While deciding that whether the Telecom Disputes Settlement and Appellate Tribunal was right in terming the action of the private telecom service providers (forming the appellant association) for levying differential tariffs for calls made from their network to the BSNL/MTNL networks compared to the calls made from one private telecom service provider to the other, as discriminatory, the Court upheld the decision of the Tribunal and stated that such classification of subscribers into two categories on the basis of calls made by them from private network to another private network and from private network to BSNL/MTNL network is arbitrary and fails to satisfy the test for reasonable classification laid down in State of West Bengal v. Anwar Ali Sarkar, AIR 1952 SC 75.
In the instant case, the appellant raised questions at the directive issued by the Telecom Regulatory Authority of India (TRAI) wherein they were directed to discontinue differential tariffs levied in the States of Maharashtra, West Bengal, Tamil Nadu and Uttar Pradesh for calls to the network of BSNL and MTNL as compared to calls terminating in the network of other private operators as it was discriminatory and inconsistent with the amended licence condition notified by the Department of Telecommunication. The counsel for the appellant Navin Chawla contended that prescribing differential tariffs does not violate Article 14 of the Constitution as the similarity of the class has to be decided on basis of similarity of the features of its constituents and the costs involved in the nature of the calls are different. Mohit Paul on behalf of the respondent argued that private GSM providers were duty bound to arrange leased lines to establish direct connection to the BSNL/MTNL networks as they had done amongst each other.
The Court on perusing the arguments and the factual situation, observed that TRAI in its Telecommunication Tariff Order, 1999 which is subject to periodical amendments, had inserted a ‘non-discrimination clause’ prohibiting the service providers to discriminate between the subscribers in matter of application of tariffs, but the issue was whether the clause is applicable to the subscribers making call to another private network from a private network as compared to the class making call from a private network to BSNL/MTNL network, to which the Court answered in positive and upheld the decision of the Tribunal terming the classification of subscribers on the ground that the call ends with the private parties and another on the ground that the call ends with BSNL/MTNL as arbitrary and discriminatory.
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO.1563 OF 2007
CELLULAR OPERATORS ASSOCIATION
OF INDIA & ORS.
VERSUS
TELECOM REGULATORY AUTHORITY
OF INDIA & ORS.
Dated;JANUARY 30, 2015.
This appeal has been preferred by the appellants against the
order
dated
22nd
December,
2006
passed
by
the
Telecom
Disputes
Settlement & Appellate Tribunal, New Delhi (hereinafter referred to
as the ‘Tribunal’) in Appeal No.2 of 2006 (with M.A. No.58 of 2006).
By the impugned order, the Tribunal while dismissing the appeal
disposed of the M.A.No.58 of 2006 with certain observations.
2.
The factual matrix of the case is as follows:
Appellant Nos.2 to 10 are private GSM cellular operators and
the first appellant is their Association. They have been issued
licences by the Central Government, Department of Telecommunication
(hereinafter
referred
to
as
‘DoT’)
under
Section
4
of
Indian
Telegraph Act, 1885 to establish, maintain and operate cellular
mobile
telephone
respective
service
services/unified
areas.
The
access
first
services
respondent
is
in
their
Regulatory
Page 1
2
Authority established under Section 3 of the Telecom Regulatory
Authority
of
India
Act,
1997
(hereinafter
referred
to
as
‘TRAI
Act’).
The first respondent-Authority issued a directive dated 27th
3.
February, 2006 wherein appellants - private mobile service providers
in the four States of Maharashtra, West Bengal, Tamil Nadu and Uttar
Pradesh were directed to discontinue differential tariffs levied in
the aforesaid four States for calls terminating in the network of
Bharat
Sanchar
Nigam
Limited
(hereinafter
referred
to
as
‘BSNL’)/Mahanagar Telephone Nigam Limited (hereinafter referred to
as ‘MTNL’) as compared to calls terminating in the network of other
private operators in another citing it to be discriminatory and
inconsistent with the amended licence condition notified by the DoT
on 20th May, 2005. The appellants complied with the directive dated
27th February, 2006 and submitted compliance report to the Authority.
4.
