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TMI Blog2012 (8) TMI 683X X X X Extracts X X X X X X X X Extracts X X X X ..... ing in view the objective of growth, affordability, penetration of wireless services in semi-urban and rural areas, the Authority is not in favour of changing the spectrum fee regime for a new entrant. The Authority recommends that any licensee who seeks to get additional spectrum beyond 10 MHz in the existing 2G bands i.e. 800,900 and 1800 MHz after reaching the specified subscriber numbers shall have to pay a onetime spectrum charge at the above mentioned rate on prorata basis for allotment of each MHz or part thereof of spectrum beyond 10 MHz. The Internal Committee of DoT considered the above recommendations made by TRAI and its report was placed before the Telecom Commission, but Finance Secretary and other three non-permanent members were not informed of that meeting, but attended only by the officials of DoT and the report of the Internal Committee was approved by the Telecom Commission. Shri A. Raja accepted the recommendations of Telecom Commission, thus did not get in touch with the Ministry of Finance to discuss and finalise the spectrum pricing formula which had to include incentive for efficient use of spectrum as well as disincentive for suboptimal usage in terms o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... then minister of Telecommunications and to appoint him as a prosecutor under Section 5(3) of the PC Act. The complaint was numbered as CC No.1 of 2010 and was heard on several occasions. The case was later transferred to the Special Judge, CBI (04)(2G Spectrum Cases), New Delhi. CBI, after investigation, filed a charge sheet in that complaint on 2.4.2011 regarding commission of offences during 2007- 2009 punishable under Sections 120B, 420, 468, 471 IPC and also punishable under Section 13(2) read with Section 13(1)(d) of the PC Act, against A. Raja and others. Special Judge took cognizance on 2.4.2011. CBI s further investigation disclosed that the monetary involvement was much more and charge was laid. Special Judge took cognizance of the aforesaid charge sheet on 25.4.2011. Both the charge sheets were clubbed together vide order dated 22.10.2011 under Section 120B read with Sections 409, 420, 468 and 471 IPC and day to day trial began from 11.11.2011. Dr. Subramanian Swamy s complaint case No.CC 01/2011 was also taken on file and renumbered as CC.No.1(A)/2011. 3. Dr. Subramanian Swamy, the petitioner, herein, while he was being examined under Section 200, Code of Criminal P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gation against Shri P. Chidambaram and to make him an accused was rejected vide order dated 04.02.2012, against which SLP (Crl.) No. 1688 of 2012 has been filed. 5. Dr. Swamy appeared in person and elaborately referred to Annexure P-1 Final Report dated 03.04.2011 submitted by CBI before the Special Judge especially Para E, charge dealing with Cheating the Government Exchequer by Non- Revision of Entry Fee . Reference was also made to the summary of his arguments raised before the Special Judge for carrying out investigation against Shri P. Chidambaram and to array him as an accused in the pending criminal case. Reference was also made to the meetings that Shri P. Chidambaram had with Shri A. Raja on 30.01.2008, 29.05.2008, 12.06.2008 and later with the Prime Minister on 04.07.2008 and submitted that in those meetings both of them conspired together for a common object and purpose in fixing the pricing of spectrum at the year 2001 level and permitting distribution equally by two companies Swan and Unitech. Further, it was also pointed out that Shri P. Chidambaram was fully aware, at least, on 09.01.2008 as to what Shri A Raja was planning to do on 10.01.2008. Referring to severa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alise spectrum pricing formula which would include incentive for efficient use of spectrum as well as disincentive for suboptimal usages. Learned counsel pointed out that the above recommendation would clearly indicate that MoF officials were fully aware that unless such concurrence based on discussion and finalization of spectrum pricing formula between the DoT and the MoF had been established, the DoT could not have moved ahead and spectrum could have been allocated at 2001 rates in the year 2007-08. 9. Learned counsel also referred to the Position Paper on Spectrum Policy prepared by the Department of Economic Affairs (revised on 03.01.2008) which was forwarded along with covering letter dated 09.01.2008. The Telecom Commission meeting which was to take place on 09.01.2008 was postponed to 15.01.2008. Further, it was pointed out that before the scheduled meeting of the Telecom Commission on 15.01.2008, DoT had already issued 122 LOIs for UAS licenses on 10.01.2008 and that LOIs were converted into licenses during 27.02.2008 to 7.3.2008 and the spectrum allocation was started from 22.4.2008 and completed 6.5.2009. Learned counsel pointed out that, the then Finance Ministe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Additional Secretary (EA) and pointed out that then Finance Minister had agreed that spectrum usage charge should be increased reflecting the scarcity value of spectrum as indicated in their note dated 11.02.2008. Further, the note also indicated the Finance Minister s view that they should insist, in principle, on pricing spectrum beyond 4.4 MHz although details could be worked out after the auction of 3G spectrum. 