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TMI Blog2022 (3) TMI 1629X X X X Extracts X X X X X X X X Extracts X X X X ..... ry and constitutionally infirm. The need for an open and transparent bidding process for the allocation of natural resources was substituted by a process which was designed to confer unlawful benefits on a group of selected bidders by which the appellant benefitted. The appellant has tried to obviate these findings by relying on its acquittal by the Special Judge, CBI. It is important to note that the criminal trial before the Special Judge, CBI was limited to the question as to whether the promoters of the appellant had cheated the DoT by providing a false representation of its compliance with Clause 8 of the UASL Guidelines, since it was allegedly being controlled by the Essar group. The Special Judge, CBI acquitted the promoters of the appellant since the prosecution was unable to prove that: (i) officers of DoT considered the representation of the appellant to be false; (ii) the appellant was engaging in a sham transaction; or (iii) the appellant was actually controlled by the Essar group. Hence, the acquittal of the promoters of the appellant of these criminal charges does not efface or obliterate the findings which are contained in the final judgment of this Court in CPIL. He ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to effect from 25 January 2008. Among the conditions which were stipulated in the UASL agreements, those governing the duration of the licence and the Entry Fee were in the following terms: "3. Duration of License 3.1 This LICENCE shall be valid for a period of 20 years from the effective date unless revoked earlier for reasons as specified elsewhere in the document. [...] 18. FEES PAYABLE 18.1 Entry Fee: One Time non-refundable Entry Fee of Rs 1.1 crore has been paid by the LICENSEE prior to signing of this License agreement." 3 On 2 February 2012, this Court by its judgment in CPIL (supra) declared that the policy of the Union government for allocation of 2G spectrum on a "First Come First Serve" basis was illegal. As a consequence, the UASLs which were granted by the Union government were quashed. On 25 May 2012, the appellant instituted a petition [Petition No 329 of 2012 ("First Telecom Petition")] before the TDSAT seeking, among other things, a refund of the Entry Fee of Rs 1454.94 crores, inclusive of interest. The appellant has stated that on 1 June 2012 it shut down its operations after porting out all its subscribers. 4 By its judgment dated 16 September 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laiming the same relief which had been sought earlier in the First Telecom Petition. It further held that had the TDSAT sought to provide the appellant with the remedy of approaching it after the conclusion of the trial before the Special Judge, CBI, it would have indicated it in its judgment. Finally, it was also noted that this Court, through its order dated 13 May 2016, did not grant the appellant the leave to approach the TDSAT but only to approach this Court. The judgment dated 11 December 2018 has given rise to the filing of the second set of civil appeals [Civil Appeal No 893 of 2019] by the appellant. The appellant also moved a Miscellaneous Application [Miscellaneous Application Nos 198-218 of 2019] in Civil Appeal Nos 1447-1467 of 2016 seeking permission for the revival of the earlier civil appeals, which had been permitted to be withdrawn on 13 May 2016. 7 By an order dated 7 January 2020, the Miscellaneous Applications seeking the revival of the first set of civil appeals were allowed, keeping open all the contentions including the contentions of the respondents based on the earlier order dated 13 May 2016. This judgment will accordingly govern both, the original set o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f a debt that is due and payable: (a) On 12 October 2012, the respondent issued "Queries and Responses to an NIA" and in answer to Query Number 74 regarding the set off of Entry Fee, it was stated as follows: "A set-off is allowed against the Earnest Money and the payment due in the event of spectrum being won in this auction. The total amount of such set off shall be limited to the total entry fee paid by the entity for all its licenses which have been quashed by the Supreme Court. No interest will be due on this amount." (b) The Empowered Group of Ministers ["EGoM"] held a meeting on 18 October 2012, at which a decision was taken in the following terms: "13. The EGoM considered the letter dated 12.10.2012 from the Minister of Information and Broadcasting regarding set-off of entry fee against the earnest money and payment due in the event of spectrum being won and noted that the entry fee paid by TSPs whose licenses were quashed was for a period of 20 years. While on one hand, the TSPs could be expected to have paid a pro-rata amount for the period of operation of the license, i.e. 2008-2012, on the other hand, there could be a claim for refund with interest for the pro-r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngs (formerly Uninor) (bought Unitech Licenses) Nov, 