REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 5017 OF 2016

(ARISING OUT OF S.L.P. (CIVIL) NO.6521 OF 2016)

CELLULAR OPERATORS ASSOCIATION

OF INDIA AND OTHERS ..APPELLANTS

VERSUS

TELECOM REGULATORY AUTHORITY

OF INDIA AND OTHERS ..RESPONDENTS

WITH

CIVIL APPEAL NO. 5018 OF 2016

(ARISING OUT OF S.L.P. (CIVIL) NO.6522 OF 2016)

JUDGMENT

R.F. Nariman, J.

1. Leave granted.

2. This group of appeals before us is by various

telecom operators who offer telecommunication

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services to the public generally. Various writ

petitions were filed in the Delhi High Court

challenging the validity of the Telecom Consumers

Protection (Ninth Amendment) Regulations, 2015

(hereinafter referred to as the “Impugned

Regulation”), notified on 16.10.2015, (to take effect

from 1.1.2016), by the Telecom Regulatory Authority

of India. The aforesaid amendment was made

purportedly in the exercise of powers conferred by

Section 36 read with Section 11 of the Telecom

Regulatory Authority of India Act, 1997. By the

aforesaid amendment, every originating service

provider who provides cellular mobile telephone

services is made liable to credit only the calling

consumer (and not the receiving consumer) with one

rupee for each call drop (as defined), which takes

place within its network, upto a maximum of three

call drops per day. Further, the service provider is

also to provide details of the amount credited to the

calling consumer within four hours of the occurrence

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 of a call drop either through SMS/USSD message.

In the case of a post paid consumer, such details of

amount credited in the account of the calling

consumer were to be provided in the next bill.

3. A brief background is necessary in order to

appreciate the controversy at hand. Under an Act of

ancient vintage, namely, the Indian Telegraph Act,

1885, the Central Government or the Telegraph

Authority is the licensing authority by which persons

are licenced under Section 4(1) of the said Act for

providing specified public telecommunication

services. Given the fact that it is the Central

Government or the Telegraph Authority who is the

licensor in all these cases, the said licensor enters

into what are described as licence agreements for

the provision of Unified Access Services in the

specified service areas. Various standard terms and

conditions are laid down in these licences, some of

which are described hereinbelow. Vide clause 2.1,

such licences are granted to provide

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telecommunication services, as defined, on a

non-exclusive basis in designated service areas. It is

mandatory that the licensee provides such services

of a good standard, by establishing a state of the art

digital network. Licences are usually given for a

period of 20 years at a time with a 10 year extension

if the licensor so deems expedient. Under clause 5

of the aforesaid licence agreement, the licensor

reserves the right to modify, at any time, the terms

and conditions of license, if in its opinion it is

necessary or expedient so to do in public interest, in

the interest of security of the State, or for the proper

conduct of telegraphs. Under condition 28, which is

of some relevance to determine the question

involved in these appeals, the licensee shall ensure

that the quality of service standards as prescribed

either by the licensor or the Telecom Regulatory

Authority of India shall be adhered to. The licensee

is made responsible for maintaining performance

and quality of service standards and is to keep a

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 record of the number of faults and rectification

reports in respect of a particular service which is to

be produced before the licensor/TRAI as and when

desired. It is also important that the licensee be

responsive to complaints lodged by its subscribers

and rectify the same. Under clause 34, which deals

with roll-out obligations, the licensee is to ensure that

coverage of a district headquarters/town would mean

that at least 90% of the area bounded by municipal

limits should get the required street and in-building

coverage. Interestingly, under clause 35, liquidated

damages are also provided for, in case the licensee

does not commission the service within 15 days of

the expiry of the commissioning date and for certain

other delays relatable to commissioning of service.

4. It may also be noted that right from September,

2005, TRAI has been lamenting the shortage and

consequent distance of mobile towers from each

other and both the Government as well as TRAI

have been writing to the Chief Secretaries of various

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State Governments to grant timely permissions for

establishing telecom towers. In this behalf, we have

been shown guidelines issued by DOT to the Chief

Secretaries dated 1.8.2013. We have also been

shown an amendment to the Quality of Service

Regulations dated 21.8.2014 by which TRAI has

noticed practical difficulties that are faced due to

various reasons by which cable breakdowns and

indoor faults take place, with the Authority requiring

the striking of a balance between the problems faced

by the licensees and the need to ensure quality of

service to customers. We were also shown a letter

from the Ministry of Communications written to Chief

Ministers of all the States to permit installation of

towers on Government buildings. This letter is dated

3.8.2015. Further, there is a constant tussle

between cell phone operators and municipal

authorities, landing cell phone operators in court

against municipal authorities, who seek to restrict the

setting up of cell phone towers, given the

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apprehension that radiation from these towers has a

direct causal link with cancer in human beings. It is

also important to note that by a Quality of Service

Regulation dated 20.3.2009, issued under Section

11 read with Section 36 of the TRAI Act, TRAI has

provided, insofar as cellular mobile phone services

are concerned, for a call drop rate of 2% averaged

over a period of one month. It has also provided for

financial disincentives in case there is a failure to

meet this parameter by enacting a second

amendment to the Quality of Service Regulations

dated 8.11.2012 by which a service provider is liable

to pay, by way of financial disincentive, an amount

not exceeding Rs.50,000/- per parameter that is

contravened as the Authority may by order direct,

and in the case of second or subsequent

contravention, to pay an amount not exceeding

Rs.1,00,000/- per parameter for each such

contravention as the Authority may by order direct.

One day before the Impugned Regulation, i.e., on

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 15.10.2015, this financial disincentive was raised

from Rs.50,000/- to Rs.1,00,000/-, and Rs.1,00,000/-

to Rs.1,50,000/- for the second consecutive

contravention, and Rs.2,00,000/- for each

subsequent consecutive contravention.

5. It is in this background that the impugned Ninth

Amendment to the Telecom Consumers Protection

Regulations of 2015 was made, on 16.10.2015. The

Impugned Regulation reads as under:-

TELECOM CONSUMERS PROTECTION (NINTH

AMENDMENT) REGULATIONS, 2015
(9 OF 2015)

No. 301/2015-F&EA ----- In exercise of the powers conferred by section

36, read with sub-clauses (i) and (v) of clause (b) of sub-section (1) of
section 11, of the Telecom Regulatory Authority of India Act, 1997 (24 of
1997), the Telecom Regulatory Authority of India hereby makes the
following regulations further to amend the Telecom Consumers
Protection Regulations, 2012 (2 of 2012), namely:-

1. (1) These regulations may be called the Telecom Consumers

Protection (Ninth Amendment) Regulations, 2015.
(2) They shall come into force from the 1st January, 2016.

2. In regulation 2 of the Telecom Consumers Protection Regulations,

2012 (hereinafter referred to as the principal regulations), after clause
(ba), the following clauses shall be inserted, namely:--

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 “(bb) “call drop” means a voice call which, after being successfully
established, is interrupted prior to its normal completion; the cause of
early termination is within the network of the service provider;”;

(bc) “calling consumer” means a consumer who initiates a voice call;”;

3. After Chapter IV of the principal regulations, the following chapter

shall be inserted, namely :-

“CHAPTER V”

RELIEF TO CONSUMERS FOR CALL DROPS

16. Measures to provide relief to consumers.- Every originating

service provider providing Cellular Mobile Telephone Service shall,
for each call drop within its network,

(a) credit the account of the calling consumer by one rupee:

Provided that such credit in the account of the calling

consumer shall be limited to three dropped calls in a day (00:00:00
hours to 23:59:59 hours);

(b) provide the calling consumer, through SMS/USSD message,

within four hours of the occurrence of call drop, the details
of amount credited in his account; and

(c) in case of post-paid consumers, provide the details of the

credit in the next bill.”

6. The explanatory memorandum to the aforesaid

amendment makes interesting reading. In the first

paragraph of the said memorandum, the 2009

Quality of Service Regulation referred to

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hereinabove, granting an allowance of an average of

2% call drops per month, is specifically referred to.

Also, interestingly enough, the service providers

have stated that they are meeting this benchmark

completely with one or two minor exceptions.

Despite this, the Authority has embarked on the

Impugned Regulation, stating that consumers, at

various fora, have raised the issue of call drops,

complaining that in their experience, the quality of

making voice calls has deteriorated. The Authority

responded by issuing a consultation paper marked

“Compensation to the Consumers in the event of

dropped calls” dated 4.9.2015. Stakeholders were

given till 21.9.2015 to submit their comments in

writing with counter comments thereto being given

one week thereafter, i.e., by 28.9.2015. The

Authority records that written comments were

received from 4 industry associations, 11 Cellular

Mobile Telephone Service Providers, 2 consumer

advocacy groups, 2 organizations, and 518

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individual consumers. 5 counter comments were

also received. The Authority notes that an open

house discussion was held on 1.10.2015 in New

Delhi with the stakeholders. According to the

Authority, consumers wanted relief in the event of

dropped calls under two broad heads – excess

charging and inconvenience caused to them. In

paragraphs 6 and 7, the arguments of service

providers have been noted, in which service

providers stated their difficulties in the matter of

sealing/closing down existing sites for towers by

municipal authorities and other related issues

together with spectrum related issues. They

specifically informed the Authority that a large

proportion of call drops are beyond their control. In

reply thereto, consumers spoke of the inconvenience

caused to them by call drops. Some consumers also

contended that the financial disincentive levied for

failing to meet the benchmark for call drop rates

should be revised upwards. (This was in fact done,

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 as we have seen, just one day before the Impugned

Regulation itself, i.e., on 15.10.2015). The

Explanatory Memorandum then goes on to state:-

“18. Based on the above, it is clear that while all
CMTSPs and the industry associations have argued
that question for compensation to the consumers on
call drops does not arise as it is neither justifiable
nor practicable, most of the consumers and
consumer advocacy groups have insisted that they
should be compensated by the CMTSPs for the
inconvenience caused to them.
19. After a careful analysis, the Authority has
come to the conclusion that call drops are instances
of deficiency in service delivery on part of the
CMTSPs which cause inconvenience to the
consumers, and hence it would be appropriate to
put in place a mechanism for compensating the
consumers in the event of dropped calls. The
Authority is of the opinion that compensatory
mechanism should be kept simple for the ease of
consumer understanding and its implementation by
the CMTSPs. While one may argue that amount of
compensation should be commensurate to the loss/
suffering caused due to an event but in case of a
dropped call it is difficult to quantity the
loss/suffering/inconvenience caused to the
consumers as it may vary from one consumer to
another and also in accordance to their situations.
Accordingly, the Authority has decided to mandate
originating CMTSPs to credit one Rupee for a
dropped call to the calling consumers as notional
compensation. Similarly, the Authority has decided
that such credit in the account of the calling
consumer shall be limited to three dropped calls in a
day (00:00:00 hours to 23:59:59 hours). The
Authority is of the view that such a mandate would
compensate the consumers for the inconvenience

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caused due to interruption in service by way of call
drops, to a certain extent.
20. The Authority is also aware that
communication to the consumers is important and
therefore, the Authority has decided to mandate
that, each originating CMTSP, within four hours of
the occurrence of call drop within its network, inform
the calling consumer, through SMS/USSD message
the details of amount credited in his account for the
dropped call, if applicable.
21. The Authority is conscious of the fact that for
carrying out the afore-mentioned mandate, the
CMTSPs would have to make suitable provisions in
their systems, which would require time and efforts.
Accordingly, the Authority has decided that the
afore-mentioned mandate would become applicable
on the CMTSPs with effect from the 1st January,
2016.
22. The Authority shall keep a close watch on the
implementation of the mandate as well as the
measures being initiated by the CMTSPs to
minimize the problem of dropped calls as given in
their submissions during the consultation process
and may review after six months, if necessary.”