14. Shri Prashant Bhushan also referred to the Office Memorandum, MoF dated 8.4.2008 prepared by Shri Govind Mohan, Director which, according to the learned counsel reflected the MoF s original position of 11.2.2008 on the issue of subjecting the entire spectrum to specific pricing. Learned counsel alleged that the note issued was later withdrawn and the officer was reprimanded and a fresh Office Memorandum was issued by the same Director. Learned counsel compared the original Office Memorandum dated 08.04.2008 and the new Office Memorandum and submitted that the original Office Memorandum had required the entire range of spectrum to be specifically priced and the revised Office Memorandum which was prepared on 9.4. 2008 had presented with a date of 8.4.2008, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... baram colluded up with Shri A Raja in non-auctioning of the spectrum and went on for allotment of first come first served basis at 2001 rates. Further, it was also pointed out that Shri P. Chidambaram had not revised his position from giving away 4.4 MHz of spectrum at 2001 prices and giving away 6.2 MHz of spectrum at 2001, thus causing huge loss to the exchequer. Further, he was also instrumental along with Shri A. Raja for allowing companies like Swan and Unitech to sell off their shares without charging any Government s share of its premium. Counsel therefore prayed for a direction of CBI to conduct a thorough investigation / further investigation into the role of Shri P. Chidambaram in 2G spectrum scam under the close scrutiny of this court. 18. We heard Dr. Subramnian Swamy, appearing in person and Shri Prashant Bhushan, learned counsel at length. Arguments raised give rise to the following questions: (1) Whether Shri P. Chidambaram has conspired with Shri A Raja in fixing the price of the spectrum at 2001 level thereby committed the offence of criminal misconduct. (2) Whether Shri P. Chidambaram by corrupt and illegal means obtained for himself or for Shri Raja any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2.1.2(4) stated that the allotment of additional spectrum would be transparent, fair and equitable, avoiding monopolistic situation regarding spectrum allotment usage. Para 2.4.6(ii) of the recommendations reads as follows: (ii) The recommendations of TRAI with regard to implementation of the Unified Access Licensing Regime for basic and cellular services may be accepted. 22. The recommendations of the GoMs were accepted by the Council of Ministers on 31.10.2003, the meeting of which was chaired by the then Prime Minister. The then Minister of Communications on 24.11.2003 accepted the recommendations that entry fee for new UAS licensees would be the entry fee of the fourth cellular operator and where there was no fourth cellular operator, it would be the entry fee fixed by the Government for the basic operator. A decision was also taken by the then Minister for Communications for the grant of spectrum licenses on firstcome- first served basis. Shri Dayanidhi Maran became the Minister for Telecommunications on 26.5.2004. 23. TRAI later made comprehensive recommendations on 13.5.2005 on various issues relating to spectrum policy i.e. efficient utilisation of spectrum, spect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case for adopting auction procedure in the allocation of all other spectrum bands except 800, 900 and 1800 MHz. Paras 2.74, 2.75, 2.76, 2.77, 2.78 and 2.79 are also relevant for determining the various issues which arise for consideration in this case and hence given below for ready reference: 2.74 Some of the existing service providers have already been allocated spectrum beyond 6.2 MHz in GSM and 5 MHz in CDMA as specified in the license agreements without charging any extra one time spectrum charges. The maximum spectrum allocated to a service provider is 10 MHz so far. However, the spectrum usage charge is being increased with increased allocation of spectrum. The details are available at Table 8. 2.75 The Authority has noted that the allocation beyond 6.2 MHz for GSM and 5 MHz for CDMA at enhanced spectrum usage charge has already been implemented. Different licensees are at different levels of operations in terms of the quantum of spectrum. Imposition of additional acquisition fee for the quantum beyond these thresholds may not be legally feasible in view of the fact that higher levels of usage charges have been agreed to and are being collected by the Government. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... recommended price are as below: Service areas Price (Rs. in million) for 2 MHz x 5 MHz Mumbai, Delhi and Category A 800 Chennai, Kolkata and Category B 400 Category C 150 The Authority recommends that any licensee who seeks to get additional spectrum beyond 10 MHz in the existing 2G bands i.e. 800,900 and 1800 MHz after reaching the specified subscriber numbers shall have to pay a onetime spectrum charge at the above mentioned rate on prorata basis for allotment of each MHz or part thereof of spectrum beyond 10 MHz. For one MHz allotment in Mumbai, Delhi and Category A service areas, the service provider will have to pay Rs. 160 million as one time spectrum acquisition charge. 