Subsequently,
first
by
its
directive
respondent-Authority,
inter
dated
alia,
22nd
March,
directed
the
2007,
the
appellants-
service providers to assess the total excess amount charged from the
subscribers; keep the entire amount in a separate Bank Account and
intimate the Authority the names of the Banks in which such amount
has been kept. After receipt of such notice dated 22 nd March, 2007
the
appellants
preferred
an
appeal
under
Section
14
read
with
Section 14A of the TRAI Act challenging the direction dated 27 th
February, 2006.
direction was
The
challenge
discriminatory
was
and
made
on
the
inconsistent
ground
with
the
licence conditions notified by the DoT on 20th May, 2005.
that
the
amended
The main
plea raised by the appellants justifying the differential half of
calls from private operator to another private operator vis-à-vis
Page 2
3
calls
from
private
operator
to
BSNL
network
was
that
direct
connectivity could be achieved between networks of private operators
but it could not be achieved between private operators and BSNL
network.
5.
Initially, BSNL/MTNL was not party to the said appeal.
The
Tribunal having noticed that the appeal pertains to the differential
tariff of calls from private operator to another private operator
vis-à-vis calls made from private operator to BSNL/MTNL network
directed the appellants to implead the BSNL/MTNL as respondent.
After hearing the parties, the Tribunal passed the impugned order
dated 22nd December, 2006 dismissing the appeal and disposing of the
M.A.No. 58 of 2006 with the observations and directions as quoted
above.
6.
In appreciation of the case, it is relevant to notice the
following facts:
For
grant
of
licences,
India
was
divided
into
four
metro
service areas of Delhi, Mumbai, Kolkata and Chennai and various
telecom circles which were roughly contiguous to the State of India.
In the first phase, licences were granted for the four metro service
areas in 1994 and thereafter in the Circles/States in 1995 defining
the geographical limits within which the licensee may operate and
offer the services. For Mumbai, Chennai, Kolkata and Delhi, in the
aforesaid manner, separate licences were issued by the DoT. Separate
and distinct licences were issued for the States of Maharashtra,
Tamil Nadu and West Bengal excluding the three metropolitan cities
of Mumbai, Chennai and Kolkata respectively for which licences were
given to MTNL. As far as State of Uttar Pradesh is concerned, it was
Page 3
4
divided into two Telecom circles, i.e., U.P. (East) and U.P.(West)
with separate licences for U.P.(East) and U.P.(West).
7.
The first respondent-Authority has laid down Inter Connection
Usage Charges (hereinafter referred to as ‘IUC’) with respect to the
changing for the use of network elements of other operators which
include termination charges, carriage charges and access deficit
charge for use of network elements of other operators. These charges
for inter-circle calls are different from those for intra-circle
calls. On 20th May, 2005, the Government of India notified that
inter-service
area
connectivity
between
access
providers
within
Mumbai Metro and Maharasthra Telecom Circle, Chennai Metro and Tamil
Nadu Telecom Circle, Kolkata Metro and West Bengal Telecom Circle
and
U.P.(East)
and
U.P.(West)
Telecom
Circle
service
areas
respectively, is permitted subject to condition that the access
provider will operate within the existing licensed service area and
shall
not
licensed
be
permitted
service
area
to
for
create
the
infrastructure
purpose
of
outside
inter-service
their
area
connectivity. It was further provided that the access provider may
take leased lines for such connectivity. With the above arrangement,
calls within a State in the above mentioned four states would be
treated as intra-service area calls for the purposes of routing as
well as ADC.
8.
The final result of the above said notification was that the
metros were merged with the respective State circles and the calls
from metros to the remaining areas of the respective States and in
case of U.P.(East) and U.P.(West) circles from one to the other,
were to be treated as intra-circle calls.
Page 4
5
9.
The appellants were charging higher tariff for calls made from
appellant’s network in the metros to the BSNL and MTNL networks in
the
remaining
areas
of
the
State
compared
to
calls
made
from
appellant’s network in the metros to another appellant’s network in
the remaining areas of the State. For example, a subscriber on a
private operator’s network calling from Mumbai to another private
operator’s subscriber at Nasik was being charged at low rate as
compared to a call made by the same subscriber from the same place
to BSNL subscriber at the other place. In this background, the first
respondent by Circular dated 27th February, 2006 observed that this
differential tariff was discriminatory and inconsistent with the
amended licence condition notified by the DoT on 20 th May, 2005 and,
therefore, directed the appellants to immediately discontinue such
differential tariff and asked for compliance of the same within 15
days.
