Holding

The Central Government’s authority to grant telecommunication licences to private bodies under Section 4(1) of the Indian Telegraph Act is valid, does not depend on rules under Section 7, and the capping policy is lawful as it is reasonable, non‑mala‑fide and within the statutory discretion.

Summary

The petitioners challenged the Central Government’s exercise of power under Section 4(1) of the Indian Telegraph Act, 1885 to grant licences to private companies for establishing and operating telecommunication services, arguing that the privilege was exclusive to the Government and that the procedure, including a capping policy limiting the number of service circles per bidder, was arbitrary and violative of public interest and national security. The Court examined the statutory language of the Act, the fiduciary duty attached to the exercise of such discretion, and the applicability of the Wednesbury principle, concluding that the power to grant licences is expressly conferred by the Act and is not dependent on the prior framing of rules under Section 7. It held that the Central Government must act reasonably, rationally and in accordance with the conditions announced, but found no evidence of bad faith, irrationality or violation of Article 14. The capping policy, being a term expressly mentioned in the tender documents and applied without mala fide intent, was upheld. Consequently, the petitions and transferred cases were dismissed, with no order on costs.

Issues considered

The scope of the Central Government’s power under Section 4(1) of the Indian Telegraph Act, 1885 to grant licences to private entities.
Whether the exercise of that power requires the prior framing of rules under Section 7 of the Act.
Whether the capping policy limiting the number of service circles per bidder is arbitrary, violative of Article 14, or mala fide.
Whether the absence of a separate Telecom Regulatory Authority invalidates the licence grant process.
Whether the licence grant and policy contravene national security or public interest considerations.

Legislation cited

Companies Act, 1956
Constitution of Indias. Article 12, s. Article 14
Indian Telegraph Act, 1885s. 3, s. 4, s. 7

Subjects

telecommunication licenceIndian Telegraph Actadministrative discretionWednesbury principlefiduciary dutypublic interestnational securityprivatizationregulatory authorityArticle 14Article 12

Judgment

DELHI SCIENCE FORUM AND ORS. ETC. A
v.
UNION OF INDIA AND ANR.

FEBRUARY 19, 1996
B
[AM. AHMADI, CJ, N.P. SINGH AND K. VENKATASWAMI, JJ.]

• Telegraph Act, 1885-Section 4-Establishing, maintaining and
Indian
working telegraphs-Telegraphs-Includes telephones & telecommunication
se1vices-Power of Central Govemment to grant licences in favour of private C
bodies-Fiduciary duty to act with restraint-Tests laid down for exercise of
statutory discretion Central Govemment expected to put such conditions which
shall safeguard public interest.

Administrative Latt--Award of contracts-Judicial Reviett--Scope
of-Test of reasonable man. D
The present writ petitions and transferred cases have been filed
questioning the power of the Central Government to grant licences to
non-Government companies to establish and maintain Telecommunication
System in the country and the validity of the procedure adopted by the
Central Government for the said grant. The petitioners questioned the E
validity and propriety of the new Telecom Policy itself on the ground that
it shall endanger the national security of the country, and shall not serve
that economic interest of the nation. The petitioners submitted that
telecommunication being a sensitive service should always be within the
exclusive domain and control of the Central Government and under no F
situation it should be parted with by way of grant of licences to non-
Government Companies and private bodies; that Central Government
which has the exclusive privilege u/s. 4 of the Indian Telegraph Act, 1885
of establishing, maintaining and working telegraphs which shall include
telephones, has no authority to part with the said privilege to non-Govern- G
ment Companies for the consideration to be paid by them as this amounts
to an out and out sale of the said privilege; that even though by virtue of
the proviso to sub section (1) of section 4 the Central Government can
grant such licences, the power should have been exercised only after
framing of rules u/s 7 of the Act and that clause (b) of the second proviso
to sub-section (1) of section 4 shall govern the grant of the licence under H
767
768 SUPREME COURT REPORTS [1996] 2 S.C.R.

A the first proviso to sub-section (1) of Section 4 as well because both
provisos contemplate grant of licence/permit for telegraphs; that the policy
of capping would not have been applied and no choice should have been
given to the bidder to select the circles and in respect thereof unilateral
decision should have been taken by the Central Government; that circle
'C' and North Eastern Regions had been neglected while implementing the
B
National Telecom Policy; that neither there was any justification nor any
rational basis for debarring the Government Company from ~ubmitting
their bids; that there was non creation of a separate Telephone
Regulatory Authority and non delegation of the power by the Central
Government to such Authority to supervise the functioning of the new
C Telecom policy in the country.

Dismissing the Petitions and Transferred cases, this Court.

HELD 1.1. The power and authority of the Central Government to
grant licences to private bodies including Companies subject to conditions
D and considerations for payments flows from sub-section (1) of Section 4 of
the Indian Telegraphs Act, 1885 which vests the privilege and right in the
Central Government. In respect of grant of any right or licence by the
Central Government or an authority, which can be held to be 'State', within
the meaning of Article 12 of the Constitution not only the source of the
E power has to be traced, but it has also to be found that the procedure
adopted for such grant was reasonable, rational and in conformity with the
conditions which had been announced. Such provisions while vesting
powers in authorities including the Central Government also enjoin a
fiduciary duty to act with due restrain, to avoid 'misplaced philanthropy or
ideology'. (777-F-H, 778-A].
--
F
1.2. The Central Government while exercising its statutory Power
under first proviso to Section 4(1) of the Act, of granting licences for
establishment, maintenance and working of Telecommunications has a
fiduciary duty as well. The new experiment of granting licences to private )
G bodies has to fulfil the tests laid down by courts for exercise of statutory L
discretion. It cannot be exercised in ·a manner which can be held to be
unlawful and which is now known in administrative law as Wednesbury
principle, which is attracted where it is shown, that an authority exercising
the discretion has taken a decision which is .devoid of any plausible jus-
tification and Any authority having reasonable persons could not have
H taken the said decision. (778-C-E]
DELHI SCIENCE FORUM v. U.0.1. 769

1.3. The Central Government is expected to put such conditions A
while granting licences, which shall safeguard the public interest and the
interest of the nation. Such conditions should be commensurate with the
obligations that flow while parting with the privilege which has been ex-
clusively vested in the Central Government by the Act. whereas the first
proviso to sub-section (1) of Section 4 contemplates the grant of a licence, B
second proviso to the same sub-section (1) of Section 4 speaks about
permitting establishment, maintenance and working of telegraphs other
than wireless telegraphs within any part of India. The concept of grant of
licence to establish, maintain or work a telegraph shalJ be different from
granting permission under the second proviso to establish, maintain or to
work a telegraph within any part of India. They do not conceive and con- C
template the same area of operation. There is no question of clause (b) of
the second proviso controlling or over-riding in any manner the first
proviso which does not speak of the grant of licence by any rules made
under the said Act. The power has been granted to the Central Government
by the Act itself, and the exercise of that right, by the Central Government, D
cannot be circumscribed, limited or restricted on any subordinate legisla-
tion to be framed under Section 7 of the Act. However it was advisable on
the part of the Central Government to frame such rules when it was so
desired by the Parliament. Even in absence of rules the power to grant
licence on such conditions and for such considerations can be exercised by
the Central Government but then such power should be exercised on well E
settled principles and norms which can satisfy the test of Article 14 of the .
Constitution. If necessary for the purpose of satisfying as to whether the
grant of the licence has been made strictly in terms of the proviso comply-
ing and fulfilng the conditions prescribed, which can be held not only
reasonable, rational, but also in the public interest can be examined by F
courts. An authority which has been empowered to attach such conditions,
as it thinks fit, must have regard to the relevant considerations and has to
disregard the irrelevant ones. The authority has to genuinely examine the
application on its individual merit and not to promote a purpose alien to
the spirit of the Act. In this background, the courts have applied the test of
a reasonable man i.e. the decision should not be taken or discretion should G
not be exercised in a manner, as no reasonable man could have ever exer-
cised. Under the changed scenarios and circumstances prevailing in the
society, Courts are not following the rule of judicial self-restraint. But at
the same time all decisions which are to be taken by an authority vested
with such power cannot.be tested and examined by the court. The situation H
770 SUPREME COURT REPORTS [1996] 2 S.C.R.

