9911796707
TMI Blog2022 (3) TMI 1629X X X X Extracts X X X X X X X X Extracts X X X X ..... 1454.94 crores representing the Entry Fee (together with interest) paid by it for 2G licences for twenty-one service areas. By the judgment of this Court in Centre for Public Interest Litigation v. Union of India [(2012) 3 SCC 1 ("CPIL")], the 2G licences which were granted by the Union of India, including to the appellant, were quashed. The appellant claims to be entitled to the refund of its Entry Fee on, as it contends, "well settled principles of civil, contractual and constitutional law". 2 The appellant applied for the grant of Unified Access Service Licences ["UASL"] for twenty-one service areas on 3 September 2007. A Letter of Intent was issued. The appellant paid the circle wise Entry Fee of Rs 1.1 crores and furnished a Performance Bank Guarantee and Financial Bank Guarantee for the twenty-one areas. The appellant entered into UASL agreements on 3 March 2008 for the twenty-one service areas with the respondent, which came into 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acquitted of criminal charges by the Special Judge, CBI. The Central Bureau of Investigation has filed a petition for leave to appeal against the order of acquittal, which is presently pending before the Delhi High Court. 5 Aggrieved by the judgment of the TDSAT dated 16 September 2015, the appellant moved this Court in Civil Appeal Nos 1447-1467 of 2016. On 13 May 2016, the appellant sought liberty of this Court to withdraw the civil appeals, and to approach this Court once again if it became so necessary. Leave was accordingly granted by this Court. 6 The appellant then instituted another petition before the TDSAT [Telecom Petition No 63 of 2018 ("Second Telecom Petition")] raising the issue of a refund of the Entry Fee, on the ground that it had been exonerated by the Special Judge, CBI. By its judgment dated 11 December 2018, the TDSAT dismissed the Second Telecom Petition noting that the appellant had made a second attempt for claiming 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d because of an act of a court (actus curiae neminem gravabit); (v) The substratum of TDSAT's decision which disallowed the claim of the appellant in view of the pending criminal proceedings has been wiped off by the acquittal of the appellant by the Special Judge, CBI; (vi) The set off policy of the Union government, in terms of which a set off of the Entry Fee which was paid was granted only to those entities who participated in the fresh round of auction which took place after the judgment of this Court in CPIL (supra), is based on incorrect classification which lacks intelligible differentia and nexus to its object. Further, the set off policy suffers from manifest arbitrariness and is discriminatory. Thus, it should be struck down as being violative of Article 14 of the Constitution; (vii) The set off policy of the Union government allowing the grant of a set off of the Entry Fee, albeit to certain bidders, is an admission of 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 Earn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payable for the spectrum has been permitted to those Telecom Service Providers ["TSPs"] who participated in and won spectrum in the subsequent auction after the judgment of this Court in CPIL (supra); (b) The licences of eight TSPs were quashed by this Court by its judgment in CPIL (supra). There cannot be any distinction or classification in law between the said eight TSPs and similar treatment must be afforded to all. The classification based on their decision to participate in the subsequent auction for refund of Entry Fee is discriminatory and has no nexus with the object sought to be achieved by the set off policy; (c) Out of the eight TSPs, four TSPs participated in the subsequent auction and were permitted a set off of their Entry Fee towards payment for the auction allotted spectrum. Details of the cases where a set off was granted are: Name of Company Year of Auction Amount set off Status in the 2G Judgment M/s Telewings (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 N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d costs of Rs 5 crores upon those licence holders before it who had benefitted at the cost of the public exchequer and had offloaded their stakes for thousands of crores in name of fresh infusion of or transfer of equity. On the other hand, costs of only Rs 50 lakhs were imposed on those licence holders (including the appellant) who had allegedly benefited by the wholly arbitrary and unconstitutional action of the Department of Telecommunication ["DoT"] for the grant of UASLs and the allocation of the 2G spectrum band. Hence, no role was attributed to the appellant for quashing of its licenses; (c) In any event, the appellant has been acquitted of criminal charges on 21 December 2017 by the Special Judge, CBI; (d) Even otherwise, the pendency of criminal proceedings is not an impediment to proceed with civil proceedings; and (e) The respondent has already auctioned spectrum which was allocated earlier to the appellant for Rs 10,400 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 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the appellant or its withdrawal, but due to the policy of the Union government being