CELLULAR OPERATORS ASSOCIATION OF INDIA & Ors. v. TELECOM REGULATORY AUTHORITY OF INDIA & Ors.

Judgment

9 S.C.R. 1 CELLULAR OPERATORS ASSOCIATION OF INDIA AND OTHERS v. TELECOM REGULATORY AUTHORITY OF INDIA AND OTHERS (Civil Appeal No. 5017of2016) MAYll,2016 [KURIAN JOSEPH AND R. F. NARIMAN, JJ,) Telecom Consumers Protection (Ninth Amendment) Regulations, 2015 - Validity of - As per the amendment of the Regulations every originating cellular mobile telephone service provider was made liable to credit the calling consumer with one rupee for each call drop, upto a maximum three call drops per day - Validity of the amendment challenged - High Court upheld its validity - On appeal, held: The amending Regulation is ultra vires the Telecom Regulatory Authority of India Act, 1997 as it does not carry out the purpose of the Act - It is violative of the fundamental rights of the service providers as provided in Art. 14 and 19(1)(g) of the Constitution - The Regulation is also liable to be struck down on the ground that it amounts to interference with the licence conditions of the service providers without authority of law and also because it completely avoids the adjudicatory process - Telecom Regulatory Authority of India Act, 1997 - Constitution of India - Arts. 14 and 19(l)(g) - Quality of Service Regulations, 2009. Constitution of India: Arts. 14, 19(1)(g) and 19(6) - Constitutional validity of Telecom Consumers Protection (Ninth Amendment) Regulations, 2015 - Held: In order to pass Constitutional muster u/Art.14, the Regulation should not be manifestly arbitrary - So far as Art.19(1)(g) is concerned, u!Art. 19(6), the State has to conform to two separate and independent tests i.e. test of 'reasonable restriction' and test of 'public interest' - The test of reasonable restriction is distinct from the test of the law being in general public interest - In the present casij though the Regulation might have been brought in the interest ojgeneral public, it is manifestly arbitrary and therefore violative of Art. 14 and is an unreasonable restriction on the fundamentr:Jl right of the service providers granted u/Art. l 9(1)(g) I A B c D E F G H 2 SUPREME COURT REPORTS [2016] 9 S.C.R. A and the same has been framed without intelligent care and deliberation. B c D Arts.19(l)(g) and 19(6) - A proper balance between the freedoms guaranteed u/Art. 19(1)(g) and the control permitted u/Art. 19(6) must be struck in all cases before the impugned law can be said to be a reasonable restriction in the public interest. Legislation: Validity of legislation - Held: A statute which is otherwise invalid as being unreasonable, cannot be saved or held valid by its being administered in a reasonable manner. Subordinate Legislation - Validity of - Held: A Regulation must be consistent with both letter as well as purpose of the parent Act - A Regulation contrary to the purpose of parent Act could be ultra vires the Act and hence invalid. Subordinate Legislation - Constitutionality of - Grounds for challenging - Held: Subordinate legislation can be challenged on any of the grounds available for challenge against plenary legislation. Subordinate Legislation - Requirement of transparency in - E Suggestion of the Court to Parliament to frame legislation by which all subordinate legislation is subject to transparent process - The transparency will not only reduce arbitrariness in subordinate legislation making, but would also conduce to openness in governance. F Interpretation of Statutes: Doctrine of reading down - Applicability of - The doctrine would apply only when general words used in a statute or regulation can oe confined in a particular manner so as not to infringe a constitutional right. G Reading down of a provision - Addition of something by the court to the provision which does not exist, would amount to legislations by court. Natural Justice - Ordinarily legislative functions do not require that natural justice be followed - Natural justice need not H be followed, except where the statute so provides. CELLULAR OPERATORS ASSN. OF INDIA v. TELECOM REGULATORY AUTHROITY OF INDIA Words and Phrases: 'Transparency' - Meaning of, in the context of Telecom Regulatory Authority of India Act, 1997. Allowing the appeals, the Court HELD: 1.1 The power to make the Impugned Regulation i.e. Telecom Consumers Protection (Ninth Amendment) Regulations, 2015 is traceable to Section 36(1) of the Telecom Regulatory Authority of India Act, 1997. Though the Regulation making power under the said Act is wide and pervasive, and is not trammeled by the provisions of Section 11, 12(4) and 13, it is a power that is non-delegable and, therefore, legislative in nature. The exercise of this power is hedged in with the condition that it must be exercised consistently with the Act and the Rules thereunder in order to carry out the p urposes of the Act. Since the regulation making power has first to be consistent with the Act, it is necessary that it not be inconsistent with Section 11 of the Act, and in particular Section ll(l)(b) thereof. This is for the reason that the functions of the Authority are laid down by this Section, and that the Impugned Regulation itself refers to Section ll(l)(b)(i) and (v) as the source of power under which the impugned Regulation has been framed. [Paras 22, 23] (33-E; 34- H; 35-A-C] . BSNL v. Telecom Regulatory Authority of India 2013 (12) SCR 999: (2014) 3 SCC 222 - relied on.