A is all the more difficult so far as the commercial contracts are concerned.
The Parliament has adopted and resolved a national policy towards
liberalisation and opening of the national gates for foreign investors. The
question of awarding licences and contracts does not depend merely on the
competitive rates offered; several factors have to be taken into considera-
tion by an expert body which is more familiar with the intricacies of that
B particular trade. While granting licences a statutory authority or the body
so constituted, should have latitude to select the best offers on terms and
conditions to be prescribed taking into account the economic and social
interest of the nation. Unless any party aggrieved satisfies the court that
the ultimate decision in respect of the selection has been vitiated, normally
c courts should be reluctant to interfere with the same.
[779-E-F, 780-B, E-G, 781-A, G-H, 782-A·B]
1.4. Unless it is alleged and proved that the Tender Evaluation
Committee's decision in respect of capping was because of any bad faith
or due to some irrational consideration, the Central government cannot
D be held responsible for that decision. In none of the writ petitions there is
any allegation of malafide against the members of the Tender Evaluation
_ Committee stating any one of them had a bias in favour of one bidder or
the other or that they have acted on dictate of any higher authority,
abdicating the functions entrusted to them. [788-G-H]

E 1.5. The new Telecom Policy is based on privatisation with foreign
participation. Government undertakings like MTNL were already
functioning in Delhi and Bombay and in spite of that it was felt that
telecommunication should be handled by non- G~vernment undertakings
with foreign participation to improve the quality of service and to cover
F larger areas. There is no question of Government undertakings being
ignored or discriminated while awarding the licences in different service
circles. The new Telecom Policy is not only a commercial venture of the
Central Government, but the object of the policy is also to improve the
service so that the said service should reach the common man and should
be within his reach. The different licences should not be left to implement
G the said Telecom Policy according to their perception. While implementing
the Telecom Policy the security aspect cannot be overlooked. The existence
of a Telecom Regulatory Authority with the appropriate powers is essential
for introduction of plurality in the Telecom Sector. The National Telecom
Policy is a historic departure from the practice followed during the past
H century. Since the private sector will have to contribute more to the
DELHISCIENCEFORUMv. U.0.1. 771

development of the telecom network than DOT/MTNL in the next few A
years, the role of an independent Telecom Regulatory Authority with
appropriate powers need not be impressed, which can harness the in-
dividual appetite for private gains, for social ends. The Central Govern-
ment and the Telecom Regulatory Authority have not to behave like
sleeping trustees, but have to function as active trustees for the public
B
good. [790-F-G,794-C-D]

2. Many administrative decisions including decisions relating to
awarding of contracts are vested in a statutory authority or a body con-
stituted under an administrative order. Any decision taken by such
authority or a body can be questioned primarily on the grounds: (i) C

- decision has been taken in bad faith: (ii) decision is based on irrational
or irrelevant considerations (iii) decision has been taken without following
the prescribed procedure which is imperative in nature. While exercising
the power of judicial review even in respect of contracts entered on behalf
of the Government or authority, which can be held to be State within D
meaning of Article 12 of the C~nstitution courts have to address while
examining the grievance of any petitioner as to whether the decision has
been vitiated on one ground or the other. It is well settled that the onus to
demonstrate that such decision has been vitiated because of adopting a
procedure not sanctioned by law, or because of bad faith or taking into
consideration factors which are irrelevant, is on the person who questions E
the validity thereof. This onus is not dischargd only by raising a doubt in
the mind of the court, but by satisfying the court that the authority or the
body which had been vested with the power to take decision has adopted
a procedure which does not satisfy the test of Article 14 of the Constitution
or which is against the provisions of the statute in question or has acted F
with oblique motive or has failed in its function to examine each claim on
its own merit on relevant considerations. [781-C-F]

Robe1ts v. Hopewood, (1925) AC 578; Prescott v. Bcnncngham Cor-
poration, [1954] 3 All ER 698; Taylor & Ors. v. Munrow,, (1960] All ER 455;
Bronley London Borough Council v. Greater London Council & Anr., (1982] G
All ER 129 and Associated Provincial Picture Houses Ltd. v. Wedncsbwy
Corp., [1947] Z All ER 680, referred to.

CIVIL ORIGINAL JURISDICTION : Writ petition (C) No. 691 of
1995 Etc. Etc. H
772 SUPREME COURT REPORTS [1996] 2 S.C.R.

A (Under Article 32 of the Constitution of India.)

Altaf Ahmad, Additional Solicitor General, C.S. Vaidyanathan, P.R.
Kumaramangalam, Shanti Bhushan, Arnn Mohan, M.H. Baig, SJ. Sorab-
jee, A.H. Desai, Gopal Subramaniam, K. Parasaran, P.P.Malhotra, Arnn
Jaitley, K.K. Venugopal, Kapil Sibal, Anil B. Divan, DR. Rajeev Dhawan,
•
B R.F. Nariman, Ms. Nandita Haksar, Ms. Kamini Jaiswal, Ms. l.M.A. Chari,
Ms. V. Mohana, Shivam, Ms. Kitty Kumaramangalam, S.K.' Bhattacharya,
Prashant Bhushan, A.K. Panda, P.H. Parekh, N.K. Sahoo, Ranjit Kumar,
Yatish _Mohan, Ms. Anu Mohla, Rajiv Duta, S.J. Kathawala, Y.P. Dan-
diwala, Manoj Wad, Ms. J.S. Wad, A.K. Aggrawal, P.N. Gupta, P.P. Singh,
C

-
Hemant S}).arma, C.V.S. Rao, W.A. Quadri, Praveen Swarup, S.A. Mattoo
(Ms. P.S. Shroff, Sunil Dogra, A. Das, S.S. Shroff) for S.A. Shroff & Co.,
R. Santhana Krishnan, Sunil Kumar, S.R. Bhat, L.R. Singh, Gautam Mitra,
Ranjan Devi and Ms. Indra Swahney for the appearing parties.

The Judgment of the Court was delivered by
D
N.P. SINGH, J. The petitioners in different writ petitions have ques-
tioned the power of the Central Government to grant licences to different
non-Governmel).t companies to establish and maintain Telecommunica-
tions System in the country and the validity of the procedure adopted by
E the Central GovP,rnment for the said grant.