2012 1658.57 Crores Respondent No 3; Penalty of Rs 5 Crores M/s Videocon Nov, 2012 1506.82 Crores Respondent No 5; No Penalty Levied M/s Idea Cellular Nov, 2012 684.59 Crores Respondent No 8; No Penalty Levied M/s Sistema Shyam March, 2013 1626.32 Crores Respondent No 10; Penalty of Rs 50 Lakhs The remaining four TSPs, including the appellant, did not participate in the subsequent auction for spectrum. Their details are tabulated below: Name of Company Entry Fee Paid Status in the 2G Judgment Action taken for refund of Entry Fee M/s S Tel Pvt. Ltd. 25 Crores Respondent No 6; Penalty of Rs 50 Lakhs Due to low amount, it did not seek refund of Entry Fee. M/s Tata Teleservices 9 Crores Respondent No 9; Penalty of Rs 5 Crores Due to low amount, it did not seek refund of Entry Fee. M/s Etisalat DB (Swan Telecom) 1564 Crores Respondent No 2; Penalty of Rs 5 Crores Refund Claimed. Civil Appeal No. 7331/2016 pending M/s Loop Telecom Ltd. (Appellant) 1454.94 Crores Respondent No 10; Penalty of Rs 50 Lakhs Refund Claimed. Present Civil Appeal against the order of TDSAT (d) TDSAT afforded differe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 00 crores and has thus benefited twice from the same spectrum. The respondent cannot be allowed to unjustly enrich itself by usurping the Entry Fee paid by the appellant. The principles underlying the doctrine of unjust enrichment are duly fulfilled in the present case; (xiii) The provisions of the Indian Contract Act would be applicable to the claim of the appellant: (a) TDSAT has wrongly held that the licences were quashed by this Court in the exercise of its constitutional powers, thereby ousting the provisions of the Indian Contract Act; (b) The licence granted under the proviso to Section 4(1) of the Indian Telegraph Act 1885 ["Telegraph Act"] is in the nature of a contract between the Government and its licensees. This proposition finds support in the judgment of this Court in Union of India v. AUSPI [(2011) 10 SCC 534 ("AUSPI")]; (c) Once the contracts were held to be void and were quashed in CPIL (supra), the consequences which are envisaged in the Indian Contract Act must follow. When a contract is discovered to be void, the benefit/advantage received by one party under the contract ought to be returned to the other party; (d) The appellant, when it entered into ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as, the appellant deposited the Entry Fee for each circle in accordance with the UASL Guidelines on 10 January 2008. The appellant became eligible for the issuance of UASLs for each of the twenty-one service areas only thereafter. The UASL agreements which were entered into between the Union Government and the appellant on 4 March 2008 expressly contemplated that the Entry Fee was a one-time non-refundable fee. The Entry Fee being nonrefundable in nature, the appellant cannot now seek a refund; (ii) The issues which are sought to be raised in the present civil appeals are squarely governed by the judgment in CPIL (supra). The judgment of this Court examined the validity of the licences and spectrum allocation made to the licensees including the appellant. The judgment in CPIL (supra) found that the licensees had unfairly gained access to the then Minister in-charge as well as certain officers of the DoT in order to gain preferences. This Court found that the grant of licences was "stage-managed" to favour specific licensees, including the appellant, as a result of which costs of Rs 50 lakhs were also imposed on them; (iii) While quashing the grant of the licences, the judgment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y was uniformly applied to all licensees covered by the judgment in CPIL (supra), including the appellant, and thus is not discriminatory. No TSP covered by the decision in CPIL (supra) was compelled to participate in the subsequent auction being conducted by the DoT by the virtue of the set off policy. Rather, the policy only sought to increase participation in the subsequent auction by offering a concession in the form of set off of the previously paid Entry Fee, in case they emerged successful in the fresh auction. Being a policy decision involving industry specific issues, this Court should be circumspect in interfering with this decision of the Union government; (vi) The acquittal of the promoters of the appellant in the criminal case has no bearing on the refund of the Entry Fee. The judgment of the Special Judge, CBI acquitting the promoters of the appellant was only concerned with the alleged violation of Clause 8 of the UASL Guidelines issued by DoT. The acquittal has no bearing on the findings of this Court in CPIL (supra), according to which UASL and allocation of spectrum was held to be "stage managed" and violative of the principles of public law. This precludes the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s observations would not apply to other proceedings and hence, there was no intent to foreclose other rights under the law. In view of these premises, it has been urged that the petition under Article 32 which led to the decision in CPIL (supra) did not seek the forfeiture of the Entry fee and hence, the principles of constructive res judicata would find no application at all. This Court having imposed costs of Rs 5 crores on one set of licensees and Rs 50 lakhs on another group of licensees (which included the appellant), it would be wholly disproportionate to forfeit an amount of Rs 1454.94 crores in the absence of an implied forfeiture in terms of the earlier decision of this Court. 