Bharti Airtel, Vodafone Idea shares rise as Bombay HC quashes govt decision to impose 1-time spectrum charge

Shares of telecom operators Bharti Airtel and Vodafone Idea advanced on Tuesday, June 9, a day after the Bombay High Court quashed the central government's 2012 decision to levy a one-time spectrum charge for spectrum held above 6.2 megahertz (MHz) from 2008 onwards.

A bench of Justices Manish Pitale and Shreeram Shirsat also set aside the demand notices issued by the centre seeking recovery of the one-time spectrum charge (OTSC) while noting that the Union government has not been able to show any source of power to issue such a decision and the consequent demand notices.

The bench observed that the centre, under the garb of public interest, has acted beyond the term of contract/licence between it and the telecom companies and has not been able to identify any source of power to issue the impugned decisions.

"We find that the government has not been able to justify its unilateral action of issuing the decision within the four corners of the terms and conditions of the contract/licence agreements or the relevant statutory provision and therefore the retrospective effect demonstrates it illegitimacy, rendering the same unsustainable and liable to be set aside," the court noted.

The two companies, in their plea, argued the centre has no power to impose such an OTSC and that, too, retrospectively under the provisions of the Telegraph Act.

In November 2012, the Union Cabinet took a decision that a one-time charge would be imposed for spectrum held beyond 6.2 MHz from July 2008 onwards. Following this, demand notices were issued to the petitioners (Bharti Airtel Ltd and Vodafone Idea Ltd) specifying the amounts payable by them towards one-time spectrum charge.

The companies moved the High Court in January 2013 against the decision and the demand notices. At the time, the HC had granted interim relief to the petitioners and said no coercive action shall be taken against them pending the hearing.

The court, in its judgement on Monday, said it cannot be contended that since spectrum is recognised as a scarce and finite natural resource, the Union of India would be entitled to resile from the terms of contract in a unilateral manner.

The court noted that under the provisions of the Telegraph Act, the government can execute a licence agreement, which is nothing but a contract consisting of clauses, terms and conditions that are binding on both parties.

"The government obviously cannot claim statutory power to act as per its own whim, notwithstanding the terms of the contract/licence executed as per the power available under the Act," the HC stated.