  the  Telecom
Disputes Settlement and Appellate Tribunal to—

(a) adjudicate any dispute—

(i) between a licensor and a licensee;

(ii) between two or more service providers;

(iii) between a service provider and a group of consumers:

Provided that nothing in this clause  shall  apply  in  respect  of  matters
relating to—

(A) the monopolistic trade practice, restrictive trade practice  and  unfair
trade practice which are subject to the jurisdiction of the  Monopolies  and
Restrictive Trade Practices Commission established under sub-section (1)  of
Section 5 of the Monopolies and Restrictive Trade Practices  Act,  1969  (54
of 1969);

(B) the complaint of an individual consumer maintainable before  a  Consumer
Disputes Redressal Forum or a Consumer Disputes Redressal Commission or  the
National Consumer Redressal Commission established under Section  9  of  the
Consumer Protection Act, 1986 (68 of 1986);

(C) the dispute between telegraph authority and any  other  person  referred
to in sub-section (1) of Section 7-B of the Indian Telegraph Act,  1885  (13
of 1885);

(b) hear and dispose of appeals against any direction, decision or order  of
the Authority under this Act.

15. Civil  Court  not  to  have  jurisdiction.—No  civil  court  shall  have
jurisdiction to entertain any suit or proceeding in respect  of  any  matter
which the Appellate Tribunal is empowered by or under this Act to  determine
and no injunction shall be granted  by  any  court  or  other  authority  in
respect of any action taken or  to  be  taken  in  pursuance  of  any  power
conferred by or under this Act.

25. Power  of  Central  Government  to  issue  directions.—(1)  The  Central
Government may, from time to time, issue to the  Authority  such  directions
as it may think necessary in the interest of the sovereignty  and  integrity
of India, the  security  of  the  State,  friendly  relations  with  foreign
States, public order, decency or morality.

(2) Without prejudice to the foregoing provisions, the Authority  shall,  in
exercise of its powers or the performance of  its  functions,  be  bound  by
such directions on questions of policy as the Central  Government  may  give
in writing to it from time to time:

Provided that the Authority shall,  as  far  as  practicable,  be  given  an
opportunity to express its views before any direction is  given  under  this
sub-section.

(3) The decision of the Central Government whether  a  question  is  one  of
policy or not shall be final.

29. Penalty for  contravention  of  directions  of  Authority.—If  a  person
violates directions of the Authority, such person shall be  punishable  with
fine which may  extend  to  one  lakh  rupees  and  in  case  of  second  or
subsequent offence with fine which may extend to two lakh rupees and in  the
case of continuing contravention with additional fine which  may  extend  to
two lakh rupees for every day during which the default continues.

36. Power to make regulations.—(1) The Authority may, by notification,  make
regulations consistent with this Act and the rules made thereunder to  carry
out the purposes of this Act.

(2) In particular, and without prejudice to the generality of the  foregoing
power, such regulations  may  provide  for  all  or  any  of  the  following
matters, namely :—

(a)  the times and places of meetings of the Authority and the procedure  to
be followed at such meetings under sub-section (1) of Section  8,  including
quorum necessary for the transaction of business;

(b)  the transaction of business at the meetings of the Authority under sub-
section (4) of Section 8;

(c)   ******

(d) matters in respect  of  which  register  is  to  be  maintained  by  the
Authority under sub-clause  (vii)  of  clause  (b)  of  sub-section  (1)  of
Section 11;

(e) levy of fee and lay down  such  other  requirements  on  fulfillment  of
which a copy of register may be obtained under sub-clause (viii)  of  clause
(b) of sub-section (1) of Section 11;

(f)    levy of fees and other charges under clause (c)  of  sub-section  (1)
of Section 11.

37. Rules and regulations to  be  laid  before  Parliament.—Every  rule  and
every regulations made under this Act shall be  paid,  as  soon  as  may  be
after it is made, before each House of Parliament, while it is  in  session,
for a total period of thirty days which may be comprised in one  session  or
in tow or more successive  sessions,  and  if,  before  the  expiry  of  the
session  immediately  following  the  session  or  the  successive  sessions
aforesaid, both Houses agree in making  any  modification  in  the  rule  or
regulation or both Houses agree that the rule or regulation  should  not  be
made, the rule or regulation shall  thereafter  have  effect  only  in  such
modified form or be of no effect, as the case may be; so, however, that  any
such modification or annulment shall be without prejudice  to  the  validity
of anything previously done under that rule or regulation.”

Parameters of Judicial Review of Subordinate Legislation

20.   In State of Tamil Nadu v. P. Krishnamoorthy, (2006) 4  SCC  517,  this
Court after adverting to the relevant case law on  the  subject,  laid  down
the parameters of  judicial  review  of  subordinate  legislation  generally
thus:-

“There is a presumption in favour of  constitutionality  or  validity  of  a
subordinate legislation and the burden is upon him who attacks  it  to  show
that  it  is  invalid.  It  is  also  well  recognised  that  a  subordinate
legislation can be challenged under any of the following grounds:

(a) Lack of legislative competence to make the subordinate legislation.

(b) Violation of fundamental rights guaranteed  under  the  Constitution  of
India.

(c) Violation of any provision of the Constitution of India.

(d) Failure to conform to the statute under which it is  made  or  exceeding
the limits of authority conferred by the enabling Act.

(e) Repugnancy to the laws of the land, that is, any enactment.

(f) Manifest arbitrariness/unreasonableness (to an extent  where  the  court
might well say that the legislature never  intended  to  give  authority  to
make such rules).

The court considering the validity of a subordinate legislation,  will  have
to consider the nature, object and scheme of the enabling Act, and also  the
area over which power has been delegated  under  the  Act  and  then  decide
whether the subordinate legislation conforms to the parent statute. Where  a
rule is directly inconsistent with a mandatory  provision  of  the  statute,
then, of course, the task of the court is simple and easy.

But where the contention is that the inconsistency or non-conformity of  the
rule is not with reference to any specific provision of  the  enabling  Act,
but with the object and scheme of the parent Act, the court  should  proceed
with caution before declaring invalidity.” [paras 15 and 16]

21.    In  the  present  case,  the  appellants  have  raised  pleas   under
paragraphs (b), (d) and (f) of paragraph 15 of the said  judgment.   We  now
move on to consider their arguments.

Ultra vires

22.   The power to make the Impugned  Regulation  is  traceable  to  Section
36(1) of the Telecom Regulatory Authority of India Act,  1997.   This  Court
in BSNL v. Telecom Regulatory Authority of India, (2014) 3  SCC  222,  after
analyzing the aforesaid provision  in  the  backdrop  of  the  Act  held  as
follows:-

“We may now advert to Section 36. Under sub-section  (1)  thereof  TRAI  can
make regulations to carry out the purposes of  the  TRAI  Act  specified  in
various provisions of the TRAI Act including Sections 11,  12  and  13.  The
exercise of power under Section 36(1) is hedged with the condition that  the
regulations must be  consistent  with  the  TRAI  Act  and  the  rules  made
thereunder. There is no other restriction on  the  power  of  TRAI  to  make
regulations. In terms of Section 37, the  regulations  are  required  to  be
laid before Parliament which can either approve, modify or annul  the  same.
Section 36(2), which  begins  with  the  words  “without  prejudice  to  the
generality of the power under sub-section (1)” specifies various  topics  on
which regulations can be made by TRAI.  Three  of  these  topics  relate  to
meetings of TRAI, the  procedure  to  be  followed  at  such  meetings,  the
transaction of business at the meetings and the register  to  be  maintained
by TRAI. The remaining two topics  specified  in  clauses  (e)  and  (f)  of
Section  36(2)  are  directly  referable  to  Sections  11(1)(b)(viii)   and
11(1)(c). These  are  substantive  functions  of  TRAI.  However,  there  is
nothing in the language of Section 36(2) from which it can be inferred  that
the provisions contained therein control  the  exercise  of  power  by  TRAI
under Section 36(1) or that Section 36(2) restricts  the  scope  of  Section
36(1)…

Before parting with this aspect of the matter, we  may  notice  Sections  33
and 37. A reading of the plain language of Section 33 makes  it  clear  that
TRAI can, by general or special order, delegate to any member or officer  of
TRAI or any other person such of its powers and  functions  under  the  TRAI
Act  except  the  power  to  settle  disputes  under  Chapter  IV  or   make
regulations under Section 36. This means that the power to make  regulations
under Section 36 is non-delegable. The reason for excluding Section 36  from
the purview of  Section  33  is  simple.  The  power  under  Section  36  is
legislative as opposed to administrative.  By  virtue  of  Section  37,  the
regulations made under the TRAI Act are placed  on  a  par  with  the  rules
which can be framed by the Central Government under Section 35 and being  in
the nature of subordinate legislations, the rules and  regulations  have  to
be laid before both the Houses of Parliament which can annul or  modify  the
same. Thus, the regulations framed  by  TRAI  can  be  made  ineffective  or
modified by Parliament and by no other body.

