Bombay HC sets aside govt order on one-time spectrum charges on Airtel, Vodafone Idea

Bombay High Court on Monday struck down the government's one-time spectrum charges imposed on Bharti Airtel Ltd. and Vodafone Idea Ltd., ruling that all the actions taken on basis of disputed demands have also been annulled.

Both the companies have together received a relief of approximately Rs 20,000 crore.

A bench of Justices Manish Pitale and Shreeram Shirsat also set aside the demand notices issued by the Centre seeking recovery of OTSC (one-time spectrum charge), while noting that the government has not been able to show any source of power to issue such a decision and the consequent demand notices.


The court directed that the bank guarantees submitted by companies must be returned. Further, all demand notices and orders related to OTSC have been set aside.

It clarified that the matter is still pending before the Supreme Court.

Vodafone Idea has received a relief of Rs 11,000 crore, while Bharti Airtel has received a relief of Rs 9,000 crore, according to ET Now.

The bench further observed that the government, under the garb of public interest, has acted beyond the term of contract/licence between it and the telecom companies and has not been able to identify any source of power to issue the impugned decisions.

"We find that the government has not been able to justify its unilateral action of issuing the decision within the four corners of the terms and conditions of the contract/licence agreements or the relevant statutory provision and therefore the retrospective effect demonstrates it illegitimacy, rendering the same unsustainable and liable to be set aside," PTI reported, citing the court.

In November 2012, the Union Cabinet decided that one-time charge would be levied for spectrum held beyond 6.2 MHz from July 2008 onwards. Consequently, demand notices were issued to the petitioners (Bharti Airtel and Vodafone Idea Ltd) specifying the amounts payable by them towards one-time spectrum charge.

As per a PIB release, the government exempt firms with spectrum holding upto 4.4 MHz (GSM) of any one-time charge.

For all spectrum holdings beyond 4.4 MHz (GSM), the Centre announced that one time charge will be levied prospectively upon the existing operators at 2012 auction determined price.

Further, for spectrum held above 6.2(GSM), a one-time charge was levied from July 2008 onwards.

"There will be two prices. The price, pro-rated for the period July 2008 up to the date of applicability of auction determined price, would be in the 2001 entry fee divided by 6.2, duly indexed using State Bank of India Prime Lending Rate (SBI PLR). The auction determined price will be levied for spectrum beyond 6.2 (GSM) with effect from the date of commencement of the first quarter following the date of the Cabinet decision," the release said.

Licensees may be given the option to surrender the spectrum beyond 4.4 MHz (GSM) if they did not wish to pay this charge, it stated.

Airtel and Vodafone Idea, in their plea, argued the government has no power to impose such one-time spectrum charge and that, too, retrospectively under the provisions of the Telegraph Act.

The companies moved the High Court in January 2013 against the decision and the demand notices. At the time, the court had granted interim relief to the petitioners and said no coercive action shall be taken against them pending the hearing.

The court, in its judgment on Monday, said it cannot be contended that since spectrum is recognized as a scarce and finite natural resource, the Union of India would be entitled to resile from the terms of contract in a unilateral manner.

It noted that under the provisions of the Telegraph Act, the government can execute a licence agreement which is nothing, but a contract consisting of clauses, terms and conditions that are binding on both parties.

"The government obviously cannot claim statutory power to act as per its own whim, notwithstanding the terms of the contract/licence executed as per the power available under the Act," the HC stated.

(With inputs from PTI)