1.2 The Impugned Regulation is not referable to Section ll(l)(b)(i) and (v) of the Act inasmuch as it has not been made to ensure compliance of the terms and conditions of the licence nor has it been made to lay down any standard of quality of service that needs compliance. This being the case, the Impugned Regulation is tie lwrs Section 11 but cannot ,be said to ·be inconsistent with Section 11 of the Act. [Para 24] [36-H; 37-A"B]

1.3 Under Section 36, not only does the Authority have to make regulations consistent with t!te Act and the Rules made thereunder, but .it also has.to carry out the purposes of the Act, as can be discerned from the Preamble to the Act. If, far from carrying out the purposes of the Act, a Regulation is made contrary 3 A B c D E F G H 4 A B c SUPREME COURT REPORTS [2016] 9 S.C.R. to such purposes, such Regulation cannot be said to be consistent with the Act, for it must be consistent with both the letter of the Act and the purposes for which the Act has been enacted. In attempting to protect the interest of the consumer of the telecom sector at the cost of the interest of a service provider who complies with the leeway of an average of 2% of call drops per month given to it by another Regulation, framed under Section ll(l)(b)(v), the balance that is sought to be achieved by the Act for the orderly growth of the telecom sector has been violated. Therefore, the impugned Regulation does not carry out the purpose of the Act and must be held to be ultra vires the Act on this score. [Para 24) [37-D-F) State of Tamil Nadu v. P. Krishnamoorthy 2006 (3) SCR 396 : (2006) 4 sec 517 - relied on. 2.1 One of the tests for challenging the constitutionality of subordinate legislation is that subordinate legislation should not D be manifestly arbitrary. Also, it is settled law that subordinate legislation can be challenged on any of the grounds available for challenge against plenary legislation. [Para 25] [37-G] E Indian Express Newspapers v. ·Union of India 1985 (2) SCR 287 : (1985) 1 SCC 641; Khoday Distilleries Ltd. v. State of Karnataka 1995 (6) Suppl. SCR 759 : (1996) 10 SCC 304; Sharma Transport v. Government of Andhra Pradesh 2001 (5) Suppl. SCR 390 : (2002) 2 sec 188 - relied on. 2.2 Thus, under Article 19(6) of the Constitution, the State F has to conform to two separate and independent tests if it is to pass constitutional muster - the restriction on the appellants' fundamental right must first be a reasonable restriction, and secondly, it should also be in the interest of the general public. The test of reasonable restriction is. however, a test separate and distinct from the test of the law being in the interest of the G general public. [Paras 29, 31) [39-F; 40-D-E] Rustom Cavasjee Cooper (Banks Nationalisation) v. Union of India 1970 (3) SCR 530 : (1970) 1 SCC 248 - followed. Chi11taman Rao v. State of Madhya Pradesh 1950 SCR 759 - relied on. H CELLULAR OPERATORS ASSN. OF INDIA v. TELECOM REGULATORY AUTHROITY OF INDIA