In February 1993, the Finance Minister in his budget speech an-
nounced Government's intention to encourage private-sector involvement
and participation in Telecom to supplement efforts of Department of
Telecommunications especially in creation of internationally competitive
F industry. May 13, 1994 National Telecom policy was announced which was
placed in the Parliament saying that the aim of the policy was to supple-
ment the effort of the Department of Telecommunications in providing
telecommunications services. Later, guidelines for induction of private-sec-
tor into basic telephone services were announced and a Committee was set
up to draft the tender documents for basic telephone services under the
G Chairmanship of G.S.S. Murthy. Ministry of Communications published the
'Tender Documents for provision of Telephone Service'. It ,specified and
prescribed the terms and conditions for the basic services and it also
conceived foreign participation but as a joint venture prescribing a ceiling
on total foreign equity so far the Indian Company was concerned was not
H to exceed 49% of the total equity apart from other conditions.
DELHISCIENCEFORUMv. U.0.1. [N.P.SINGHJ.] 773

Pursuant to the notice inviting tenders, tenders were submitted for A
different circles, but before licences could be granted by the Central
Government, writ petitions were filed in different High courts as well as
before this Court. All writ petitions filed before different High Courts were
transferred to this Court to be heard together.
B
Telecommunications has been internationally recognised as a public
utility of strategic importance. The variety or Telecommunications services
that has become available globally in the last decade is remarkable. It is
being realised that economy is increasingly related to the way this Telecom
infrastructure functions for purpose of processing and transmission of C
information, which has acquired central stage in the economic world today.
The special aspect about Telecommunications is inter-connectivity which
is known as 'any to any requirement'. Because of the economic growth and
commercial changes in different parts of the world, need for inter-connec-
tivity means that communication systems have to be compatible with each
other and have to be actually inter-connected. Because of this, there is a D
demand even in developing countries to have communication system on
international standards. Even after several decades of the invention of the
telephone system, in almost all countries Telecommunications was the
subject of monopoly supplied with the public network operator normally
being the State owned Corporation or Government Department. Then it E
was not thought due to different considerations that such right could be
granted to private sectors denuding the right of the monopoly of the
Government to maintain and run the system of Ttilecommunications. The
developed countries first took decision in respect of privatisation of
Telecom which amounted to giving up the claim of exclusive privilege over F
such system and this led to the transition from monopoly to a duopoly
policy in many countries. India, although a developing country also faced
a challenge in this sector. By and large it was realised that this sector
needed acceleration because of the adoption of liberalised economic policy
for the economic growth of the country. It appears that the policy makers
were faced with the implications for public welfare vis-a-vis the sector G
being capital intensive. How the network is well maintained so as it
reaches the largest number of people at a price to be paid by such users
which can be held as reasonable? This issue was also inter-related with the
defence and national security of the nation. Different committees and
bodies constituted from time to time examined the Telecom policy which H
774 SUPREME COURT REPORTS (1996] 2 S.C.R.

could be adopted by the nation from different aspects and ~ngles.

The counsel appearing in some of the writ petitions questioned the
validity and propriety of the new Telecom Policy itself on the ground that
it shall endnager the national security of the country , and shall not serve
the economic interest of the nation. According to them, telecommunication
B being a sensitive service should always be within the exclusive domain and
control of the Central Government and under no situation it should be
parted with by way of grant of licences to non-Government Companies and
private bodies. The national policies in respect of economy, finance, com-
munications, trade, telecommunications and others have to be decided .by
c the Parliament and the representatives of the people on the floor of the
Parliament can challenge and question any such policy adopted by the
ruling government. In the case of R.K Garg Etc. Etc. v. Union of India &
Ors., (1982] S.C.R. 947 a Constitution Bench of this Court said :

"Another rule of equal importance is that laws relating to
D economic activities should be viewed with greater latitude then
laws touching civil rights such as freedom of speech, religion etc.
It has been said by no less a person than Holmes, J. that the
legislature should be allowed some play in the joints, because it
has to deal with complex problems which do not admit of solution
E through any doctrinaire or straight Jacket formula and this is
particularly true in case of legislation dealing with economic mat-.
ters, where, having regard to the nature of the problems required
to be dealt with, greater play in the joints has to be allowed to the
legislature. The court should feel more inclined to give judicial
deference to legislature judgment in the field of economic regula-
F tion than in other areas where fundamental human rights are
involved."

In Morey v. Dond, 354 US 457 Frankfurter, J said:

"In the utilities, tax and economic regulation cases, there are
G good reasons for judicial self-restraint if not judicial difference to
legislative judgment. The legislature after all has the affirmative
responsibility. The courts have only the power to destroy, not to
reconstruct. When these are added to the complexity of economic
regulation, the uncertainty, the liability to error, the bewildering
conflict of the experts, and the number of times the judges have
_l
DELHISCIENCEFORUMv. U.0.1. [N.P.SINGHJ.] 775

been overruled by events- self-limitation can be seen to be the path A
to judicial wisdom and institutional prestige and stability."

What has been said in respect of legislations is applicable even in respect
of policies which have been adopted by the Parliament. They cannot be
tested in Court of Law. The courts cannot express their opinion: as to B
whether at a particular juncture or under a particular situation prevailing
in the country any such national policy should have been adopted or not.
There may be vie~s and views, opinions and opinions which may be shared
and believed by citizens of the country including the representatives of the
people in the Parliament. But thafhas to be sorted out in the Parliament
which has to approve such policies. Privatisation is a fundamental concept C
underlying the question about the power to make economic decisions.
What should be the role of the state in the economic development of the
nation? How the resources of the country shall be used? How the goals
fixed shall be attained? What are to be the safeguards to prevent the ab~se
of the economic power? What is the mechanism of accountability to ensure D
that the decision regarding privatisation is in public interest? All these
questions have to be answered by a vigilant parliament. Courts have their
limitations-because these issues rest with the policy makers for the nation.
No direction can be given or is expected from the courts unless while
implementing such policies, there is violation of infringement of any of the
Constitutional or statutory provision. The new Telecom Policy was placed E
before the Parliament and it shall be deemed that Parliament has approved
the same. This Court cannot review and examine as to whether said policy
should have been adopted. Of course, whether there is any legal or Con-
stitutional bar in adopting such policy can certainly be examined by the
court.
F
The primary ground of the challenge in respect of the legality of the
implementation of the policy is that Central Government which has the
exclusive privilege under Section 4 of the Indian Telegraph Act, 1885
(hereinafter referred to as the 'Act') of establishing, maintaining and
working telegraphs which shall include telephones, has no authority to part G
with the said privilege to non-Government companies for the consideration
to be paid by such companies on basis of tenders submitted by them; this
amounts to an out and out sale of the said privilege.

The expression 'telegraph' has been defined in Section 3(1) : H
J_
776 SUPREME COURT REPORTS [1996] 2 S.C.R.

A "3(1) "telegraph" means any appliance, instrument, material or
apparatus used or capable of use of transmission or reception of
signs, signals, writing, images and sounds or intelligence of any
nature by wire, visual or other electro- magnetic emissions, Radio
waves or Hertzian waves, galvanic, electric or magnetic means.
B Explanation - "Radio waves" or "Hertzian waves" means electro-
magnetic waves of frequencies lower than 3,000 giga- cycles per
second propagated in space without artificial guide."

Section 4 of the Act is as follows :
c
"4. (1) Within India the Central Government shall have the ex-
clusive privilege of establishing, maintaining and working
telegraphs :

Provided that the Central Government may grant a ticence, on
D such conditions and in consideration of such payments as it thinks
fit to any person to establish, maintain or work a telegraph within
any part of India :

Provided further that the Central Government may, by rules
E made under this Act and published in the Official Gazette, permit,
subject to such restrictions and conditions as it thinks fit, the
establishment, maintenance and working -

(a) of wireless telegraphs on ships within Indian territorial
waters and on aircraft within or above India, or Indian territorial
F waters and

(b) of telegraphs other than wireless telegraphs within any part
of India.