11 The rival submissions will now be analysed. C The CPIL judgment 12 The decision of this Court, which was rendered on 2 February 2012, arose from petitions under Article 32 of the Constitution. The petitions questioned the grant of UASLs to the private respondents in those proceedings (which included the appellant), on the ground that the procedure which was adopted by DoT was arbitrary, illegal and in violation of Article 14 of the Constitution. Among the grounds of challenge, it was urged th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... way prices by wilfully ignoring the concerns raised from various quarters including the Prime Minister, Ministry of Finance and also some of its own officers. This becomes clear from the fact that soon after obtaining the licences, some of the beneficiaries offloaded their stakes to others in the name of transfer of equity or infusion of fresh capital by foreign companies, and thereby made huge profits. We have no doubt that if the method of auction had been adopted for grant of licence which could be the only rational transparent method for distribution of national wealth, the nation would have been enriched by many thousand crores." 14 This Court found a basic flaw in the "First Come First Serve" policy, holding: "94. There is a fundamental flaw in the first-come-first-served policy inasmuch as it involves an element of pure chance or accident. In matters involving award of contracts or grant of licence or permission to use public property, the invocation of first-come-first-served policy has inherently dangerous implications. Any person who has access to the power corridor at the highest or the lowest level may be able to obtain information from the government files or the fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 24,493 crores in favour of foreign companies. Therefore, it was absolutely necessary for DoT to take the opinion of the Finance Ministry as per the requirement of the Government of India (Transaction of Business) Rules, 1961. (iii) The officers of DoT who attended the meeting of the Telecom Commission held on 10-10-2007 hardly had any choice but to approve the recommendations made by TRAI. If they had not done so, they would have incurred the wrath of the Minister of Communications and Information Technology. (iv) In view of the approval by the Council of Ministers of the recommendations made by the Group of Ministers in 2003, DoT had to discuss the issue of spectrum pricing with the Ministry of Finance. Therefore, DoT was under an obligation to involve the Ministry of Finance before any decision could be taken in the context of Paras 2.78 and 2.79 of the TRAI's recommendations. However, as the Minister of Communications and Information Technology was very much conscious of the fact that the Secretary, Finance, had objected to the allocation of 2G Spectrum at the rates fixed in 2001, he did not consult the Finance Minister or the officers of the Finance Ministry. (v) The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T for grant of licence and allocation of spectrum by applying the principle of level playing field. (ix) The manner in which the exercise for grant of the LoIs to the applicants was conducted on 10-1-2008 leaves no room for doubt that everything was stage-managed to favour those who were able to know in advance the change in the implementation of the first-come-first-served policy. As a result of this, some of the companies which had submitted applications in 2004 or 2006 were pushed down in the priority and those who had applied between August and September 2007 succeeded in getting higher seniority entitling them to allocation of spectrum on priority basis." This is a clear indicator of the complicity between the Minister and the business entities he was acting to favour on the basis of the "First Come First Serve" policy. 17 This Court found that "everything was stage-managed to favour those who were able to know in advance the change in the implementation of the first-come first served policy". It was in the backdrop of the above finding, that this Court issued the following directions: "102. In the result, the writ petitions are allowed in the following terms: (i) The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evention of MoneyLaundering Act, 2002 and other similar statutes." 