2.3 Though TRAI may have brought in the impugned Regulation in the interest of general 1mblic, yet it is important to note that, apart from the common good in the form of consumer interest, the Regulation must also pass a separate and independent test of not being manifestly arbitrary or unreasonable. When viewed from the angle of manifest arbitrariness or reasonable restriction, sounding in Article 14 and Article 19(1)(g) respectively, the Regulation must, in order to pass constitutional muster, be as a result of intelligent care and deliberation, that is, the choice of a course which reason dictates. Any arbitrary invasion of a fundamental right cannot be said to contain this quality. A proper balance between the freedoms guaranteed and the control permitted under Artieie 19(6) must be struck in all cases before the. impugned law can be said to be a reasonable restriction in the public interest. [Para 31) [40-E-H)_ Delhi Science Forum v. Union of India 1996 (2) SCR 767 : (1996) 2 sec 405 - referred to. 2.4 According to TRAI, the cause _for caH drops is twofold - one owing to the fault of the consumer, and the other owing to the fault of the service provider. The technical paper dated 13.11.2015 shows that an average of 36.9% can be call drops owing to the fault of the consumer. If this is so, the Impugned Regulation's very basis is destroyed: the Regulation is based on the fact that the service provider is 100% at fault. This becomes clear from a reading of the text of the said Regulation together with the Explanatory Memorandum. This being the case, it is clear that the service provider is made to pay for call drops that may not be attributable to his fault, and the consumer receives compensation for a call drop that may be attributable to the fault of the consumer himself, and that makes the Impugned Regulation a regulation framed without intelligent care and deliberation. [Para 32) [41-B-D)

2.5 The impugned Regulation cannot be read down to mean that it would apply only when the fault is that of the service provider. The doctrine of reading down would apply only when general words used in a statute or regulation can be confined in a particular manner so as not to infringe a constitutional right. The language of the impugned Regulation is definite and 5 A B c D E F G H 6 A B c D E F G H SUPREME COURT REPORTS [2016] 9 S.C.R. unambiguous - every service provider has to credit the account of the calling consumer by one rupee for every single call drop which occurs within its network. The Explanatory Memorandum to the aforesaid Regulation further makes it clear, in paragraph 19 thereof, that the Authority has come to the conclusion that call drops are instances of deficiency in service delivery on the part of the service provider. It is thus unambiguously clear that the impugned Regulation is based on the fact that the service provider is alone at fault and must pay for that fault. In these circumstances, to read a proviso into the Regulation that it will not apply to consumers who are at fault themselves is not to restrict general words to a particular meaning, but to add something to the provision which does not exist, which would be nothing short of the court itself legislating. [Paras 33, 35) (41-E; 43-C-E] In Re: Hindu Womens Rights. to Property Act, 1937 AIR 1941 FC 72 - relied on. Delhi Transport Corpn. v. D.T.C. Mazdoor Congress 1990 (1) Suppl. SCR 142 : 1991 Supp (1) sec 600 - followed.

2.6 The plea that the impugned Regulation would be worked in such a manner that the service provider would be liable to pay only when it is found that it is at fault, again falls foul of constitutional doctrine. A statute which is otherwise invalid as being unreasonable cannot be saved by its being administered in a reasonable manner. [Para 36) (43-F-H] Collector of Customs v. Nathe/la Sampathu Chetty (1962) 3 SCR 786 - relied on.

2.7 The impugned Regulation does not accord with the Statement of Objects and Reasons of the TRAI Act, 1997. The policy of the 1997 Act, as amended by the 2000 Act, is to protect the interests of service providers and consumers of the telecom sector together, so that the orderly growth of the telecom sector is ensured thereby. The orderly growth of the telecom sector cannot be ensured or promoted by a manifestly arbitrary or unreasonable regulation which makes a service provider pay a penalty without it being necessarily at fault. The motive for the impugned Regulation may well be to compensate the small CELLULAR OPERATORS ASSN. OF INDIA v. TELECOM REGULATORY AUTHROITY OF INDIA consumers, but that does not make it immune from Article 14 and the twin tests of Article 19(6). The Authority framing the Regulation must ensure that its means are as pure as its ends - only then will regulations made by it pass constitutional muster. [Paras 38, 39] [44-D-E, F-G]

2.8 Profits or losses of the service providers cannot be relevant for determining whether the Impugned Regulation is otherwise arbitrary or unreasonable. It is always open to the Authority, with the vast powers given to it under the TRAI Act, to ensure, in a reasonable and non-arbitrary manner, that service providers provide the necessary funds for infrastructure development and deal with them so as to protect the interest of the consumer. [Para 40 ] [45-B, D-E] 7 A B c