2.78 As far as a new entrant is concerned, the question arises whether there is any need for change in the pricing methodology for allocation of spectrum in the 800, 900 and 1800 MHz bands. Keeping in view the objective of growth, affordability, penetration of wireless services in semi-urban and rural areas, the Authority is not in favour of changing the spectrum fee regime for a new entrant. Opportunity for equal competition has always been one of the prime p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Committee of DoT, Telecom Commission and DoT. DoT, it may be noted, did not get in touch with the Ministry of Finance to discuss and finalise the spectrum pricing formula which had to include incentive for efficient use of spectrum as well as disincentive for suboptimal usage in terms of the Cabinet decision of 2003. 27. Above facts would indicate that neither Shri P. Chidambaram nor the officials of MoF had any role in the various decisions taken by TRAI on 28.8.2007, decision taken by the Internal Committee of DoT and the decision of the Telecom Commission taken on 10.10.2007. 28. DoT then went ahead to process applications received for UAS licences. Between 24.9.2007 and 1.10.2007, over 300 applications were received. The Member (Technology), Telecom Commission and ex-officio Secretary to the Government of India sent a letter dated 26.10.2007 to the Secretary, Department of Legal Affairs, Ministry of Law and Justice seeking the opinion of the Attorney General of India/Solicitor General of India for dealing with those applications for licences. The Law Secretary placed the papers before the Minister of Law and Justice on 1.11.2007 who had recommended that the entire issue be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore, there is enough scope for allotment of spectrum to few new operators even after meeting the requirements of existing operators and licensees. An increase in number of operators will certainly bring real competition which will lead to better services and increased teledensity at lower tariff. Waiting for spectrum for long after getting licence is not unknown to the Industry and even at present Aircel, Vodafone, Idea and Dishnet are waiting for initial spectrum in some Circles since December 2006." 30. Shri P. Chidambaram, it is seen, had no role in the exchange of those communications or the expression of opinions of the decisions taken between Shri A. Raja and the Prime Minister s Office, a situation created by Shri A. Raja and the officials of DoT. Neither Shri P. Chidambaram nor the officials of the MoF did figure in those communications and hence the allegation of involvement of Shri P. Chidambaram in the 2G Scam has to be examined in that background. 31. The Secretary, DoT made a presentation of the spectrum policy on 20.11.2007 to the Cabinet Secretary. Finance Secretary, Dr. Subbarao, who had witnessed the presentation sent a letter dated 22.11.2007 to the Secretary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Issue of Letter of Intent (LOI): DOT follows a policy of First-cum-First Served for granting LOI to the applicants for UAS licence, which means, an application received first will be processed first and if found eligible will be granted LOI. 2. Issue of Licence: The First-cum-First Served policy is also applicable for grant of licence on compliance of LOI conditions. Therefore, any applicant who complies with the conditions of LOI first will be granted UAS licence first. This issue never arose in the past as at one point of time only one application was processed and LOI was granted and enough time was given to him for compliance of conditions of LOI. However, since the Government has adopted a policy of "No Cap" on number of UAS Licence, a large number of LOI's are proposed to be issued simultaneously. In these circumstances, an applicant who fulfils the conditions of LOI first will be granted licence first, although several applicants will be issued LOI simultaneously. The same has been concurred by the Solicitor General of India during the discussions." DDG (AS), DoT, after a few days, prepared a note incorporating therein the changed first-come-first-served policy to wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... res between March, 2009 and February, 2010. (iii) Tata Tele Services transferred 27.31% of equity worth Rs. 12,924 crores in favour of NTT DOCOMO. (iv) Tata Tele Services (Maharashtra) transferred 20.25% equity of the value of Rs. 949 crores in favour of NTT DOCOMO. 38. Materials made available would not indicate any role played by Shri P. Chidambaram on the steps taken by Shri A. Raja and DoT, reference of which have elaborately been made in the previous paragraphs of this judgment. The views expressed by Dr. D. Subbarao in his letter dated 22.11.2007 were already brushed aside by A. Raja and DoT officials and a communication dated 29.11.2007 was already sent to Dr. Subbarao followed by a letter to the Prime Minister on 26.12.2007. 