Mtnl vs Telecom Regulatory Authority Of ...
2000 Latest Caselaw 25 Del

ORDER

S.N. Variava, CJ.

1. This common Order would cover the above mentioned two Petitions. In these Petitions the Telecommunication Interconnection (Charges and Revenue Sharing - First Amendment)Regulation,1999 dated 17th September, 1999 and the Telecommunication Tariff (Fifth Amendment) Order,1999 also dated 17th September, 1999 have been impugned on various grounds. One of the common grounds in both the Petitions, is that the Telecom Regulatory Authority of India (hereinafter called the Authority) does not have any power to issue any Regulation which affect the rights of individuals under contracts or which seeks to override terms and conditions of licenses issued by the Central Government to various parties.

2. It must be mentioned that the tariffs and charges laid down by the Authority are also being questioned on various other grounds. However, all parties have agreed that the question whether the Authority has power, be first decided Parties have agreed that if this Court holds that the Author- ity has power then the Authority will consider all objections and sugges- tions of all the parties and thereafter decide afresh whether or not the impugned Regulations and Tariff Order require any variation. Therefore, for the present, all parties have restricted their arguments only on the ques- tion as to whether or not the Authority has power to issue Regulations as set out hereinabove.

3. The Authority has been established under The Telecom Regulatory Authority of India Act, 1997 (the said Act). The statement of objections and reasons sets out that the Act is enacted for the establishment of Telecom Regulatory Authority of India to regulate the telecommunication services and for matters connected therewith. Even though this may be the statement of objects and reasons ultimately one has to look at the provisions of the said Act to see what functions and powers are given to the Authority. It will thus be necessary to set out the relevant provisions of the said Act.

4. Section 2(e) provides that a Licensee means any person who is licensed under sub-Section (1) of Section 4 of the Indian Telegraph Act, 1985 for providing specified telecommunication services. Thus it is to be seen that licenses are not issued under this Act but under the Indian Telegraph Act, 1985.

5. Section 2(j) defines "a service provider" as meaning the Government and including a licensee.

Section 2(k) defines "Telecommunication Services" as follows :-

"Telecommunication service" means service of any description (including electronic mail, voice mail, data services, audio tex services, video tex services, radio paging and cellular mobile telephone services) which is made available to users by means of any transmission or reception of signs, signals, writing, images and sounds or intelligence of any nature, by wire, radio, visual or other electromagnetic means but shall not include broadcasting services."

6. Section 11 provides the functions of the Authority. It reads as under :-

"Functions of Authority. - (1) Notwithstanding anything contained in the Indian Telegraph Act, 1885 (13 of 1885), the functions of the Authority shall be to -

(a) recommend the need and timing for introduction of new service provider.

(b) recommend the terms and conditions of licence to a service provider;

(c) ensure technical compatibility and effective inter-connection between different service providers;

(d) regulate arrangement amongst service providers of sharing their revenue derived from providing telecommunication services;

(e) ensure compliance of terms and conditions of licence;

(f) recommend revocation for licence for non-compliance of terms and conditions of licence;

(g) lay down and ensure the time period for providing local and long distance circuits of telecommunication between different service providers;

(h) facilitate competition and promote efficiency in the opera- tion of telecommunication services so as to facilitate growth in such services;

(i) protect the interest of the consumers of telecommunication and service;

(j) monitor the quality of service and conduct the periodical survey of such provided by the service providers;

(k) inspect the equipment used in the network and recommend the type of equipment to be used by the service providers;

(l) maintain register of interconnect agreements and of all such other matters as may be provided in the regulations;

(m) keep register maintained under clause (l) open for inspection to any member of public on payment of such fee and compliance of such other requirements as may be provided in the regulations;

(n) settle disputes between service providers;

(o) render advice to the Central Government in the matters relating to the development of telecommunication technology and any other matter relatable to telecommunication industry in general;

(p) levy fees and other charges at such rates and in respect of such services as may be determined by regulations;

(q) ensure effective compliance of universal service obligations;

(r) perform such other functions including such administrative and financial functions as may be entrusted to it by the Central Government or as may be necessary to carry out the provisions of this Act.

(2) Notwithstanding anything contained in the Indian Telegraph Act, 1885 (13 of 1885), the Authority may, from time to time, by order, notify in the Official Gazette the rates at which the telecommunication services within India and outside India shall be provided under this Act including the rates at which messages shall be transmitted to any country outside India:

Provided that the Authority may notify different rates for dif- ferent persons or class of persons for similar telecommunication services and where different rates are fixed as aforesaid the Authority shall record the reasons therefore.

(3) While discharging its functions under sub-section (1), the Authority shall not act against the interest of the sovereignty and integrity of India, the security of the State, friendly relations with foreign States, public order, decency or morality.

(4) The authority shall ensure transparency while exercising its powers and discharging its functions."