2.9 It cannot be said that the appellants have approached the Court in haste. If the appellants had not gone to court when they did, the Regulation would have affected their fundamental · rights on and from 1.1.2016. Further, they would have been denied D interim and/or other relief on the ground that they have not moved the Court without undue delay. [Para 42] [46-D-E] Prag Ice & Oil Mills v. Union of India 1978 (3) SCR 293 : (1978) 3 sec 459 - distinguished. 2.10 To say that the Impugned Regulation is only an experimental measure that would last in its present form for six months is again incorrect. It is only the Explanatory Memorandum which says that the Authority may review the aforesaid Regulation after working of the said Regulation after six months, and that too only if found to be necessary. Obviously, this would not mean that the aforesaid Regulation would necessarily be reviewed at all, even after six months. [Para 42] [46-E-G]

2.11 The Quality of Service Regulations and the Consumer Regulations must be read together as part of a single scheme in order to test the reasonableness thereof. The countervailing advantage to service providers by way of the allowance of 2% average call drops per month, which has been granted under the 2009 Quality of Service Regulations, could not have been ignored by the Impugned Regulation so as to affect the fundamental rights of the appellants, and having been so ignored, would render the E F G H 8 SUPREME COURT REPORTS [2016] 9 S.C.R. A Impugned Regulation manifestly arbitrary and unreasonable. [Para 45) [48-B-C] The Lord Krishna Sugar Mills Ltd. and Anr. ll Union of India and Anr. (1960) 1 SCR 39 - relied on. B c

2.12 The 2009 Quality of Service Regulation is made under Section ll(l)(b)(v), which is the very Section which is claimed to be the source of the impugned Regulation. Both the regulations deal with the same subject matter - namely, call drops, and both regulations are made in the interest of the consumer. If an average of 2% per month is allowable to every service provider for call drops, and it is the admitted position that all service providers before the Court, short of Aircel, and that too in a very small way, have complied with the standard, penalizing a service provider who complies with another Regulation framed with reference to the same source of power would itself be manifestly arbitrary and would render the Regulation to be at odds with both Articles 14 D and 19(l)(g). [Para 43] [47-D-E]

2.13 A strict penal liability laid down on the erroneous basis that the fault is entirely with the service provider is manifestly arbitrary and unreasonable. Also, the payment of such penalty to a consumer who may himself be at fault, and which gives an unjustifiable windfall to such consumer, is also manifestly arbitrary and unreasonable. [Para 46) [48-D-E] Shree Bhagwati Steel Rolling Mills v. Commissioner of Central Excise (2016) 3 SCC 643 - relied on.

2.14 The reason given in the Explanatory Memorandum for compensating the consumer is that the compensation given is only notional. The very notion that only notional compensation is awarded, is also entirely without basis. A consumer may well suffer a call drop after 3 or 4 seconds in a voice call. Whereas the consumer is charged only 4 or 5 paise for such dropped call, the service provider has to pay a sum of rupee one to the said consumer. This cannot be called notional at all. It is also not clear as to why the Authority decided to limit compensation to three call drops per day or how it arrived at the figure of Re.1 to compensate inconvenience caused to the consumer. It is equally unclear as to why the calling party alone is provided compensation E F G H CELLULAR OPERATORS ASSN. OF INDIA v. TELECOM REGULATORY AUTHROITY OF INDIA because, according to the Explanatory Memorandum, inconvenience is suffered due to the interruption of a call, and such inconvenience is suffered both by the calling party and the person who receives the call. The receiving party can legitimately claim that his inconvenience when a call drops, is as great as that of the calling party. And the receiving party may need to make the second call, in which case he receives nothing, and the calling party receives Re.1 fo1· the additional expense made by the receiving party. All this betrays a complete lack of intelligent care and deliberaHon in framing such a regulation by the Authority, rendering the impugned Regulation manifestly arbitrary and [49-E-H; 50-A) unreasonable. [Para 49) DSC-Viacon Ventures Pvt. Ltd. (Now Known as DSC Ventures Pvt. Ltd) v. Lal Manohar Pandey and Ors. 2015 (10) SCALE 249 - distinguished.