found to be illegal and arbitrary; and (xiv) The decisions [Union of India v. Association of Unified Telecom Service Providers of India and Ors., (2020) 3 SCC 525; and Union of India v. Association of Unified Telecom Service Providers of India and Ors., Civil Appeal Nos 6328-6399 of 2015] of this Court in the relation to the payment of Adjusted Gross Revenue ["AGR"] have no relevance to the present case. 9 Opposing the submissions which have been urged on behalf of the appellant, Mr. Vikramjit Banerjee, learned Additional Solicitor General, appearing on behalf of the Union of India has urged the following submissions: (i) The Entry Fee paid by the appellant is specifically made non-refundable by the UASL Guidelines which were issued by the DoT on 14 December 2005. Once the Letters of Intent were issued to the appellant for twenty-one service areas, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spirit of the order dated 13 May 2016 of this Court; (v) The decision of the EGoM dated 31 October 2012 granting set off to those bidders who had participated and were found to be successful in the fresh round of auctions was a one-time concession offered to TSPs whose licences were quashed earlier, in order to ensure that telecom services were provided to consumers in an uninterrupted manner. The decision in CPIL (supra) did not bar licensees from participating in the subsequent auction. Since the Entry Fees paid by licensees covered by the judgment in CPIL (supra) could not have been refunded, the EGoM decided to adjust their Entry Fee in the subsequent auction in the event that they were declared successful. It was believed that this would encourage the participation of all TSPs in the subsequent auction and increase the prospects of a higher price discovery, thereby ultimately benefitting the public exchequer. This set off policy 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 cond ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... must be clearly evident. In a Public Interest Litigation petition, it would not be appropriate to apply the principles of constructive res judicata against the respondent (the appellant herein) save in an exceptional case. Elaborating on the above submissions, Mr. Huzefa Ahmadi urged that: (i) The right to claim restitution would arise only after the licences were quashed by this Court and hence, the decision in CPIL (supra) does not operate as constructive res judicata; (ii) The relief sought before this Court in the public interest petition under Article 32 of the Constitution which led to the decision in CPIL (supra) was the setting aside of the auction and damages. This Court did not grant damages per se while it imposed costs on the licensees. Hence, in terms of Section 11 of the Civil Procedure Code 1908, the prayer for damages must be deemed to have been refused; and (iii) The ultimate direction in CPIL (supra) was that its 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Union government did not take any action to cancel the licences of a number of licensees who had failed to fulfil the roll-out obligations and violated the conditions of the licences. 13 While dealing with the grounds of challenge, in the course of the judgment, this Court underscored that natural resources, such as spectrum, are public goods and the doctrine of equality and public trust must guide the State in determining the actual mechanism for their distribution. After analysing the rationale adopted by TRAI for recommending the allocation of the 2G spectrum on the basis of 2001 prices, this Court held: "91. To say the least, the entire approach adopted by TRAI was lopsided and contrary to the decision taken by the Council of Ministers and its recommendations became a handle for the then Minister of Communications and Information Technology and the officers of DoT who virtually gifted away the important national asset at throw-away 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 benefic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ogy wanted to favour some companies at the cost of the public exchequer and for this purpose, he took the following steps: (i) Soon after his appointment as Minister of Communications and Information Technology, he directed that all the applications received for grant of UAS licence should be kept pending till the receipt of the TRAI recommendations. (ii) The recommendations made by TRAI on 28-8-2007 were not placed before the full Telecom Commission which, among others, would have included the Finance Secretary. The notice of the meeting of the Telecom Commission was not given to any of the non-permanent members despite the fact that the recommendations made by TRAI for allocation of spectrum in 2G bands had serious financial implications. This has been established from the pleadings and the records produced before this Court which show that after issuance of licences, 3 applicants transferred their equities for a total sum of Rs 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 D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ided by the Minister of Communications and Information Technology on 2-11-2007 was not made public till 10-1-2008 and the first-come-first served policy, which was being followed since 2003 was changed by him on 7-1-2008 and was incorporated in press release dated 