In view of the above discussion  and  the  propositions  laid  down  in  the
judgments referred to in the preceding paragraphs, we hold  that  the  power
vested in  TRAI  under  Section  36(1)  to  make  regulations  is  wide  and
pervasive. The exercise of this power is only subject to the  provisions  of
the TRAI Act and the rules framed under Section  35  thereof.  There  is  no
other limitation on the exercise of power by TRAI under  Section  36(1).  It
is not controlled or limited by Section 36(2) or Sections 11,  12  and  13.”
[paras 89, 98 – 100]

23.   It will thus be seen that though the  Regulation  making  power  under
the said Act is wide and pervasive, and is not trammeled by  the  provisions
of Section 11, 12(4) and 13, it  is  a  power  that  is  non-delegable  and,
therefore, legislative in nature.  The exercise of this power is  hedged  in
with the condition that it must be exercised consistently with the  Act  and
the Rules thereunder in order to carry out the purposes of  the  Act.  Since
the regulation making power has first to be consistent with the Act,  it  is
necessary that it not be inconsistent with Section 11 of  the  Act,  and  in
particular Section 11(1)(b) thereof.   This  is  for  the  reason  that  the
functions of the Authority are laid down  by  this  Section,  and  that  the
Impugned Regulation itself refers to Section  11(1)(b)(i)  and  (v)  as  the
source of power under which the Impugned Regulation has been framed.   Since
ensuring compliance with the terms and conditions of licence  is  the  first
thing that has been argued on behalf of the respondents, it is important  to
advert to the provisions of the licence between  the  service  provider  and
the consumer.  As has been mentioned above, two very  important  clauses  of
this licence refer to (i)  the power to modify the licence conditions  which
is contained in clause 5 and (ii) the ensuring  by  the  licensee  that  the
quality of service shall be as prescribed by the licensor or TRAI by  clause
28 thereof.  Under clause 5, the licensor reserves the right to  modify  the
terms and conditions of the licence if in the opinion of the licensor it  is
necessary or expedient so to do in public interest or  in  the  interest  of
security of the State or for the proper conduct of telegraphs.   It  may  be
stated that no modification of the licence has in  fact  been  attempted  or
has taken place in the facts of the present case. Therefore  clause  5  need
not detain us further. Clause 28 reads as follows:

“28.  Quality of Performance:

28.1  The LICENSEE shall ensure the Quality of Service (QoS)  as  prescribed
by the LICENSOR or TRAI.  The LICENSEE shall adhere to  such  QoS  standards
and provide timely information as required therein.

28.2  The LICENSEE shall be responsible for:-
i)    Maintaining the performance and quality    of service standards.
ii)   Maintaining the MTTR (Mean  Time  To  Restore)  within  the  specified
limits of the quality of
service.
iii)  The LICENSEE will keep a record of number of faults and  rectification
reports in respect of  the  service,  which  will  be  produced  before  the
LICENSOR/TRAI as and when and in whatever form desired.

28.3  The LICENSEE shall be responsive  to  the  complaints  lodged  by  his
subscribers.  The Licensee shall  rectify  the  anomalies  within  the  MTTR
specified and maintain the history sheets for each installation,  statistics
and analysis on the overall maintenance status.

28.4  The LICENSOR or TRAI may carry out  performance  tests  on  LICENSEE’s
network and also  evaluate  Quality  of  Service  parameters  in  LICENSEE’s
network prior to grant of permission for commercial launch  of  the  service
after successful completion of interconnection  tests  and/or  at  any  time
during the currency of the License to ascertain that the network  meets  the
specified standards  on  Quality  of  Service  (QoS).   The  LICENSEE  shall
provide ingress and other support including  instruments,  equipments  etc.,
for such tests.

28.5  The LICENSEE shall enforce  and  ensure  QOS,  as  prescribed  by  the
LICENSOR/TRAI, from the INFRASTRUCTURE PROVIDER(s) with whom  it  may  enter
into agreement/contract for leasing/hiring/buying  or  any  such  instrument
for  provision  of  infrastructure   or   provision   of   bandwidth.    The
responsibility of ensuring QOS shall be that of LICENSEE.”

24.   Under clause 28 it is a condition that the licensee shall  ensure  the
quality of service as prescribed by the licensor or TRAI, and  shall  adhere
to such standards as are provided.  Another important  thing  to  notice  is
that under clause 28.2 the licensee has to keep a record of  the  number  of
faults and rectification reports in respect of its service,  which  will  be
produced before the licensor/TRAI as and when desired. This being the  case,
it is clear that the Impugned  Regulation  cannot  be  said  to  fall  under
Section 11(1)(b)(i) at all inasmuch as it does not seek to enforce any  term
or condition of the licence between the service provider and  the  consumer.
Coming to sub-para (v) of Section 11(1)(b), the  Impugned  Regulation  would
again have no reference to the said paragraph, inasmuch as it does  not  lay
down any standard of quality of  service  to  be  provided  by  the  service
provider. In order that clause (v) be attracted, not only  do  standards  of
quality of service to be provided by the service providers have to  be  laid
down, but standards have to be adhered to by the service providers so as  to
protect  the  interests  of  the  consumers.   We  find  that  the  Impugned
Regulation is not referable to  Section  11(1)(b)(i)  and  (v)  of  the  Act
inasmuch as it has not been made to  ensure  compliance  of  the  terms  and
conditions of the licence nor has it been made to lay down any  standard  of
quality of  service  that  needs  compliance.   This  being  the  case,  the
Impugned Regulation is  de  hors  Section  11  but  cannot  be  said  to  be
inconsistent with Section 11 of the Act.  This Court has categorically  held
in the BSNL judgment that the power under Section 36  is  not  trammeled  by
Section 11. This being so, the Impugned Regulation  cannot  be  said  to  be
inconsistent with Section 11 of the Act.  However, what has also to be  seen
is whether the said Regulation carries out the purpose of the Act which,  as
has been pointed out hereinabove, under the amended Preamble to the Act,  is
to protect the interests of service providers as well as  consumers  of  the
telecom sector so as to promote and ensure orderly  growth  of  the  telecom
sector.  Under Section  36,  not  only  does  the  Authority  have  to  make
regulations consistent with the Act and the Rules made  thereunder,  but  it
also has to carry out the purposes of the Act, as can be discerned from  the
Preamble to the Act.  If, far from carrying out the purposes of the  Act,  a
Regulation is made contrary to such  purposes,  such  Regulation  cannot  be
said to be consistent with the Act, for it must be consistent with both  the
letter of the Act and the purposes for which the Act has  been  enacted.  In
attempting to protect the interest of the consumer of the telecom sector  at
the cost of the interest of a service provider who complies with the  leeway
of an average of 2%  of  call  drops  per  month  given  to  it  by  another
Regulation, framed under Section 11(1)(b)(v),  the balance  that  is  sought
to be achieved by the Act for the orderly growth of the telecom  sector  has
been violated.  Therefore we hold that  the  Impugned  Regulation  does  not
carry out the purpose of the Act and must be held to be ultra vires the  Act
on this score.

Violation of Fundamental Rights

25.   We have already seen  that  one  of  the  tests  for  challenging  the
constitutionality  of   subordinate   legislation   is   that    subordinate
legislation should not be manifestly arbitrary.  Also,  it  is  settled  law
that subordinate legislation  can  be  challenged  on  any  of  the  grounds
available for challenge against plenary legislation – [See:  Indian  Express
Newspapers v. Union of India, (1985) 1 SCC 641 at Para 75].

26.   The  test  of  “manifest  arbitrariness”  is  well  explained  in  two
judgments  of  this  Court.   In  Khoday  Distilleries  Ltd.  v.  State   of
Karnataka, (1996) 10 SCC 304, this Court held:
“It is next submitted before  us  that  the  amended  Rules  are  arbitrary,
unreasonable and cause undue hardship and, therefore, violate Article 14  of
the Constitution. Although the protection of Article  19(1)(g)  may  not  be
available to the appellants, the rules must, undoubtedly, satisfy  the  test
of Article 14, which is a guarantee against arbitrary action.  However,  one
must bear in mind that what is being challenged here  under  Article  14  is
not executive action but  delegated  legislation.  The  tests  of  arbitrary
action which  apply  to  executive  actions  do  not  necessarily  apply  to
delegated legislation. In order that delegated  legislation  can  be  struck
down, such legislation must be manifestly arbitrary; a law which  could  not
be reasonably expected to emanate  from  an  authority  delegated  with  the
lawmaking power. In the case of  Indian  Express  Newspapers  (Bombay)  Pvt.
Ltd. and Ors. v. Union of India and Ors. [(1985) 1 SCC 641 : 1985 SCC  (Tax)
121 : (1985) 2 SCR 287],  this  Court  said  that  a  piece  of  subordinate
legislation does not carry the same degree of immunity which is  enjoyed  by
a statute passed by a competent legislature. A subordinate  legislation  may
be questioned under Article 14  on  the  ground  that  it  is  unreasonable;
“unreasonable not in the sense of not being reasonable,  but  in  the  sense
that it is manifestly arbitrary”. Drawing a comparison between  the  law  in
England and in India, the Court further observed that in England the  Judges
would say, “Parliament never intended the  authority  to  make  such  Rules;
they are unreasonable and ultra vires”. In India,  arbitrariness  is  not  a
separate ground since it will come within the embargo of Article 14  of  the
Constitution. But subordinate legislation  must  be  so  arbitrary  that  it
could not be said to be in conformity with the statute or  that  it  offends
Article 14 of the Constitution.” [para 13]

27.   Also, in Sharma Transport v. Government of Andhra  Pradesh,  (2002)  2
SCC 188, this Court held:
“… The tests of arbitrary action  applicable  to  executive  action  do  not
necessarily apply to delegated  legislation.  In  order  to  strike  down  a
delegated legislation as arbitrary it has to be established  that  there  is
manifest arbitrariness. In order to be described as arbitrary,  it  must  be
shown that it was not reasonable and manifestly  arbitrary.  The  expression
“arbitrarily”  means:  in  an  unreasonable  manner,  as   fixed   or   done
capriciously or at pleasure, without  adequate  determining  principle,  not
founded in the nature of things, non-rational, not done or acting  according
to reason or judgment, depending on the will alone. …”

28.   When we come to Article 19(1)(g) of the Constitution,  the  tests  for
challenge to plenary legislation are well settled.  First  and  foremost,  a
sea change took place with the 11-Judge Bench judgment  in  Rustom  Cavasjee
Cooper (Banks Nationalisation) v. Union of  India,  (1970)  1  SCC  248,  in
which the impact of State action upon fundamental rights was stated thus:

“We have carefully considered the  weighty  pronouncements  of  the  eminent
Judges who gave shape to the  concept  that  the  extent  of  protection  of
important guarantees, such as the liberty of person, and right to  property,
depends upon the form and object of the  State  action,  and  not  upon  its
direct operation upon the individual’s freedom. But it is not the object  of
the authority making the law impairing the right of a citizen, nor the  form
of action taken that determines the protection  he  can  claim:  it  is  the
effect of the law and of the  action  upon  the  right  which  attracts  the
jurisdiction of the Court to grant relief. If this be the true view  and  we
think it is, in determining the impact of State action  upon  constitutional
guarantees which are fundamental, it follows that the extent  of  protection
against impairment of a fundamental right is determined not  by  the  object
of the Legislature nor by  the  form  of  the  action,  but  by  its  direct
operation upon the individual’s rights.” [para 49]