7. At this stage, it is necessary to refer to a technical

paper issued by the very same Authority a few days

after the Impugned Regulation. On 13.11.2015,

TRAI issued a paper called “Technical Paper on call

drops in cellular network”. TRAI noticed that the

consumer base in the country is growing very fast

and that the mobile telecom infrastructure is not

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 growing at the same pace. This leads to a dip in the

quality of service provided. It is interesting to notice

that TRAI specifically adverts to the fact that call

drops can take place due to a variety of reasons. It

pointed out that one of the reasons is due to the

consumer’s own fault, and that 36.9% of call drops

are attributable to consumer faults. It further went on

to notice that the benchmark set for call drops is 2%,

and it is seen that only 3 out of 12 licensees are not

adhering to the said benchmark – 2 of them being

BSNL, who is not an appellant before us, the other

one being Aircel. The Authority ultimately

concluded:-
“5.27. In light of the reasons discussed above about
the increase in call drops, it must be realized that
mobile towers do not have an unlimited capacity for
handling the current network load. There is an
urgent need to increase the number of the towers
so as to cater to the demands of a growing
subscriber base. At the same time, problems like
removal of towers from certain areas by Authorities
should be adequately addressed. This problem is
particularly evident in urban areas. Moreover, with
the increase in the usage of 3G networks, the
growth rate of mobile towers supporting 2G
networks has reduced. This must be addressed.

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 5.28. The previous sections highlighted some
important countermeasures at the TSPs’ end.
Measures like Dynamic Channel Allocation, multiple
call routing and optimized resource management
can be employed by the TSP’s besides usage of
mobile signal boosters through the TSPs at users’
buildings or premises. Some prioritization schemes
like MBPS, CAC, Guard Channels, Handoff
Queuing and Auxiliary Stations essentially need to
be incorporated by TSPs to reduce call drops.”

8. A Writ Petition, being Writ Petition (Civil) No.11596 of

2015, was filed before the Delhi High Court, together with

various other petitions, in which the Ninth Amendment, being

the Impugned Amendment to the Regulation pointed out

hereinabove, was challenged. By the impugned judgment dated

29.2.2016, the Delhi High Court noticed the various arguments

addressed on behalf of the various appellants, together with the

reply given by Shri P.S. Narasimha, learned Additional Solicitor

General of India appearing on behalf of TRAI. The High Court

then went on to discuss the validity of the Impugned Regulation

under two grounds – the ground of being ultra vires the parent

Act, and the ground that the Regulation was otherwise

unreasonable and manifestly arbitrary. The High Court repelled

the challenge of the appellants on both the aforesaid grounds.

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The High Court first referred to BSNL v. Telecom Regulatory

Authority of India, (2014) 3 SCC 222 in some detail, and then

went on to hold that the power vested in TRAI under

Section 36(1) to make regulations is wide and pervasive, and

that as there can be no dispute that the Impugned Regulation

has been made to ensure quality of service extended to the

consumer by the service provider, it would fall within Section

36(1) read with Section 11(1)(b)(v). The High Court further held

that the contention that the compensation provided under the

Impugned Regulation amounts to imposition of penalty is liable

to be rejected, since compensation as provided under the

Impugned Regulation is only notional compensation to

consumers who have suffered as a result of call drops. The

High Court then went on to say that a transparent consultative

process was followed by TRAI in making the Impugned

Regulation, and that the technical paper on call drops issued on

13.11.2015 addressed all issues that were sought to be raised

in the present petitions. The contention that 100% performance

is demanded under the Impugned Regulation was rejected as

being factually incorrect and without any basis. It was further

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added that the impossibility of identification of the reason for the

call drop was incorrect inasmuch as these reasons are network

related, and that is something that has not been disputed by

telecom equipment manufacturers like M/s. Nokia and M/s.

Ericsson. It was further held that the Impugned Regulation

attempted to balance the interest of consumers with the interest

of service providers by limiting call drops that are to be

compensated to only 3 and also mandating that only the calling

consumer and not the receiving consumer was liable to be so

compensated. In dealing with manifest arbitrariness, the High

Court held that the 2% standard imposed by the Quality of

Service Regulations is distinct and different from compensation

provided to consumers for dropped calls. The High Court

sought to make a distinction between the 2% tolerance limit as

being a quality parameter for the entire network area, as

against compensation provided which specifies an individual

standard. On the plea that the difficulties faced by service

providers in setting up mobile towers being something beyond

their control, the High Court declined to enter into the said

controversy since the High Court does not have the expertise to

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adjudicate on such rival claims. The validity of the Impugned

Regulation was upheld and the Writ Petitions were dismissed.

9. At this stage, it would be important to notice the

arguments made on behalf of the various appellants before us.

We have heard learned senior advocates Shri Kapil Sibal, Dr.

Abhishek Manu Singhvi, and Shri Gopal Jain. The arguments

that were made by them can fall into four neat logical

compartments. First and foremost, they argued that the Ninth

Amendment to the Telecom Consumers Protection Regulations,

2015, is ultra vires Section 36 read with Section 11 of the

Telecom Regulatory Authority of India Act, 1997. They argued

that, in any event, these Regulations, being in the nature of

subordinate legislation, were manifestly arbitrary and

unreasonable, and therefore affected their fundamental rights

under Article 14 and Article 19(1)(g) of the Constitution. They

further went on to state that there was no power in the TRAI to

interfere with their licence conditions which are contract

conditions between the licensor and the licensee, and that the

said Regulations in seeking to impose a penalty not provided

for by the licence should be struck down as such. Fourthly,

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they argued that Section 11(4) of the said Act requires the

Authority to be transparent in its dealings with the various

stakeholders, and it has miserably failed in this also.

10. Under the broad head “ultra vires” learned counsel have

argued that Regulations can only be made under Section 36(1)

of the TRAI Act if they are consistent with and carry out the

purposes of the Act. The present Regulations having

purportedly been made under Section 11(1)(b)(i) and (v) of the

Act are in fact de hors Section 11(1)(b)(i) and (v), and contrary

to the Quality of Service Regulations already made by the same

Authority under the self-same provision. They argued that the

present Impugned Regulation has nothing to do with ensuring

compliance of the terms and conditions of licence inasmuch as

none of such terms and conditions empowers the Authority to

levy a penalty based on No Fault Liability. They also argued

that no standard of quality of service is prescribed by the

Regulation at all, and therefore the so-called protection of the

consumers is without laying down a standard of quality of

service and is also directly contrary to the 2% standard already

laid down. It was argued by them that as all of them met the

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2% standard laid down by the 2009 standard of quality

regulation, they could not be penalized as that would then

amount to substituting 98% with 100% as even one call drop

would lead to a payment of penalty of rupee one. They also

argued that such penalty was not authorized by either Section

36 or by Section 11, and, unlike Section 29 of the Act, no such

authority is to be found in the said Sections.

11. Under the broad head “manifestly arbitrary”, and

“unreasonable restrictions” learned counsel for the appellants

argued that without there being any fault on their part, they

were foisted with a penal liability. This is not only contrary to

any norm of law or justice, but directly contrary to Section 14 of

the Act which speaks of adjudication taking place between a

service provider and a group of consumers. The complaint of

an individual consumer before a Consumer Disputes Redressal

Forum would be dismissed on the ground that penal damages

cannot be awarded without the establishment of fault in any

adjudication for “inconvenience” as opposed to “loss caused”.

To lay down by way of subordinate legislation, a strict no fault

penal liability would go contrary to the scheme of the TRAI Act,

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particularly when it is contrasted with the Electricity Act, 2003.

We were shown Section 57 and certain other Sections of the

said Act in which the Central and State Commissions for

Electricity, unlike the TRAI, also have adjudicatory functions. If,

as a result of the adjudicatory function, compensation for loss is

decreed, the Commission under the Electricity Act could do so,

but not TRAI, as it has no adjudicatory functions but only

recommendatory, administrative, and legislative functions. It

was argued by them that Sections 73 and 74 of the Contract

Act were also breached as damages by way of penalty, which

are not a genuine pre-estimate of loss, have been laid down by

the Impugned Regulation, as it is admitted that no loss but only

inconvenience has been caused to the consumers. It was

further argued, based on the amended Preamble to the TRAI

Act, that the Impugned Regulation only protects the interest of

the consumers of the telecom sector, whereas a balancing of

the interests of service providers and consumers is required by

the said Preamble. Further, orderly growth of the telecom

sector would also be directly affected if arbitrary penalties of

this nature were to be inflicted upon service providers. It was

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also argued that having made the financial disincentive for a

breach of the 2% benchmark even higher just one day before

the Impugned Regulation, the Impugned Regulations were

wholly uncalled for. Further, one hand of TRAI does not seem to

know what the other hand is doing. A few days after the

Impugned Regulation, the TRAI’s own technical paper makes it

clear that the TRAI has itself admitted that call drops are

caused in many ways, most of which are not attributable to

service providers. That being so, the impugned amendment is

wholly arbitrary in that the assumption on which it is based,

namely, that the service provider is at fault every time a call

drop takes place, is wholly unfounded, as has been found by

TRAI itself in the said technical paper.

12. The learned Counsel have also argued, based on Section

402 of the Companies Act, 1956 and Section 27(d) of the

Competition Act, 2002, that no power is given by the TRAI Act

for interference with licence conditions, which amount to a

contract between licensor and licensee. They also referred to

Section 11(1)(b)(ii) which uses the familiar “notwithstanding

anything contained in the terms and conditions of the licence

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……….” which is missing from the other provisions of the TRAI

Act. The argument, therefore, being that when the licence

conditions/contract itself makes it clear that a no fault liability for

call drops cannot be made, the impugned amendment would

follow the terms and conditions of the licence between licensor

and licensee and would be bad as a result.

13. Finally, it was argued that Section 11(4) of the Act was

breached inasmuch as the transparency mandated by the Act in

the framing of the regulations was wholly missing as no reason

whatsoever has been given for negativing the objections of the

service providers and laying down a no fault strict penal liability

on them.

14. The learned Attorney General, appearing on behalf of the

Telecom Regulatory Authority of India, has countered these

submissions and sought to defend the High Court judgment.