18 Reading the judgment of this Court in CPIL (supra), it is impossible to accept the submission which has been urged on behalf of the appellant that the fraud in the "First Come First Serve" policy lay at the doorstep of the Union government alone and that the appellant was free from taint or wrong doing. The decision of this Court held that the "First Come First Serve" policy was writ large with arbitrariness, and was intended to favour certain specific entities at a grave detriment to the public exchequer. Undoubtedly, the authors of the "First Come First Serve" policy were the official actors comprised within the Union government. But equally, the decision did not exculpate the private business entities who obtained UASLs and became the beneficiaries of their decision. The decision of this Court concludes in no uncertain terms that the then Minister of Communications and Information Technology wanted to favour some companies at the cost of the public exchequer, and that as a matter of fact the entire process was "stage-managed" to favour those who had access to the nitty-gritties of the policy in advance. As a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 005. Clause 6[1] of the Guidelines required each applicant seeking a UASL for a given service area to deposit a "nonrefundable entry fee" in accordance with Annexure 1, which elucidated the quantum of the fee which was payable for different service areas. Clause 14[2] indicates that the Entry Fee was payable in addition to the annual licence fee which was payable for holding a UASL. 22 Letters of Intent were issued to the appellant for providing unified access service to twenty-one service areas. The appellant deposited the circle wise Entry Fee, in terms of the UASL Guidelines, on 10 January 2008 in the amount of Rs 1454.94 crores. It is only upon the payment of this Entry Fee that the appellant became eligible to be issued UASLs in the twenty-one service areas. Clause 18.1[3] of the UASL agreement acknowledged the payment of a "onetime non-refundable entry fee" prior to the signing of the agreement. Thus, the Entry Fee was a onetime non-refundable fee payable. According to the Union government, this was payable by an applicant for participating in the process of obtaining the UASL and was distinguishable from the licence fee under Clause 10.1[4], which was relatable to the actua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l reliefs granted by this court. The TDSAT held that since the challenge was focused on the arbitrary and mala fide actions that were embodied in the policy of allotting 2G spectrum licences, the quashing of the licences was a necessary consequence of the grant of the licences being vitiated. Thus, the TDSAT held that "a direction for refund [is] outside the purview of the Contract Act and an exercise of Constitutional powers is clearly beyond the authority of this Tribunal [TDSAT] and in that regard the petitioner must approach the Court that quashed its licenses, that is, Supreme Court and seek appropriate reliefs". 26 This Court will analyse whether the TDSAT had the jurisdiction to entertain the claim for a refund of the Entry Fee. The TDSAT is an adjudicatory body constituted under the TRAI Act. Initially, the TRAI was empowered to regulate the telecom sector in India and adjudicate upon disputes. The adjudicatory powers of TRAI, specifically with respect to issuing directions to DoT, were placed in issue before the Delhi High Court in Union of India v. Telecom Regulatory Authority of India [(1998) 46 DRJ 557]. The Delhi High Court held that TRAI did not possess the authority ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and dispose of appeal against any direction, decision or order of the Authority. The aforesaid provision was absolutely essential as the organizations of the licensor, namely, MTNL and BSNL were also service providers. That being the object for which an independent tribunal was constituted, the power of that Tribunal has to be adjudged from the language conferring that power and it would not be appropriate to restrict the same on the ground that the decision which is the subject-matter of challenge before the Tribunal was that of an expert body. [...] Having regard to the very purpose and object for which the Appellate Tribunal was constituted and having examined the different provisions contained in Chapter IV, more particularly, the provision dealing with ousting the jurisdiction of the civil court in relation to any matter which the Appellate Tribunal is empowered by or under the Act, as contained in Section 15, we have no hesitation in coming to the conclusion that the power of the Appellate Tribunal is quite wide, as has been indicated in the statute itself and the decisions of this Court dealing with the power of a court, exercising appellate power or original power, wil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Law by H.W.R. Wade and C.F. Forsyth, p. 260.) Only when a question of law or a mixed question of fact and law are decided by a tribunal, the High Court or the Supreme Court can exercise its power of judicial review. [...] 34. Statutory recommendations made by it are normally accepted by the Central Government, as a result of which the rights and obligations of the parties may seriously be affected. It was in the aforementioned premise Parliament thought of creating an independent expert tribunal which, if an occasion arises therefor, may interfere with the finding of fact, finding of law or a mixed question of law and fact of the authority. Succinctly stated, the jurisdiction of the Tribunal is not circumscribed in any manner whatsoever..." 