29.   Under Article 19(6) of the Constitution, the State has to  conform  to
two separate and independent tests if it is to pass constitutional muster  –
the restriction on  the  appellants’  fundamental  right  must  first  be  a
reasonable restriction, and secondly, it should also be in the  interest  of
the general public.  Perhaps the best  exposition  of  what  the  expression
“reasonable restriction” connotes was laid down in Chintaman  Rao  v.  State
of Madhya Pradesh, 1950 SCR 759, as follows:-

“The phrase “reasonable restriction” connotes that  the  limitation  imposed
on a person in enjoyment of the right should  not  be  arbitrary  or  of  an
excessive nature, beyond what is required in the interests  of  the  public.
The word “reasonable” implies intelligent care and  deliberation,  that  is,
the choice of a course which reason dictates. Legislation which  arbitrarily
or excessively invades the right cannot be said to contain  the  quality  of
reasonableness and unless it strikes a proper balance  between  the  freedom
guaranteed in article 19(1)(g) and the social control  permitted  by  clause
(6) of article 19, it must be held to  be  wanting  in  that  quality.”  [at
p.763]

30.   It is interesting  to  note  that  the  original  Constitution,  while
enumerating various rights under Article 19(1),  when  it  referred  to  the
right of freedom of speech in Article 19(1)(a), laid down in  Article  19(2)
that any law abridging the right  to  freedom  of  speech  could  only  pass
constitutional muster if it related to any of  the  subjects  laid  down  in
clause (2).  What was conspicuous by its absence was the phrase  “reasonable
restriction”, which was only brought  in  by  the  first  amendment  to  the
Constitution.

31.   Similarly, the  first  amendment  to  the  Constitution  also  amended
Article 19(6), with which we are directly concerned, to provide for a  State
monopoly, which would not have to be tested  on  the  ground  of  reasonable
restrictions.  Therefore, the first amendment to the Constitution  of  India
has made it clear that reasonable restrictions, added in Article  19(2)  and
subtracted from Article 19(6) (insofar as State monopolies  are  concerned),
point to the fact that this test is a test separate and  distinct  from  the
test of the law being in the interest of the general public.  Why we are  at
pains to point this out is because the learned Attorney  General’s  argument
focused primarily on the Impugned Regulation being in the  public  interest.
He referred to Delhi Science Forum v. Union of India, (1996) 2 SCC 405,  for
the proposition that TRAI, as an active trustee, has framed this  Regulation
for the common good.  While accepting that TRAI may have done so, yet it  is
important to note that, apart from the common good in the form  of  consumer
interest, the Regulation must also pass a separate and independent  test  of
not being manifestly arbitrary or unreasonable.  We cannot forget that  when
viewed from the angle of manifest arbitrariness or  reasonable  restriction,
sounding in Article 14 and Article  19(1)(g)  respectively,  the  Regulation
must, in order to pass constitutional muster, be as a result of  intelligent
care and deliberation,  that  is,  the  choice  of  a  course  which  reason
dictates.  Any arbitrary invasion of a fundamental right cannot be  said  to
contain this quality.  A proper balance  between  the   freedoms  guaranteed
and the control permitted under Article 19(6) must be struck  in  all  cases
before the impugned law can be said to be a reasonable  restriction  in  the
public interest.

32.   We find that it is not necessary to go in  detail  into  many  of  the
submissions made on either side as to the technical difficulties  which  may
or may not lead to call drops.  This is for  the  reason  that  even  if  we
accept the demarcation of the cause of call drops to  be  what  the  learned
Attorney General says it is, the Impugned Regulation  must  be  held  to  be
manifestly arbitrary and an  unreasonable  restriction  on  the  appellants’
fundamental rights to carry on business. According to the  learned  Attorney
General, the cause for call drops is twofold – one owing  to  the  fault  of
the consumer, and the other owing to the  fault  of  the  service  provider.
And, for this dichotomy, he  has  referred  to  the  technical  paper  dated
13.11.2015, which shows that an average of 36.9% can be call drops owing  to
the fault of the consumer. If this is so,  the  Impugned  Regulation’s  very
basis is destroyed: the Regulation is based on the  fact  that  the  service
provider is 100% at fault.  This becomes clear from a reading  of  the  text
of the said Regulation together with  the  Explanatory  Memorandum  set  out
hereinabove.  This being the case, it is clear that the service provider  is
made to pay for call drops that may not be attributable to  his  fault,  and
the consumer receives compensation for a call drop that may be  attributable
to  the  fault  of  the  consumer  himself,  and  that  makes  the  Impugned
Regulation a regulation framed without intelligent care and deliberation.

33.   But it was said that the aforesaid Regulation should be read  down  to
mean that it would apply  only  when  the  fault  is  that  of  the  service
provider.  We are afraid that such a course is not open to us  in  law,  for
it is well settled that the doctrine of reading down would apply  only  when
general words used  in  a  statute  or  regulation  can  be  confined  in  a
particular manner so as not to infringe a constitutional  right.   This  was
best exemplified in one of the earliest judgments dealing with the  doctrine
of reading down, namely the judgment of the Federal Court in  In  Re:  Hindu
Women’s Rights to Property Act, 1937, AIR 1941 FC  72.   In  that  judgment,
the word “property” in Section 3 of the Hindu  Women’s  Rights  to  Property
Act was read down so as not to include agricultural  land,  which  would  be
outside the central legislature’s powers under the Government of India  Act,
1935. This is done because it is  presumed  that  the  legislature  did  not
intend to transgress constitutional limitations.  While so reading down  the
word “property”, the Federal Court held:

“If the restriction of the general words to purposes  within  the  power  of
the Legislature would be to leave an Act with nothing or next to nothing  in
it, or an Act different in kind, and not merely in degree, from  an  Act  in
which the general words were given the wider meaning, then it is plain  that
the Act as a whole must be held invalid, because in  such  circumstances  it
is impossible to assert with any confidence that  the  Legislature  intended
the general words which it has used to be construed  only  in  the  narrower
sense: Owners of SS. Kalibia  v.  Wilson  (1910)  11  CLR  689,  Vacuum  Oil
Company Ltd. v. State of Queensland (1934) 51 CLR 677,  R.  v.  Commonwealth
Court of Conciliation and Arbitration (1910) 11 CLR 1 and  British  Imperial
Oil Co. Ltd. v. Federal Commissioner of Taxation (1925) 35 CLR 422.”

34.   This judgment was followed by a Constitution Bench of  this  Court  in
Delhi Transport Corpn. v. D.T.C. Mazdoor Congress, 1991 Supp  (1)  SCC  600.
In that case, a question arose as to whether a particular  regulation  which
conferred power on an authority to terminate the  services  of  a  permanent
and confirmed employee by issuing a notice terminating his services,  or  by
making payment in lieu of such notice  without  assigning  any  reasons  and
without any opportunity of hearing to the employee,  could  be  said  to  be
violative of the  appellants’  fundamental  rights.   Four  of  the  learned
Judges who heard the case,  the  Chief  Justice  alone  dissenting  on  this
aspect,  decided  that  the  regulation  cannot  be  read  down,  and  must,
therefore, be held to be unconstitutional.  In the  lead  judgment  on  this
aspect by Sawant,J., this Court stated:

“It is thus clear that the doctrine of reading  down  or  of  recasting  the
statute can be applied  in  limited  situations.  It  is  essentially  used,
firstly, for saving a statute from being  struck  down  on  account  of  its
unconstitutionality. It is an extension  of  the  principle  that  when  two
interpretations are possible —  one  rendering  it  constitutional  and  the
other making it  unconstitutional,  the  former  should  be  preferred.  The
unconstitutionality  may  spring  from  either  the  incompetence   of   the
legislature to enact the statute  or  from  its  violation  of  any  of  the
provisions of the Constitution. The second situation which summons  its  aid
is where the provisions of the statute are vague and  ambiguous  and  it  is
possible to gather the intentions of the legislature from the object of  the
statute, the context in which the  provision  occurs  and  the  purpose  for
which it is made. However, when the provision is  cast  in  a  definite  and
unambiguous language and its intention  is  clear,  it  is  not  permissible
either to mend or bend it even if such recasting  is  in  accord  with  good
reason and conscience. In such circumstances, it is  not  possible  for  the
court to remake the statute. Its only duty is to strike it  down  and  leave
it to the legislature if it so desires, to amend it.  What  is  further,  if
the remaking of the statute by the courts is to lead to its distortion  that
course is to be scrupulously avoided. One of the  situations  further  where
the doctrine can never be called into play is  where  the  statute  requires
extensive additions and deletions. Not only it is no  part  of  the  court’s
duty to undertake such exercise, but it is beyond  its  jurisdiction  to  do
so.” [para 255]

35.   Applying the aforesaid test to the Impugned Regulation,  it  is  clear
that the language of the Regulation is  definite  and  unambiguous  –  every
service provider has to credit the account of the calling  consumer  by  one
rupee for every single call drop  which  occurs  within  its  network.   The
Explanatory Memorandum to the aforesaid Regulation further makes  it  clear,
in paragraph 19 thereof, that the Authority has come to the conclusion  that
call drops are instances of deficiency in service delivery on  the  part  of
the service provider. It is  thus  unambiguously  clear  that  the  Impugned
Regulation is based on the fact that the service provider is alone at  fault
and must pay for that fault.  In these  circumstances,  to  read  a  proviso
into the Regulation that it will not apply to consumers  who  are  at  fault
themselves is not to restrict general words to a particular meaning, but  to
add something to the provision which does not exist, which would be  nothing
short of the court itself legislating.  For this reason, it is not  possible
to accept the  learned  Attorney  General’s  contention  that  the  Impugned
Regulation be read down in the manner suggested by him.