(2) The Central Government may, by notification in the Official
G Gazette, delegate to the telegraph authority all or any of its powers
under the first proviso to sub-section (1).

The exercise by the telegraph authority of any power so
delegated shall be subject to such restrictions and conditions the
H Central Government may, by the notification, think fit to impose."
- DELHISCIENCEFORUMv. U.0.1. [N.P.SINGHJ.] 777

There is no dispute that the expression 'telegraph' as defined in the A
'. Act shall include telephones and telecommunications services. Sub-section
(1) of Section 4 on plain reading vests the right of exclusive privilege of
establishing, maintaining and working telegraphs in the Central Govern-
ment, but the proviso thereof enables the Central Government to grant
licence, on such conditions and in consideration ·of such payments as it B
thinks fit, to any person to establish, maintain and work telegraph within
any part of India. It is true that the Act was enacted as early as in the year
1885 and Central Government exercised the exclusive privilege of estab-
lishing, maintaining and working telegraphs for more than a century. But
the framers of the Act since the very beginning conceived and con-
templated that a situation may arise when the Central Government may C
have to grant a licence to any person to establish, maintain or work such
telegraph including telephone within any part of India. With that object in
view, it was provided and prescribed that licence may be granted to any
person on such conditions and in consideration of such payments as the
Central Government may think fit. If proviso to sub-section (1) of Section
4 itself provides for grant of licence on condition to be prescribed and n·
considerations to be paid, to any person, then whenever such licence is
granted, such grantee can establish, maintain or work the telephone system
in that part of India. In view of the clear and unambiguous proviso to
sub-section (1) of Section 4 enabling the Central Government to grant
licences for establishment, maintenance or working of telegraphs including E
telecommunications, how can it be held that the privilege which has been
vested by su_b-section (1) of Section 4 of the Act in the Central Government
cannot be granted to others on conditions an:d for considerations regarding
payments? According to us the power and authority of the Central Govern-
ment .to grant licences to private bodies including Companies subject to
conditions and considerations for payments cannot be questioned. That F
right flows from the same sub-section (1) of Section 4 which vests that
privilege and right in the Central Government. Of course, there can be
controversy in respect of the manner in which such right and privilege
which has been vested in the Central Government has been parted with in
favour of private bodies. It cannot be disputed that in respect of grant of G
any right or licence by the Central Government or an authority which can
be held to be State within the meaning of Article 12 of the Constitution
not only the source of the power has to be traced, but it has also to be
found that the procedure adopted for such grant was reasonable, rational
and in confirmity with the conditions which had been announced. Statutory
authorities have some times used their discretionary power to confer social H
J_
778 SUPREME COURT REPORTS [1996] 2 S.C.R.

A or economic benefits on a particular section or group of community. The
plea raised is that the Act vests power in them to be exercised as they 'think
fit'. This is a misconception. Such provisions while vesting powers in
authorities including the Central Government also enjoin a fiduciary duty
to act with due restrain, to avoid 'misplaced philanthropy or ideology'.
Reference in this connection can be made to the cases : Roberts v.
B Hopewood, (1925) AC. 578; Prescott v. Bimiingham C01poration, [1954) 3
All E.R. 698; Taylor & Ors. v. Munrow, [1960) 1 All E.R. 455 and Bromley
London Borough Council v. Greater London Council and anotlw; [1982) 1
All E.R. 129.

C As such Centr,al Government while exercising its statutory power under
first proviso to section 4(1) of the Act, of granting licences for estab-
lishment, maintenance and working of Telecommunications has a fiduciary
duty as well. The new eiperiment has to fulfill the tests laid down by courts
for exercise of a statutory discretion. It cannot be exercised in a maimer
which can be held to be unlawful and which is now known in administrative
D law as Wednesbury principl~, stated inAssociated Provincial Picture Houses
Ltd. v. Wednesbury Co1p., [1947) 2 All E.R. 680. The aforesaid principle is
attracted where it is shown, that an authority exercising the discretion has
taken a decision which ·is devoid of any plausible justification and any
authority having reasonable persons could not have taken the said decision.
E In the case of Bromley LBC (supra) it was said by Lord Diplock :-

"Powers to direct or approve the general level and structure of
fares to be charged by the LTE for the carriage of passengers on
its transport system, although unqualified by any express words in
the Act, may nonetheless be subject td implied limitations when
F expressed to be exercisable by a local authority such as the
GLC..................... 11

As such Central Government is expected to put such conditions while
granting licences, which shall safeguard the public interest and the interest
G of the nation. Such conditions should be commensurate with the obligations
that flow while parting with the privilege which has been exclusively vested
in the Central Government by the Act.

A stand was taken that even if It is assumed that because of the
proviso to sub-sectic~n (1) of Section 4, the Central Government can grant
H licences in respect of establishing, maintaining or working of telecom-
DELHI SCIENCE FORUM v. U.0.1. [N.P. SINGH J.] 779

munications to Indian Companies registered under the Indian Companies A
Act, such power should have been exercised only after framing of rules
..... under Section 7 of the Act. In support of this stand, attention was drawn
to second proviso to sub-section (1) of Section 4 which says that 'the
Central Government may, by rules made under this Act' permit subject to
such restrictions and conditions as it thinks fit, the establishment, main-
B
tenance and working -

(a) of wireless telegraphs on ships within Indian territorial waters and
on aircraft within or above India, or Indian territorial waters and

(b) of telegraphs other than wireless telegraphs within any part of C
India.

It was pointed out that clause (b) of the second proviso to sub-section (1)
of Section 4 shall govern the grant of the licence under the first proviso to
sub-section (1) of Section 4 as well because both provisos contemplate D
grant of licence/permit for telegraphs within any part of India to any person
by the Central Government. At first blush this argument appears to be
attractive, but on closer examination, it appears that whereas the first
proviso to sub-section (1) of Section 4 contemplates the grant of a licence,
second proviso to the same sub-section (1) of Section 4 speaks about
permitting establishment, maintenance and working of telegraphs other E
than wireless telegraphs within any part of India. It need not be pointed

.. out that the concept of grant of licence to establish, maintain or work a
telegraph shall be different from granting permission under the second
proviso to establish, maintain or to work a telegraph within any part of
India. They do not conceive and contemplate the same area of operation. F
It may be relevant to point out that so far clause (b) of second proviso is
concerned, it excludes wireless telegraphs, which restriction has not been
prescribed in the first proviso. The second proviso was introduced by Act
No. VII of 1914. From a copy of the Bill which was introduced in the
Council of the Governor General of India in respect of adding one more
proviso to sub-section (1) of Section 4 of the Act, it appears there was no G
clause (b). In the Statement of Objects and Reasons of the said Amend-
ment, it was said that the second proviso was being introduced, for estab-
lishment, maintenance and working of the wireless telegraphs on ships
within Indian territorial waters. However, in the Amending Act, clause (b)
aforesaid was also introduced enabling the Central Government, by rules H
J__
780 SUPREME COURT REPORTS [1996) 2 S.C.R.