According to the learned Attorney General, it is first necessary

to see the Statement of Objects and Reasons of the Telecom

Regulatory Authority of India Act, 1997. Paragraph one of the

said statement was referred to in order to emphasize that the

National Telecom Policy of 1994 provided for the meeting of

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customer’s demands at a reasonable price, and the promotion

of consumer interest by ensuring fair competition. When read

in light of the Statement of Objects and Reasons, it is clear that

the Impugned Regulation has been made bearing this object in

mind. According to the learned Attorney General, Section 36 of

the Act has to be read in a wide and expansive manner, as has

been done in BSNL’s judgment, and when so read, it is clear

that the Impugned Regulation conforms to Section 11(1)(b)(i)

and (v) and is otherwise not ultra vires the Act. Countering the

submission as to arbitrariness and unreasonableness of the

Impugned Regulation, he argued that the said Regulation was

really framed keeping the small man in mind, and told us that

96% of consumers are pre-paid customers who recharge their

account balance for an average of Rs.10/- at a time. The

Impugned Regulation seeks to provide some solace to these

persons for dropped calls. He further argued that members of

the appellants have made huge profits from the aforesaid

business and have pumped in very little funds for

infrastructural development. He referred to funds pumped in in

China, for example, which were ten times more than the funds

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in this country. He, therefore, submitted that if the revenues of

service providers were computed at a rough average of

approximately Rs.96,560 crores per annum, payments that they

would have to make, according to a calculation made by him,

for call drops under the Impugned Regulation, would amount to

a sum of roughly only Rs.280 crores per annum, which would

not therefore really affect the appellants’ right to carry on

business. He further argued that the Impugned Regulation is

only an experimental measure and was liable to be revisited in

six months. This being so, the appellants should not have

rushed to court, but allowed the regulation to work, and if there

were any shortfalls, these could be ironed out in the working of

the Impugned Regulation. He countered the argument made

on behalf of the appellants that it is not possible, technically

speaking, to arrive at the cause of a call drop, and read

manuals from some of the service providers to show that this

was, in fact, possible, and that the reason for the call drop could

ultimately be pinpointed to the service providers when they are

at fault. He also refuted the submission made on behalf of the

appellants that there were four broad reasons for call drops,

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three of which cannot be laid at the appellants door. He

referred to the technical paper dated 13.11.2015, in particular,

and to various other documents, to show that call drops

occurred basically due to two reasons alone – those that can be

said to be due to the fault of the service providers, and those

that can be said to be due to the fault of the consumers. In

particular, he referred to and relied upon a statistic showing that

an average of 36.9% of call drops take place owing to the fault

of the consumer – the rest take place because of the fault of the

service provider, or the fact that it has not pumped in enough

funds for technical advancements to prevent the cause for such

call drops. According to him, with the provision of equipment,

including boosters, call drops need not take place inside

buildings with thick walls and/or lifts. In any case, the number

of call drops that take place owing to such reasons is itself

minimal. According to him, therefore, the Impugned Regulation

should be read down so that service providers are made to pay

only for faults attributable to them, which would come to a

rough figure of 63% of what is charged, for amounts payable to

the consumers under the Impugned Regulation. The learned

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Attorney General has assured us that, in point of fact, the

authorities will administer the Impugned Regulation in such a

manner that service providers would only be made liable to pay

for call drops owing to their own fault. He further argued that

three documents, if read together, would make it clear that the

Impugned Regulation cannot be said to be manifestly arbitrary

or unreasonable, and that the consultation paper dated

4.9.2015, the Impugned Regulation dated 16.10.2015, and the

technical paper dated 13.11.2015, should all be read together

as being part of one joint exercise to alleviate the small

consumers’ inconvenience because of call drops. He further

went on to argue that it is not correct to say that TRAI has

contradicted itself in the technical paper of 13.11.2015, when

compared to the Impugned Regulation, and stated that the

Quality of Service Regulation which allowed a 2% average per

month for call drops should not be confused with the Impugned

Regulation. They are, according to him, a parallel set of

regulations which have to be read separately, both having been

framed by TRAI, in order to protect consumer interest. He also

added that guess work is inherent in framing a regulation of the

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sort that is impugned, and further stated that three call drops

per day mitigated the rigour of having to pay for more than 3

call drops per day, and that rupee one per call drop would really

be payment or recompense for call drops which take place

because the consumer has to incur an extra charge to connect

with the person whose call dropped yet again and spend more

money for the second call. He also added that only the

consumer who dials the call which has dropped is paid and not

the receiving consumer, thereby again mitigating the rigour of

what could amount to a double payment for one call. He cited a

number of judgments to buttress the aforesaid submissions,

stating that the said judgments would show that the Court

should not substitute its wisdom for that of the wisdom of

legislative policy, and that TRAI being an active trustee for the

common good has framed this regulation acting as such. He

also refuted the submission that the licence conditions were

illegally modified by the Impugned Regulation, and stated that

the Explanatory Memorandum to the Impugned Regulation

would show that the transparency required under Section 11(4)

of the Act was duly and faithfully observed by TRAI.

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15. In rejoinder, learned senior counsel for the appellants

stoutly resisted the factual statements made by the learned

Attorney General. They pointed out that the net debt of the

various telecom operators before us, as on 31.12.2015, ran into

approximately Rs.3,80,000/- crores and that this was because

huge amounts had to be borrowed from banks in order to pay

for both spectrum and infrastructure. They were at pains to

point out that though service providers in India contributed to

13% of the world’s telecommunication services, the revenue

earned by them was only 2.7%, and even this was fast

decreasing. According to the learned counsel, they have

covered over 500,000 villages in India contributing to 6% of

India’s GDP, thus being amongst the highest contributors in

foreign direct investment in this country in the last decade.

They have also made the second large private sector

investment in infrastructure amounting to Rs. 800,000/- crores

despite the return on investment being only 1%. Contrary to

what the learned Attorney General had to say, a vast number of

towers have been set up – more than two lac sites in the last 15

months alone. When viewed with the gigantic net debt and

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Page 29
return on investment, the figure of gross revenue given by the

learned Attorney General is said to be a highly misleading

figure. Also, the comparison with infrastructure investment in

China is wholly misplaced inasmuch as the Chinese

Government has unlimited funds to pour into its telecom

companies, over 70% of their share capital being held by the

Government. Spectrum allocation to Chinese operators is at

almost no cost, whereas in India, thousands of crores of rupees

have to be spent as spectrum is now auctioned to the highest

bidder. Also, the revenue of the top three Chinese telecom

operators is more than six times the revenue of the top three

Indian operators. In addition, it was argued that the facts and

figures reeled out by the learned Attorney General are not

based on the record of the case, and, in any case, have very

little connection with the challenge to the Impugned Regulation

in the present case.

16. We have also heard learned counsel appearing for

various consumer groups. They supported the arguments of

the learned Attorney General and went on to state that since

the focus of the TRAI Act and the Impugned Regulation was for

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Page 30
the small and impoverished consumers in India, this Court

would be loathe to strike down the Impugned Regulation. They

further argued that the doctrine of public trust would apply to

the Impugned Regulation, as the Regulation was part of the

overall social responsibility that the regulator TRAI has cast

upon the service providers in favour of consumers. They also

cited a few judgments dealing with the vires of subordinate

legislation and with transparency in the context of the Impugned

Regulation.

17. Having heard learned counsel for all the parties, it is first

necessary to set out the relevant provisions of the Telecom

Regulatory Authority of India Act, 1997.

18. The Statement of Objects and Reasons for the said Act is

as follows:

“1. In the context of the National Telecom Policy,

1994, which amongst other things, stresses on
achieving the universal service, bringing the quality
of telecom services to world standards, provisions
of wide range of services to meet the customers
demand at reasonable price, and participation of the
companies registered in India in the area of basic as
well as value added telecom services as also
making arrangements for protection and promotion
of consumer interest and ensuring fair competition,
there is a felt need to separate regulatory functions
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Page 31
 from service providing functions which will be in
keeping with the general trend in the world. In the
multi-operator situation arising out of opening of
basic as well as value added services in which
private operator will be competing with Government
operators, there is a pressing need for an
independent telecom regulatory body for regulation
of telecom services for orderly and healthy growth
of telecommunication infrastructure apart from
protection of consumer interest.”

The Preamble of the Telecom Regulatory Authority Act of

1997 reads as under:

“Preamble - An act to provide for the establishment

of the Telecom Regulatory Authority of India to
regulate the telecommunication services, and for
matters connected therewith or incidental thereto.”

Section 11(n) read as under:-

Functions of Authority – (1) Notwithstanding

anything contained in the Indian Telegraph Act,
1885, the functions of the Authority shall be to –
(n) settle disputes between service providers”

19. In 2000, the Act was amended. By the Amended Act, the

adjudicatory function of the TRAI was taken away from it and

was vested in an Appellate Tribunal. The relevant provisions of

the Act as amended in 2000 are as follows:-

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“Preamble- An Act to provide for the establishment
of the Telecom Regulatory Authority of India and the
Telecom Disputes Settlement and Appellate Tribunal
to regulate the telecommunication services,
adjudicate disputes, dispose of appeals and to
protect the interests of service providers and
consumers of the telecom sector, to promote and
ensure orderly growth of the telecom sector and for
matters connected therewith or incidental thereto”
11. Functions of Authority. (1) Notwithstanding
anything contained in the Indian Telegraph Act,
1885, the functions of the Authority shall be to-
(b) discharge the following functions, namely:-
(i) ensure compliance of terms and conditions of
license;
(ii) notwithstanding anything contained in the terms
and conditions of the license granted before the
commencement of the Telecom Regulatory
Authority (Amendment) Ordinance,2000, fix the
terms and conditions of inter-connectivity between
the service providers;
xx
(v) lay down the standards of quality of service to be
provided by the service providers and ensure the
quality of service and conduct the periodical survey
of such service provided by the service providers so
as to protect interest of the consumers
of telecommunication services;

11. (4) The Authority shall ensure transparency

while exercising its powers and discharging its
functions.

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Page 33
12. Powers of Authority to call for information,
conduct investigations, etc. —

(4) The Authority shall have the power to issue such

directions to service providers as it may consider
necessary for proper functioning by service
providers.

13. Power of Authority to issue directions.—The

Authority may, for the discharge of its functions
under sub-section (1) of Section 11, issue such
directions from time to time to the service providers,
as it may consider necessary:

Provided that no direction under sub-section (4)

of Section 12 or under this section shall be issued
except on the matters specified in clause (b) of
sub-section (1) of Section 11.

14. Establishment of Appellate Tribunal.—The

Central Government shall, by notification, establish
an Appellate Tribunal to be known as the Telecom
Disputes Settlement and Appellate Tribunal to—

(a) adjudicate any dispute—

(i) between a licensor and a licensee;

(ii) between two or more service providers;

(iii) between a service provider and a group of

consumers:

Provided that nothing in this clause shall apply in

respect of matters relating to—

(A) the monopolistic trade practice, restrictive

trade practice and unfair trade practice which are
subject to the jurisdiction of the Monopolies and

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Page 34
Restrictive Trade Practices Commission established
under sub-section (1) of Section 5 of the
Monopolies and Restrictive Trade Practices Act,
1969 (54 of 1969);

(B) the complaint of an individual consumer

maintainable before a Consumer Disputes
Redressal Forum or a Consumer Disputes
Redressal Commission or the National Consumer
Redressal Commission established under Section 9
of the Consumer Protection Act, 1986 (68 of 1986);

(C) the dispute between telegraph authority and

any other person referred to in sub-section (1) of
Section 7-B of the Indian Telegraph Act, 1885 (13 of
1885);

(b) hear and dispose of appeals against any

direction, decision or order of the Authority under
this Act.

15. Civil Court not to have jurisdiction.—No civil

court shall have jurisdiction to entertain any suit or
proceeding in respect of any matter which the
Appellate Tribunal is empowered by or under this
Act to determine and no injunction shall be granted
by any court or other authority in respect of any
action taken or to be taken in pursuance of any
power conferred by or under this Act.

25. Power of Central Government to issue

directions.—(1) The Central Government may,
from time to time, issue to the Authority such
directions as it may think necessary in the interest
of the sovereignty and integrity of India, the security
of the State, friendly relations with foreign States,
public order, decency or morality.

(2) Without prejudice to the foregoing provisions,

the Authority shall, in exercise of its powers or the
performance of its functions, be bound by such
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Page 35
directions on questions of policy as the Central
Government may give in writing to it from time to
time:

Provided that the Authority shall, as far as

practicable, be given an opportunity to express its
views before any direction is given under this
sub-section.

(3) The decision of the Central Government

whether a question is one of policy or not shall be
final.

29. Penalty for contravention of directions of

Authority.—If a person violates directions of the
Authority, such person shall be punishable with fine
which may extend to one lakh rupees and in case of
second or subsequent offence with fine which may
extend to two lakh rupees and in the case of
continuing contravention with additional fine which
may extend to two lakh rupees for every day during
which the default continues.

36. Power to make regulations.—(1) The Authority

may, by notification, make regulations consistent
with this Act and the rules made thereunder to carry
out the purposes of this Act.

(2) In particular, and without prejudice to the

generality of the foregoing power, such regulations
may provide for all or any of the following matters,
namely :—

(a) the times and places of meetings of the

Authority and the procedure to be followed at
such meetings under sub-section (1) of Section
8, including quorum necessary for the
transaction of business;

(b) the transaction of business at the meetings of

the Authority under sub-section (4) of Section 8;
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Page 36
 ******
(c)

(d) matters in respect of which register is to be

maintained by the Authority under sub-clause
(vii) of clause (b) of sub-section (1) of Section
11;

(e) levy of fee and lay down such other

requirements on fulfillment of which a copy of
register may be obtained under sub-clause (viii)
of clause (b) of sub-section (1) of Section 11;

(f) levy of fees and other charges under clause (c)

of sub-section (1) of Section 11.