36.   The other string to the bow of this  argument  is  that  the  Impugned
Regulation would be worked in such a manner that the service provider  would
be liable to pay only when it is found that it  is  at  fault.   This  again
falls foul of constitutional doctrine. In Collector of Customs  v.  Nathella
Sampathu Chetty, (1962) 3 SCR 786, this Court held:

“The possibility of abuse of a statute otherwise valid does  not  impart  to
it any element of invalidity. The converse must also follow that  a  statute
which is otherwise invalid as being unreasonable  cannot  be  saved  by  its
being administered in a reasonable manner. The  constitutional  validity  of
the statute would have to be determined on the basis of its  provisions  and
on the ambit of its operation as  reasonably  construed.  If  so  judged  it
passes the test of  reasonableness,  possibility  of  the  powers  conferred
being improperly used is no ground for pronouncing the  law  itself  invalid
and similarly if the law properly interpreted and tested  in  the  light  of
the requirements set out in Part III of the Constitution does not  pass  the
test it cannot be pronounced valid merely because it is  administered  in  a
manner which might not conflict with the constitutional  requirements.”  [at
pp.825 – 826]

37.   This statement of the law applies on all fours to  the  facts  of  the
present case, and is a complete answer to the Attorney General’s  contention
that the Impugned Regulation would  be  administered  so  that  the  service
provider would be liable under it only when it is at fault for call drops.

38.   The learned Attorney General has argued that the  Impugned  Regulation
accords with the Statement of Objects and Reasons of the TRAI Act, 1997.  As
has been pointed out by us,  the original Act was amended in the year  2000,
in which its Preamble was substituted.  The substitution indicates that  the
policy of the 1997 Act, as amended by  the  2000  Act,  is  to  protect  the
interests  of  service  providers  and  consumers  of  the  telecom   sector
together, so that the orderly  growth  of  the  telecom  sector  is  ensured
thereby.  We are afraid that  the  orderly  growth  of  the  telecom  sector
cannot be ensured or promoted by  a  manifestly  arbitrary  or  unreasonable
regulation which makes a service provider pay a  penalty  without  it  being
necessarily at fault.

39.   We were then told that the Impugned Regulation was framed  keeping  in
mind the small consumer, that is, a person who has a pre-paid SIM Card  with
an average balance of Rs.10/- at a time, and  that  the  Regulation  goes  a
long way to compensate such person. The motive for the Regulation  may  well
be what the Attorney General says it is, but that does not  make  it  immune
from Article 14 and  the  twin  tests  of  Article  19(6).    The  Authority
framing the Regulation must ensure that its means are as pure as its ends  –
only then will regulations made by it pass constitutional muster.

40.   We were  also  told  that  huge  profits  were  made  by  the  service
providers, and that the amount they would have to pay would not  even  be  a
flea bite  compared to the profits they make, viewed in the background  that
they are not pouring in enough funds for infrastructure  development.   This
was stoutly resisted by the appellants, pointing  out  that  the  so  called
huge profits earned is misleading, as the figure of net debt is far  greater
than that of revenue earned, and that huge  sums  had  been  pumped  in  for
infrastructure development.  Without  going  into  the  factual  controversy
thus presented, there  are  two  answers  to  this  submission.   First  and
foremost, whether the service providers make profits  or  losses  cannot  be
said to be relevant for  determining  whether  the  Impugned  Regulation  is
otherwise arbitrary or unreasonable.  If the Attorney General were  correct,
then the converse proposition would also be true – namely, that even if  all
the service providers were suffering  huge  losses,  then  such  regulation,
since it makes them fork out crores of  rupees  and  add  to  their  losses,
would have to be held to be unconstitutional.  Assuming that six out of  the
twelve service providers make profits, and the other six  make  losses,  the
Impugned Regulation cannot be held to be constitutional   so  far  as  those
making a profit, and unconstitutional qua those making losses.  And what  if
the same service provider makes a profit in one  year  and  a  loss  in  the
succeeding year.  Is the Impugned Regulation unconstitutional in  the  first
year and constitutional in the succeeding year?  Obviously  not.   Secondly,
it is always open to the Authority, with the vast powers given to  it  under
the TRAI Act, to ensure, in a  reasonable  and  non-arbitrary  manner,  that
service  providers  provide   the   necessary   funds   for   infrastructure
development and deal with  them  so  as  to  protect  the  interest  of  the
consumer. Consequently, this submission is also without substance.

41.   The learned Attorney General strongly relied upon  a  passage  from  a
Constitution Bench judgment in Prag Ice &  Oil  Mills  v.  Union  of  India,
(1978) 3 SCC 459, to the following effect:-

“The Parliament having entrusted  the  fixation  of  prices  to  the  expert
judgment of the Government, it would be wrong for this Court,  as  was  done
by common consent in Premier Automobiles [20 L Ed 2d 312]  to  examine  each
and every  minute  detail  pertaining  to  the  Governmental  decision.  The
Government, as was said in Permian Basin Area Rate  cases,  is  entitled  to
make  pragmatic  adjustments  which  may  be  called   for   by   particular
circumstances and the price control can be  declared  unconstitutional  only
if it is patently arbitrary, discriminatory or  demonstrably  irrelevant  to
the policy which the legislature is free  to  adopt.  The  interest  of  the
producer  and  the  investor  is  only  one  of   the   variables   in   the
“constitutional  calculus  of  reasonableness”  and  courts  ought  not   to
interfere so long as the exercise of Governmental power to fix  fair  prices
is broadly within a “zone of reasonableness”. If we were to embark  upon  an
examination of the disparate contentions raised before us on behalf  of  the
contending parties, we have no doubt that we shall have exceeded our  narrow
and circumscribed authority.

Before closing, we would like to mention  that  the  petitioners  rushed  to
this Court too precipitately on  the  heels  of  the  Price  Control  Order.
Thereby they deprived themselves of an opportunity to show  that  in  actual
fact, the Order  causes  them  irreparable  prejudice.  Instead,  they  were
driven through their ill-thought haste to rely on speculative hypothesis  in
order to buttress their grievance that  their  right  to  property  and  the
right to do trade was gone or was  substantially  affected.  A  little  more
patience, which could have been  utilised  to  observe  how  the  experiment
functioned, might have paid better dividends.” (para 71).

42.    The  observations  made  in  the  aforesaid   judgment   are   wholly
distinguishable. In the present case, if the  appellants  had  not  gone  to
court when they did, the Regulation would have  affected  their  fundamental
rights on and from 1.1.2016.  Further, they would have been  denied  interim
and/or other relief on the  ground  that  they  have  not  moved  the  Court
without undue delay.  Also, to say that the Impugned Regulation is  only  an
experimental measure that would last in its present form for six  months  is
again wholly incorrect.  The Impugned Regulation begins to tick on and  from
1.1.2016, in which case three rupees  per  day,  for  call  drops  made  not
exclusively owing to the fault of the service provider,  would  have  to  be
paid.  Further, it is only the Explanatory Memorandum which  says  that  the
Authority may review the aforesaid Regulation  after  working  of  the  said
Regulation after six months, and that too only if  found  to  be  necessary.
Obviously,  this  would  not  mean  that  the  aforesaid  Regulation   would
necessarily be reviewed at all, even after six months.  We  are,  therefore,
unable to subscribe to the aforesaid submission.

43.   We now come to a very  important  part  of  the  submissions  made  on
behalf of the appellants.  The appellants have strongly contended that a  2%
allowance of call drops on the basis of averaging call drops per  month  has
been allowed to them by the Quality of Service Regulations already  referred
to hereinabove.  This would amount to the Authority penalizing  the  service
provider even when it complies with another regulation made under  the  same
source of power, and for this reason alone, the Impugned Regulation must  be
held to be bad as being manifestly arbitrary.  The learned Attorney  General
refuted this submission in two ways.   First,  he  argued  that  Quality  of
Service Regulations and  regulations  made  to  benefit  consumers  must  be
viewed separately, as they are distinct regulations in parallel streams.  He
also argued that the 2% average allowance for call drops  is  different  and
distinct from paying compensation for call drops inasmuch  as,  conceivably,
in a given set of facts, call drops may take place extensively  in  a  given
sector but not in other sectors so that an average of 2% per  month  is  yet
maintained, but the service provider would be penalized as it has  not  been
able to maintain a 3% standard  laid  down  qua  deficiency  of  service  in
individual towers leading to call drops.  However, the  persons  who  suffer
in the sector in which call drops are many and frequent would then  have  no
protection. We are afraid neither of these  reasons  avails  the  Authority.
First and foremost, the 2009 Quality of Service  Regulation  is  made  under
Section 11(1)(b)(v), which is the very Section which is claimed  to  be  the
source of the Impugned Regulation.  Secondly,  both  regulations  deal  with
the same subject matter – namely, call drops, and both regulations are  made
in the interest of  the  consumer.   If  an  average  of  2%  per  month  is
allowable to every service provider for call drops, and it is  the  admitted
position that all service providers before us, short  of  Aircel,  and  that
too in a very small way, have  complied  with  the  standard,  penalizing  a
service provider who complies with another Regulation framed with  reference
to the same source of power would itself be manifestly arbitrary  and  would
render the Regulation to be at odds with both Articles 14 and 19(1)(g).

44.   In this regard, it would be of assistance  to  note  what  this  Court
held in The Lord Krishna Sugar Mills Ltd. and Anr. v.  Union  of  India  and
Anr., [1960] 1 SCR 39:

“It is, however, contended that though  one  can  look  at  the  surrounding
circumstances, it is not open to the Court to  examine  other  laws  on  the
subject, unless those laws be incorporated by  reference.  In  our  opinion,
this is a fallacious argument. The Court in judging the reasonableness of  a
law, will necessarily see, not only the surrounding  circumstances  but  all
contemporaneous  legislation  passed  as  part  of  a  single  scheme.   The
reasonableness of the restriction and not of the law has to  be  found  out,
and if restriction is  under  one  law  but  countervailing  advantages  are
created by another law passed as part of  the  same  legislative  plan,  the
Court should not refuse to take that other law into account.” [at para 56]

45.   In view of the aforesaid, it is clear  that  the  Quality  of  Service
Regulations and the Consumer Regulations must be read together as part of  a
single  scheme  in  order  to   test   the   reasonableness   thereof.   The
countervailing advantage to service providers by way of the allowance of  2%
average call drops per month, which has been granted under the 2009  Quality
of Service  Regulations,  could  not  have  been  ignored  by  the  Impugned
Regulation so as to affect the fundamental rights  of  the  appellants,  and
having been so ignored, would  render  the  Impugned  Regulation  manifestly
arbitrary and unreasonable.