A to permit, subject to such restrictions and conditions, the establishment,
maintenance and working of telegraphs other than wireless telegraphs
within any part of India. According to us, there is no question of clause
(b) of the second proviso controlling or over-riding in any manner the first
proviso which does not speak of the grant of licence by any rules made
under the said Act.
B
Section 7 enables the Central Government to make rules consistent
with the provisions of the Act for the conduct of all or any telegraphs
established, .maintained or worked by the Government or by persons
licensed under the said Act. Clause (e) of sub-section (2) of Section 7
C prescribes that rules under the said Section may provide for conditions and
restrictions subject to which any telegraph line, appliance or apparatus for
telegraphic communication shall be established, maintained, worked,
repaired, transferred, shifted, withdrawn or disconnected. There is no
dispute that no such rules have been framed as contemplated by Section
D 7(2)(e) of the Act. But in that event, it cannot be held that unless such
rules are framed, the power under sub-section (1) of Section 4 cannot be
exercised by the Central Government. The power has been granted to the
Central Government by the Act itself, and the exercise of that right, by the
Central Government, cannot be circumscribed, limited or restricted on any
subordinate legislation to be framed under Section 7 of the Act. No doubt,
E it was advisable on the part of the Central Government to frame such rules
when it was so desired by the Parliament. Clause (e) to sub-section (2) of
Section 7 was introduced by Amending Act 47 of 1957. If the conditions
and restrictions subject to which any telegraph - telephone line is to be
established, maintained or worked had been prescribed by the rules, there
F would have been less chances of abuse or arbitrary exercise of the said
power. That is why by the Amending Act 47 of 1957 the Parliament
required the rules to the framed. But the question is as to whether it can
be held that till such rules are framed Central Government cannot exercise
the power which has been specifically vested in it by first proviso to Section
4(1) of the Act? Even in absence of rules the power to grant licence on
G such conditions and for such considerations can be exercised by the Central
Government but then such power should be exercised on well settled
principles and norms which can satisfy the test of Article 14 of the Con-
stitution. If necessary for the purpose of satisfying as to whether the grant
of the licence has been made strictly in terms of the proviso complying and
H fulfilling the conditions prescribed, which cai.i be held not only reasonable,
DELHI SCIENCE FORUM v. U.0.1. [N.P. SINGH J.) 781

rational, but also in the public interest can be examined by courts. It need A
not be impressed that an authority which has been empowered to attach
such conditions, as it thinks fit, must have regard to the relevant considera-
tions and has to disregard the irrelevant ones. The authority has to genuine-
ly examine the applications on its individual merit and not to promote a
purpose alien to the spirit of the Act. In this background, the courts have B
applied the test of a reasonable man i.e. the decision should not be taken
or discretion should not be exercised in a manner, as no reasonable man
could have ever exercised. Many administrative decisions including
decisions relating to awarding of contracts are vested in a statutory
authority or a body constituted under an administrative order. Any decision C
taken by such authority or a body can be questioned primarily on the
grounds : (i) decision has been taken in bad faith; (ii) decision is based on
irrational or irrelevant considerations; (iii) decision has been taken without
following the prescribed procedure which is imperative in nature. While
exercising the power of judicial review even in respect of contracts entered
on behalf of the Government or authority, which can be held to be State D
within meaning of Article 12 of the Constitution courts have to address
while examining the grievance of any petitioner as to whether the decision
has been vitiated on one ground or the other. It is well settled that the onus
to demonstrate that such' decision has been vitiated because of adopting a
procedure not sanctioned by law, or because of bad faith or taking into E
consideration factors which are irrelevant, is on the person who questions
the validity thereof. This onus is not discharged only by raising a doubt in
the mind of the court, but by satisfying the court that the authority or the
body which had been vested with the power to take decision has adopted
a procedure which does not satisfy the test of Article 14 of the Constitution F
or which is against the provisions of the statute in question or has acted
with oblique motive or has failed in its function to examine each claim on
its own merit on relevant considerations. Under the changed scenarios and
circumstances prevailing in the society, courts are not following the rule of
judicial self- restraint. But at the same time all decisions which are to be
taken by an authority vested with such power cannot be tested and ex- G
amined by the court. The situation is all the more difficult so far the
commercial contracts are concerned. The Parliament has adopted and
resolved a national policy towards liberalisation and opening of the na-
tional gates for foreign investors. The question of awarding licences and
contracts does not depend merely on the competitive rates offered; several H
782 SUPREME COURT REPORTS [1996] 2 S.C.R.

A factors have to be taken into consideration by an expert body which is more
familiar with the intricacies of that particular trade. While granting licences
a statutory authority or the body so constituted, should have latitude to
select the best offers on terms and conditions to be prescribed taking into
account the economic and social interest ot tu1., nation. Unless any party
aggrieved satisfies the court that the ultimate decision in respect of the
B
selection has been vitiated, normally courts should be reluctant to interfere
with the same. ·

Tender documents for provision of telephone service were issued
inviting tenders in respect following Telecom Territorial Circles:
c (1) Andhra Pradesh, (2) Andaman & Nicobar Islands, (3) Assam, (4)
Bihar, (5) Gujarat, (6) Haryana, (7) Himachal Pradesh, (8) Jammu &
Kashmir, (9) Karnataka, (10) Kerala, (11) Madhya Pradesh, (12)
Maharashtra (including MTNL Bombay), (13) North East, (14) Orissa,
(15) Punjab, (16) Rajasthan, (17) Tamilnadu (including Madras Metro
D Distt.), (18) Uttar Pradesh, (19) West Bengal (including Calcutta Metro
Distr.), {20) Delhi (MTNL Delhi).

In the Tender Documents the aforesaid Telecom Territorial Circles
were put under three categories as Category A, Category B and Category
E C service areas. In Category A - AP. Circle, Delhi (MTNL), Gujarat
Circle, Karnataka Circle, Maharashtra Circle (including Bombay MTNL),
T.N. Circle (including Madras Metro District); in Category B - Haryana
Circle, Kerala Circle, M.P. Circle, Pu~jab Circle, Rajasthan Circle, U.P.
West Circle, U.P. East Circle, W.B. Circle (Including Calcutta Metro
District); arid in Category C - Andaman & Nicobar Islands Circle, Assam
F Circle, Bihar Circle, H.P. Circle, J&K Circle, N.E. Circle, Orissa Circle
were specified. It was said the DOT/MTNL shall continue to operate
telephone service in the Service Areas mentioned aforesaid. It was further
said that in respect of International, National and Inter-service Areas,
Telephone Traffic will be routed through the Long Distance Network of
G DOT (Department of Telecommunications). The eligibility conditions for
bidders which were specified in Clause 2.1 Part I Section II of the Tender
Documents:

"2.1 ELIGIBILITY CONDITIONS FOR BIDDERS :

H (i) Indian Company : The bidder must be an Illdian Company
DELHI SCIENCE FORUM v. U.0.1. [N.P. SINGH J.] 783

- registered, before the date of submission of bid, under the Indian A
Companies Act, 1956. However, the bidder must not be a Govern-
ment Company as defined in the Indian Companies Act, 1956.