10-1-2008. This enabled some of the applicants, who had access either to the Minister or the officers of DoT to get the demand drafts, bank guarantee, etc. prepared in advance for compliance with conditions of the LoIs, which was the basis for determination of seniority for grant of licences and allocation of spectrum. (viii) The meeting of the full Telecom Commission, which was scheduled to be held on 9-1-2008 to consider issues relating to grant of licences and pricing of spectrum was deliberately postponed on 7-1-2008 so that the Secretary, Finance and Secretaries of three other important Departments may not be able to raise objections against the procedure devised by DoT 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l 2007. (vi) Within four months, 50% of the costs shall be deposited with the Supreme Court Legal Services Committee for being used for providing legal aid to poor and indigent litigants. The remaining 50% costs shall be deposited in the funds created for Resettlement and Welfare Schemes of the Ministry of Defence. (vii) However, it is made clear that the observations made in this judgment shall not, in any manner, affect the pending investigation by CBI, Directorate of Enforcement and other agencies or cause prejudice to those who are facing prosecution in the cases registered by CBI or who may face prosecution on the basis of charge-sheet(s) which may be filed by CBI in future and the Special Judge, CBI shall decide the matter uninfluenced by this judgment. We also make it clear that this judgment shall not prejudice any person in the action which may be taken by other investigating agencies under the Income Tax Act, 1961, the Prevention 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 Firs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ormer their stakes had been offloaded ostensibly in the name of a fresh infusion or transfer of equity. However, it is evident that all these licensees were complicit in the illegal exercise of obtaining favours for themselves by the indulgence of those in power. That, above all, was the foundation of the decision in CPIL (supra) and the justification for quashing licences and the allocation of the 2G spectrum. This Court then directed the TRAI to frame fresh recommendations for the grant of licences and for the allocation of spectrum in the 2G band in twenty-two service areas by auction, as was done for the allocation of spectrum in the 3G band. Thus, the decision in CPIL (supra) leaves no manner of doubt that the appellant was in pari delicto along with the Union government. D The claim for refund of Entry Fee 21 The nature of the Entry Fee has to be understood from the UASL Guidelines which were issued by the DoT on 14 December 2005. 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 ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the process followed by the Union government were arbitrary, and unjustified benefits had been granted to the licensees. Thus, the TDSAT held that, strictly speaking, the contractual term stipulating that the Entry Fee was nonrefundable would not by and in itself preclude the claim for refund on the basis of the judgment of this Court in CPIL (supra), which held that the entire process leading up to the award of the licences was arbitrary and constitutional. The TDSAT having entered the above finding, for the rest of the discussion, this judgment will also proceed on that premise. E Jurisdiction of TDSAT 25 The appellant has objected to TDSAT's conclusion that the appellant's remedy does not fall in the contractual realm between itself and the Union of India. Since the public law remedy of restitution was neither claimed before nor granted by this Court in CPIL (supra), the TDSAT went into the genesis of the dispute and consequential 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ators Association of India v. Union of India [(2003) 3 SCC 186] by a three-judge Bench of this Court. The Court held that the powers envisaged by the TRAI Act for the TDSAT are wide and it would not be appropriate for this Court to impose limitations on them. Chief Justice G B Pattanaik noted: "8...Chapter IV containing Section 14 was inserted by an amendment of the year 2002 and the very Statement of Objects and Reasons would indicate that to increase the investors' confidence and to create a level playing field between the public and the private operators, suitable amendment in the Telecom Regulatory Authority of India Act, 1997 was brought about and under the amendment, a tribunal was constituted called the Telecom Disputes Settlement and Appellate Tribunal for adjudicating the disputes between a licensor and a licensee, between two or more service providers, between a service provider and a group of consumers and also to hear 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... correctness of a direction/order or decision of the authority in terms of sub-section (2) of Section 14 as also the dispute made in an application under subsection (1) thereof. The approach of the learned TDSAT, being on the premise that its jurisdiction is limited or akin to the power of judicial review is, therefore, wholly unsustainable. The extent of jurisdiction of a court or a tribunal depends upon the relevant statute. TDSAT is a creature of a statute. Its jurisdiction is also conferred by a statute. The purpose of creation of TDSAT has expressly been stated by Parliament in the amending Act of 2000. TDSAT, thus, failed to take into consideration the amplitude of its jurisdiction and thus misdirected itself in law... [...] 