10.
dated
As noticed above, the first respondent-authority vide Circular
No.101-15/2005-MN
dated
27th
February,
2006
observed
that
differential tariff was discriminatory and inconsistent with the
amended licence conditions notified by the DoT on 20th May, 2005 and,
therefore, directed the appellants to immediately discontinue such
differential tariff and ask for compliance within 15 days.
11.
The
aforesaid
direction
was
challenged
by
the
appellants
before the Tribunal with a prayer to set aside the directions issued
by the Circular No.101-15/2005-MN dated 27th February, 2006. The
appellants also sought for an interim relief granting ex-parte stay
of operation of the said circular.
12.
The
Tribunal
having
not
granted
any
interim
relief,
the
appellants moved before the High Court in a Writ Petition, being
Page 5
6
W.P.(C) No.5428 of 2006. The High Court observed that no punitive or
coercive action shall be taken by the first respondent Authority at
least till the next date of hearing before the Tribunal and disposed
of the writ petition. The Tribunal by the impugned order dated 22 nd
December, 2006 held as follows:
“26. Having
gone
through
the
documents
produced by both the parties and having heard
arguments we are of the view that the
appellants did not make adequate effort to
provide
direct
connectivity
between
the
appellants’ MSCs and the BSNL/MTNL’s MSCs
which would have brought tariffs at part for
calls made within the appellants’ network. We
are also left with the impression that DoT and
BSNL could have taken a more pro-active
approach to ensure that the requisite leased
lines and Ps of I were made available for
establishing direct connectivity in a time
bound manner which would have helped achieving
the transition sought to be brought about by
the DoT notification of 20-5-2005 in a more
smooth manner. Be that as it may, we do not
agree with the argument put forth by the
appellants about the protection to them for
charging higher tariff under the clause of
forbearance. The clause of non-discrimination
is very clear and self-explanatory which has
been defied by the appellants. We do not find
any merit in the appeal and the same is
dismissed. M.A. No. 58 of 2006 also stands
disposed.”
13.
Learned
submitted
counsel
that
the
appearing
differential
on
behalf
tariffs
of
are
the
appellants
because
of
the
difference in the cost elements involved in the two natures of
calls. Insofar as calls terminating in the network of BSNL/MTNL are
concerned, as direct connectivity had not been established between
the appellant’s network and BSNL/MTNL network, the appellants were
obliged to pay carriage charges to BSNL and MTNL (respondent nos. 2
and 3) for calls terminating on their networks. But in case of a
call
terminating
charges
were
not
in
the
network
applicable
as
of
the
direct
private
operator
connectivity
had
these
been
Page 6
7
established
between
the
private
operators.
Therefore,
the
cost
elements involved in the two calls were different leading to a
difference in tariffs charged by the service provider for such calls
from its subscribers. The above position is explained with the help
of a Diagram to show that in the case of a call from a metro like
Mumbai to another place like Pune, the call between two subscribes
of private networks is connected directly, which in the case of a
call to BSNL subscriber is treated as a STD call as it is first
connected to Nagpur and then to Pune, which is the routing plan for
STD calls. According to appellants, in STD arrangement, BSNL as the
National Long Distance Operator was able to recover carriage charges
which were as high as Rs.1.10 per minute, which charges would no
longer be payable once direct connectivity was established.
14.
Thus
the
reason
for
the
differential
tariffs
as
per
the
appellant was that the call between subscribers of private operators
was routed directly and costed as a local call while the call to a
BSNL/MTNL subscriber was routed through another place and costed as
an STD call.
15.
It
continued
was
further
right
from
contended
July,
that
2005
in
the
aforesaid
the
knowledge
position
of
the
had
first
respondent and now in sudden turn around, the first respondent chose
to disregard the compulsions under which the private operators were
constrained to offer differential tariffs and directed the private
operators to discontinue the differential tariff. Its net effect was
to
force
the
terminating
on
operators
the
to
network
increase
of
their
other
tariffs
private
for
calls
operator
or
alternatively reduce the tariff for calls to BSNL/MTNL subscribers
and
pay
the
difference
from
their
own
pocket.