29 Section 14 of the TRAI Act has also been interpreted in Union of India v. TATA Teleservices (Maharashtra Ltd) [(2007) 7 SCC 517 ("Tata Teleservices")] by a two-judge Bench of this Court. In that case, the respondent had moved the TDSAT seeking a declaration that the action of the Union of India (the licensor) in raising a claim and recovering the amount was unlawful. The respondent also sought a declaration that a set-off made by invokin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disputes arising out of licences granted under the Act. We therefore do not think that there is any reason to restrict the jurisdiction of the tribunal so constituted by keeping out of its purview a person whose offer has been accepted and to whom a letter of intent is issued by the Government and who had even accepted that letter of intent. Any breach or alleged breach of obligation arising after acceptance of the offer made in response to a notice inviting tender, would also normally come within the purview of a dispute that is liable to be settled by the specialised tribunal." This Court also held that there was no reason to restrict the expression "licensee" appearing in Section 14(a)(i) to exclude a person like the respondent to whom a Letter of Intent had been issued, when the Letter of Intent had been accepted but an attempt had been made to negotiate certain terms before a formal contract was entered into and work commenced. The Court held: "23. We see no reason to restrict the expressions "licensor" or "licensee" occurring in Section 14(a)(i) of the Act and to exclude a person like the respondent who had been given a letter of intent regarding the Karnataka Circle, who ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e that an agreement which is void cannot be split up and none of the parties to the agreement can be permitted to seek part-enforcement of a contract through a court of law. In support of this proposition, reliance has been placed on the decision of this Court in Tarsem Singh v. Sukhminder Singh [1998 (3) SCC 471 ("Tarsem Singh")]. A two-judge Bench of this Court had held that if an agreement is held to be void, then none of the terms, "except in certain known exceptions, specially where the clause is treated to constitute separate and independent agreement, severable from the main agreement" can be enforced separately and independently. 31 The reliance on the principle embodied in Tarsem Singh (supra) is a clear indicator that the basis of the claim of the refund does not emanate from the relationship between the appellant and the respondent as licensor and licensee. The claim for restitution is based independently on the ground that upon the decision of this Court in CPIL (supra) holding the licence to be unlawful, the appellant is entitled to restoration of the benefit which has been obtained by the Union of India under an agreement which is held to be void. 32 Apart from what ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... procedure prescribed by law. It is in the interest of the public at large that finality should attach to the binding decisions pronounced by a court of competent jurisdiction and it is also in the public interest that individuals should not be vexed twice over with the same kind of litigation. While hearing a petition under Article 32 it is not permissible for this Court either to exercise a power of review or some kind of an appellate jurisdiction over a decision rendered in a matter which has come to this Court by way of a petition under Article 136 of the Constitution. The view taken in Bhagubhai Dullabhbhai Bhandari v. District Magistrate [AIR 1956 SC 585 : 1956 SCR 533 : 1956 Cri LJ 1126] that the binding nature of the conviction recorded by the High Court against which a special leave petition was filed and was dismissed cannot be assailed in proceedings taken under Article 32 of the Constitution was approved in Daryao v. State of U.P. [AIR 1961 SC 1457 : (1962) 1 SCR 574] (see para 14 of the Report)." 34 The judgment in CPIL (supra) contains a detailed enumeration of the facts which were brought to the attention of the Court and all the submissions which were placed on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the decision in Tata Teleservices (supra). However, since the policy on the allocation of spectrum and the licences were quashed on the grounds of mala fides and arbitrariness in the Union government's policy, the subsequent enquiry into viability of the refund of the Entry Fee would have to be agitated before the same Court. 