46.   Secondly, no facts have been shown to us which would indicate  that  a
particular area would be filled with call drops thanks to the fault  on  the
part  of  the  service  providers  in  which  consumers  would  be  severely
inconvenienced.  The mere  ipse  dixit  of  the  learned  Attorney  General,
without any facts being pleaded to this  effect,  cannot  possibly  make  an
unconstitutional regulation constitutional.   We,  therefore,  hold  that  a
strict penal liability laid down on the erroneous basis that  the  fault  is
entirely  with  the   service   provider   is   manifestly   arbitrary   and
unreasonable.  Also, the payment of such  penalty  to  a  consumer  who  may
himself be at fault, and which  gives  an  unjustifiable  windfall  to  such
consumer,  is  also  manifestly  arbitrary   and   unreasonable.    In   the
circumstances, it is not necessary to go into  the  appellants’  submissions
that call drops take place because of four reasons, three of which  are  not
attributable to the fault of the service provider,  which  includes  sealing
and shutting down towers by municipal authorities over  upon  they  have  no
control, or whether they are attributable to only two causes,  as  suggested
by the Attorney General,  being  network  related  causes  or  user  related
causes.  Equally, it is not necessary to determine  finally  as  to  whether
the reason for a call drop can technologically be found out and  whether  it
is a network related reason or a user related reason.

47.   In Shree Bhagwati Steel  Rolling  Mills  v.  Commissioner  of  Central
Excise, (2016) 3 SCC 643, Rules 96 –ZO, ZP and  ZQ  of  the  Central  Excise
Rules, 1994, which consisted inter alia of penalty provisions,  were  struck
down by this Court. One of the  reasons  for  striking  down  the  aforesaid
Rules is that a mandatory penalty became  leviable  despite  the  fact  that
fault on the part of assessee could not be established. This Court held:
“It is also correct in saying that there  may  be  circumstances  of  force
majeure which may prevent a bona fide  assessee  from  paying  the  duty  in
time, and on certain given factual circumstances,  despite  there  being  no
fault on the part of the assessee in making the deposit of duty in  time,  a
mandatory penalty of an equivalent amount  of  duty  would  be  compulsorily
leviable and  recoverable  from  such  assessee.  This  would  be  extremely
arbitrary and violative of Article 14 for this reason as well.  Further,  we
agree with the High Court in stating that this would also  be  violative  of
the appellant’s fundamental rights under Article 19(1)(g) and would  not  be
saved by Article 19(6), being an unreasonable restriction on  the  right  to
carry on trade or business. Clearly the levy of penalty in these cases of  a
mandatory nature for even one day’s delay, which may be beyond  the  control
of the assessee, would be arbitrary and excessive.” [at para 35]

48.   In the present case, also, a  mandatory  penalty  is  payable  by  the
service provider for call drops that may take place which  are  not  due  to
its fault, and may be due to the fault of  the  recipient  of  the  penalty,
which is violative of Articles 14 and 19(1)(g).

49.   The reason given in the Explanatory Memorandum  for  compensating  the
consumer is that the compensation given is only notional.  The  very  notion
that only notional compensation is awarded, is also entirely without  basis.
A consumer may well suffer a call drop after 3 or  4  seconds  in  a  voice
call. Whereas the consumer is charged only 4 or 5  paise  for  such  dropped
call, the service provider has to pay  a  sum  of  rupee  one  to  the  said
consumer.  This cannot be called notional at all.  It is also not  clear  as
to why the Authority decided to limit compensation to three call  drops  per
day or how it arrived at the figure  of  Re.1  to  compensate  inconvenience
caused to the consumer.  It is equally unclear as to why the  calling  party
alone  is  provided  compensation  because,  according  to  the  Explanatory
Memorandum, inconvenience is suffered due to the  interruption  of  a  call,
and such inconvenience is suffered both by the calling party and the  person
who receives the call.  The receiving party can legitimately claim that  his
inconvenience when a call drops, is as great as that of the  calling  party.
And the receiving party may need to make the second call, in which  case  he
receives nothing, and the calling party receives  Re.1  for  the  additional
expense made by the receiving party.  All this betrays a  complete  lack  of
intelligent care and deliberation  in  framing  such  a  regulation  by  the
Authority,  rendering  the  Impugned  Regulation  manifestly  arbitrary  and
unreasonable.

50.   However, the learned Attorney General referred to  a  recent  judgment
being DSC-Viacon Ventures Pvt. Ltd. (Now Known as DSC Ventures Pvt. Ltd)  v.
Lal Manohar Pandey and Ors., (Civil Appeal Nos. 6781-6782 of  2015,  decided
on August 27, 2015).  He referred to paragraph 21 in order to  show  that  a
certain amount of guess work is unavoidable in matters of this nature.

51.   The context in which this statement occurs in  paragraph  21  is  very
different from the present context.  This Court held that a  toll  can  only
be collected for maintaining a road. The patches in which the  road  is  not
properly maintained should reduce proportionately the amount  of  toll  that
is to be paid. As there was no data in that case to indicate the  extent  of
road length and the resultant inconvenience to users of the road, a  certain
amount of guess work was said to be unavoidable.  The present is a  case  in
which we are not informed as to how rupee one is computed,  how  three  call
drops per day has been arrived  at,  or  why  the  calling  party  alone  is
provided compensation.  These matters go out of mere guess  work,  and  into
the realm of unreasonableness, as obviously, as has been held by  us,  there
was no intelligent care and deliberation  before  any  of  these  parameters
have been fixed.

52.    We  have  already  seen  that  the  Impugned  Regulation   is   dated
16.10.2015, which was to come into force only on  1.1.2016.   We  have  been
shown a technical paper issued by the same Authority on  13.11.2015  i.e.  a
few days after the Impugned Regulation, in which the  Authority  has  itself
recognised that 36.9% of call drops take place because of the fault  at  the
consumer’s end.  Instead of having a relook at the problem in the  light  of
the said technical paper, the Authority has gone  ahead  with  the  Impugned
Regulation, which states that the said  Regulation  has  been  brought  into
force because of deficiency of service in service providers leading to  call
drops. The very  basis  of  this  statement  contained  in  the  Explanatory
Memorandum to the Impugned Regulation is found by  the  self-same  Authority
to be incorrect only a few days after publishing  the  Impugned  Regulation.
This itself shows the manifest arbitrariness on the part of the TRAI,  which
has not bothered to have a  relook  into  the  said  problem.  For  all  the
aforesaid reasons, we  find  that  the  Impugned  Regulation  is  manifestly
arbitrary and therefore violative of Article  14,  and  is  an  unreasonable
restriction on the right of the appellants’ fundamental right under  Article
19(1)(g) to carry on business, and is therefore struck down as such.

53.   Viewed at from a slightly different angle  it  is  clear  that  if  an
individual consumer were to go to the consumer forum  for  compensation  for
call drops, he would have to prove that the call drop took place due to  the
fault of the service provider.  He would further have to prove that  he  has
suffered a monetary loss for which he  has  to  be  compensated,  which  the
Explanatory Memorandum itself says is  impossible  to  compute.   Thus,  the
Impugned  Regulation  completely  avoids  the  adjudicatory   process,   and
legislatively lays down a penal consequence to  a  service  provider  for  a
call drop taking place without the consumer being able to prove that  he  is
not himself responsible for such call drop and without proof of  any  actual
monetary loss.  Whereas individual consumers,  either  before  the  Consumer
Forum, or in a dispute as a group with service providers  before  the  TRAI,
would fail in an action to  recover  compensation  for  call  drops,  yet  a
statutory penalty is laid down, applicable legislatively,  and  without  any
adjudication. This again makes the Impugned Regulation manifestly  arbitrary
and unreasonable.

54.   We have seen that the  2000  Amendment  has  taken  away  adjudicatory
functions from the TRAI, leaving  it  with  administrative  and  legislative
functions.  By Section 14 of  the  Act,  adjudicatory  functions  have  been
vested  in  an  Appellate  Tribunal,  where  disputes  between  a  group  of
consumers and the service providers are to be adjudicated by  the  Appellate
Tribunal.  In stark contrast, under  the  scheme  of  the  Electricity  Act,
2003, the Central Electricity Regulatory Commission and  the  various  State
Electricity  Regulatory   Commissions   have   to   discharge   legislative,
administrative, and quasi-judicial functions.  This is clear  on  a  reading
of Section 79(1)(f) and Section 86(1)(f) of the Electricity Act,  which  are
set out hereinbelow:-

“Section  79.  Functions  of  Central  Commission:  —  (1)  The  Central
Commission shall discharge the following functions, namely:-

(f)  to  adjudicate  upon  disputes  involving   generating   companies   or
transmission licensee in regard to matters connected  with  clauses  (a)  to
(d) above and to refer any dispute for arbitration;

Section 86. Functions of State Commission:  —  (1)  The  State  Commission
shall discharge the following functions, namely: –

(f) adjudicate upon the  disputes  between  the  licensees,  and  generating
companies and to refer any dispute for arbitration.”

55.   Secondly, as part of the adjudicatory  process,  compensation  can  be
paid to an affected person if a licensee fails to meet standards  prescribed
without prejudice to any penalty which may be imposed or  prosecution  which
may be initiated. This takes place under Section 57 of the said  Act,  which
reads as under:-

“Section 57. Consumer Protection: Standards of performance of licensee:  (1)
The Appropriate Commission may, after consultation with  the  licensees  and
persons likely to  be  affected,  specify  standards  of  performance  of  a
licensee or a class of licensees.

(2) If a licensee fails to meet the standards  specified  under  sub-section
(1), without prejudice to any penalty which may be  imposed  or  prosecution
be initiated, he shall be liable to pay  such  compensation  to  the  person
affected as may be determined by the Appropriate Commission:  Provided  that
before determination of compensation, the concerned licensee shall be  given
a reasonable opportunity of being heard.

