Declaring the allocation of 2G spectrum by the Congress-led United Progressive Alliance (UPA) government “illegal” and an example of the arbitrary exercise of power, the Supreme Court on Thursday cancelled all 122 telecom licences allotted on or after January 10, 2008 to 11 companies during the tenure of the former telecom minister, A. Raja.

Click >here for a .pdf of the Supreme Court order

Click >here for a .pdf of the graphic

Holding that spectrum was a natural resource, the court said natural resources “are vested with the government as a matter of trust in the name of the people of India, and it is the solemn duty of the state to protect the national interest, and natural resources must always be used in the interests of the country and not private interests.”

Allowing writ petitions filed by the Centre for Public Interest Litigation and others and Janata Party president Subramanian Swamy seeking the cancellation of the licences, a Bench of Justices G.S. Singhvi and A.K. Ganguly said: “The licences granted to the private respondents — Etisalat DB Telecom (Swan Telecom); Unitech Wireless; Loop Telecom; Videocon Telecommunications; S-Tel Ltd; Allianz Infratech; Idea Cellular and Aditya Birla Telecom (Space Communications); Tata Teleservices; Sistema Shyam Tele Services (Shyam Telelink); Dishnet Wireless; [and] Vodafone Essar South — on or after January 10, 2008, pursuant to two press releases issued on January 10, 2008, and the subsequent allocation of spectrum to the licensees are declared illegal and are quashed.”

The licences cancelled include 21 of Videocon, 22 of Unitech Wireless Ltd. (Uninor), nine of Idea, 21 of Loop, six of S-Tel, 21 of Sistema, three of Tatas, 13 of Swan and two of Allianz.

The Bench did not order a CBI probe against P. Chidambaram, then Union Finance Minister (now Home Minister), as demanded by Dr. Swamy, taking note of the fact that he had already filed a private complaint in a special CBI court which had reserved orders.

It was Dr. Swamy's contention that Mr. Chidambaram had played a major role in fixing the prices for the spectrum licence, along with Mr. Raja, and in the dilution of shares by two telecom companies to foreign firms. The Bench asked the special court to decide the matter uninfluenced by the proceedings in the Supreme Court.

The court rejected the plea for setting up a special investigation team (SIT) to monitor the probe in the 2G case. Instead, it asked the CBI to submit its probe report to the Central Vigilance Commission (CVC) for scrutiny. The CVC would then file its report to the Supreme Court. The Bench said the Supreme Court would continue monitoring the probe.

The Bench made it clear that the cancellation of the licences would become operative only after four months. “Within two months, the Telecom Regulatory Authority of India (TRAI) shall make fresh recommendations for [the] grant of licence and [the] allocation of spectrum in [the] 2G band in 22 service areas by auction, as was done for the allocation of spectrum in [the] 3G band. The Central government shall consider the recommendations of the TRAI and take an appropriate decision within the next one month, and fresh licences be granted by auction.

“While Etisalat; Unitech and Tatas who were benefited by a wholly arbitrary and unconstitutional action taken by the DoT [Department of Telecom] for grant of UAS licences and allocation of spectrum in [the] 2G band and who off-loaded their stakes for many thousand crores in the name of fresh infusion of equity or transfer of equity shall pay cost of Rs.5 crore each, respondent Nos. 4 [Loop Telecom], 6 [S-Tel], 7 [Allianz Infratech] and 10 [Shyam Telelink] shall pay cost of Rs.50 lakh each, because they too had been benefited by the wholly arbitrary and unconstitutional exercise undertaken by the DoT for the grant of UAS licences and allocation of spectrum in [the] 2G band.”

The Bench held that there was a fundamental flaw in the first-come, first-served principle, inasmuch as it “involves an element of pure chance or accident.”

It said: “In matters involving award of contracts or grant of licence or permission to use public property, the invocation of the first-come, first-served principle has inherently dangerous implications.”