37. Rules and regulations to be laid before

Parliament.—Every rule and every regulations
made under this Act shall be paid, as soon as may
be after it is made, before each House of
Parliament, while it is in session, for a total period of
thirty days which may be comprised in one session
or in tow or more successive sessions, and if,
before the expiry of the session immediately
following the session or the successive sessions
aforesaid, both Houses agree in making any
modification in the rule or regulation or both Houses
agree that the rule or regulation should not be
made, the rule or regulation shall thereafter have
effect only in such modified form or be of no effect,
as the case may be; so, however, that any such
modification or annulment shall be without prejudice
to the validity of anything previously done under that
rule or regulation.”

Parameters of Judicial Review of Subordinate Legislation

20. In State of Tamil Nadu v. P. Krishnamoorthy, (2006) 4

SCC 517, this Court after adverting to the relevant case law on

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Page 37
the subject, laid down the parameters of judicial review of

subordinate legislation generally thus:-

“There is a presumption in favour of constitutionality

or validity of a subordinate legislation and the
burden is upon him who attacks it to show that it is
invalid. It is also well recognised that a subordinate
legislation can be challenged under any of the
following grounds:
(a) Lack of legislative competence to make the
subordinate legislation.
(b) Violation of fundamental rights guaranteed under
the Constitution of India.
(c) Violation of any provision of the Constitution of
India.
(d) Failure to conform to the statute under which it is
made or exceeding the limits of authority conferred
by the enabling Act.
(e) Repugnancy to the laws of the land, that is, any
enactment.
(f) Manifest arbitrariness/unreasonableness (to an
extent where the court might well say that the
legislature never intended to give authority to make
such rules).
The court considering the validity of a subordinate
legislation, will have to consider the nature, object
and scheme of the enabling Act, and also the area
over which power has been delegated under the Act
and then decide whether the subordinate legislation
conforms to the parent statute. Where a rule is
directly inconsistent with a mandatory provision of
the statute, then, of course, the task of the court is
simple and easy.

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Page 38
 But where the contention is that the inconsistency or
non-conformity of the rule is not with reference to
any specific provision of the enabling Act, but with
the object and scheme of the parent Act, the court
should proceed with caution before declaring
invalidity.” [paras 15 and 16]

21. In the present case, the appellants have raised pleas

under paragraphs (b), (d) and (f) of paragraph 15 of the said

judgment. We now move on to consider their arguments.

Ultra vires

22. The power to make the Impugned Regulation is traceable

to Section 36(1) of the Telecom Regulatory Authority of India

Act, 1997. This Court in BSNL v. Telecom Regulatory

Authority of India, (2014) 3 SCC 222, after analyzing the

aforesaid provision in the backdrop of the Act held as follows:-

“We may now advert to Section 36. Under

sub-section (1) thereof TRAI can make regulations
to carry out the purposes of the TRAI Act specified
in various provisions of the TRAI Act including
Sections 11, 12 and 13. The exercise of power
under Section 36(1) is hedged with the condition
that the regulations must be consistent with the
TRAI Act and the rules made thereunder. There is
no other restriction on the power of TRAI to make
regulations. In terms of Section 37, the regulations
are required to be laid before Parliament which can
either approve, modify or annul the same. Section
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Page 39
36(2), which begins with the words “without
prejudice to the generality of the power under
sub-section (1)” specifies various topics on which
regulations can be made by TRAI. Three of these
topics relate to meetings of TRAI, the procedure to
be followed at such meetings, the transaction of
business at the meetings and the register to be
maintained by TRAI. The remaining two topics
specified in clauses (e) and (f) of Section 36(2) are
directly referable to Sections 11(1)(b)(viii) and 11(1)
(c). These are substantive functions of TRAI.
However, there is nothing in the language of Section
36(2) from which it can be inferred that the
provisions contained therein control the exercise of
power by TRAI under Section 36(1) or that Section
36(2) restricts the scope of Section 36(1)…
Before parting with this aspect of the matter, we
may notice Sections 33 and 37. A reading of the
plain language of Section 33 makes it clear that
TRAI can, by general or special order, delegate to
any member or officer of TRAI or any other person
such of its powers and functions under the TRAI Act
except the power to settle disputes under Chapter
IV or make regulations under Section 36. This
means that the power to make regulations under
Section 36 is non-delegable. The reason for
excluding Section 36 from the purview of Section 33
is simple. The power under Section 36 is legislative
as opposed to administrative. By virtue of Section
37, the regulations made under the TRAI Act are
placed on a par with the rules which can be framed
by the Central Government under Section 35 and
being in the nature of subordinate legislations, the
rules and regulations have to be laid before both the
Houses of Parliament which can annul or modify the
same. Thus, the regulations framed by TRAI can be
made ineffective or modified by Parliament and by
no other body.

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Page 40
 In view of the above discussion and the propositions
laid down in the judgments referred to in the
preceding paragraphs, we hold that the power
vested in TRAI under Section 36(1) to make
regulations is wide and pervasive. The exercise of
this power is only subject to the provisions of the
TRAI Act and the rules framed under Section 35
thereof. There is no other limitation on the exercise
of power by TRAI under Section 36(1). It is not
controlled or limited by Section 36(2) or Sections 11,
12 and 13.” [paras 89, 98 – 100]

23. It will thus be seen that 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 purposes 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 11(1)(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 11(1)(b)(i) and (v) as the source of power under which

the Impugned Regulation has been framed. Since ensuring

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Page 41
compliance with the terms and conditions of licence is the first

thing that has been argued on behalf of the respondents, it is

important to advert to the provisions of the licence between the

service provider and the consumer. As has been mentioned

above, two very important clauses of this licence refer to (i) the

power to modify the licence conditions which is contained in

clause 5 and (ii) the ensuring by the licensee that the quality of

service shall be as prescribed by the licensor or TRAI by clause

28 thereof. Under clause 5, the licensor reserves the right to

modify the terms and conditions of the licence if in the opinion

of the licensor it is necessary or expedient so to do in public

interest or in the interest of security of the State or for the

proper conduct of telegraphs. It may be stated that no

modification of the licence has in fact been attempted or has

taken place in the facts of the present case. Therefore clause 5

need not detain us further. Clause 28 reads as follows:

“28. Quality of Performance:

28.1 The LICENSEE shall ensure the Quality of

Service (QoS) as prescribed by the LICENSOR or
TRAI. The LICENSEE shall adhere to such QoS
standards and provide timely information as
required therein.

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Page 42
28.2 The LICENSEE shall be responsible for:-
i) Maintaining the performance and quality of
service standards.
ii) Maintaining the MTTR (Mean Time To
Restore) within the specified limits of the quality of
service.
iii) The LICENSEE will keep a record of number
of faults and rectification reports in respect of the
service, which will be produced before the
LICENSOR/TRAI as and when and in whatever
form desired.

28.3 The LICENSEE shall be responsive to the

complaints lodged by his subscribers. The
Licensee shall rectify the anomalies within the
MTTR specified and maintain the history sheets for
each installation, statistics and analysis on the
overall maintenance status.

28.4 The LICENSOR or TRAI may carry out

performance tests on LICENSEE’s network and
also evaluate Quality of Service parameters in
LICENSEE’s network prior to grant of permission for
commercial launch of the service after successful
completion of interconnection tests and/or at any
time during the currency of the License to ascertain
that the network meets the specified standards on
Quality of Service (QoS). The LICENSEE shall
provide ingress and other support including
instruments, equipments etc., for such tests.

28.5 The LICENSEE shall enforce and ensure

QOS, as prescribed by the LICENSOR/TRAI, from
the INFRASTRUCTURE PROVIDER(s) with whom
it may enter into agreement/contract for
leasing/hiring/buying or any such instrument for
provision of infrastructure or provision of bandwidth.
The responsibility of ensuring QOS shall be that of
LICENSEE.”
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Page 43
24. Under clause 28 it is a condition that the licensee shall

ensure the quality of service as prescribed by the licensor or

TRAI, and shall adhere to such standards as are provided.

Another important thing to notice is that under clause 28.2 the

licensee has to keep a record of the number of faults and

rectification reports in respect of its service, which will be

produced before the licensor/TRAI as and when desired. This

being the case, it is clear that the Impugned Regulation cannot

be said to fall under Section 11(1)(b)(i) at all inasmuch as it

does not seek to enforce any term or condition of the licence

between the service provider and the consumer. Coming to

sub-para (v) of Section 11(1)(b), the Impugned Regulation

would again have no reference to the said paragraph, inasmuch

as it does not lay down any standard of quality of service to be

provided by the service provider. In order that clause (v) be

attracted, not only do standards of quality of service to be

provided by the service providers have to be laid down, but

standards have to be adhered to by the service providers so as

to protect the interests of the consumers. We find that the

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Page 44
Impugned Regulation is not referable to Section 11(1)(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 de hors Section 11 but cannot be said to be

inconsistent with Section 11 of the Act. This Court has

categorically held in the BSNL judgment that the power under

Section 36 is not trammeled by Section 11. This being so, the

Impugned Regulation cannot be said to be inconsistent with

Section 11 of the Act. However, what has also to be seen is

whether the said Regulation carries out the purpose of the Act

which, as has been pointed out hereinabove, under the

amended Preamble to the Act, is to protect the interests of

service providers as well as consumers of the telecom sector so

as to promote and ensure orderly growth of the telecom sector.

Under Section 36, not only does the Authority have to make

regulations consistent with the 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

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Page 45
carrying out the purposes of the Act, a Regulation is made

contrary 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 11(1)(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 we hold that 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.

Violation of Fundamental Rights

25. We have already seen that one of the tests for

challenging the constitutionality of subordinate legislation is that

subordinate legislation should not be manifestly arbitrary. Also,

it is settled law that subordinate legislation can be challenged

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on any of the grounds available for challenge against plenary

legislation – [See: Indian Express Newspapers v. Union of

India, (1985) 1 SCC 641 at Para 75].