36 Such practice has been previously followed by the TDSAT. In AUSPI (supra), a two-judge Bench of this Court considered the decision of the TDSAT on the definition of AGR which was upheld by this Court in the exercise of its appellate jurisdiction under Section 18 of the TRAI Act. This Court was called upon to decide whether a substantially similar question can be reagitated before the TDSAT after this Court's dismissal of the civil appeal against the TDSAT order holding that AGR will include only revenue arising from licensed activities and not revenue from activities outside the licence of the licensee. The Court observed that the TDSAT had jurisdiction, only after specifically noting the order of this Court granting the Union of India specific liberty to allege the issues before the TDSAT. This Court noted: "32. The first substantial question of law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is Court in the order dated 19-1-2007 [Union of India v. Assn. of Unified Telecom Service Providers of India, Civil Appeal No. 84 of 2007 decided on 19-1-2007 (SC)], the Union of India could urge before the Tribunal all the contentions covered under Grounds 1 to 6 extracted above including the contention that the definition of adjusted gross revenue as given in the licence could not be challenged by the licensees before the Tribunal and will include all items of revenue mentioned in the definition of adjusted gross revenue in the licence." 37 Apart from the above, it must be noted that the appellant made no effort to urge during the course of the submissions before the Court in CPIL (supra) that they should be allowed a refund of Entry Fee in the event that the Court were to quash the process and the award of licences. Significantly, the appellant did not seek the permission of this Court at that stage to reserve their liberties of agitating a claim for refund of Entry Fee in separate proceedings. Besides having such a course of action open to them before the judgment was delivered, the appellants had their remedies open in law even after the decision by seeking liberty of ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hopping and selectively deciding where and before whom it would pursue its remedies. It is in this backdrop, that the failure of the appellant to be fair with the Court when it addressed its submissions in the judicial process leading up to the decision in CPIL (supra) must be assessed. For the above reasons we are of the view that the TDSAT has correctly come to the conclusion that the claim by the appellant for refund of the Entry Fee could not have been entertained. F The claim founded on frustration and restitution 39 In this section of the judgment, we will analyse the claim of the appellant that it is entitled to claim a refund of the Entry Fee on an application of the doctrine of frustration and the principle of restitution. The appellant has placed reliance on the provisions of Sections 56 and 65 of the Contract Act. The basic postulate of the appellant is that when a licence is granted under the proviso to Section (4)(1) of the Telegraph Act, the licence is in the nature of a contract between the government and licensee, thus bringing it within the ambit of the Indian Contract Act. 40 In AUSPI (supra), a two-judge Bench of this Court has held: "39. The proviso to sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... doctrine of frustration, yet the essential idea upon which the doctrine is based is that of impossibility of performance of the contract; in fact impossibility and frustration are often used as interchangeable expressions. The changed circumstances, it is said, make the performance of the contract impossible and the parties are absolved from the further performance of the contract impossible and the parties are absolved from the further performance of it as they did not promise to perform an impossibility...We hold, therefore, that the doctrine of frustration is really an aspect or part of the law of discharge of contract by reason of supervening impossibility or illegality of the act agreed to be done and hence comes within the purview of Section 56 of the Indian Contract Act. It would be incorrect to say that Section 56 of the Contract Act applies only to cases of physical impossibility and that where this section is not applicable, recourse can be had to the principles of English law on the subject of frustration..." Thus, it was held that the applicability of Section 56 of the Indian Contract Act is not limited to cases of physical impossibility. The Court also noted that in d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : "Section 65 is not in derogation of the common law maxims ex dolo malo non oritur actio and in pari delicto potior est conditio possidentis; and only those cases as are not covered by these maxims can attract application of the provision of section 65 on the footing that when an agreement in its inception was not void and it was not hit by the maxims but is discovered to be void subsequently, right to restitution of the advantage received under such agreement is secured on equitable consideration. The section has been held not to apply where both parties knew of the illegality at the time the agreement was made, and were in pari delicto." Thus, the application of Section 65 has to be limited to those cases were the party claiming restitution itself was not in pari delicto. 