29. If a jurisdictional question or the extent thereof is disputed before a tribunal, the tribunal must necessarily decide it unless the statute provides otherwise. (See Judicial Review of Administrative 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 recommendat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "19...In other words, a dispute commencing with the acceptance of a tender leading to the possible issue of a licence and disputes arising out of the grant of licence even after the period has expired would all come within the purview of Section 14(a) of the Act. To put it differently, Section 14 takes within its sweep disputes following the issue of a letter of intent, pre-grant of actual licence as also disputes arising out of a licence granted between a quondam licensee and the licensor." The Court observed that though the bid submitted by the respondent had been accepted by the Union of India and a letter of intent was issued, the contract ultimately did not come into existence since the respondent was insisting on certain modifications and the licence was not actually granted. The Court held: "22. We have already indicated that a specialised tribunal has been constituted for the purpose of dealing with specialised matters and 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 l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctrum was held to be vitiated and the licences were quashed. The TDSAT has accepted this line of submission of the appellant and held that the UASL condition in regard to the non-refundability of the one-time Entry Fee would not per se stand attracted where the licence was not terminated for a breach but was quashed by this Court by the exercise of its jurisdiction under Article 32 for the reason that the entire process was found to be vitiated and manifestly arbitrary. The basis of the claim which has been raised by the appellant for refund is not a dispute over the terms which govern the relationship between the parties following the issuance of a Letter of Intent but before the grant of an actual licence, or a dispute arising out of a licence granted between the licensor or a licensee. As a matter of fact, it is also important to note that the appellant, as will be analyzed in greater detail later, has placed reliance on the doctrine 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry No. 18447 of 2020 (9 July 2021)] had disapproved of such tactics. In that case, the Court dismissed a review petition against the decision in Goa Foundation v. Sesa Sterlite Limited & Ors. [(2018) 4 SCC 218] which had analysed a party's attempt to pursue litigation before the High Court in spite of a conclusive decision of this Court which had quashed its mining leases and directed issuances of fresh leases with fresh environmental clearances in the State of Goa. In T P Moideen Koya v. Government of Kerala [(2004) 8 SCC 106], a three-judge Bench of this Court disapproved of the practice of vexatious litigation when the effect of a binding judgement is sought to be diluted or altered in a manner that deviates from the procedure for modification. The Court noted: "13. It is well settled that a decision pronounced by a court of competent jurisdiction is binding between the parties unless it is modified or reversed by adopting a 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll financial conspectus which led to the award of licences. The adjudication before this Court in CPIL (supra) must be construed as a one composite whole from which its parts cannot be separated. 35 The appellant has argued that if the TDSAT's conclusion on the jurisdiction were to be accepted, it would impinge on the expanse of its jurisdiction and will exclude certain disputes falling within the ambit of public law. However, this argument is not a correct reading of the conclusion that TDSAT has arrived at. De hors the decision in CPIL (supra), the appellant's dispute over the terms of the license with the Union of India (licensor) would fall within the jurisdiction of the TDSAT under Section 14(a)(i), as affirmed by this Court in Tata Teleservices (supra). The respondent's argument that the appellant is no longer a "licensor" after the quashing of the licenses would be a restrictive reading of the jurisdiction of the TDSAT in view 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Telecom Service Providers of India, Civil Appeal No. 84 of 2007 decided on 19-1-2007 (SC)] that while dismissing the appeal, the Court has given liberty to the appellant, namely, Union of India, to urge the contentions raised in Civil Appeal No. 84 of 2007. 