39. MoF then sent a letter on 9.1.2008, following the letter of Dr. D. Subbarao dated 22.11.2007 as well as the reply received from DoT on 29.11.2007, which was prepared and sent as instructed by Shri P. Chidambaram for presentation in the meeting of the Telecom Commission which was held on 10.1.2008. Note referred to the recommendations of GoMs for discussing and finalizing the spectrum pricing formula by DoT and Ministry of Finance. Paras 6.3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... para 13 of the note reads as follows: 13. This leaves the question about licensees who hold spectrum over and above the start up spectrum. In such cases, the past may be treated as a closed chapter and payments made in the past for additional spectrum (over and above the start up spectrum) may be treated as the charges for spectrum for that period. However, prospectively, licensee should pay for the additional spectrum that they hold, over and above the start-up spectrum, at the price discovered in the auction. This will place old licensees, existing licensee seeking additional spectrum and new licensees on par so far as spectrum charges are concerned. Shri P. Chidambaram had indicated his mind in the note sent to the Prime Minister. 41. Prime Minister s Office, it is seen, had not taken any contrary view to that of Shri P. Chidambaram and, in any view, no materials were also made available when this Court was dealing with the case relating to cancellation of licences, wherein Union of India was a party. In such circumstances, it is difficult to conclude, on the materials available, that P. Chidambaram had conspired with A. Raja in subverting the process of issuance of LoI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hough may be legally possible but it would not be practical proposition to auction or fixing a price for 4.4 MHz spectrum due to following: 2.1.1 As per clause 43.5 (i) of UAS License, which provides that: initially a cumulative maximum of up to 4.4 MHz +4.4 MHz shall be allocated in the case of GSM based systems . It implies that when a service provider signs UAS License he understands that and contractually he is eligible for initially a cumulative maximum of 4.4 MHz subject to availability. 2.1.2 120 LoIs have been issued and the Department is contractually obliged to give them start up spectrum of 4.4. MHz under UASL. 2.1.3 As auctioning does not assure the operators to get initial spectrum of 4.4 MHz as per UAS License provision, auctioning and the clause 43.5 (i) of the UASL are contradictory. 2.1.4 If the new entrants get spectrum by auctioning, they may be paying more as compared to the existing players. Hence (a) auction will not ensure level playing; (b) also, as the cost to the new entrants would be more, they may not be able to offer competitive tariff. 2.1.5 Also 4.4. MHz is a part of the license agreement; no spectrum acquisition charge is proposed to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pecified subscriber numbers shall have to pay a onetime spectrum charge at the below mentioned rates on pro-rata basis for allotment of each MHz or part thereof of spectrum beyond 10 MHz . Para 4 of the Approach Paper deals with the price of spectrum beyond 6.2 MHz. Relevant portion of para 4 reads as under: 4. Price o f spectrum beyond 6.2 MHz The UASL does not explicitly provide any provision or spectrum beyond 6.2 MHz and upto 10 MHz, however the UASL clause 43.5(iv) provides that the Licensor has right to modify and / or amend the procedure of allocation of spectrum including quantum of spectrum at any point of time without assigning any reason . Hence the spectrum beyond 6.2 MHz should be properly priced keeping in mind the market value of spectrum. 4.1 Auction Path : Since we are not auctioning startup spectrum of 4.4 MHz and only pricing additional allocation of 1.8 MHz as explained earlier, therefore, we can take 6.2 MHz as threshold for consideration for auction as this also falls beyond the provisions of the license agreement. The following points are brought out: 2G GSM Spectrum bands are 890-915 MHz paired with 935-960 MHz, 1710- 1755 MHz paired with 180 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... figures of 2007-08 with 2003-04 is compared. It is for consideration to charge x times of base price of Rs.375 crore/MHz, where x is to be decided. This will be charged to existing as well as new entrants. Those who decide not to pay may be asked to surrender the excess spectrum beyond 6.2 MHz. Para 6 deals with the Merger and Acquisition (M A) is also relevant and the same reads as under: 6. Mergers and Acquisition (M A) In the context of intra-circle merger and acquisition, TRAI in their report of August 2007 have considered various factors, namely Definition of Market Assessment of Market Power criteria and Methodology, Determination of minimum number of access service providers in a post merger scenario and spectrum cap of the merged entity. The TRAI Recommendations had been considered by Telecom Commission. Some of the issues have been referred back to TRAI for consultation. In view of very large number of new players, it is expected that consolidation is likely to take place in the industry in future. 