Either
of
these
Page 7
8
alternatives
would
responsibilities
of
be
the
against
first
the
fundamental
respondent
under
the
duties
Act
and
and
the
impugned action was not only against the public interest but would
also have put the private operators in a highly disadvantageous
position.
16.
Learned counsel for the appellant further submitted that the
Tribunal erred in law in not appreciating that simply prescribing
differential tariff does not violate the mandate of Article 14 of
the Constitution or result in discrimination; the same class has to
be determined in accordance with the similarity of features of its
constituents. According to the appellants, the costs involved in the
nature of the two calls are different and, therefore, though the
subscribers belong to the appellants, they form a distinct class
when they make a call to the BSNL Cell one number. It is also
submitted that the Tribunal failed to notice that the DoT decision
of 20th May, 2005 explicitly stated that the tariffs which were under
forbearance would continue to be regulated by market forces.
17.
Learned
counsel
appearing
on
behalf
of
first
respondent
submitted that it was the duty of the appellants to arrange the
leased lines for establishing direct connectivity with the BSNL
network
as
they
had
done
to
connect
each
other’s
network.
The
appellants no where pleaded that the second respondent denied the
provision of Points of Interconnect (hereinafter referred to as ‘Ps
of I’) and the only pleading was with respect to non-grant of leased
lines by BSNL. In fact, the appellants never approached the BSNL for
provision of Ps of I.
18.
It was brought to the notice of the Court that immediately on
issue of letter by the DoT when the metro circles were merged with
Page 8
9
the respective state circles, BSNL had issued a Circular on 24th May,
2005
asking
the
appellants
to
sign
addenda
to
the
existing
interconnect agreements for provision of Ps of I. However, no effort
was made by the appellants to this effect. In another case before
the Tribunal, respondent No.2 had stated on affidavit that wherever
the payments have been made, the Ps of I were being provided within
90 days. In these four service areas, no demand was ever placed on
BSNL.
19.
Similar was the stand taken by the appellants and respondents
before the Tribunal. The Tribunal observed that some demands for Ps
of I/E-1 connectivity were placed by the appellants on BSNL but as
late
as
in
December
2005,
January
2006
and
February
2006.
The
Tribunal held that there was no reason that in case infrastructure
for direct connectivity could be created for connecting amongst
themselves the networks of the appellants, the same could not be
done for connecting the MSCs of appellants’ networks to those of
BSNL/MTNL networks in the four service areas in question.
The Tribunal rightly held that the appellant could have made
use of the similar leased lines as they had between their networks
and asked for Ps of I from the BSNL for the MSCs located in these
four service areas which was not done. No effort was made by the
appellants to create this direct connectivity and they took recourse
to the easier way of handing the traffic to the BSNL as National
Long Distance Operator and continued charging the consumers higher
tariffs.
20.
The
respondent
has
prescribed
the
tariffs
for
various
calls/telecom services under the Telecommunication Tariff Order 1999
as amended from time to time. As a general condition clause 6 of the
Page 9
10
Tariff
Order
prescribes
that
no
service
provider
shall,
in
any
manner, discriminate between subscribers of the same class and such
classification shall not be arbitrary. Further, clause 2(k) of the
Tariff
Order
provider
defines
shall
discriminate
not,
between
“Non-discrimination”
in
the
matter
subscribes
of
of
the
to
mean
that service
of tariffs,
application
same
class
and
such
classification of subscribes shall not be arbitrary. Clause 2(k) and
Clause 6 of the Tariff Order are reproduced herein under:
“2(k) Non-discrimination means that service
provider
shall
not
in
the
matter
of
application of tariffs, discriminate between
subscribers of the same class and such
classification of subscribers shall not be
arbitrary.
Clause 6. Non-discrimination:
No
service
provider shall, in any manner, discriminate
between subscribers of the same class and such
classification shall not be arbitrary.”
In terms of the above Tariff Order, the first respondent in
September 2002, introduced forbearance in prescribing tariffs as far
as Cellular calls are concerned and in taking this decision the
first respondent took note of the emerging market scenario and came
to the conclusion that a stage had been reached, when market forces
could effectively regulate the cellular tariff.
21.