34...Thus, as per the express language of 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)] of this Court in Civil Appeal No. 84 of 2007, the Union of India could raise each of the grounds extracted above before the Tribunal. Hence, even if we hold that the order dated 7-7-2006 of the Tribunal got merged with 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)] of this Court passed in Civil Appeal No. 84 of 2007, by the express liberty granted by this 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 un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by filing the Second Telecom Petition. The TDSAT noted that the petition was a "second attempt" by the Appellant "for claiming the same relief" which had been sought under the impugned order of the TDSAT. Thus, when the appellant failed in seeking relief on 11 December 2018, it filed an appeal against the order of TDSAT and then moved this Court for restoration of the first set of appeals which was allowed on 7 January 2020. The course of action which has been adopted by the appellant is anything but fair - withdrawing the civil appeals which were instituted against the first order of the TDSAT without obtaining specific liberty or permission to move the TDSAT, instituting a second round of litigation before the TDSAT, and then obtaining a revival of the first set of civil appeals. A party must not be allowed to conduct litigation in this manner. Such a course of action is subject to grave abuse since it lays bare an effort at forum-shopping 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 decisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er the contract is made, becomes impossible, or, by reason of some event which the promisor could not prevent, unlawful, becomes void when the act becomes impossible or unlawful. Compensation for loss through non-performance of act known to be impossible or unlawful.-Where one person has promised to do something which he knew, or, with reasonable diligence, might have known, and which the promisee did not know, to be impossible or unlawful, such promisor must make compensation to such promisee for any loss which such promisee sustains through the nonperformance of the promise." 42 The doctrine of frustration is elucidated in the three-judge Bench decision of this Court in Satyabrata Ghose v. Mugneeram Bangur & Co. [1954 SCR 310]. Justice BK Mukherjee, while explaining the doctrine of frustration, observed: "10. Although various theories have been propounded by the Judges and jurists in England regarding the juridical basis of the 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, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve) and hence, the voidness which attaches to its UASLs would relate back to their very inception. It is on this basis that the appellant stakes its claim for a refund of the Entry Fee based on the principle of restitution. 45 Section 65 of the Indian Contract Act recognizes the principle of restitution, particularly when a contract is discovered to be or becomes void. It stipulates thus: "65. Obligation of person who has received advantage under void agreement, or contract that becomes void.- When an agreement is discovered to be void, or when a contract becomes void, any person who has received any advantage under such agreement or contract is bound to restore it, or to make compensation for it, to the person from whom he received it." 46 In Pollock & Mulla's seminal treatise on the Indian Contract Act[8], it has been noted that Section 65 does not operate in derogation of the maxim in pari delicto potior est conditio possidentis: "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 secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is more responsible for the illegality or the parties are considered to be equally responsible, the in pari delicto principle applies and restitution will be denied." (emphasis supplied) Thus, when the party claiming restitution is equally or more responsible for the illegality of a contract, they are considered in pari delicto. 48 In the decision of the UK Supreme Court in Patel v. Mirza [[2016] 3 WLR 399], Lord Sumption JSC has succinctly explained the nature of the inquiry to determine whether a party is in pari delicto: "241 To the principle that a person may not rely on his own illegal act in support of his claim, there are significant exceptions, which are as old as the principle itself and generally inherent in it. These are broadly summed up in the proposition that the illegality principle is available only where the parties were in pari delicto in relation to the illegal act. This principle must not be misunderstood. It 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h are ab initio void including agreements based on unlawful consideration, it follows that the person who has paid money or transferred property to another for an illegal purpose can recover it back from the transferee under this section even if the illegal purpose is carried into execution and both the transferor and transferee are in pari delicto. The Bench then proceeded to observe: "In our opinion, the view of the learned authors is neither supported by any of the subsequent Privy Council decisions nor is it consistent with the natural meaning to be given to the provisions of Section 65. The section by using the words "when an agreement is discovered to be void" means nothing more nor less than: when the plaintiff comes to know or finds out that the agreement is void. The word "discovery" would imply the pre-existence of something which is subsequently found out and it may be observed that Section 66, Hyderabad Contract Act makes 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 discover ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "it [the Full Bench of the Hyderabad High Court] has rightly pointed out that if both the transferor and transferee are in pari delicto the courts do not assist them". 