(ii) Foreign Equity : Total foreign equity in the bidding Company
must not exceed 49% of the total equity.
B
(iii) Networth : Networth of the bidder Company and its
promoters, both Indian and Foreign, as reflected in the latest
audited balance sheet, must not be less than the amount mentioned
in Table I for each category of Service Areas provided that the
networth of a foreign promoter shall not be taken into account for c
-· this purpose if its share in the equity capital of the bidder Company
is less than 10%. A bidder Company which meets the minimum
requirement of networth for a Service Area of one category may
bid for any number of Service Areas of that or lower category.
1• Total Networth of the Bidder Category of Service Areas (one D
Company or more Service Area) for
which bid can be submitted.
Rs. 50 Crores c
Rs. 200 Crores Band C
Rs. 300 Crores A, Band C E
Networth in foreign currency shall be converted into Indian
Rupees at rates valid for 16.01.1995 as declared by the. Reserve
Bank of India.

Networth is defined as the total in Rupees of paid up equity F
capital and free reserves.

(iv) Experience : The bidder must have experience· as a service
provider and a network operator of a public switched telephone
network with a minimum subscriber base in terms of DELs served G
(excluding ISON lines and mobile telephone lines) as on 01.01.19~5
of not less than 500,000 (5 Laich) lines.

For the purpose of eligi."bility with regard to experience of a
promoter Company which has an equity of 10% or more in the
bidder Company and which is a service provider and a network H
784 SUPREME COURT REPORTS (1996] 2 S.C.R.

A operator of a public switched telephone network, will also be
added to the experience of the bidder Company.

NOTE:

1. Subscriber base refers to the subscribers who are being
B provided telephone service.

2. Telephone service - see Section IV.

(v) Any number of Indian Companies as well as foreign Companies
can combine to promote the bidder Company. However, an Indian
c Company cannot be part of more than one such joint venture. The
same restriction applies to a foreign Company."

Clause 2.2 required the bidder company to submit apart from other
documents mentioned therein :

D (i) Copy of Certificate of incorporation of the bidder company from
the Registrar of Companies.

(ii) Memorandum and Articles of Association of the bidder com-
pany.
E (iii) Networth and experience calculation sheet as per Annexure 1.

(iv) Annual reports for the last five financial years of the bidder
Company as well as all the promoter Companies which have to be taken
into consideration for the purpose of evaluating networth and experience.
F (v) A comprehensive detailed document containing company profile,
a five year perspective network plan, a five year financial plan with funding
mechanism. Details of management and technical expertise etc.

.(vi) Copy of the agreement between Indian and foreign Company.
G
(vii) Approval of the Government of India for the terms of foreign
participation, if already taken, otherwise copy of the application submitted
to the competent authority of Government of India, in this regard to gather
with proof of submission.

H (viii) Certificate from the competent authority in the Government of
DELHI SCIENCE FORUM v. U.0.1. [N.P. SINGH J.] 785

India to the effect that the total foreign equity in the bidder Company does A
not exceed 49%.

(ix) Documentary evidence in support of the experience claimed and
other items quoted in the bid.

Clause 12 provided for the award of tenders. The relevant part is as B
follows:

"The maximum number of Service Areas, a successful bidder
can be licensed for, is dependent upon the total networth of the
bidder. A successful bidder can be awarded X, Y, Z numbers of C
category A, B and C areas respectively if the total networth .
calculated as per Clause 2.1. (iii) above equals or exceeds Rs.
(300X + 200Y + SOZ) Crores .......................... .

TELECOM AUTHORITY is free to restrict the number of service
areas for which any one company can be licensed to provide the D
SERVICE.'; .

(emphasis supplied)

Section III contained different conditions including in respect of E
Security in Clause 16, Section IV provided the condition relating to tech-
nical service. In the same Tender Documents telephone service tariff was
also specified.

Pursuant to the invitation of tenders aforesaid different Indian Com-
.panies including Indian Companies with foreign equities submitted their F
tenders.

The Tender Evaluation Committee comprised of the following mem-
bers for evaluation of the bids for basic telephone service :

Shri B.S. Karandikar, Member (Production) Chairman G
Shri S.D. Chaturvedi, Jt. Secretary (T) Member
Smt. Runu Ghosh, DDG (LF) Member
Shri S.K. Jain, DDG (TX) Member
Shri M.K. Garg, DDG (VAS) Member
Shri O.P. Choudhary, DOG (BS) Member & Convenor H
786 SUPREME COURT REPORTS (1996] 2 S.C.R.

A All the tenders were placed before the said Committee which after
evaluating all the bids received submitted its report. We are not concerned
with the details of the said report, but it shall be proper to refer to some
salient features which have bearing on some of the issues raised in these
writ petitions. As one of the tenderers M/s HFCL - Bezeq had emerged
as the highest bidder in nine circles, the Committee reported :
B
"Multiple H 1 Bids from a Single Bidder :

(1) The Committee observed that in nine Circles, .only one bidder
viz. M/s HFCL Bezeq have emerged as the highest bidder. If all
c the nine Circles are awarded to this bidder, It would result in a
kind of private monopoly with M/s HFCL emerging as the single
largest dominant private undertaking in this sector with over 75%
share of additional D ELs over a period of three years.

(2) The main purpose of allowing the private sector to enter into
D Basic Service was to complement the efforts of DOT in reaching
the target of 'telephone-on-demand' situation by 1997, covering all
villages as early as possible and providing telecom services of world
standard. If we entrust the development of telecom in so many
major Circles to only one bidder and that bidder is not able to
E deliver the number of lines promised due to inability in a short
time to mobilise the very large resources required for providing
services in so many Circles, then development of-Telecom in the
country will be stunted;

(3) Further, Telecom being a very sensitive sector from the point
F of view of national security, private foreign investment should be
more evenly distributed and the predominance of any one foreign
country (which would result from one bidder with a specific foreign
.
partner getting a majority of Circles) should be avoided.
'

(4) Taking all these factors into consideration, imposition of a limit
G on the maximum number of Circles to be allotted in 'A' & 'B'
category circles, seems to be called for. The restriction can be as
follows:

(i) Out of category 'A' & 'B' circles bid, not more than three
H circles should be allotted to any single bidder. This restriction need
DELHI SCIENCE FORUM v. U.0.1. [N.P. SINGH J.] 787

not apply to category 'C' circles which have evoked poor response A
from the bidders.

(ii) Subject to this restriction, the Hl bidder should be given
an option to choose the Circles.

(iii) The Circles which are vacated by Hl bidder after exercis- B
ing the above option will need to be offered to the rest of the
bidders in the descending order of their ranking for matching the
package offered by the Hl bidder.

(5) The Committee felt that the gap between Hl and the H2 bids C
in such Circles referred to in para B 4 (iii) above is so wide that
there appears to be remote possibility of any of the bidders
matching the Hl package. In such a situation, the Department may
have to go in for retendering for these Circles. However, the
'committee noted that if we invite fresh bids through an open D
tender for both technical/commercial as well as financial bids, this
process would take a very long time and the main purpose of
allowing the private section to participate in the operation of Basic
Service, which was to meet the objectives of the National Telecom
Policy would be defeated. The Committee, therefore, felt that the E
purpose will be served by inviting fresh financial bids only, from
among those bidders except Hl who have already participated in
the original tender and whose bids have been found technically
and commercially compliant. The Committee observed that for this
purpose, an important issue will be fixation of Reserve Price below
which no offer would be accepted. The normal procedure would F
have been to keep the levy quoted by the highest bidder as the
reserve price, since the highest bidder has not withdrawn his offer
but would be prevented from accepting these Circles on account
of the proposed restriction placed on the number of Circles to be
allotted to any single bidder. But since all bidders for a particular G
Circle would have already refused to match the highest levy before
calling fo! fresh financial bids, no purpose would be served by
keeping that levy as a reserve price."