2.15 The technical paper issued by the same Authority on 13.11.2015 i.e. a few days after the impugned Regulation, the Authority has its~lf recognised that 36.9% of call drops take place because of the fault at the consumer's end. Instead of having a relook at the problem in.the light of the said technical paper, the Authority has g,.one ahead with the impugned Regulation. The very basis of this statement contained in the Explanatory Memorandum to the impugned Regulation is found by the self same Authority to be incorrect only a few days after publishing the impugned Regulation. This itself shows the manifest arbitrariness on the part of the TRAI, which has not bothered to have a relook into the said problem. [Para 52) [50-F-H]

2.16 Thus, the impugned Regulation is manifestly arbitrary and therefore violative of Article 14, and is an unreasonable restriction on the right of the appellants' fundamental right under Article 19(1)(g}"to carry on business, and is therefore, struck down as such. [l'ara 52) (50-H; 51-A)

2.17 The impugned Regulation completely avoids the adjudicatory p_1·ocess, and legislatively lays down a penal consequence to a service provider for a call drop taking place without the consumer being able to prove that he is not himself responsible for such call drop and without proof of any actual monetary loss. Whereas individual consumers, either before the 9 A B c D E F G H SUPREME COURT REPORTS [2016] 9 S.C.R. Consumer Forum, or in a dispute as a group with service providers before the TRAI, would fail in an action to recover compensation for call drops, yet a statutory penalty is laid down, applicable legislatively, and without any adjudication. This again makes the impugned Regulation manifestly arbitrary and unreasonable. [Para 53] [51-C-D]

2.18 When compensation is to be paid to a person who is affected by breach of a standard of quality required under the Act, such compensation can only be for actual loss suffered, and only as a result of fault of the service provider being established before a quasi judicial Tribunal. This may be notwithstanding the fact that the service provider otherwise meets the average of 2% call drops per month allowed to him by the 2009 Quality of Service Regulation. This is for the reason -that once fault and actual loss suffered are established before a quasi judicial Tribunal, it would not be open to plead, on the facts of an -individual case, that an overall standard of performance has been met. For this reason also, a legislatively pre determined penalty, without fault or loss being established by evidence before a quasi judicial authority, and where the cause of a call drop may be because of the consumer himself, renders the impugned Regulation manifestly arbitrary and unreasonable. (Para 56) [52-F-H) F

#3. The licence conditions, which are a contract between the service providers and consumers, have been amended to the former's disadvantage by making the service provider pay a penalty for call drops despite there being no fault which can be traceable exclusively to the service provider, despite the service provider maintaining the necessary standard of quality required of it - namely, adhering to the limit of an average of 2% of call drops per month. Condition 28 of the licence requires the licensee to ensure that the quality of service standards, as prescribed by TRAI, are adhered to, and that the Impugned G Regulation docs not lay down quality of service standards. This being so, it is clear that the laying down of a penalty de lrors condition 28, which also requires establishing of fault of the service provider when it docs not conform to a quality of service standard laid down by TRAI, would amount to interference with the licence conditions of the service providers without authority of law. On 10 A B c D E H CELLULAR OPERATORS ASSN. OF INDIA v. TELECOM REGULATORY AUTHROITY OF INDIA 11 this ground also, therefore, the Impugned Regulation deserves A to be struck down. [Para 62) [54-F-H; 55-A-B) Union of India v. Assn. of Unified Telecom Service Providers of India 2011 (14) SCR 657 : (2011)10 SCC 543 - relied on.

4.1 Section 11(4) of the TRAI Act requires that the Authority shall ensure transparency while exercising its powers and discharging its functions. "Transparency" has not been defined anywhere in the Act. However, the definition of "transparency" as provided in s. 13(4) of the Airports Economic Regulatory Authority of India Act, 2008 provides a good working test of 'transparency' referred to in Section 11(4) of the TRAI Act. [Paras 63, 64] [55-B-C, F-G]

4.2 No doubt in the facts of the present case, the Authority did hold due consultations with all stakeholders and did allow all stakeholders to make their submissions to the Authority. However, no discussion or reasoning dealing with the arguments put forward by the service providers, that call drops take place for a variety of reasons, some of which arc beyond the control of the service provider and are because of the consumer himself. Consequently, the conclusion that scrv'ice providers are alone to blame and arc consequently deficient in service when it comes to call drops is not a conclusion which a reasonable person can reasonably arrive at. Ordinarily legislative functions do not require that natural justice be followed. However, it has been recognised in some of the judgments dealing with this aspect that natural justice need not be followed except where the statute so provides. [Para 66) [56-B-D]