6.1 In view of this, we need to have clear guidelines relating to M A. We also need to consider fees on account of transfer of spectrum to the merged entity. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tical and legal implications. On the subject of market based price determination, the MoF in paras 19 20 stated as follows: Market Based Price Determination 19. If auction is ruled out, what are the alternatives for determining an appropriate market based price for spectrum? 20. The value of spectrum embedded in the entry fee provides a possible reference frame for pricing spectrum. Currently, 4.4MHz of spectrum is allotted at the entry level on payment of an entry fee of Rs. 1650 crores for pan-India operation. This translates to an embedded price of Rs.375 crores/MHz. This price was discovered in 2001 and fixed in 2003/04. Using this reference frame price, there are two options for determining the current price of spectrum. On the question of pricing of spectrum beyond 4.4 MHz, the views expressed by the Ministry of Finance in the above letter read as follows: 28. DoT is of the view that it is not advisable / possible to price the start-up allocation of a 4.4 MHz on the following argument. Allocation of 4.4 MHz spectrum is part of the licence Agreement. This start-up spectrum was given free of cost in the past. The new entrants who were given licenses in January ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ermined? 45. Ministry of Finance (Department of Economic Affairs) also prepared a note on 7.4.2008 after discussing the matter with the Minister of Finance, which shows that the Minister of Finance had also agreed that spectrum usage charges should be increased reflecting the scarcity value of spectrum as indicated in Ministry s note dated 11.2.2008. On pricing of spectrum, the Ministry of Finance was of the view that they might insist in principle on pricing spectrum (beyond 4.4. MHz) although details could be worked out after the auction of 3G s spectrum. 46. Mr. Govind Mohan, Director, Ministry of Finance had prepared a detailed office memorandum on 8.4.2008, wherein after referring to the DoT letter dated 29.1.2008, the following amendments were suggested: 4.0 Union Cabinet, in its meeting on October 31, 2003 had, inter alia, decided that spectrum pricing would need to be decided mutually between DoT and MoF so as to provide incentive for efficient use of spectrum as well as disincentive for sub-optimal usage. In the context of this decision, the following amendments are being suggested in Pricing of Spectrum, its allotment among Access providers and Spectrum Usage Cha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s subscriber licensees under UASL regime beyond the initial start-up allocation of 4.4 MHz may henceforth be specifically priced and charged for. Details in this regard can be worked out; 2. The price determined as above may be made applicable to both the new and existing operators; such operators who do not intend to pay the new charges may be given the option of surrendering the spectrum allotted to them; 3. Spectrum Usage Charge, instead of being charged as a fixed percentage of Adjusted Gross Revenue (AGR) for different spectrum bands, may henceforth be charged as a percentage of AGR based on volume of business categorization, so as to better reflect and capture the circle specific scarcity value of spectrum. The revised charges proposed for various Circles are as per the table annexed to this OM and as agreed in the discussions between Finance Secretary and Secretary, Department of Telecom; 4. The recommendations of TRAI for revising the subscriber base criteria for allotment of spectrum may be considered for implementation in the interest of enhancing efficiency of spectrum usage and encouraging technological innovations. 49. Shri P. Chidambaram, wrote a letter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issued a notification on April 22, 2007 on Guidelines for intra service merger of Cellular Mobile Telephone Service (CMTS)/Unified Access Services (UAS) Licensees . 17. The guidelines derive substantially from the recommendations made by TRAI on this subject vide Report of August, 2007. The guidelines mandate a spectrum transfer charges to be payable as specified by Government. 18. DoT may be advised that fixation of spectrum transfer charges shall be in consultation with DEA. 51. Shri P. Chidambaram and Shri A. Raja met on 29.5.2008 and 12.6.2008 for resolving the then outstanding issues relating to the allocation and pricing 2G and 3G Spectrums. Meeting of two Ministers would not by itself be sufficient to infer the existence of a conspiracy. Even before those meetings, as instructed by the Finance Minister, the Finance Secretary and Telecom Secretary had already met on 24.4.2008, had agreed that it might not be possible to charge operators already having allocation upto 6.2 MHz and the principle of equity and level playing field would require that the operators who get fresh allotment of Spectrum upto 6.2MHz for GSM too should not be charged for Spectrum upto 6.2 MHz ..... X X X X Extracts X X X X X X X X Extracts X X X X
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