26. The test of “manifest arbitrariness” is well explained in two

judgments of this Court. In Khoday Distilleries Ltd. v. State

of Karnataka, (1996) 10 SCC 304, this Court held:

“It is next submitted before us that the amended

Rules are arbitrary, unreasonable and cause undue
hardship and, therefore, violate Article 14 of the
Constitution. Although the protection of Article 19(1)
(g) may not be available to the appellants, the rules
must, undoubtedly, satisfy the test of Article 14,
which is a guarantee against arbitrary action.
However, one must bear in mind that what is being
challenged here under Article 14 is not executive
action but delegated legislation. The tests of
arbitrary action which apply to executive actions do
not necessarily apply to delegated legislation. In
order that delegated legislation can be struck down,
such legislation must be manifestly arbitrary; a law
which could not be reasonably expected to emanate
from an authority delegated with the lawmaking
power. In the case of Indian Express Newspapers
(Bombay) Pvt. Ltd. and Ors. v. Union of India and
Ors. [(1985) 1 SCC 641 : 1985 SCC (Tax) 121 :
(1985) 2 SCR 287], this Court said that a piece of
subordinate legislation does not carry the same
degree of immunity which is enjoyed by a statute
passed by a competent legislature. A subordinate
legislation may be questioned under Article 14 on
the ground that it is unreasonable; "unreasonable
not in the sense of not being reasonable, but in the
sense that it is manifestly arbitrary". Drawing a

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Page 47
 comparison between the law in England and in
India, the Court further observed that in England the
Judges would say, "Parliament never intended the
authority to make such Rules; they are
unreasonable and ultra vires". In India, arbitrariness
is not a separate ground since it will come within the
embargo of Article 14 of the Constitution. But
subordinate legislation must be so arbitrary that it
could not be said to be in conformity with the statute
or that it offends Article 14 of the Constitution.” [para
13]

27. Also, in Sharma Transport v. Government of Andhra

Pradesh, (2002) 2 SCC 188, this Court held:

“… The tests of arbitrary action applicable to

executive action do not necessarily apply to
delegated legislation. In order to strike down a
delegated legislation as arbitrary it has to be
established that there is manifest arbitrariness. In
order to be described as arbitrary, it must be shown
that it was not reasonable and manifestly arbitrary.
The expression "arbitrarily" means: in an
unreasonable manner, as fixed or done capriciously
or at pleasure, without adequate determining
principle, not founded in the nature of things,
non-rational, not done or acting according to reason
or judgment, depending on the will alone. …”

28. When we come to Article 19(1)(g) of the Constitution, the

tests for challenge to plenary legislation are well settled. First

and foremost, a sea change took place with the 11-Judge

Bench judgment in Rustom Cavasjee Cooper (Banks

Nationalisation) v. Union of India, (1970) 1 SCC 248, in which

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Page 48
the impact of State action upon fundamental rights was stated

thus:

“We have carefully considered the weighty

pronouncements of the eminent Judges who gave
shape to the concept that the extent of protection of
important guarantees, such as the liberty of person,
and right to property, depends upon the form and
object of the State action, and not upon its direct
operation upon the individual's freedom. But it is not
the object of the authority making the law impairing
the right of a citizen, nor the form of action taken
that determines the protection he can claim: it is the
effect of the law and of the action upon the right
which attracts the jurisdiction of the Court to grant
relief. If this be the true view and we think it is, in
determining the impact of State action upon
constitutional guarantees which are fundamental, it
follows that the extent of protection against
impairment of a fundamental right is determined not
by the object of the Legislature nor by the form of
the action, but by its direct operation upon the
individual's rights.” [para 49]

29. Under Article 19(6) of the Constitution, the State 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.

Perhaps the best exposition of what the expression “reasonable

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Page 49
restriction” connotes was laid down in Chintaman Rao v. State

of Madhya Pradesh, 1950 SCR 759, as follows:-

“The phrase "reasonable restriction" connotes that

the limitation imposed on a person in enjoyment of
the right should not be arbitrary or of an excessive
nature, beyond what is required in the interests of
the public. The word "reasonable" implies intelligent
care and deliberation, that is, the choice of a course
which reason dictates. Legislation which arbitrarily
or excessively invades the right cannot be said to
contain the quality of reasonableness and unless it
strikes a proper balance between the freedom
guaranteed in article 19(1)(g) and the social control
permitted by clause (6) of article 19, it must be held
to be wanting in that quality.” [at p.763]

30. It is interesting to note that the original Constitution, while

enumerating various rights under Article 19(1), when it referred

to the right of freedom of speech in Article 19(1)(a), laid down in

Article 19(2) that any law abridging the right to freedom of

speech could only pass constitutional muster if it related to any

of the subjects laid down in clause (2). What was conspicuous

by its absence was the phrase “reasonable restriction”, which

was only brought in by the first amendment to the Constitution.

31. Similarly, the first amendment to the Constitution also

amended Article 19(6), with which we are directly concerned, to

provide for a State monopoly, which would not have to be

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tested on the ground of reasonable restrictions. Therefore, the

first amendment to the Constitution of India has made it clear

that reasonable restrictions, added in Article 19(2) and

subtracted from Article 19(6) (insofar as State monopolies are

concerned), point to the fact that this test is a test separate and

distinct from the test of the law being in the interest of the

general public. Why we are at pains to point this out is because

the learned Attorney General’s argument focused primarily on

the Impugned Regulation being in the public interest. He

referred to Delhi Science Forum v. Union of India, (1996) 2

SCC 405, for the proposition that TRAI, as an active trustee,

has framed this Regulation for the common good. While

accepting that TRAI may have done so, 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. We cannot forget that 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

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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 Article 19(6) must be struck in all cases

before the impugned law can be said to be a reasonable

restriction in the public interest.

32. We find that it is not necessary to go in detail into many of

the submissions made on either side as to the technical

difficulties which may or may not lead to call drops. This is for

the reason that even if we accept the demarcation of the cause

of call drops to be what the learned Attorney General says it is,

the Impugned Regulation must be held to be manifestly

arbitrary and an unreasonable restriction on the appellants’

fundamental rights to carry on business. According to the

learned Attorney General, the cause for call drops is twofold –

one owing to the fault of the consumer, and the other owing to

the fault of the service provider. And, for this dichotomy, he has

referred to the technical paper dated 13.11.2015, which shows

that an average of 36.9% can be call drops owing to the fault of

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Page 52
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 set out hereinabove. 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.

33. But it was said that the aforesaid Regulation should be

read down to mean that it would apply only when the fault is

that of the service provider. We are afraid that such a course is

not open to us in law, for it is well settled that 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. This was best

exemplified in one of the earliest judgments dealing with the

doctrine of reading down, namely the judgment of the Federal

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Court in In Re: Hindu Women's Rights to Property Act, 1937,

AIR 1941 FC 72. In that judgment, the word “property” in

Section 3 of the Hindu Women’s Rights to Property Act was

read down so as not to include agricultural land, which would

be outside the central legislature’s powers under the

Government of India Act, 1935. This is done because it is

presumed that the legislature did not intend to transgress

constitutional limitations. While so reading down the word

“property”, the Federal Court held:

“If the restriction of the general words to purposes

within the power of the Legislature would be to
leave an Act with nothing or next to nothing in it, or
an Act different in kind, and not merely in degree,
from an Act in which the general words were given
the wider meaning, then it is plain that the Act as a
whole must be held invalid, because in such
circumstances it is impossible to assert with any
confidence that the Legislature intended the general
words which it has used to be construed only in the
narrower sense: Owners of SS. Kalibia v. Wilson
(1910) 11 CLR 689, Vacuum Oil Company Ltd. v.
State of Queensland (1934) 51 CLR 677, R. v.
Commonwealth Court of Conciliation and Arbitration
(1910) 11 CLR 1 and British Imperial Oil Co. Ltd. v.
Federal Commissioner of Taxation (1925) 35 CLR
422.”

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34. This judgment was followed by a Constitution Bench of

this Court in Delhi Transport Corpn. v. D.T.C. Mazdoor

Congress, 1991 Supp (1) SCC 600. In that case, a question

arose as to whether a particular regulation which conferred

power on an authority to terminate the services of a permanent

and confirmed employee by issuing a notice terminating his

services, or by making payment in lieu of such notice without

assigning any reasons and without any opportunity of hearing

to the employee, could be said to be violative of the appellants’

fundamental rights. Four of the learned Judges who heard the

case, the Chief Justice alone dissenting on this aspect, decided

that the regulation cannot be read down, and must, therefore,

be held to be unconstitutional. In the lead judgment on this

aspect by Sawant,J., this Court stated:

“It is thus clear that the doctrine of reading down or

of recasting the statute can be applied in limited
situations. It is essentially used, firstly, for saving a
statute from being struck down on account of its
unconstitutionality. It is an extension of the principle
that when two interpretations are possible — one
rendering it constitutional and the other making it
unconstitutional, the former should be preferred.
The unconstitutionality may spring from either the
incompetence of the legislature to enact the statute
or from its violation of any of the provisions of the

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Page 55
 Constitution. The second situation which summons
its aid is where the provisions of the statute are
vague and ambiguous and it is possible to gather
the intentions of the legislature from the object of
the statute, the context in which the provision
occurs and the purpose for which it is made.
However, when the provision is cast in a definite
and unambiguous language and its intention is
clear, it is not permissible either to mend or bend it
even if such recasting is in accord with good reason
and conscience. In such circumstances, it is not
possible for the court to remake the statute. Its only
duty is to strike it down and leave it to the legislature
if it so desires, to amend it. What is further, if the
remaking of the statute by the courts is to lead to its
distortion that course is to be scrupulously avoided.
One of the situations further where the doctrine can
never be called into play is where the statute
requires extensive additions and deletions. Not only
it is no part of the court's duty to undertake such
exercise, but it is beyond its jurisdiction to do so.”
[para 255]

35. Applying the aforesaid test to the Impugned Regulation, it

is clear that the language of the Regulation is definite and

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

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Page 56
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. For this reason, it

is not possible to accept the learned Attorney General’s

contention that the Impugned Regulation be read down in the

manner suggested by him.

36. The other string to the bow of this argument is 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. This again falls foul of constitutional doctrine.

In Collector of Customs v. Nathella Sampathu Chetty,

(1962) 3 SCR 786, this Court held:

“The possibility of abuse of a statute otherwise valid

does not impart to it any element of invalidity. The
converse must also follow that a statute which is
otherwise invalid as being unreasonable cannot be
saved by its being administered in a reasonable
manner. The constitutional validity of the statute
would have to be determined on the basis of its

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Page 57
 provisions and on the ambit of its operation as
reasonably construed. If so judged it passes the test
of reasonableness, possibility of the powers
conferred being improperly used is no ground for
pronouncing the law itself invalid and similarly if the
law properly interpreted and tested in the light of the
requirements set out in Part III of the Constitution
does not pass the test it cannot be pronounced valid
merely because it is administered in a manner
which might not conflict with the constitutional
requirements.” [at pp.825 – 826]

37. This statement of the law applies on all fours to the facts

of the present case, and is a complete answer to the Attorney

General’s contention that the Impugned Regulation would be

administered so that the service provider would be liable under

it only when it is at fault for call drops.

38. The learned Attorney General has argued that the

Impugned Regulation accords with the Statement of Objects

and Reasons of the TRAI Act, 1997. As has been pointed out by

us, the original Act was amended in the year 2000, in which its

Preamble was substituted. The substitution indicates that 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. We are afraid that the

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Page 58
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.

39. We were then told that the Impugned Regulation was

framed keeping in mind the small consumer, that is, a person

who has a pre-paid SIM Card with an average balance of

Rs.10/- at a time, and that the Regulation goes a long way to

compensate such person. The motive for the Regulation may

well be what the Attorney General says it is, 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.

40. We were also told that huge profits were made by the

service providers, and that the amount they would have to pay

would not even be a flea bite compared to the profits they

make, viewed in the background that they are not pouring in

enough funds for infrastructure development. This was stoutly

resisted by the appellants, pointing out that the so called huge

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Page 59
profits earned is misleading, as the figure of net debt is far

greater than that of revenue earned, and that huge sums had

been pumped in for infrastructure development. Without going

into the factual controversy thus presented, there are two

answers to this submission. First and foremost, whether the

service providers make profits or losses cannot be said to be

relevant for determining whether the Impugned Regulation is

otherwise arbitrary or unreasonable. If the Attorney General

were correct, then the converse proposition would also be true

– namely, that even if all the service providers were suffering

huge losses, then such regulation, since it makes them fork out

crores of rupees and add to their losses, would have to be held

to be unconstitutional. Assuming that six out of the twelve

service providers make profits, and the other six make losses,

the Impugned Regulation cannot be held to be constitutional so

far as those making a profit, and unconstitutional qua those

making losses. And what if the same service provider makes a

profit in one year and a loss in the succeeding year. Is the

Impugned Regulation unconstitutional in the first year and

constitutional in the succeeding year? Obviously not.

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Secondly, 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.

Consequently, this submission is also without substance.