50 In an earlier decision of this Court in Inmani Appa Rao v. Gollapalli Ramalingamurthi [(1962) 3 SCR 739 ("Inmani Appa Rao")], a three-judge Bench held that where both the parties before the Court are confederates in the fraud, the Court must lean in favour of the approach which would be less injurious to public interest. Justice P B Gajendragadkar (as he then was), speaking for the Court, held: "12. Reported decisions bearing on this question show that consideration of this problem often gives rise to what may be described as a battle of legal maxims. The appellants emphasised that the doctrine which is pre-eminently applicable to the present case is ex dolo malo non oritur actio or ex turpi causa non oritur actio. In other words, they contended that the right of action 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 la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 SCR 739 : AIR 1962 SC 370]. At the cost of repetition, both the parties are common participator in the illegality. In such a situation, the balance of justice would tilt in whose favour is the question. As held in Immani Appa Rao [Immani Appa Rao v. Gollapalli Ramalingamurthi, (1962) 3 SCR 739 : AIR 1962 SC 370], if the decree is granted in favour of the plaintiff on the basis of an illegal agreement which is hit by a statute, it will be rendering an active assistance of the court in enforcing an agreement which is contrary to law. As against this, if the balance is tilted towards the defendants, no doubt that they would stand benefited even in spite of their predecessor-in-title committing an illegality. However, what the court would be doing is only rendering an assistance which is purely of a passive character. As held by Gajendragadkar, J. in Immani Appa Rao [Immani Appa Rao v. Gollapalli Ramalingamurthi, (1962) 3 SCR 739 : AIR 1962 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t rejected but was held in abeyance and it would be considered on a first-come-first serve basis in terms of the then prevailing policy in consultation with the TRAI. This Court disposed of the appeal while sustaining the findings recorded by the Delhi High Court in regard to the change in the cut-off dates. For the purpose of the present discussion, it would not be necessary to advert to the detailed analysis in the above case, save and except to note that the petitioner moved the TDSAT claiming a refund of the amount which it had paid for the 3G spectrum in three service areas. Significantly in that case, the TDSAT observed: "In course of hearing of the case we repeatedly asked Mr. Banerjee what blame, if any, for the quashing of its licences extends to the petitioner. Mr. Banerjee was unable to show anything from the Supreme Court judgment in Centre for Public Interest Litigation or from the Government records that might show that 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 illegali ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cision of this Court in CPIL (supra). That being the position, the appellant would not be entitled to a refund of the Entry Fee even on the principle of restitution embodied in Section 65 of the Indian Contract Act. G The policy of set off 56 According to the appellant, the set off which was granted by the Union government in pursuance of the decision of the EGoM on 31 October 2012, constitutes an admission of liability. In this backdrop, it has been submitted that the policy which was adopted by the Union government by allowing a set off to licensees whose licences have been quashed subject to their participating in and being found successful in the fresh auction, suffers from manifest arbitrariness. 57 By the judgment of this Court in the CPIL (supra), the licensees whose licences had been quashed were not barred from participating in the subsequent auction for the grant of fresh licences. On 12 October 2012, the Ministry of Communications 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 Numbe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ." (emphasis supplied) 58 On 31 October 2012, the Cabinet Secretariat of the Union government circulated the Minutes of the Meeting of the EGoM held on 18 October 2012. The Minutes contain the rationale for the adoption of a policy of set off in the following terms: "13. The EGoM considered the letter dated 12.10.2012 from the Minister of Information & Broadcasting regarding set-off of entry fee against 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 the 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-rata amount for the balance period. Therefore, the EGoM decided to allow such TSPs to adjust an amount equivalent to their full entry fee, without any interest, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he public exchequer. The contention of the appellant that it was exculpated from any wrong doing by the judgment of this Court in CPIL (supra) is patently erroneous. The process leading up to the award of the UASLs and the allocation of the 2G spectrum was found to be arbitrary 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... od will be taken as period spent."
[5] Available at X X X X Extracts X X X X X X X X Extracts X X X X
|