(3) The compensation determined under sub-section (2) shall be paid  by  the
concerned licensee within ninety days of such determination.”

56.   Obviously, when such compensation is to be paid to  a  person  who  is
affected by breach of a standard of quality required  under  the  Act,  such
compensation can only be for actual loss suffered, and only as a  result  of
fault of the service provider being  established  before  a  quasi  judicial
Tribunal. This may be notwithstanding the fact  that  the  service  provider
otherwise meets the average of 2% call drops per month  allowed  to  him  by
the 2009 Quality of Service Regulation.  This is for the  reason  that  once
fault and actual loss suffered  are  established  before  a  quasi  judicial
Tribunal, it would not be open to plead,  on  the  facts  of  an  individual
case, that an overall standard  of  performance  has  been  met.   For  this
reason also, a legislatively pre determined penalty, without fault  or  loss
being established by evidence before a quasi judicial authority,  and  where
the cause of a call drop may be because of  the  consumer  himself,  renders
the Impugned Regulation manifestly arbitrary and unreasonable.

Modification of licence condition by Impugned Regulation

57.   The appellants have also argued that the Impugned Regulation seeks  to
modify the licence conditions, and the licence conditions being  a  contract
between the service provider  and  the  consumer,  such  conditions  can  be
modified only where the statute contains language by which an  Authority  is
empowered to disregard an agreement between the parties.  It  will  be  seen
that Section 11(1)(b)(ii), which has been  set  out  hereinabove,  expressly
contains such language and therefore states that  terms  and  conditions  of
interconnectivity   between   the   service   providers   may    be    fixed
notwithstanding anything contained  in  the  terms  and  conditions  of  the
licence granted before the commencement of the TRAI Amendment Act, 2000.

58.   The same kind of language  is  contained  in  Section  402(d)  of  the
Companies Act, 1956, which reads as follows:-

“Section 402. POWERS OF TRIBUNAL ON APPLICATION UNDER SECTION 397 OR 398.

Without prejudice to the generality of the  powers  of  the  Tribunal  under
section 397 or 398, any order under either section may provide for –

(d) the  termination,  setting  aside  or  modification  of  any  agreement,
howsoever arrived at, between the company on the one hand, and  any  of  the
following persons, on the other, namely :

(i) the managing director,

(ii) any other director,

(iii) and (iv) [***]

(v) the manager, upon such terms and conditions as may, in  the  opinion  of
the Tribunal be just and equitable in all the circumstances of the case.”

59.   The said  Section  is  now  contained  in  Section  242(2)(e)  of  the
Companies Act, 2013.

“242. Powers of the Tribunal.

(2) Without prejudice to the generality  of  the  powers  under  sub-section
(1), an order under that sub-section may provide for—

(e) the termination,  setting  aside  or  modification,  of  any  agreement,
howsoever arrived at, between the company and  the  managing  director,  any
other director or manager, upon such terms and conditions  as  may,  in  the
opinion of the Tribunal, be just and equitable in the circumstances  of  the
case.”

60.   We were also referred to Section 27(d) of the Competition  Act,  2002,
in this behalf which reads as follows:

“27. Orders  by  Commission  after  inquiry  into  agreements  or  abuse  of
dominant position.  Where  after  inquiry  the  Commission  finds  that  any
agreement referred to in section 3 or action of an enterprise in a  dominant
position, is in contravention of section 3 or section 4,  as  the  case  may
be, it may pass all or any of the following orders, namely:—

(d) direct that the agreements shall stand modified to  the  extent  and  in
the manner as may be specified in the order by the Commission;.”

61.   In Union of India v. Assn. of Unified  Telecom  Service  Providers  of
India, (2011)10 SCC 543, this Court held:

“A Constitution Bench of this Court  in State  of  Punjab  v. Devans  Modern
Breweries Ltd. [(2004) 11 SCC 26] relying on Har Shankar case [(1975) 1  SCC
737] and Panna Lal v. State of Rajasthan [(1975) 2  SCC  633]  has  held  in
para 121 at p. 106 that issuance of liquor licence  constitutes  a  contract
between the parties. Thus, once a licence is issued  under  the  proviso  to
sub-section (1) of Section 4 of the Telegraph Act,  the  licence  becomes  a
contract between the licensor and the licensee.” (para 40).

62.   Having regard to the above, it is clear that the  licence  conditions,
which are a contract between the service providers and consumers, have  been
amended to the former’s disadvantage by making the service  provider  pay  a
penalty for call drops despite there being no fault which can  be  traceable
exclusively to the  service  provider,  and  despite  the  service  provider
maintaining the necessary standard of  quality  required  of  it  –  namely,
adhering to the limit of an average of 2% of call drops per month.  We  have
already seen that condition 28 of  the  licence  requires  the  licensee  to
ensure that the quality of service standards, as  prescribed  by  TRAI,  are
adhered to, and that the Impugned Regulation does not lay  down  quality  of
service standards. This being so, it is clear that  the  laying  down  of  a
penalty de hors  condition  28,  which,  as  we  have  seen,  also  requires
establishing of fault of the service provider when it does not conform to  a
quality of service standard laid down by TRAI, would amount to  interference
with the licence conditions of the service providers  without  authority  of
law. On this ground also, therefore, the Impugned Regulation deserves to  be
struck down.

Transparency

63.   Section 11(4) of the Act requires  that  the  Authority  shall  ensure
transparency while exercising its  powers  and  discharging  its  functions.
“Transparency” has not been defined anywhere in the Act.  However, we  find,
in  a  later  Parliamentary  Enactment,  namely,   the   Airports   Economic
Regulatory Authority of India Act, 2008, that  Section  13  deals  with  the
functions of the  Airports  Economic  Regulatory  Authority,  (which  is  an
Authority   which   has   legislative   and    administrative    functions).
“Transparency” is defined, by sub-section (4), as follows:-

THE AIRPORTS ECONOMIC REGULATORY AUTHORITY OF INDIA ACT, 2008

13. Functions of Authority.

(4) The Authority shall ensure transparency while exercising its powers  and
discharging its functions, inter alia,—

(a) by holding due consultations with all stake-holders with the airport;

(b)  by  allowing  all  stake-holders  to  make  their  submissions  to  the
authority; and

(c)  by  making  all  decisions  of  the  authority  fully  documented   and
explained.”

64.   This definition of “transparency” provides  a  good  working  test  of
‘transparency’ referred to in Section 11(4) of the TRAI Act.

65.   In fact, a judgment of the Court of Appeal in  England,  being  Regina
v. North and East Devon Health Authority, Ex parte Coughlan, [2001] QB  213,
puts the meaning of “consultation” rather well as follows:-

“It is common  ground  that,  whether  or  not  consultation  of  interested
parties and the public is a legal requirement, if it  is  embarked  upon  it
must  be  carried  out  properly.   To  be  proper,  consultation  must   be
undertaken at a time when proposals are still at a formative stage; it  must
include  sufficient  reasons  for  particular  proposals  to   allow   those
consulted to give intelligent consideration  and  an  intelligent  response;
adequate  time  must  be  given  for  this  purpose;  and  the  product   of
consultation must be conscientiously taken into account  when  the  ultimate
decision is taken.”

66.   No doubt in the facts of the present case, the Authority did hold  due
consultations with all stakeholders and did allow all stakeholders  to  make
their submissions to the  Authority.  However,  we  find  no  discussion  or
reasoning dealing with the arguments put forward by the  service  providers,
that call drops take place for a variety  of  reasons,  some  of  which  are
beyond the control of the service provider and are because of  the  consumer
himself.  Consequently, we find that the conclusion that  service  providers
are alone to blame and are consequently deficient in service when  it  comes
to call drops is not a conclusion which a reasonable person  can  reasonably
arrive at.  We  are  cognizant  of  the  fact  that  ordinarily  legislative
functions do not require that natural justice be followed.  However, it  has
been recognised in some of the  judgments  dealing  with  this  aspect  that
natural justice need not be followed except where the statute  so  provides.

67.   In Union of India v. Cynamide India  Ltd.,  (1987)  2  SCC  720,  this
Court held:

“The second observation we wish to make is, legislative action,  plenary  or
subordinate, is not subject to rules of natural  justice.  In  the  case  of
Parliamentary legislation, the proposition is self-evident. In the  case  of
subordinate legislation, it may happen that Parliament  may  itself  provide
for a notice and for  a  hearing  —  there  are  several  instances  of  the
legislature requiring the subordinate legislating authority to  give  public
notice and a public hearing before say, for  example,  levying  a  municipal
rate — in which case  the  substantial  non-observance  of  the  statutorily
prescribed mode  of  observing  natural  justice  may  have  the  effect  of
invalidating the subordinate legislation.  The  right  here  given  to  rate
payers or others is in the nature of a concession which is  not  to  detract
from the character of the activity as legislative  and  not  quasi-judicial.
But, where the legislature has not chosen  to  provide  for  any  notice  or
hearing, no one can insist upon it and it will not be  permissible  to  read
natural justice into such legislative activity.” [para 5]

68.   Similarly, in M.R.F. Ltd. v. Inspector  Kerala  Govt.,  (1998)  8  SCC
227, this Court held:

“Learned counsel for  the  appellants  contended  that  before  raising  the
national and festival holidays from their original number under  the  Parent
Act to the number of days contemplated by the Amending Act,  the  industries
or their  representatives  should  have  been  given  an  opportunity  of  a
hearing. This argument  is  wholly  untenable.  The  principles  of  natural
justice cannot be imported in the  matter  of  legislative  action.  If  the
legislature in exercise of its  plenary  power  under  Article  245  of  the
Constitution, proceeds to enact a law, those who would be affected  by  that
law cannot legally raise a grievance that before  the  law  was  made,  they
should have been given an opportunity of a hearing.