41. The learned Attorney General strongly relied upon a

passage from a Constitution Bench judgment in Prag Ice & Oil

Mills v. Union of India, (1978) 3 SCC 459, to the following

effect:-

“The Parliament having entrusted the fixation of

prices to the expert judgment of the Government, it
would be wrong for this Court, as was done by
common consent in Premier Automobiles [20 L Ed
2d 312] to examine each and every minute detail
pertaining to the Governmental decision. The
Government, as was said in Permian Basin Area
Rate cases, is entitled to make pragmatic
adjustments which may be called for by particular
circumstances and the price control can be declared
unconstitutional only if it is patently arbitrary,
discriminatory or demonstrably irrelevant to the
policy which the legislature is free to adopt. The
interest of the producer and the investor is only one
of the variables in the “constitutional calculus of
reasonableness” and courts ought not to interfere
so long as the exercise of Governmental power to
fix fair prices is broadly within a “zone of
reasonableness”. If we were to embark upon an

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 examination of the disparate contentions raised
before us on behalf of the contending parties, we
have no doubt that we shall have exceeded our
narrow and circumscribed authority.

Before closing, we would like to mention that the

petitioners rushed to this Court too precipitately on
the heels of the Price Control Order. Thereby they
deprived themselves of an opportunity to show that
in actual fact, the Order causes them irreparable
prejudice. Instead, they were driven through their
ill-thought haste to rely on speculative hypothesis in
order to buttress their grievance that their right to
property and the right to do trade was gone or was
substantially affected. A little more patience, which
could have been utilised to observe how the
experiment functioned, might have paid better
dividends.” (para 71).

42. The observations made in the aforesaid judgment are

wholly distinguishable. In the present case, 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 interim and/or other relief

on the ground that they have not moved the Court without

undue delay. Also, to say that the Impugned Regulation is only

an experimental measure that would last in its present form for

six months is again wholly incorrect. The Impugned Regulation

begins to tick on and from 1.1.2016, in which case three rupees

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per day, for call drops made not exclusively owing to the fault of

the service provider, would have to be paid. Further, 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. We are, therefore, unable to subscribe to the aforesaid

submission.

43. We now come to a very important part of the submissions

made on behalf of the appellants. The appellants have strongly

contended that a 2% allowance of call drops on the basis of

averaging call drops per month has been allowed to them by

the Quality of Service Regulations already referred to

hereinabove. This would amount to the Authority penalizing the

service provider even when it complies with another regulation

made under the same source of power, and for this reason

alone, the Impugned Regulation must be held to be bad as

being manifestly arbitrary. The learned Attorney General

refuted this submission in two ways. First, he argued that

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Quality of Service Regulations and regulations made to benefit

consumers must be viewed separately, as they are distinct

regulations in parallel streams. He also argued that the 2%

average allowance for call drops is different and distinct from

paying compensation for call drops inasmuch as, conceivably,

in a given set of facts, call drops may take place extensively in

a given sector but not in other sectors so that an average of 2%

per month is yet maintained, but the service provider would be

penalized as it has not been able to maintain a 3% standard

laid down qua deficiency of service in individual towers leading

to call drops. However, the persons who suffer in the sector in

which call drops are many and frequent would then have no

protection. We are afraid neither of these reasons avails the

Authority. First and foremost, the 2009 Quality of Service

Regulation is made under Section 11(1)(b)(v), which is the very

Section which is claimed to be the source of the Impugned

Regulation. Secondly, both 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

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it is the admitted position that all service providers before us,

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 and

19(1)(g).

44. In this regard, it would be of assistance to note what this

Court held in The Lord Krishna Sugar Mills Ltd. and Anr. v.

Union of India and Anr., [1960] 1 SCR 39:

“It is, however, contended that though one can look

at the surrounding circumstances, it is not open to
the Court to examine other laws on the subject,
unless those laws be incorporated by reference. In
our opinion, this is a fallacious argument. The Court
in judging the reasonableness of a law, will
necessarily see, not only the surrounding
circumstances but all contemporaneous legislation
passed as part of a single scheme. The
reasonableness of the restriction and not of the law
has to be found out, and if restriction is under one
law but countervailing advantages are created by
another law passed as part of the same legislative
plan, the Court should not refuse to take that other
law into account.” [at para 56]

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45. In view of the aforesaid, it is clear that 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

Impugned Regulation manifestly arbitrary and unreasonable.

46. Secondly, no facts have been shown to us which would

indicate that a particular area would be filled with call drops

thanks to the fault on the part of the service providers in which

consumers would be severely inconvenienced. The mere ipse

dixit of the learned Attorney General, without any facts being

pleaded to this effect, cannot possibly make an unconstitutional

regulation constitutional. We, therefore, hold that 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

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consumer who may himself be at fault, and which gives an

unjustifiable windfall to such consumer, is also manifestly

arbitrary and unreasonable. In the circumstances, it is not

necessary to go into the appellants’ submissions that call drops

take place because of four reasons, three of which are not

attributable to the fault of the service provider, which includes

sealing and shutting down towers by municipal authorities over

upon they have no control, or whether they are attributable to

only two causes, as suggested by the Attorney General, being

network related causes or user related causes. Equally, it is not

necessary to determine finally as to whether the reason for a

call drop can technologically be found out and whether it is a

network related reason or a user related reason.

47. In Shree Bhagwati Steel Rolling Mills v. Commissioner

of Central Excise, (2016) 3 SCC 643, Rules 96 –ZO, ZP and

ZQ of the Central Excise Rules, 1994, which consisted inter alia

of penalty provisions, were struck down by this Court. One of

the reasons for striking down the aforesaid Rules is that a

mandatory penalty became leviable despite the fact that fault

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on the part of assessee could not be established. This Court

held:

“It is also correct in saying that there may be

circumstances of force majeure which may prevent
a bona fide assessee from paying the duty in time,
and on certain given factual circumstances, despite
there being no fault on the part of the assessee in
making the deposit of duty in time, a mandatory
penalty of an equivalent amount of duty would be
compulsorily leviable and recoverable from such
assessee. This would be extremely arbitrary and
violative of Article 14 for this reason as well. Further,
we agree with the High Court in stating that this
would also be violative of the appellant's
fundamental rights under Article 19(1)(g) and would
not be saved by Article 19(6), being an
unreasonable restriction on the right to carry on
trade or business. Clearly the levy of penalty in
these cases of a mandatory nature for even one
day's delay, which may be beyond the control of the
assessee, would be arbitrary and excessive.” [at
para 35]

48. In the present case, also, a mandatory penalty is payable

by the service provider for call drops that may take place which

are not due to its fault, and may be due to the fault of the

recipient of the penalty, which is violative of Articles 14 and

19(1)(g).

49. The reason given in the Explanatory Memorandum for

compensating the consumer is that the compensation given is

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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 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 for the additional

expense made by the receiving party. All this betrays a

complete lack of intelligent care and deliberation in framing

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such a regulation by the Authority, rendering the Impugned

Regulation manifestly arbitrary and unreasonable.

50. However, the learned Attorney General referred to a

recent judgment being DSC-Viacon Ventures Pvt. Ltd. (Now

Known as DSC Ventures Pvt. Ltd) v. Lal Manohar Pandey

and Ors., (Civil Appeal Nos. 6781-6782 of 2015, decided on

August 27, 2015). He referred to paragraph 21 in order to show

that a certain amount of guess work is unavoidable in matters

of this nature.

51. The context in which this statement occurs in paragraph

21 is very different from the present context. This Court held

that a toll can only be collected for maintaining a road. The

patches in which the road is not properly maintained should

reduce proportionately the amount of toll that is to be paid. As

there was no data in that case to indicate the extent of road

length and the resultant inconvenience to users of the road, a

certain amount of guess work was said to be unavoidable. The

present is a case in which we are not informed as to how rupee

one is computed, how three call drops per day has been arrived

at, or why the calling party alone is provided compensation.

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These matters go out of mere guess work, and into the realm of

unreasonableness, as obviously, as has been held by us, there

was no intelligent care and deliberation before any of these

parameters have been fixed.

52. We have already seen that the Impugned Regulation is

dated 16.10.2015, which was to come into force only on

1.1.2016. We have been shown a technical paper issued by

the same Authority on 13.11.2015 i.e. a few days after the

Impugned Regulation, in which the Authority has itself

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 gone ahead with the Impugned Regulation, which states

that the said Regulation has been brought into force because of

deficiency of service in service providers leading to call drops.

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

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bothered to have a relook into the said problem. For all the

aforesaid reasons, we find that 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.

53. Viewed at from a slightly different angle it is clear that if

an individual consumer were to go to the consumer forum for

compensation for call drops, he would have to prove that the

call drop took place due to the fault of the service provider. He

would further have to prove that he has suffered a monetary

loss for which he has to be compensated, which the

Explanatory Memorandum itself says is impossible to compute.

Thus, the Impugned Regulation completely avoids the

adjudicatory process, 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 Consumer Forum, or in a dispute as a group with service

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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.

54. We have seen that the 2000 Amendment has taken away

adjudicatory functions from the TRAI, leaving it with

administrative and legislative functions. By Section 14 of the

Act, adjudicatory functions have been vested in an Appellate

Tribunal, where disputes between a group of consumers and

the service providers are to be adjudicated by the Appellate

Tribunal. In stark contrast, under the scheme of the Electricity

Act, 2003, the Central Electricity Regulatory Commission and

the various State Electricity Regulatory Commissions have to

discharge legislative, administrative, and quasi-judicial

functions. This is clear on a reading of Section 79(1)(f) and

Section 86(1)(f) of the Electricity Act, which are set out

hereinbelow:-

“Section 79. Functions of Central Commission:

--- (1) The Central Commission shall discharge the
following functions, namely:-
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 (f) to adjudicate upon disputes involving generating
companies or transmission licensee in regard to
matters connected with clauses (a) to (d) above and
to refer any dispute for arbitration;
Section 86. Functions of State Commission: ---
(1) The State Commission shall discharge the
following functions, namely: -
(f) adjudicate upon the disputes between the
licensees, and generating companies and to refer
any dispute for arbitration.”

55. Secondly, as part of the adjudicatory process,

compensation can be paid to an affected person if a licensee

fails to meet standards prescribed without prejudice to any

penalty which may be imposed or prosecution which may be

initiated. This takes place under Section 57 of the said Act,

which reads as under:-

“Section 57. Consumer Protection: Standards of

performance of licensee: (1) The Appropriate
Commission may, after consultation with the
licensees and persons likely to be affected, specify
standards of performance of a licensee or a class of
licensees.
(2) If a licensee fails to meet the standards specified
under sub-section (1), without prejudice to any
penalty which may be imposed or prosecution be
initiated, he shall be liable to pay such
compensation to the person affected as may be
determined by the Appropriate Commission:
Provided that before determination of

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 compensation, the concerned licensee shall be
given a reasonable opportunity of being heard.
(3) The compensation determined under
sub-section (2) shall be paid by the concerned
licensee within ninety days of such determination.”

56. Obviously, when such 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

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consumer himself, renders the Impugned Regulation manifestly

arbitrary and unreasonable.

Modification of licence condition by Impugned Regulation

57. The appellants have also argued that the Impugned

Regulation seeks to modify the licence conditions, and the

licence conditions being a contract between the service

provider and the consumer, such conditions can be modified

only where the statute contains language by which an Authority

is empowered to disregard an agreement between the parties.

It will be seen that Section 11(1)(b)(ii), which has been set out

hereinabove, expressly contains such language and therefore

states that terms and conditions of interconnectivity between

the service providers may be fixed notwithstanding anything

contained in the terms and conditions of the licence granted

before the commencement of the TRAI Amendment Act, 2000.

58. The same kind of language is contained in Section 402(d)

of the Companies Act, 1956, which reads as follows:-

“Section 402. POWERS OF TRIBUNAL ON

APPLICATION UNDER SECTION 397 OR 398.

