Govt sweeps its muck at SC’s doorstep

The Presidential Reference in the matter of the 2G Supreme Court
judgment, cancelling 123 licenses, after being opposed by the Deputy
Chairman of the Planning Commission, Montek Singh Ahluwalia was
finally cleared by the Cabinet and then filed before the Supreme
Court. A reading of the Presidential Reference shows that it is
nothing but an angry expression from the government that has been
besieged with bad publicity after all its defence starting in 2008
about the 2G scam being a policy decision in the interest of the
common man fell flat on its face with the 2G judgment.

Further, the government’s defence such as the ‘zero loss’ theory
floated by Telecom Minister Kapil Sibal was taken apart when the
judgment cancelling the licenses clearly upheld the fact that spectrum
was indeed a scarce resource, and further, that the beneficiary
companies had offloaded their stakes for a huge profit.

Throughout 2010 and 2011, government spokespersons such as Manish
Tewari, Jayanti Natarajan (now Minister of Environment), and later,
Salman Khurshid made valiant attempts to defend A. Raja by taking a
stance that no wrongdoing had occurred on his account. This too was
trashed as the Supreme Court held that Raja and officials of the DoT
had acted in an unconstitutional and capricious manner and further,
that their action was against public interest as well as the
principles of equity.

With nowhere to hide, and threats of bilateral and international
litigation pending at their doorstep from companies such as Telenor,
Sistema, and possibly Etisalat and Bahrain Telecom, the government has
decided to sweep its garbage in front of the Supreme Court’s door.

The Reference, which seems to be lazily and unthoughtfully worded,
makes assertions which could not have been further from the truth. For
example, it makes bizarre claims such as that spectrum was allocated
to eight cellular mobile licenses in 1994 and 34 cellular mobile
licenses in 1995 on a first come, first served (FCFS) basis. This
flies in the face of the fact that the Reference itself claims in the
opening paragraphs that the eight CMTS (cellular mobile telephone
service) licenses in 1994 were selected based on rankings received by
them on a technical criterion and were required to pay a fixed license
fee determined by the government. Similarly, in case of 1995, the
selection was based on an auction across 18 circles for 10 year
licenses. Clearly, there is no occasion for determining the FCFS
allocation of spectrum, leave alone implementing such a disastrous
scheme when only 2 licenses existed in each circle.

In another part of the Reference, a comparison is made between
licenses of the pre-2001 era with the ones awarded in 2001 (17
licenses in the fourth cellular mobile multi-stage bidding and 22
licenses awarded for limited mobility) along the lines that a
one-time, non-refundable entry fee was payable in both cases. This
belies the basic understanding of the telecom sector wherein licenses
awarded in 1995 and 1997 were required to pay annual instalments and
not a one-time, non-refundable fee arising out of the bid that had
been placed. It is only in case of the 2001 licenses that a one-time,
non-refundable entry fee was to be paid.


The Reference also makes a desperate attempt to convince the Court
that spectrum has never been paid for upfront. It hopes to portray
that the Court’s order of February 2, 2012, cancelling 123 licenses on
account of first come, first served (FCFS) is no different from what
was occurring before 2008. In its desperation, the Reference claims
that upfront payment for spectrum has never been made till 2001.
Surely, the authors must then be able to explain why the fourth
cellular mobile operators made the upfront payment of Rs. 1,658
crores, or why is it that on migration from limited mobility to
Unified Access Service Licence, the basic service licensees of 2001
had to pay an additional amount which allowed them to provide full
mobility and acquire CDMA spectrum of a corresponding amount.

The Presidential Reference thrown open a Pandora’s Box. Pandora’s Box
in Greek mythology contained all the evil of the world, although at
the same time, it had one other item – strangely called Hope which was
not released to the world, even as all the evil was. The Reference
puts at stake the entire India investment of Maxis Aircel, which owns
22 licenses across the country. Tatas get hit twice – 17 of their
licenses fall under suspicion since they were awarded between 2001 and
2004, but all of the 19 licenses again need to dodge the legal bullet
since they are beneficiaries of dual technology spectrum in 2008.
Similarly, in case of Reliance, whose licenses are under the legal
scanner now both due to their vintage of 2001 till 2003, and later
because they also received dual technology spectrum.

The companies that are least affected are Vodafone, 12 of whose
licenses are going to require a clean chit from the Supreme Court, and
Bharti, whose 8 licenses out of the 22 are in serious trouble.

This move by the government is expected to plunge the sector into the
kind of uncertainty that it has never seen before.

If, perchance, the Supreme Court decides to hear the matter, the
government will be in no position to defend any of these licenses
since it is the one that has sought the opinion. As a result, it will
be up to the private parties’ lawyers to provide defence against the
Court’s enquiries and legal attacks from those who have initiated the
original PIL. With the government out of the defence ring, the legal
balance could seriously tilt against these companies in the coming
days.


Experts believe that the dual technology licenses are the most
vulnerable if the review occurs since those were not only given by
former Telecom Minister A. Raja, but in fact have already been in the
eye of suspicion. In fact, the Cellular Operators Association of India
(COAI) has filed a petition, questioning the legality of such dual
technology licenses, which is already pending in the Court.


All in all, the situation in the telecom sector could get much worse.
The government inexplicably at one level seeks to protect its rights
to executive decision and policy making but through this Reference has
placed the most fundamental issues at the Supreme Court’s doorstep.
All eyes now towards the President’s Office and the Supreme Court.