The
applicable
question
to
the
whether
class
of
the
non-discrimination
subscribers
making
call
clause
to
is
another
private network from a private network as compared to the class
making call from a private network to BSNL/MTNL network was raised
by both the parties. The appellants’ contention was that they were
two different classes since the routing of the call was different
and BSNL was charging higher amount for the latter category of
Page 10
11
calls. In reply to the same, it has been rightly contended on behalf
of the respondents that the same subscriber or two subscribers from
the same house making calls from the same network to another private
network or to BSNL network located at the same destination form the
same class. The interpretation of the respondents being more logical
was also accepted by the Tribunal. For the said reason the Tribunal
rightly held that the action of appellants amount to discrimination
between the same class of subscribers which is against the basic
definition laid down in Clause 2(k) of the Tariff Order.
22.
On 20th May, 2005, the Government of India announced that inter
service
area
connectivity
between
Access
Providers
within
four
States – Mumbai Metro & Maharashtra Telecom Circle, Chennai Metro &
Tamil
Nadu
Telecom
Circle,
Kolkata
Metro
&
West
Bengal
Telecom
Circle and U.P. (East) & U.P.(West) Telecom Circle Service areas is
permitted subject to the condition that the Access provider will
operate within their existing licensed service area and shall not be
permitted to create infrastructure outside their licensed service
area for the purpose of inter-service area connectivity. The access
providers may take lease lines for such connectivity. This inter-
service area connectivity shall be only for terminating traffic.
Relevant extracts from Clause 5.2 and 6.0 of the Circular dated 24 th
May, 2005 are reproduced hereunder:
“5.2. The
traffic
organized
by
mobile
subscribers belonging to one service area but
located in another service area within same
state shall be treated as home network traffic
instead of national roaming traffic. This
principle
shall
be
applicable
for
both
charging
at
POI
as
well
as
traffic
certificates for ADC billing. Further, since
the traffic between two service areas within
same state shall be treated as intra-service
area traffic, therefore, such traffic shall
not be handed over by NLDOs to BSNL.
Page 11
12
6.0. The access service providers of these
four states shall be permitted to seek POIs
with BSNL switches in the complete state
irrespective of their service areas in which
they can provide their services. Concerned
access provider shall have to sign separate
Addenda to existing Interconnect Agreements
with BSNL for establishing these new POIs with
BSNL. Till the time these Addendas are signed
and
new
POIs
established
the
existing
arrangements shall continue including handover
of such calls to BSNL through NLDOs treating
the traffic as inter circle and charging IUC
accordingly. All the traffic within a state
(in these four States only and in case of
State of UP it also includes State of
Uttaranchal) shall be treated as intra circle
traffic and IUC charged accordingly at POI
(except the traffic handed over at POIs of
NLDOs) as well as for the purpose of traffic
certificates for ADC billing. These new POIs,
as
above,
shall
be
commissioned
after
concerned access providers sign these Addendas
to their existing Interconnect Agreement with
BSNL. These instructions are to be implemented
w.e.f. 0000 hours of 25th May, 2005.”
The
net
effect
of
the
aforesaid
Circular
was
that
the
appellants were to sign the Addenda agreements with BSNL and then
apply for new Ps of I and till such time that the new Ps of I are
established the existing arrangements were to continue.
23.
We have noticed that the appellants took advantage of the
aforesaid provision. But they did not apply before the BSNL/MTNL to
apply new Ps of I and treating the tariff as inter service charges
differently from same sets of consumers. The access providers have
option to continue with the existing inter-connected routing of the
class of service areas but that cannot be a ground to discriminate,
in
any
Tribunal
manner,
rightly
between
held
the
that
subscribers
the
of
appellants
the
-
same
service
class.
The
providers
discriminated between subscribers of the same class; one on the
ground that the call ends with the private parties and another on
Page 12
13
the ground that the call ends with BSNL/MTNL.
The classification of
the subscribers into two categories on the basis of calls made by
them
from
private
network
to
another
private
network
and
from
private network to BSNL/MTNL network is arbitrary as it fails to
satisfy the twin test for reasonable classification laid down by
this Court in State of West Bengal v. Anwar Ali Sarkar & Anr. AIR
1952 SC 75. Therefore, the Tribunal rightly dismissed the appeal.
24.
We find no merit in this appeal, it is accordingly dismissed.
No costs.
....................................................J.
(SUDHANSU JYOTI MUKHOPADHAYA)
....................................................J.
(PRAFULLA C. PANT)
NEW DELHI;
JANUARY 30, 2015.
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