This principle may, in limited cases, be invoked in the case of  subordinate
legislation specially where the  main  legislation  itself  lays  down  that
before the subordinate legislation is made, a public notice shall  be  given
and objections shall be invited as is usually the case, for example, in  the
making  of  municipal  bye-laws.  But  the  principle  of  natural  justice,
including the right of hearing, cannot be  invoked  in  the  making  of  law
either by Parliament or by the State Legislature.” [paras 23 – 24]

69.   The question of  transparency  raises  a  more  fundamental  question,
namely, that  of  openness  in  governance.   We  find  that  the  Right  to
Information Act of 2005 has gone a  long  way  to  strengthen  democracy  by
requiring that the Government be transparent in  its  actions,  so  that  an
informed  citizenry  is  able   then  to  contain   corruption,   and   hold
Governments and their instrumentalities accountable to the people of  India.
The preamble to the said Act, in ringing terms, states:-

“WHEREAS the Constitution of India has established democratic Republic;

AND WHEREAS democracy requires an informed  citizenry  and  transparency  of
information  which  are  vital  to  its  functioning  and  also  to  contain
corruption and to hold Governments and their  instrumentalities  accountable
to the governed;

AND WHEREAS revelation of  information  in  actual  practice  is  likely  to
conflict with other public interests including efficient operations  of  the
Governments, optimum use of limited fiscal resources  and  the  preservation
of confidentiality of sensitive information;

AND WHEREAS it is necessary to harmonise these conflicting  interests  while
preserving the paramountcy of the democratic ideal;

Now,  THEREFORE,  it  is  expedient  to  provide  for   furnishing   certain
information to citizens who desire to have it.”

70.   We find that under Section 4(1) every public authority is not only  to
maintain all its records duly catalogued and  indexed  but  is  to  publish,
within 120 days from the enactment of the said Act, the  procedure  followed
by  it  in  its  decision  making  process,  which  includes   channels   of
supervision and accountability.  Section 4(1)(b)(iii) states:

“4. Obligations of public authorities. —(1) Every public authority shall—

(b) publish within one hundred and twenty days from the  enactment  of  this
Act,—

(iii) the procedure followed  in  the  decision  making  process,  including
channels of supervision and accountability.”

71.   Under Section 8, there  is  no  obligation  to  give  to  any  citizen
information disclosure of which would prejudicially affect  the  sovereignty
and integrity of India, the security of the State etc.  Subject,  therefore,
to well-defined exceptions, openness in governance is  now  a  legislatively
established fact. In fact, in Chief Information  Commissioner  v.  State  of
Manipur, (2011) 15 SCC page 1, this Court had  occasion  to  deal  with  the
aforesaid Act in the following terms:

“Before dealing with the controversy in this  case,  let  us  consider  the
object and purpose of the Act and the  evolving  mosaic  of  jurisprudential
thinking which virtually led to its enactment in 2005.

As its Preamble shows, the Act  was  enacted  to  promote  transparency  and
accountability in  the  working  of  every  public  authority  in  order  to
strengthen the core constitutional values of a democratic  republic.  It  is
clear that Parliament enacted the said Act keeping in mind the rights of  an
informed citizenry in which transparency of information is vital in  curbing
corruption and making the Government and its instrumentalities  accountable.
The Act is meant to harmonise the conflicting interests  of  the  Government
to preserve the confidentiality of sensitive information with the  right  of
citizens to know the functioning of the governmental process in such  a  way
as to preserve the paramountcy of the democratic ideal. The  Preamble  would
obviously show that the Act is based on the concept of an open society.

On the emerging concept of an  “open  Government”,  about  more  than  three
decades ago, the Constitution Bench of this Court  in State  of  U.P. v. Raj
Narain [(1975) 4 SCC 428 : AIR 1975 SC  865]  speaking  through  Mathew,  J.
held: (SCC p. 453, para 74)
“74. … The people of this country have a right to  know  every  public  act,
everything that is done in a public  way,  by  their  public  functionaries.
They are entitled to know the particulars of  every  public  transaction  in
all its bearing.The right to know, which is  derived  from  the  concept  of
freedom of speech, though not absolute, is a factor which  should  make  one
wary, when secrecy is claimed for transactions which can, at any rate,  have
no repercussion on public security. [Ed.: See New York Times  Co. v.  United
States, 29 L Ed 2d 822 : 403 US 713 (1971).] To cover with veil of  secrecy,
the common routine business, is not in the  interest  of  the  public.  Such
secrecy can seldom be legitimately desired.” (AIR p. 884, para 74)
(emphasis supplied)
Another Constitution Bench in S.P. Gupta v. Union of  India [1981  Supp  SCC
87 : AIR 1982 SC 149] relying on the ratio in Raj Narain [(1975) 4 SCC  428:
AIR 1975 SC 865] held: (S.P. Gupta case [1981 Supp SCC  87  :  AIR  1982  SC
149] , SCC p. 275, para 67)
“67. … The concept of an open Government is the direct  emanation  from  the
right to know which seems to be implicit in the right  of  free  speech  and
expression  guaranteed  under  Article 19(1)(a).  Therefore,  disclosure  of
information in regard to the functioning of Government must be the rule  and
secrecy an exception justified  only  where  the  strictest  requirement  of
public interest so demands. The approach of the court must be  to  attenuate
the area of secrecy as much as possible consistently  with  the  requirement
of public interest, bearing in  mind  all  the  time  that  disclosure  also
serves an important aspect of  public  interest.”  (AIR  p.  234,  para  66)
(emphasis supplied)

It is, therefore, clear from  the  ratio  in  the  above  decisions  of  the
Constitution Bench of this Court that the right  to  information,  which  is
basically founded on the  right  to  know,  is  an  intrinsic  part  of  the
fundamental right to free speech and  expression  guaranteed  under  Article
19(1)(a)  of  the  Constitution.  The  said  Act  was,  thus,   enacted   to
consolidate the fundamental right of free speech.

In Ministry of Information & Broadcasting, Govt. of India  v. Cricket  Assn.
of Bengal [(1995) 2 SCC 161] this Court also  held  that  right  to  acquire
information and to disseminate it is an intrinsic component  of  freedom  of
speech and expression. (See p. 213, para 43 of the Report.)

Again in Reliance Petrochemicals Ltd. v. Indian  Express  Newspapers  Bombay
(P) Ltd. [(1988) 4  SCC  592]  this  Court  recognised  that  the  right  to
information is a fundamental right under Article  21  of  the  Constitution.
This Court speaking through Sabyasachi Mukharji, J., as  His  Lordship  then
was, held: (SCC p. 613, para 34)
“34. … We must remember that the people at large have a  right  to  know  in
order to be able  to  take  part  in  a  participatory  development  in  the
industrial life and  democracy.  Right  to  know  is  a  basic  right  which
citizens of a free country aspire in the broader horizon  of  the  right  to
live in this age in our land under Article  21  of  our  Constitution.  That
right has reached new  dimensions  and  urgency.  That  right  puts  greater
responsibility upon those who take upon  themselves  the  responsibility  to
inform.”

In People’s Union for Civil Liberties v. Union of India [(2004) 2  SCC  476]
this Court reiterated, relying on the aforesaid  judgments,  that  right  to
information is a facet of the right to freedom of  “speech  and  expression”
as contained in Article 19(1)(a) of the Constitution of India and also  held
that right to information is definitely a fundamental right.  In  coming  to
this conclusion, this Court traced the origin of the  said  right  from  the
Universal Declaration of Human Rights, 1948  and  also  Article  19  of  the
International Covenant on Civil and Political Rights, which was ratified  by
India in 1978. This Court also found a similar enunciation of  principle  in
the Declaration of European Convention for the Protection  of  Human  Rights
(1950) and found that the spirit of the Universal  Declaration  of  1948  is
echoed in Article 19(1)(a) of the Constitution. (See paras 45, 46 and 47  at
pp. 494-95 of the Report.)

The exercise of judicial discretion in favour of free  speech  is  not  only
peculiar to our jurisprudence, the same is a part of  the  jurisprudence  in
all the countries which are governed by the rule of law with an  independent
judiciary. In this connection, if we may quote what Lord Acton said  in  one
of his speeches:
“Everything secret degenerates, even the administration of justice;  nothing
is safe that does not show how it can bear discussion and publicity.”

It is, therefore, clear that a society which adopts openness as a  value  of
overarching significance not only permits  its  citizens  a  wide  range  of
freedom of expression, it also goes  further  in  actually  opening  up  the
deliberative process of the Government itself  to  the  sunlight  of  public
scrutiny.

Frankfurter, J. also opined:
“The ultimate foundation of a free society is the binding  tie  of  cohesive
sentiment. Such a sentiment is fostered by all those agencies  of  the  mind
and spirit which may  serve  to  gather  up  the  traditions  of  a  people,
transmit them  from  generation  to  generation,  and  thereby  create  that
continuity of a treasured common life which constitutes a civilisation.  ‘We
live  by  symbols.’  The  flag  is  the  symbol  of  our   national   unity,
transcending all internal differences, however large, within  the  framework
of the Constitution.”

Actually the concept of active liberty, which is structured on free  speech,
means  sharing  of  a  nation’s  sovereign  authority  among   its   people.
Sovereignty involves the legitimacy of  governmental action. And  a  sharing
of  sovereign  authority   suggests   intimate   correlation   between   the
functioning  of  the  Government  and  common  man’s   knowledge   of   such
functioning. (Active Liberty by Stephen Breyer, p. 15.)” [paras 5 – 16]

72.   In another context also this Court has emphasized  the  importance  of
openness of governance.   In  Global  Energy  Ltd.  V.  Central  Electricity
Regulatory Commission, (2009) 15 SCC 570 at 589, this Court stated:

“The law sometimes can be written  in  such  a  subjective  manner  that  it
affects the efficiency and transparent function of the  Government.  If  the
statute provides for pointless  discretion  to  agency,  it  is  in  essence
demolishing the accountability strand within the administrative  process  as
the agency is not  under  obligation  from  an  objective  norm,  which  can
enforce accountability in decision-making process. All law-making, be it  in
the context of delegated legislation or primary legislation, has to  conform
to the fundamental tenets of transparency  and  openness  on  one  hand  and
responsiveness and  accountability  on  the  other.  These  are  fundamental
tenets  flowing  from  due  process  requirement  under  Article  21,  equal
protection clause embodied in Article 14  and  fundamental  freedoms  clause
ingrained under Article 19. A modern deliberative democracy cannot  function
without these attributes.”