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 Without prejudice to the generality of the powers of
the Tribunal under section 397 or 398, any order
under either section may provide for –
(d) the termination, setting aside or modification of
any agreement, howsoever arrived at, between the
company on the one hand, and any of the following
persons, on the other, namely :
(i) the managing director,
(ii) any other director,
(iii) and (iv) [***]
(v) the manager, upon such terms and conditions
as may, in the opinion of the Tribunal be just
and equitable in all the circumstances of the
case.”

59. The said Section is now contained in Section 242(2)(e) of

the Companies Act, 2013.

“242. Powers of the Tribunal.

(2) Without prejudice to the generality of the powers
under sub-section (1), an order under that
sub-section may provide for—
(e) the termination, setting aside or modification, of
any agreement, howsoever arrived at, between the
company and the managing director, any other
director or manager, upon such terms and
conditions as may, in the opinion of the Tribunal, be
just and equitable in the circumstances of the case.”

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60. We were also referred to Section 27(d) of the Competition

Act, 2002, in this behalf which reads as follows:

“27. Orders by Commission after inquiry into

agreements or abuse of dominant position. Where
after inquiry the Commission finds that any
agreement referred to in section 3 or action of an
enterprise in a dominant position, is in contravention
of section 3 or section 4, as the case may be, it may
pass all or any of the following orders, namely:—
(d) direct that the agreements shall stand modified
to the extent and in the manner as may be specified
in the order by the Commission;.”

61. In Union of India v. Assn. of Unified Telecom Service

Providers of India, (2011)10 SCC 543, this Court held:

“A Constitution Bench of this Court in State of

Punjab v. Devans Modern Breweries Ltd. [(2004) 11
SCC 26] relying on Har Shankar case [(1975) 1
SCC 737] and Panna Lal v. State of
Rajasthan [(1975) 2 SCC 633] has held in para 121
at p. 106 that issuance of liquor licence constitutes
a contract between the parties. Thus, once a licence
is issued under the proviso to sub-section (1) of
Section 4 of the Telegraph Act, the licence becomes
a contract between the licensor and the licensee.”
(para 40).

62. Having regard to the above, it is clear that the licence

conditions, which are a contract between the service providers

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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, and 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. We have already seen that 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 Regulation does not lay down quality of

service standards. This being so, it is clear that the laying down

of a penalty de hors condition 28, which, as we have seen, also

requires establishing of fault of the service provider when it

does 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 this ground

also, therefore, the Impugned Regulation deserves to be struck

down.

Transparency

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63. Section 11(4) of the 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, we find, in a later Parliamentary

Enactment, namely, the Airports Economic Regulatory Authority

of India Act, 2008, that Section 13 deals with the functions of

the Airports Economic Regulatory Authority, (which is an

Authority which has legislative and administrative functions).

“Transparency” is defined, by sub-section (4), as follows:-

“THE AIRPORTS ECONOMIC REGULATORY

AUTHORITY OF INDIA ACT, 2008
13. Functions of Authority.
(4) The Authority shall ensure transparency while
exercising its powers and discharging its functions,
inter alia,—
(a) by holding due consultations with all
stake-holders with the airport;
(b) by allowing all stake-holders to make their
submissions to the authority; and
(c) by making all decisions of the authority fully
documented and explained.”

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64. This definition of “transparency” provides a good working

test of ‘transparency’ referred to in Section 11(4) of the TRAI

Act.

65. In fact, a judgment of the Court of Appeal in England,

being Regina v. North and East Devon Health Authority, Ex

parte Coughlan, [2001] QB 213, puts the meaning of

“consultation” rather well as follows:-

“It is common ground that, whether or not

consultation of interested parties and the public is a
legal requirement, if it is embarked upon it must be
carried out properly. To be proper, consultation
must be undertaken at a time when proposals are
still at a formative stage; it must include sufficient
reasons for particular proposals to allow those
consulted to give intelligent consideration and an
intelligent response; adequate time must be given
for this purpose; and the product of consultation
must be conscientiously taken into account when
the ultimate decision is taken.”

66. 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, we find no discussion or reasoning dealing with the

arguments put forward by the service providers, that call drops

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take place for a variety of reasons, some of which are beyond

the control of the service provider and are because of the

consumer himself. Consequently, we find that the conclusion

that service providers are alone to blame and are consequently

deficient in service when it comes to call drops is not a

conclusion which a reasonable person can reasonably arrive at.

We are cognizant of the fact that 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.

67. In Union of India v. Cynamide India Ltd., (1987) 2 SCC

720, this Court held:

“The second observation we wish to make is,

legislative action, plenary or subordinate, is not
subject to rules of natural justice. In the case of
Parliamentary legislation, the proposition is
self-evident. In the case of subordinate legislation, it
may happen that Parliament may itself provide for a
notice and for a hearing — there are several
instances of the legislature requiring the
subordinate legislating authority to give public notice
and a public hearing before say, for example,
levying a municipal rate — in which case the
substantial non-observance of the statutorily
prescribed mode of observing natural justice may
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 have the effect of invalidating the subordinate
legislation. The right here given to rate payers or
others is in the nature of a concession which is not
to detract from the character of the activity as
legislative and not quasi-judicial. But, where the
legislature has not chosen to provide for any notice
or hearing, no one can insist upon it and it will not
be permissible to read natural justice into such
legislative activity.” [para 5]

68. Similarly, in M.R.F. Ltd. v. Inspector Kerala Govt.,

(1998) 8 SCC 227, this Court held:

“Learned counsel for the appellants contended that

before raising the national and festival holidays from
their original number under the Parent Act to the
number of days contemplated by the Amending Act,
the industries or their representatives should have
been given an opportunity of a hearing. This
argument is wholly untenable. The principles of
natural justice cannot be imported in the matter of
legislative action. If the legislature in exercise of its
plenary power under Article 245 of the Constitution,
proceeds to enact a law, those who would be
affected by that law cannot legally raise a grievance
that before the law was made, they should have
been given an opportunity of a hearing.
This principle may, in limited cases, be invoked in
the case of subordinate legislation specially where
the main legislation itself lays down that before the
subordinate legislation is made, a public notice shall
be given and objections shall be invited as is usually
the case, for example, in the making of municipal
bye-laws. But the principle of natural justice,
including the right of hearing, cannot be invoked in

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 the making of law either by Parliament or by the
State Legislature.” [paras 23 – 24]

69. The question of transparency raises a more fundamental

question, namely, that of openness in governance. We find that

the Right to Information Act of 2005 has gone a long way to

strengthen democracy by requiring that the Government be

transparent in its actions, so that an informed citizenry is able

then to contain corruption, and hold Governments and their

instrumentalities accountable to the people of India. The

preamble to the said Act, in ringing terms, states:-

“WHEREAS the Constitution of India has

established democratic Republic;
AND WHEREAS democracy requires an informed
citizenry and transparency of information which are
vital to its functioning and also to contain corruption
and to hold Governments and their instrumentalities
accountable to the governed;
AND WHEREAS revelation of information in actual
practice is likely to conflict with other public interests
including efficient operations of the Governments,
optimum use of limited fiscal resources and the
preservation of confidentiality of sensitive
information;
AND WHEREAS it is necessary to harmonise these
conflicting interests while preserving the
paramountcy of the democratic ideal;

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 Now, THEREFORE, it is expedient to provide for
furnishing certain information to citizens who desire
to have it.”

70. We find that under Section 4(1) every public authority is

not only to maintain all its records duly catalogued and indexed

but is to publish, within 120 days from the enactment of the said

Act, the procedure followed by it in its decision making process,

which includes channels of supervision and accountability.

Section 4(1)(b)(iii) states:

“4. Obligations of public authorities. —(1) Every

public authority shall—
(b) publish within one hundred and twenty days
from the enactment of this Act,—
(iii) the procedure followed in the decision making
process, including channels of supervision and
accountability.”

71. Under Section 8, there is no obligation to give to any

citizen information disclosure of which would prejudicially affect

the sovereignty and integrity of India, the security of the State

etc. Subject, therefore, to well-defined exceptions, openness in

governance is now a legislatively established fact. In fact, in

Chief Information Commissioner v. State of Manipur, (2011)

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15 SCC page 1, this Court had occasion to deal with the

aforesaid Act in the following terms:

“Before dealing with the controversy in this case, let

us consider the object and purpose of the Act and
the evolving mosaic of jurisprudential thinking which
virtually led to its enactment in 2005.
As its Preamble shows, the Act was enacted to
promote transparency and accountability in the
working of every public authority in order to
strengthen the core constitutional values of a
democratic republic. It is clear that Parliament
enacted the said Act keeping in mind the rights of
an informed citizenry in which transparency of
information is vital in curbing corruption and making
the Government and its instrumentalities
accountable. The Act is meant to harmonise the
conflicting interests of the Government to preserve
the confidentiality of sensitive information with the
right of citizens to know the functioning of the
governmental process in such a way as to preserve
the paramountcy of the democratic ideal. The
Preamble would obviously show that the Act is
based on the concept of an open society.
On the emerging concept of an “open Government”,
about more than three decades ago, the
Constitution Bench of this Court in State of
U.P. v. Raj Narain [(1975) 4 SCC 428 : AIR 1975 SC
865] speaking through Mathew, J. held: (SCC p.
453, para 74)
“74. … The people of this country have a right to
know every public act, everything that is done in a
public way, by their public functionaries. They are
entitled to know the particulars of every public
transaction in all its bearing.The right to know,
which is derived from the concept of freedom of
speech, though not absolute, is a factor which
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should make one wary, when secrecy is claimed for
transactions which can, at any rate, have no
repercussion on public security. [Ed.: See New York
Times Co. v. United States, 29 L Ed 2d 822 : 403
US 713 (1971).] To cover with veil of secrecy, the
common routine business, is not in the interest of
the public. Such secrecy can seldom be legitimately
desired.” (AIR p. 884, para 74)
(emphasis supplied)
Another Constitution Bench in S.P. Gupta v. Union
of India [1981 Supp SCC 87 : AIR 1982 SC 149]
relying on the ratio in Raj Narain [(1975) 4 SCC
428: AIR 1975 SC 865] held: (S.P. Gupta
case [1981 Supp SCC 87 : AIR 1982 SC 149] , SCC
p. 275, para 67)
“67. … The concept of an open Government is
the direct emanation from the right to know which
seems to be implicit in the right of free speech and
expression guaranteed under Article 19(1)(a).
Therefore, disclosure of information in regard to the
functioning of Government must be the rule and
secrecy an exception justified only where the
strictest requirement of public interest so demands.
The approach of the court must be to attenuate the
area of secrecy as much as possible consistently
with the requirement of public interest, bearing in
mind all the time that disclosure also serves an
important aspect of public interest.” (AIR p. 234,
para 66) (emphasis supplied)

It is, therefore, clear from the ratio in the above

decisions of the Constitution Bench of this Court
that the right to information, which is basically
founded on the right to know, is an intrinsic part of
the fundamental right to free speech and expression
guaranteed under Article 19(1)(a) of the
Constitution. The said Act was, thus, enacted to
consolidate the fundamental right of free speech.

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In Ministry of Information & Broadcasting, Govt. of
India v. Cricket Assn. of Bengal [(1995) 2 SCC 161]
this Court also held that right to acquire information
and to disseminate it is an intrinsic component of
freedom of speech and expression. (See p. 213,
para 43 of the Report.)
Again in Reliance Petrochemicals Ltd. v. Indian
Express Newspapers Bombay (P) Ltd. [(1988) 4
SCC 592] this Court recognised that the right to
information is a fundamental right under Article 21 of
the Constitution. This Court speaking through
Sabyasachi Mukharji, J., as His Lordship then was,
held: (SCC p. 613, para 34)
“34. … We must remember that the people at
large have a right to know in order to be able to take
part in a participatory development in the industrial
life and democracy. Right to know is a basic right
which citizens of a free country aspire in the broader
horizon of the right to live in this age in our land
under Article 21 of our Constitution. That right has
reached new dimensions and urgency. That right
puts greater responsibility upon those who take
upon themselves the responsibility to inform.”