47 In The Principles of Law of Restitution[9], it has been noted that all claims for restitution are subject to a defence of illegality. The genesis of this defence is in the legal maxim ex turpi causa non oritur actio (no action can arise from a bad cause). A court will not assist those who aim to perpetuate illegality. This rule was initially recognized by the House of Lords in its decision in Holman v. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... does not authorise a general inquiry into their relative blameworthiness. The question is whether they were legally on the same footing. The case law discloses two main categories of case where the law regards the parties as not being in pari delicto, but both are based on the same principle. 242 One comprises cases in which the claimant's participation in the illegal act is treated as involuntary: for example, it may have been brought about by fraud, undue influence or duress on the part of the defendant who seeks to invoke the defence... 243 The other category comprises cases in which the application of the illegality principle would be inconsistent with the rule of law which makes the act illegal. The paradigm case is a rule of law intended to protect persons such as the plaintiff against exploitation by the likes of the defendant. Such a rule will commonly require the plaintiff to have a remedy notwithstanding that he participated in its breach..." (emphasis supplied) Thus, in determining a claim of restitution, the claiming party's legal footing in relation to the illegal act (and in comparison to the defendant) must be understood. Unless the party claiming restitution ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the knowledge (Ilm) of the agreement being void as one of the pre-requisites for restitution and is used in the sense of an agreement being discovered to be void. If knowledge is an essential requisite even an agreement ab initio void can be discovered to be void subsequently. There may be cases where parties enter into an agreement honestly thinking that it is a perfectly legal agreement and where one of them sues the other or wants the other to act on it, it is then that he may discover it to be void. There is nothing specific in Section 65, Indian Contract Act or its corresponding section of the Hyderabad Contract Act to make it inapplicable to such cases. A person who, however, gives money for an unlawful purpose knowing it to be so, or in such circumstances that knowledge of illegality or unlawfulness can as a finding of fact be imputed to him, the agreement under which the payment is made cannot on his part be said to be discovered to be void. The criticism that if the aforesaid view is right then a person who has paid money or transferred property to another for illegal purpose can recover it back from the transferee under this section even if the illegal purpose is carri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction cannot arise out of fraud or out of transgression of law; and according to them it is necessary in such a case that possession should rest where it lies in pari delicto potior est conditio possidentis; where each party is equally in fraud the law favours him who is actually in possession, or where both parties are equally guilty the estate will lie where it falls. On the other hand, Respondent 1 argues that the proper maxim to apply is nemo allegans suam turpitudinum audiendum est, whoever has first to plead turpitudinum should fail; that party fails who first has to allege fraud in which he participated. In other words, the principle invoked by Respondent 1 is that a man cannot plead his own fraud. In deciding the question as to which maxim should govern the present case it is necessary to recall what Lord Wright, M.R. observed about these maxims in Berg v. Sadler and Moore [(1937) 2 KB 158 at p. 62]. Referring to the maxim ex turpi causa non oritur actio Lord Wright observed that "this maxim, though veiled in the dignity of learned language, is a statement of a principle of great importance; but like most maxims it is much too vague and much too general to admit of applicat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 962 SC 370], the first course would be clearly and patently inconsistent with the public interest whereas, the latter course is lesser injurious to public interest than the former." 52 Hence, in adjudicating a claim of restitution under Section 65 of the Indian Contract Act, the court must determine the illegality which caused the contract to become void and the role the party claiming restitution has played in it. If the party claiming restitution was equally or more responsible for the illegality (in comparison to the defendant), there shall be no cause for restitution. This has to be determined on the facts of each individual case. 53 The appellant before us has relied upon the decision of TDSAT in S Tel Pvt. Ltd. v. Union of India [2015 SCC OnLine TDSAT 1 ("S Tel")] to establish that the blame for quashing of the UASLs lies with the Union government alone. The issue which came up for decision before the TDSAT in that case was whether the petitioner was entitled to the refund of the money which it paid for allocation of 3G spectrum under licences which were later quashed by the judgment of this Court. In