Licensees have no vested right for renewal or extension of licences : Supreme Court

By | November 6, 2015


Bharti Airtel Ltd.


Union of India


CIVIL APPEAL NOS. 1969, 2072, 2803, 5376 AND 9116 OF 2014
WRIT PETITION (CIVIL) NOS. 180, 971 AND 1056 OF 2014

MAY  14, 2015

On behalf of the licensees, the following submissions are made:

  1. The licences, such as the one under consideration in this batch of matters, are nothing but contracts between the Union of India and the Licensees. They secured the licences in the year 1994-95 admittedly through a transparent process of bidding. Under the terms of the said licences/contract, the Licensees have a right to have their claim for extension appropriately considered in terms of the contract. Therefore, the respondents are neither entitled nor justified in calling upon the Licensees to participate in the auction of the spectrum to obtain the necessary spectrum to work their respective licences.
  2. Such a decision of the respondent is violative of the contractual rights of the Licensees. It is also the case of the Licensees that under the terms of the licence, they are entitled to seek an extension, but not a ‘renewal’ of the licence. The employment of the word ‘extension’ in the licence confers a higher right than the right to seek a renewal.
  3. The principle that the State owned resources cannot be alienated except by a process of auction is not a principle applicable universally and is so clarified by this court in Natural Resources Allocation, Special Reference No. 1 of 2012, In re (2012) 4 Comp. LJ 225 (SC).
  4. The decision of this court in 2G Case (2012) 1 Comp LJ 497 (SC) by which this court found fault with the policy of the Government of India to grant licences on the basis of ‘first come first serve’ without auctioning the spectrum is applicable only to the licences granted in 2008 but not to every licence granted under section 4 of the Indian Telegraph Act, 1885.
  5. Maximization of revenue shall not be the only consideration for the Union of India while deciding to hold the auction in question. Union of India was under an obligation to ensure continuity of telecom services to millions of people who are already utilizing services of the existing operators. Introducing new operators at this stage would cause disruption in the service to the customers and likely to create an unhealthy competition for access to spectrum which would eventually burden the ultimate consumer.
  6. Each of the Licensees has made a huge investment in the infrastructure for the purpose of providing services to its customers. Such infrastructure is created by borrowing from various banks and financial institutions. If the licences of the Licensees are not extended, it would result in a huge wastage of the national financial and material resources. If the licences of the existing operators are not renewed, such infrastructure would simply go waste resulting into not only loss to the national resources but also lead to a situation in which the recovery of the loans obtained by various operators would become doubtful.
  7. Under the TRAI Act, the authority, constituted under section 3, is under an obligation to make recommendations either suo motu or on a request of the Central Government regarding the terms and conditions of licence to a service provider and efficient management of available spectrum. The authority also has a duty to ‘ensure compliance of terms and conditions of a license’. The Government of India in violation of such statutory stipulation ignored the recommendation made by the authority and put the spectrum in auction.

On behalf of the Union of India, it is argued by the learned Solicitor General

that none of the Licensees have any vested right for either renewal or extension of their respective licences. Under the terms and conditions of the licences, the Licensees are only entitled for a consideration of their claim for extension of their licences period. However, such a right is subject to the following conditions:

* There must be a request from the licensee for such an extension of the period of licence;

* Such a request must be made during the 19th year from the effective date of the licence;

* The extension of the licence is at the discretion of the Licensor as is evident from the language of the relevant clauses of the license which states that the Licensor may extend;

* That condition of clause 4.1 which says that ‘the decision of the Licensor in regard to the grant of extension is final’ indicates that the discretion vested in the Licensor is absolute.


Under the terms of the license, the Licensor is required to extend the license only on ‘mutually agreed terms and conditions’, if such an extension is sought in the 19th year of the currency of the licence. To test the correctness of the submission that under the contract, the Licensor is under an obligation to consider the extension of licence, we take an example of a case where the Licensee does not make an application in the 19th year but makes it just a few days before the expiry of the 20th year. Does the Licensee still have a right of consideration? In our opinion, the answer should be ‘No’ for two reasons; (i) that such a claim is plainly unsupported by the text of the contract, (ii) the failure to seek extension in the 19th year, makes the continuance of the service to the public uncertain. The Government of India cannot afford to remain waiting without making alternative arrangements, because the disruption in the communication in the modern world may lead to many undesirable consequences apart from causing inconvenience to the public. Take the alternative possibility of the Licensee not making an application for extension at all because he is not interested in the extension (a very unlikely scenario). Can the Licensor insist that the licensee should continue to offer the service either on the same economic considerations or otherwise? The answer seems to be plain and ‘No’. The language of the contract—’mutually agreed terms’—clearly indicates so, though it requires an examination whether the Licensor, i.e., the State, can compel the Licensee in a given case in exercise of its authority, either legislative or executive. Therefore, under the contract, neither the Licensor nor the Licensee has a right to insist that other party should continue with the contract even if such other party is not willing to continue except on such terms and conditions on which the other party may desire to continue. Such terms and conditions obviously include terms and conditions regarding the economic stipulations subject to which either of the parties is willing to be in the contract.

In the case in hand, the Licensees are not compelled to pay any specific tariffs fixed by the Licensor (Union of India), for availing the right to use the spectrum. If the price for securing allocation of spectrum is likely to go up because of the procedure of auctioning to have access to spectrum, it goes up because of the market forces. Because there are people who are willing to acquire such a right paying a higher price on the assessment that they would be able to carry on the business profitably even after paying higher amounts for acquisition of spectrum. The Licensees are corporate houses with enormous economic power, which enables them to secure adequate expert advice in the matter of financial planning. We cannot believe that they would make any investment without making a reasonable assessment of the possible return on such investment. There is no compulsion by the State in this regard.

Complete Judgement



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