73.   We have been  referred  to  the  U.S.  Administrative  Procedure  Act,
Section 553 of which states as follows:-

5 USCA § 553

§ 553 – Rule making

(a)This section applies, according to the provisions thereof, except to  the
extent that there is involved—
(1) a military or foreign affairs function of the United States; or
(2) a matter relating  to  agency  management  or  personnel  or  to  public
property, loans, grants, benefits, or contracts.
(b)General notice of proposed rule making shall be published in the  Federal
Register, unless persons subject thereto are  named  and  either  personally
served or otherwise have actual notice thereof in accordance with  law.  The
notice shall include—
(1) a statement of the  time,  place,  and  nature  of  public  rule  making
proceedings;
(2) reference to the legal authority under which the rule is proposed; and
(3) either the terms or substance of the proposed rule or a  description  of
the subjects and issues involved.

Except when notice or hearing is required by statute, this  subsection  does
not apply—
(A) to interpretative rules, general  statements  of  policy,  or  rules  of
agency organization, procedure, or practice; or
(B) when the agency for good cause finds (and incorporates the  finding  and
a brief statement of reasons therefor in the rules issued) that  notice  and
public procedure thereon are impracticable, unnecessary, or contrary to  the
public interest.
(c) After notice required by this section, the agency shall give  interested
persons an opportunity to participate in the rule making through  submission
of written data, views, or arguments with or without  opportunity  for  oral
presentation. After consideration of  the  relevant  matter  presented,  the
agency shall incorporate in the rules adopted a  concise  general  statement
of their basis and purpose. When rules are required by statute  to  be  made
on the record after opportunity for an  agency  hearing,  sections  556  and
557 of this title apply instead of this subsection.

(d)The required publication or service of a substantive rule shall  be  made
not less than 30 days before its effective date, except—

(1) a substantive rule which grants or recognizes an exemption  or  relieves
a restriction;

(2) interpretative rules and statements of policy; or

(3) as otherwise provided by the agency for good cause found  and  published
with the rule.

(e) Each agency shall give an interested person the right  to  petition  for
the issuance, amendment, or repeal of a rule.”

In  Corpus Juris Secundum (March 2016 Update) it is stated:
“Under the informal rulemaking requirements of  the  Federal  Administrative
Procedure Act, after a federal administrative agency considers the  relevant
matter presented, it  must  incorporate  in  the  rules  adopted  a  concise
general  statement  of  their  basis  and  purpose.   The  purpose  of   the
requirement is to enable courts, which have the duty to exercise review,  to
be aware  of  the  legal  and  factual  framework  underlying  the  agency’s
actions.  The requirement is a means of holding an  agency  accountable  for
administering  the  laws  in  a  responsible  manner,  free  from  arbitrary
conduct.  The statement is  not  intended  to  be  an  abstract  explanation
addressed to an imaginary complaint but is intended, rather, to  respond  in
a reasoned manner to the  comments  received,  to  explain  how  the  agency
resolved the significant problems raised by the comments, and  to  show  how
that resolution led the agency to the ultimate  rule.   The  statement  must
identify what major issues of policy were  ventilated  and  why  the  agency
reacted to them as it did and should enable a reviewing court  to  ascertain
such matters.  The statement must respond to the  major  comments  received,
explain how they affected the regulation, and, where an  old  regulation  is
being replaced, explain why the old regulation is no longer desirable.

Agencies have a good deal of discretion in expressing the basis of  a  rule.
The requirement is not to be interpreted over literally, but it  should  not
be stretched into a mandate to refer to all specific issues  raised  in  the
comments on the proposed regulations.  Although  an  agency  must  genuinely
consider  comments  it  receives  from  interested  parties,  there  is   no
requirement that an agency discuss in great detail all comments,  especially
those which are frivolous or  repetitive.   Although  the  agency  need  not
address every comment received, it must respond  in  a  reasoned  manner  to
those that raise significant problems, to explain how  the  agency  resolved
any significant problems raised by  the  comments,  and  to  show  how  that
resolution led the agency to the ultimate rule.  Conclusory statements  will
not fulfill the administrative  agency’s  duty  to  incorporate  in  adopted
rules a concise general statement of their basis and  purpose.   The  agency
must articulate a satisfactory  explanation  for  its  action,  including  a
rational connection between the facts it found  and  the  choices  it  made.
Under some circumstance, agencies must identify  specific  studies  or  data
that they rely upon in arriving at their decision to adopt a rule.

Regulations which lack a statement of basis and purpose  may  be  upheld  if
the basis and purpose and obvious.  Moreover, the failure of  an  agency  to
incorporate the statement does not render a rule ineffective as  to  parties
to litigation who had knowledge of the rule.

Despite the statutory language mandating that  the  statement  of  basis  of
purposes be “incorporate[d] in the rules adopted,” the  statement  of  basis
and purpose does not have to be published at precisely the  same  moment  as
the rules.  Rather, the rules and statement need  only  be  published  close
enough together in time so  that  there  is  no  doubt  that  the  statement
accompanies, rather than rationalizes, the rules.”

74.   We find that, subject to certain well defined exceptions, it would  be
a healthy functioning of our democracy if all subordinate  legislation  were
to be “transparent” in the manner pointed out above.   Since  it  is  beyond
the scope of this judgment to deal with subordinate  legislation  generally,
and  in  particular  with  statutes  which  provide  for  rule  making   and
regulation making without any added requirement of  transparency,  we  would
exhort Parliament to take up this issue and frame a  legislation  along  the
lines of the U.S. Administrative Procedure Act (with  certain  well  defined
exceptions)  by  which  all  subordinate  legislation  is   subject   to   a
transparent process by which due consultations  with  all  stakeholders  are
held, and the rule  or  regulation  making  power  is  exercised  after  due
consideration  of  all   stakeholders’   submissions,   together   with   an
explanatory memorandum which broadly takes into account what they have  said
and the reasons for agreeing or disagreeing with them. Not only  would  such
legislation reduce arbitrariness in subordinate legislation making,  but  it
would also conduce to openness in governance.   It  would  also  ensure  the
redressal,  partial  or  otherwise,   of   grievances   of   the   concerned
stakeholders prior to the making of  subordinate  legislation.   This  would
obviate, in many cases, the need for persons to approach  courts  to  strike
down subordinate  legislation  on  the  ground  of  such  legislation  being
manifestly arbitrary or unreasonable.

75.   In the present case, we find that the High Court  judgment  is  flawed
for several reasons.  The judgment is not correct when it  says  that  there
can be no dispute that the Impugned  Regulation  has  been  made  to  ensure
quality of service extended to consumers by service providers.  As has  been
pointed out hereinabove, the Impugned  Regulation  does  not  lay  down  any
quality of service – what it does is  to  penalise  service  providers  even
though they conform to the 2% standard laid down by the Quality  of  Service
Regulations,  2009.  In  holding  that  the  Impugned  Regulation  therefore
conforms  to  Section  11(1)(b)(v),  the  judgment  is  plainly   incorrect.
Similarly, the  finding  that  notional  compensation  is  given,  and  that
therefore no penalty is imposed,  is  also  wrong  and  set  aside  for  the
reasons given by us hereinabove. The finding that a transparent process  was
followed by TRAI in making the Impugned Regulation is only  partly  correct.
While it is true that all stakeholders  were  consulted,  but  unfortunately
nothing is disclosed as to why service providers were  incorrect  when  they
said that call drops were due to various reasons, some of  which  cannot  be
said to be because of the  fault  of  the  service  provider.   Indeed,  the
Regulation, in assuming that every call drop is a deficiency of  service  on
the part of the service provider, is plainly incorrect.  Further, the   High
Court judgment, when it speaks of the technical paper of  13.11.2015,  seems
to have mixed it up with the consultation paper dated 4.9.2015  referred  to
in the Explanatory Memorandum to the Impugned Regulation. The  judgment  has
entirely  missed  the  fact  that  the   technical   paper   of   13.11.2015
unequivocally states that the causes for call drops are many and  are  often
beyond the control of service providers and attributable to  the  extent  of
36.9% to the consumers themselves.  The judgment is also incorrect  when  it
says that 100% performance is not demanded from service providers when  call
drops are made.  We have already  pointed  out  that  the  2%  standard  has
admittedly been met by almost all the service providers, and this being  so,
even if the very first call drop and all other  subsequent  call  drops  are
made  within  the  network  of  a  service  provider  and  are   within  the
parameters of 2%, yet the penal consequence of the amended  regulation  must
follow. The  judgment  is  also  incorrect  in  stating  that  the  Impugned
Regulation has attempted to balance the interest  of  service  providers  by
limiting call drops  to  be  compensated  to  only  three  and  by  limiting
compensation to only the calling and not the receiving  consumer.   We  have
already pointed out that a  penalty  that  is  imposed  without  any  reason
either as to the number of call drops made being  three,  and  only  to  the
calling consumer, far from balancing the interest of consumers  and  service
providers, is manifestly arbitrary, not being based on any factual  data  or
reason.  We also find that when the service  provider  argued  that  it  was
being penalised despite being within the tolerance limit of 2%,  the  answer
given by the High Court is disingenuous, to say the  least,  when  the  High
Court says that 2% is a quality parameter for the entire network as  opposed
to payment of compensation to an individual  consumer.   We  are  unable  to
appreciate the aforesaid reasoning.  As has been held by us above,  the  two
sets of Regulations  have  to  be  considered  together  when  the  Impugned
Regulation is being  tested  on  the  ground  of  violation  of  fundamental
rights. Also, the High Court did not advert  to  a  large  number  of  other
submissions made by the appellants before them and/or answer them  correctly
in law.   As a result, therefore, we set aside  the  judgment  of  the  High
Court and allow these appeals, declaring that  the  Impugned  Regulation  is
ultra vires   the  TRAI  Act   and  violative  of   the   appellant’s

fundamental rights under Articles 14 and 19(1)(g) of the Constitution.
…………………………J. (Kurian Joseph)

…………………………J.(R.F. Nariman)

New Delhi;
May 11, 2016.

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