that case, the petitioner had applied for UASLs in six circles/service ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the petitioner was in any way responsible for the quashing of its licences. It is thus clear that though the petitioner's UAS licences were declared illegal and quashed, that was not due to any fault by the petitioner but on account of the illegalities committed by the Government in the issuance of those one hundred and twenty two (122) licences. While discussing the provisions of clauses 3.6 and 3.7 of the NIA it is noted above that those clauses deal with a situation where the licence is cancelled/terminated at the instance of the licensor for some fault on the part of the licensee. The quashing of the petitioner's licences in the present case thus clearly does not fall under the two clauses in the NIA. Further, as a result of the quashing of the petitioner's licences its contract with the Government relating to 3G spectrum got discharged on account of frustration, as provided under section 56 of the Contract Act, leaving it open to the petitioner to seek the relief of restitution in terms of section 65 of the Contract Act." The decision of the TDSAT to allow a refund is thus clearly postulated on the principle that the petitioner was not at fault, but the UASLs were quas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unications and Information Technology issued a document titled "Queries and Responses to the NIA for competitive bids for allocation of spectrum issued by the DoT". Among the queries, which were in the nature of Frequently Asked Questions, Query Numbers 74 and 75 and the response were in the following terms: "74. i) The original entry level Pan India license fee of Rs. 1506.82 crore (along with interest from the date of payment of such license fee) which was paid for acquiring the licenses, which are quashed by the Hon'ble Supreme Court for no reason attributable to a licensee, should be allowed to be set off against the earnest money required to be paid for participating in the new auction and against the successful bid amount, in the event of a successful bid. In the event there would be any shortfall in the money required to be paid by xxx on successful bid and the licensee fee already paid to you in respect of the quashed 21 UASL, xxx shall obviously pay such additionally. A set off is allowed against the Earnest Money and the payment due in the event of spectrum being won in this auction. The total amount of such set off shall be limited to the total entry fee paid by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nterest, against the auction payments, both for participation and for final payment on successful conclusion. It was clarified that the set-off would be permitted only to the quashed license holders participating in the auction. Such set off would be allowed to the extent of total entry fee paid for all quashed licenses on an aggregate basis without consideration of the expired period of license, only if they succeed in the auction. The set off will be permitted against the Earnest Money Bank Guarantee amount initially and later against the amount payable for auction price, irrespective of the number of Local Service Areas (LSAs) in which the holder of quashed license is successful in the auction and without requiring correlation between LSAs in which licenses were held earlier and the LSAs in which the holder of the quashed licenses is successful." The Union government has submitted before this Court that the set off policy was formulated in order to encourage participation of all telecom operators in the subsequent auction, increasing the possibility of higher price discovery to the benefit of the public exchequer. It has been urged that the set off policy was aimed at the reviv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the Essar group. The Special Judge, CBI acquitted the promoters of the appellant since the prosecution was unable to prove that: (i) officers of DoT considered the representation of the appellant to be false; (ii) the appellant was engaging in a sham transaction; or (iii) the appellant was actually controlled by the Essar group. Hence, the acquittal of the promoters of the appellant of these criminal charges does not efface or obliterate the findings which are contained in the final judgment of this Court in CPIL (supra). Hence, as a beneficiary and confederate of fraud, the appellant cannot be lent the assistance of this Court for obtaining the refund of the Entry Fee. In any event, such a course of action before the TDSAT was clearly in the teeth of the judgment of this Court in CPIL (supra). 61 For the above reasons, we have come to the conclusion that there is no merit in the appeals. The appeals are accordingly dismissed. 62 Pending application(s), if any, stand disposed of. [1] "6 The detail of non-refundable Entry fee, Category of service area, Financial bank guarantee, performance bank guarantee, Net worth and Paid up equity capital required under the Unified Access ..... X X X X Extracts X X X X X X X X Extracts X X X X
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