From the aforesaid recommendations of the Committee it appears that it H
788 SUPREME COURT REPORTS l1996] 2 S.C.R.
A recommended that out of category 'A' and 'B' service areas not more than
three service areas be allotted to any bidder; no such restriction was to be
applied to category 'C' service areas which had evoked poor response from
the bidders. It also recommended that while applying the above restrictions
the Hl bidder may be given an option to choose from the service areas
\
where he had offered the package with highest ranking. It is no doubt little
B
surprising as to how and why Mis HFCL - Bezeq offered such high bids
in nine circles. But it is an admitted position that in view of the recommen-
dations of the Tender Evaluation Committee capping system was intro-
duced and aforesaid Mis HFCL - Bezeq was allotted only three circles i.e.
--
Delhi, U.P. (West) and Haryana so far categories 'A' and 'B' circles are
C concerned. In respect of the other 'A' and 'B'circles although the said Mis
HFCL - Bezeq was the highest bidder, the offer was not accepted because
in that event it would have led to a virtual monopoly, the said Mis HFCL
- Bezeq l]aving emerged as a single largest dominant private undertaking.

D The learned counsel appearing in different writ petitions have attack-
ed this policy of capping. However, inspite of repeated queries, none of
them could satisfy as to how in this process the said Mis HFCL - Bezeq
had been a gainer or the nation has been a loser. It was pointed out that
if this capping system would not have been applied, then a much higher
amount would have been received because of the high tenders submitted
E by said Mis HFCL - Bezeq for other circles which on principle of capping
was denied to the said company. It was also submitted that in any event,
no choice should have been given to the bidders to select the circles and
in respect thereof unilateral decision should have been taken by the Central
Government. As pointed out above, the decision regarding capping and
p putting a limit in respect of category 'A' a,nd 'B' circles bid to not more
than three was recommended by the Tender Evaluation Committee which
appears to have been accepted by the Central Government. Unless it·is
alleged and proved that the Tender Evaluation Committee's decision in
respect of capping was because of any bad faith or due to some irrational
consideration, according to us the Central Government cannot be held
G responsible for that decision. It may be mentioned at the outset that in
none of the writ petitions there is any whisper much less any allegation of
malafide against the members of the Tender Evaluation Committee stating
any one of them had a bias in favour of one bidder or the other or that
they have acted on dictate of any higher authority, abdicating their func-
H tions entrusted to them.
DELHISCIENCEFORUMv. U.0.1. [N.P.SINGHJ.] 789

Some of the petitioners urged that policy of capping was applied A
after receipt of the tenders. This is not correct. In the Tender Documents
as quoted above it had been clearly stated that 'Telecom Authority is free
to restrict the number of the service areas for which one Company can be
licensed to provide the service'. As such, it cannot be urged that the
decision regarding capping restricting the award of licence in category 'A'
B
and 'B' circles to one bidder to three was taken with some ulterior motive
or purpose, not being one of the terms specified and prescribed in the
tender documents.

It was also pointed out in respect of M/s HFCL - Bezeq that its
networth was shown at Rs. 4,622 crores, but the break up of the networth C
of different Companies which are the partner Companies thereof, it shall
appear that one foreign Company holding only 26% equity share has shown
networth of Rs. 4,1116 crores i.e. 89.05% whereas the Indian Company
Consortium Leader HFCL having equity share of 44% has shown its
networth was Rs. 62 crores i.e. 1.34%. As already pointed out above clause D
2.2. of Section II of Part I of tender documents required the bidder
Company to produce the copy of the agreement between the Indian and
Foreign Company including the approval of the Government of India for
the terms of foreign participation and certificate from the competent
authority in Government of India to the effect that total foreign equity in
the bidder Company does not exceed 49%. It was stated during the hearing E
of writ petitions on behalf of the aforesaid M/s HFCL - Bezeq that it had
produced the copy of certificate of incorporation of the said Company from
the Registrar of Companies including Memorandum and Articles of As-
sociation. The terms and conditions of tender documents restricted the
bidder Company that it shall not have total foreign equity in excess of 49%. F
In the instant case, the foreign Company admittedly does not have foreign
equity in excess of 49%. It was also pointed out on behalf of the respon-
dents that when the tender documents prescribed about the networth of
the bidder Company, it did not mean the actual investment of that amount.
If a foreign company having equity less than 49% has networth to fulfill
the requirement of the bidder Company, its bid had to be examined by the G
Tender Evaluation Committee as has been done in the present case.
Counsel appearing for writ petitioners and M/s HFCL - Bezeq were heard
on the question as to whether clauses 2.1. and 2.2. of Section II of the
Tender Documents in respect of Eligibility Conditions had been complied ,
with by aforesaid M/s HFCL - Bezeq. Mr. Venugopal, the learned counsel H
790 SUPREME COURT REPORTS [1996] 2 S.C.R.

A appearing for the said respondent pointed out that 30.3.1995 was the date
fixed for submission of the tenders which was later extended to 23.6.1995.
He further stated that the said respondent submitted different documents
specified in clause 2.2. of Section II of the Tender Documents along with
the bid and as such there has been full compliance of clauses 2.1. and 2.2.
None of the counsel appearing in different writ petitions challenged this
B
statement. The counsel for writ petitioners did not allege any bias against
the Tender Evaluation Committee sµggesting that it has favoured the said
Mis HFCL - Bezeq so far the. grant of licence in the three circles men-
tioned above are concerned. It can be said that the petitioners in different
writ petitions have primarily questioned the right and propriety of the
C Central Government to grant licences to non-Government Companies. No
direct attack was made in respect of pro~edure for selection adopted by
the Tender Evaluation Committee.

On behalf of petitioners it was urged that Circle 'C' and North Easter
D Regions have been neglected while implementing the National Telecom
Policy. Objections were also raised in respect of rates of charges for l.S.D.
and S.T.D. It is not possible for this Court to issue specific directions on
those questions. I! need not be pointed out that whenever a new policy is
implemented there are teething problems. But they have to be sorted out.

E On behalf of the petitioners, it was also submitted that neither there
was any justification nor any rational basis for debarring the Government
Company from submitting their bids. Although it is not necessary for this
Court to express any opinion on that question because according to us that
shall amount to a policy matter, but it can be said that the new Telecom
F Policy is based on privatisation with foreign participation. Government
undertakings like MTNL were already functioning in Delhi and Bombay
and in spite of that it was felt that telecommunication should be handled
by non-Government undertakings with foreign participation to improve the
quality of service and to cover larger areas. In this background, there is no
question of Government undertakings being ignored or discriminated while
G awarding the_licences in different service circles.