In People's Union for Civil Liberties v. Union of India

[(2004) 2 SCC 476] this Court reiterated, relying on
the aforesaid judgments, that right to information is
a facet of the right to freedom of “speech and
expression” as contained in Article 19(1)(a) of the
Constitution of India and also held that right to
information is definitely a fundamental right. In
coming to this conclusion, this Court traced the
origin of the said right from the Universal
Declaration of Human Rights, 1948 and also Article
19 of the International Covenant on Civil and
Political Rights, which was ratified by India in 1978.
This Court also found a similar enunciation of
principle in the Declaration of European Convention
for the Protection of Human Rights (1950) and
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found that the spirit of the Universal Declaration of
1948 is echoed in Article 19(1)(a) of the
Constitution. (See paras 45, 46 and 47 at pp.
494-95 of the Report.)

The exercise of judicial discretion in favour of free

speech is not only peculiar to our jurisprudence, the
same is a part of the jurisprudence in all the
countries which are governed by the rule of law with
an independent judiciary. In this connection, if we
may quote what Lord Acton said in one of his
speeches:
“Everything secret degenerates, even the
administration of justice; nothing is safe that does
not show how it can bear discussion and publicity.”

It is, therefore, clear that a society which adopts

openness as a value of overarching significance not
only permits its citizens a wide range of freedom of
expression, it also goes further in actually opening
up the deliberative process of the Government itself
to the sunlight of public scrutiny.

Frankfurter, J. also opined:

“The ultimate foundation of a free society is the
binding tie of cohesive sentiment. Such a sentiment
is fostered by all those agencies of the mind and
spirit which may serve to gather up the traditions of
a people, transmit them from generation to
generation, and thereby create that continuity of a
treasured common life which constitutes a
civilisation. ‘We live by symbols.’ The flag is the
symbol of our national unity, transcending all
internal differences, however large, within the
framework of the Constitution.”

Actually the concept of active liberty, which is

structured on free speech, means sharing of a
nation's sovereign authority among its people.
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 Sovereignty involves the legitimacy of
governmental action. And a sharing of sovereign
authority suggests intimate correlation between the
functioning of the Government and common man's
knowledge of such functioning. (Active Liberty by
Stephen Breyer, p. 15.)” [paras 5 – 16]

72. In another context also this Court has emphasized the

importance of openness of governance. In Global Energy Ltd.

V. Central Electricity Regulatory Commission, (2009) 15

SCC 570 at 589, this Court stated:

“The law sometimes can be written in such a

subjective manner that it affects the efficiency and
transparent function of the Government. If the
statute provides for pointless discretion to agency, it
is in essence demolishing the accountability strand
within the administrative process as the agency is
not under obligation from an objective norm, which
can enforce accountability in decision-making
process. All law-making, be it in the context of
delegated legislation or primary legislation, has to
conform to the fundamental tenets of transparency
and openness on one hand and responsiveness
and accountability on the other. These are
fundamental tenets flowing from due process
requirement under Article 21, equal protection
clause embodied in Article 14 and fundamental
freedoms clause ingrained under Article 19. A
modern deliberative democracy cannot function
without these attributes.”

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73. We have been referred to the U.S. Administrative

Procedure Act, Section 553 of which states as follows:-

5 USCA § 553

§ 553 - Rule making

(a)This section applies, according to the provisions

thereof, except to the extent that there is involved—
(1) a military or foreign affairs function of the United
States; or
(2) a matter relating to agency management or
personnel or to public property, loans, grants,
benefits, or contracts.
(b)General notice of proposed rule making shall be
published in the Federal Register, unless persons
subject thereto are named and either personally
served or otherwise have actual notice thereof in
accordance with law. The notice shall include—
(1) a statement of the time, place, and nature of
public rule making proceedings;
(2) reference to the legal authority under which the
rule is proposed; and
(3) either the terms or substance of the proposed
rule or a description of the subjects and issues
involved.

Except when notice or hearing is required by

statute, this subsection does not apply—
(A) to interpretative rules, general statements of
policy, or rules of agency organization, procedure,
or practice; or
(B) when the agency for good cause finds (and
incorporates the finding and a brief statement of
reasons therefor in the rules issued) that notice and
public procedure thereon are impracticable,
unnecessary, or contrary to the public interest.
(c) After notice required by this section, the agency
shall give interested persons an opportunity to
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participate in the rule making through submission of
written data, views, or arguments with or without
opportunity for oral presentation. After consideration
of the relevant matter presented, the agency shall
incorporate in the rules adopted a concise general
statement of their basis and purpose. When rules
are required by statute to be made on the record
after opportunity for an agency hearing, sections
556 and 557 of this title apply instead of this
subsection.
(d)The required publication or service of a
substantive rule shall be made not less than 30
days before its effective date, except—
(1) a substantive rule which grants or recognizes an
exemption or relieves a restriction;
(2) interpretative rules and statements of policy; or
(3) as otherwise provided by the agency for good
cause found and published with the rule.
(e) Each agency shall give an interested person the
right to petition for the issuance, amendment, or
repeal of a rule.”
In Corpus Juris Secundum (March 2016 Update) it
is stated:
“Under the informal rulemaking requirements of the
Federal Administrative Procedure Act, after a
federal administrative agency considers the relevant
matter presented, it must incorporate in the rules
adopted a concise general statement of their basis
and purpose. The purpose of the requirement is to
enable courts, which have the duty to exercise
review, to be aware of the legal and factual
framework underlying the agency’s actions. The
requirement is a means of holding an agency
accountable for administering the laws in a
responsible manner, free from arbitrary conduct.
The statement is not intended to be an abstract

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explanation addressed to an imaginary complaint
but is intended, rather, to respond in a reasoned
manner to the comments received, to explain how
the agency resolved the significant problems raised
by the comments, and to show how that resolution
led the agency to the ultimate rule. The statement
must identify what major issues of policy were
ventilated and why the agency reacted to them as it
did and should enable a reviewing court to ascertain
such matters. The statement must respond to the
major comments received, explain how they
affected the regulation, and, where an old regulation
is being replaced, explain why the old regulation is
no longer desirable.
Agencies have a good deal of discretion in
expressing the basis of a rule. The requirement is
not to be interpreted over literally, but it should not
be stretched into a mandate to refer to all specific
issues raised in the comments on the proposed
regulations. Although an agency must genuinely
consider comments it receives from interested
parties, there is no requirement that an agency
discuss in great detail all comments, especially
those which are frivolous or repetitive. Although the
agency need not address every comment received,
it must respond in a reasoned manner to those that
raise significant problems, to explain how the
agency resolved any significant problems raised by
the comments, and to show how that resolution led
the agency to the ultimate rule. Conclusory
statements will not fulfill the administrative agency’s
duty to incorporate in adopted rules a concise
general statement of their basis and purpose. The
agency must articulate a satisfactory explanation for
its action, including a rational connection between
the facts it found and the choices it made. Under
some circumstance, agencies must identify specific
studies or data that they rely upon in arriving at their
decision to adopt a rule.

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 Regulations which lack a statement of basis and
purpose may be upheld if the basis and purpose
and obvious. Moreover, the failure of an agency to
incorporate the statement does not render a rule
ineffective as to parties to litigation who had
knowledge of the rule.
Despite the statutory language mandating that the
statement of basis of purposes be “incorporate[d] in
the rules adopted,” the statement of basis and
purpose does not have to be published at precisely
the same moment as the rules. Rather, the rules
and statement need only be published close enough
together in time so that there is no doubt that the
statement accompanies, rather than rationalizes,
the rules.”

74. We find that, subject to certain well defined exceptions, it

would be a healthy functioning of our democracy if all

subordinate legislation were to be “transparent" in the manner

pointed out above. Since it is beyond the scope of this

judgment to deal with subordinate legislation generally, and in

particular with statutes which provide for rule making and

regulation making without any added requirement of

transparency, we would exhort Parliament to take up this issue

and frame a legislation along the lines of the U.S.

Administrative Procedure Act (with certain well defined

exceptions) by which all subordinate legislation is subject to a

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transparent process by which due consultations with all

stakeholders are held, and the rule or regulation making power

is exercised after due consideration of all stakeholders’

submissions, together with an explanatory memorandum which

broadly takes into account what they have said and the reasons

for agreeing or disagreeing with them. Not only would such

legislation reduce arbitrariness in subordinate legislation

making, but it would also conduce to openness in governance.

It would also ensure the redressal, partial or otherwise, of

grievances of the concerned stakeholders prior to the making of

subordinate legislation. This would obviate, in many cases, the

need for persons to approach courts to strike down subordinate

legislation on the ground of such legislation being manifestly

arbitrary or unreasonable.

75. In the present case, we find that the High Court judgment

is flawed for several reasons. The judgment is not correct when

it says that there can be no dispute that the Impugned

Regulation has been made to ensure quality of service

extended to consumers by service providers. As has been

pointed out hereinabove, the Impugned Regulation does not lay

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down any quality of service – what it does is to penalise service

providers even though they conform to the 2% standard laid

down by the Quality of Service Regulations, 2009. In holding

that the Impugned Regulation therefore conforms to Section

11(1)(b)(v), the judgment is plainly incorrect. Similarly, the

finding that notional compensation is given, and that therefore

no penalty is imposed, is also wrong and set aside for the

reasons given by us hereinabove. The finding that a transparent

process was followed by TRAI in making the Impugned

Regulation is only partly correct. While it is true that all

stakeholders were consulted, but unfortunately nothing is

disclosed as to why service providers were incorrect when they

said that call drops were due to various reasons, some of which

cannot be said to be because of the fault of the service

provider. Indeed, the Regulation, in assuming that every call

drop is a deficiency of service on the part of the service

provider, is plainly incorrect. Further, the High Court judgment,

when it speaks of the technical paper of 13.11.2015, seems to

have mixed it up with the consultation paper dated 4.9.2015

referred to in the Explanatory Memorandum to the Impugned

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Regulation. The judgment has entirely missed the fact that the

technical paper of 13.11.2015 unequivocally states that the

causes for call drops are many and are often beyond the

control of service providers and attributable to the extent of

36.9% to the consumers themselves. The judgment is also

incorrect when it says that 100% performance is not demanded

from service providers when call drops are made. We have

already pointed out that the 2% standard has admittedly been

met by almost all the service providers, and this being so, even

if the very first call drop and all other subsequent call drops are

made within the network of a service provider and are within

the parameters of 2%, yet the penal consequence of the

amended regulation must follow. The judgment is also incorrect

in stating that the Impugned Regulation has attempted to

balance the interest of service providers by limiting call drops

to be compensated to only three and by limiting compensation

to only the calling and not the receiving consumer. We have

already pointed out that a penalty that is imposed without any

reason either as to the number of call drops made being three,

and only to the calling consumer, far from balancing the interest

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of consumers and service providers, is manifestly arbitrary, not

being based on any factual data or reason. We also find that

when the service provider argued that it was being penalised

despite being within the tolerance limit of 2%, the answer given

by the High Court is disingenuous, to say the least, when the

High Court says that 2% is a quality parameter for the entire

network as opposed to payment of compensation to an

individual consumer. We are unable to appreciate the aforesaid

reasoning. As has been held by us above, the two sets of

Regulations have to be considered together when the

Impugned Regulation is being tested on the ground of violation

of fundamental rights. Also, the High Court did not advert to a

large number of other submissions made by the appellants

before them and/or answer them correctly in law. As a result,

therefore, we set aside the judgment of the High Court and

allow these appeals, declaring that the Impugned Regulation is

ultra vires the TRAI Act and violative of the appellant’s

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fundamental rights under Articles 14 and 19(1)(g) of the

Constitution.

..............................J.
(Kurian Joseph)

..............................J.
(R.F. Nariman)
New Delhi;
May 11, 2016.

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