The coli isel appearing· in some of the writ petitions laid great stress
on non-crea(on of a separate Telephone Reg~latory Authority after
amending the .hct and non delegation of the power by the Central Govern-
H ment to such Authority to supervise the functioning of the new Telec:Om
DELHI SCIENCE FORUM v. U.0.1. [N.P. SINGH J.] 791

Policy in the country. A

It appears that almost all the countries of the world who have·
privatised the telecommunications, have constituted Regulatory Authorities
under the different enactments. In United Kingdom under the Telecom-
munications Act 1984 a Regulatory Authority has been constituted to B
secure that tl\e telecommunications services are provided throughout the
United Kin~m and to supervise the connected issues. Such Authority has
to promote the interests of the consumers, purchasers and other users in
the United Kingdom (including in particular those who are disabled or of
pensionable age) in respect of prices charged for and the quality and •
variety of telecommunications services provided. It also maintains and C
promotes effective competition between persons engaged in commercial
activities connected with telecommunications in the United Kingdom. The
Authority is also responsible to encourage persons providing telecom-
munication services and telecommunication apparatus in the United
Kingdom to compete effectively in the provision of such services and supply D
of such apparatus outside the United Kingdom. In United States the
Federal Communication Comn:Ussion created by the Communication Act,
1934 is a primary federal regulator of the· communication industry. The
Federal Communication Commission is currently organised into six
bureaus. As a gener.al rule the operating bureaus are authorised to enforce
existing Commission decisions and policies. Wireless Telecommunication E
Bureau has the responsibility to supervise all wireless technologies includ-
ing Cellular services. In Canada the Telecommunication Act which is the
primary statute relating to telecommunications came into force in 1993
replacing variety of statutes. It contains different provisions to review the
functioning of the telecommunications and vests power in authorities in F
respect of supervision and implementation of the said policy. In Australia,
AUSTEL is responsible for regulation of telecommunication services,
equipment and cabling under Telecoms Act, 1991. AUSTEL determines
standards relating to network integrity and safety, compliance with recog-
nised international standards and end-to-end quality of service. In France, G
General Directorate for Post and Telecommunications, 'DCPT' has the
responsibilities of determining and adapting the economic and technical
framework for post and telecommunications activities, ensuring the condi-
tions of fair competition among the various competitors in the telecom-
munications field. There are other supervisory and advisory borties assisting
the regulation of the telecommunications. In Japan the Tele1~Jmmunica- H
792 SUPREME COURT REPORTS [1996] 2 S.C.R.
J_
A · tions Technology Council has over all responsibility to co ordinate the
services, with outside administrative bodies and various manufacturers,
users, institutes and other organisations in establishing. the standards for
Japan. Similar is the position in many other countries developed as well as
"'-
under-developed.
B It appears that the Telecom Regulatory Authority of India Or-
dinance, 1996 has been promulgated after the hearing of the writ petitions
concluded. From the preamble of the said Ordinance it appears that object
. thereof is to establish the Telecom Regulatory Authority of India to
regulate the telecommunication services, and for matters connected there-
C with or incidental thereto. Section 2(i) defines 'telecommunication service'.
Chapter II contains provisions in respect of the establishment of the
Telecom Regulatory Authority of India and conditions of service in respect
of Chairperson and members thereof. The Chairperson shall be a person
who is or has been a Judge of the Supreme Court or who is or has been
the Chief Justice of a High Court. A Member shall be a person who is
D holding the post of Secretary or Additional Secretary to the Government
of India or to any equivalent post in the Central Government or the State
Government for a period of three years. The term of the Chairperson has
been fixed at five years from the date on which he enters upon his office.
So far the Member is concerned, he has to hold office for a term of five
E years from the date on which he enters upon his office or UQ.til he attains
the age of ·62 years, whichever is earlier. The other conditions have been
prescribed in tht! said Chapter. Chapter III prescribes the powers and
functions of the said Authority. Section 11 opens with a non- obstante
clause saying that notwithstanding anything contained in the Indian
Telegraph Act, 1885, the functions of the Authority shall be as specified in
F the said Section including to ensure technical compatibility and effective
inter-relationship between different service providers, to ensure com-
pliance of licence conditions by all service providers, to facilitate competi-
tion and promote efficiency in the operation of telecommunication services,
to protect the interest of the consumers of the telecommunication services,
to levy fees at such rates and in respect of such services as may be
G determined by regulations. Sub-section (2) of Section 11 says :

"Notwithstanding anything contained in the Indian Telegraph
Act, 1885, the Authority may, from time to time, by order, notify
the rates at which the telecommunication services within India and
H outside India shall be provided under this Ordinance including the
DELHI SCIENCE FORUM v. U.0.1. [N.P. SINGH J.] 793

rates at which messages shall be transmitted to any country outside A
India."

-. Sub-section (2) of Section 11 has also a non-obstante clause giving over-
riding effects to said sub-section over anything contained in the Indian
Telegraph Act, 1885. In view of the aforesaid sub-section, the Authority B
may from time to time by order notify the rates at which telecommunication
services within India and outside India shall be provided. Sub-section (3)
of Section 11 enjoins the Authority not to act against the interest of the
sovereignty, integrity of India, the security of the State, friendly relations
with foreign States, public order, decency or morality. In view of Section
12 if the Authority considers it expedient so to do, it may by order in C
writing call upon any service provider at any time to furnish in writing such
information or explanation relating to its affairs as the Authority may
require. It can also appoint one or more persons to make enquiry in
relation to the affairs of any service provider. The Authority can also direct
any of its officers or employees to inspect the books of accounts or other D
documents of any service provider. The Authority has been vested with the
powers to issue such directions to service providers 'as it may consider
necessary', for proper functioning by the service provider. Section 13 also
reiterates the said power of the Authority by saying that for its functions
under sub-section (1) of Section 11, the Authority can issue such directions
from time to time to service provider as it may consider necessary. Chapter E
IV contains provision in respect of settlement of disputes. Section 29
provides for penalty if any person violates the directions of the Authority
and Section 30 prescribes for punishment if the offence is alleged to have
been committed by a Company. With the establishment of the Telecom
Regulatory Authority of India, it can be said that an independent Telecom F
Regulatory .Authority is to supervise the functioning of different Telecom
service prqviders and their activities can be regulated in accordance with
the provisions of the said Ordinance.

Section V of Tender Documents contains financial conditions.
Clause 2.0 thereof says : G

"TARIFF: Tariff for the SERVICE provided by the LICENSEE
shall not be more than DOT's Tariff. Tariff is subject to regulation
by Telecom Regulatory Authority of India, as and when such an
authority is set up by the Government of India." H
794 SUPREME COURT REPORTS [1996) 2 S.C.R.
J_-
A The aforesaid condition provides that licensee shall not charge tariff for
service more than DOT's tariff and such tariff shall be subject to regulation
by Telecom Regulatory Authority of India. This condition shall safeguard
the interest of the persons to whom services are provided by the licensees.

The new Telecom Policy is not only a commercial venture of the
B Central Government, but the object of the policy is also to improve the
service so that the said service should reach the common man and should
be within his reach. The different licensees should not be left to implement
the said Telecom Policy according to their perception. It has rightly been
urged that while implementing the Telecom Policy the security aspect
C cannot be overlooked. The existence of a Telecom Regulatory· Authority
with the appropriate powers is essential for introduction of plurality in the
Telecom Sector. The National Telecom Policy is a historic departure from
the practice followed during the past century. Since the private sector will
have to contribute more to the development of the telecom network than
DOT/MTNL in the next few years, the role of an independent Telecom
D Regulatory Authority with .appropriate powers need not be impressed,
which can harness the individual appetite for private gains,' for social ends.
The Central Government and the Telecom Regulatory Authority have not
to behave like sleeping trustees, but have to function as active trustees for
the public good.
E Subject to the directions given above, the writ petitions and Trans-
ferred Cases are dismissed. However, there shall be no orders as to costs.

R.A. Petitions and Transferred Cases dismissed.