7. Section 12 deals with the powers of the Authority. It reads as follows :

"Powers of Authority to call for information, conduct investiga- tion, etc. (1) where the Authority considers it expedient so to do, it may, by order in writing -

(a) call upon any service provider at any time to furnish in writing such information or explanation relating to its affairs as the Authority may require; or

(b) appoint one or more persons to make an inquiry in relation to the affairs of any service provider; and

(c) direct any of its officers or employees to inspect the books of account or other documents of any service provider.

(2) Where any inquiry in relation to the affairs of a service provider has been undertaken under sub-section (1) -

(a) every officer of the Government Department, if such service provider is a department of the Government.

(b) every Director, Manager, Secretary or other Officer if such service provider is a company; or

(c) every Partner, Manager, Secretary or other Officer, if such service provider is a firm, or

(d) every other person or body of persons who has had dealing in the court of business with any of the persons mentioned in clauses (b) and (c).

shall be bound to produce before the Authority making the inquiry, all such books of account or other documents in his custo- dy or power relating to, or having a bearing on the subject- matter of such inquiry and also to furnish to the Authority with all such statement or information relating thereto, as the case may be, required of him, within such time as may be specified.

(3) Every service provider shall maintain such books of account or other documents as may be prescribed.

(4) The Authority shall have the power to issue such directions to service providers as it may consider necessary for property functioning by service providers."

8. Section 13 provides that the Authority may, from time to time, for discharge of its functions under sub-Section (1) of Section 11, issue such directions to the service providers, as it may consider necessary.

9. Section 14 gives to the Authority the power to settle disputes. It reads as follows :-

Authority to settle disputes. - (1) If a dispute arises, in respect of matters referred to in sub-section (2), among service providers or between service providers and a group of consumers, such disputes shall be adjudicated by a bench constituted by the Chairperson and such bench shall consist of two members:

Provided that if the members of the bench differ on any point or points they shall state the point or points on which they differ and refer the same to a third member for hearing on such point or points and such point or points shall be decided according to the opinion of that member.

(2) The bench constituted under sub-section (1) shall exercise, on and from the appointed day all such jurisdiction, powers and authority as were exercisable immediately before that date by any Civil Court on any matter relating to -

(i) technical compatibility and inter-connections between service providers:

(ii) revenue sharing arrangements between different service providers:

(iii) quality of telecommunication services and interest of consumers:

Provided that nothing in this sub-section 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 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 Redres- sal Commission or the National Consumer Redressal Commission established under Section 9 of the Consumer Protection Act, 1986 (68 of 1986);

(c) dispute between telegraph authority and any other person referred to in sub-section (1) of Section 7B of the Indian Tele- graph Act, 1885 (13 of 1885)."

10. Under Section 16, the Authority is to be guided by the principles of natural justice and for the purposes of discharging its functions, it has the same power as are vested in a Civil Court under the Code of Civil Procedure, in respect of the matters as set out therein. The proceedings before the Authority are deemed to be judicial proceedings within the meaning of Sections 193 and 228, and for the purposes of Section 196 of the Indian Penal Code (45 of 1860) and the Authority shall be deemed to be a Civil Court under Section 195 and Chapter XXVI of the Criminal Procedure Code, 1973.

11. Section 18 provides that any person aggrieved by any decision or or order of the Authority may file an Appeal to the High Court within thirty days from the date of communication of the decision or order from the Authority.

12. Section 25 vests in the Central Government the power to issue, from time to time, directions to the Authority as the Central Government thinks 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. This Section provides that the Authority would be bound by such directions on questions of policy as the Central Government may give it in writing from time to time. However, the Authority has to be given, as far as practicable, an opportunity to express its views before any direction is given by the Central Government.

13. Section 35 vests in the Central Government the power to make rules for carrying out all the purposes of this Act.

14. Section 36 vests in the Authority, the power to make regulations. However, the regulations have to be consistent with the Act and with the Rules made by the Central Government.

15. Section 37 provides that the Rules and Regulations which are made shall be laid before both the Houses of Parliament and that if both the Houses agree to make a modification and/or if both the Houses agree that the Rules and Regulations should not be made, the Rules and Regulations shall have effect only in the modified forum or have no effect.

16. Section 38 provides that the provisions of the said Act are in addi- tion to the provisions of the Indian Telegraph Act, 1885 and the Indian Wireless Telegraphy Act, 1933 and in particular nothing in this Act would affect the jurisdiction, powers and functions required to be exercised or performed by the Telegraph Authority in relation to any area falling within the jurisdiction of that Authority.

17. From the above mentioned provisions it is clear that the functions and powers given to the Authority, regulatory or otherwise are only qua service providers. In all matters concerning the Central Government (not in the capacity of service provider) the Authority has only recommendatory func- tion and powers. As stated above, the Authority being a creature of Stat- ute, can only exercise such functions and powers as are vested in it by the Statute.

18. Mr. Vaidyanathan and Mr. Salve, Learned Solicitor General of India have submitted that a proper reading of the said Act would show that very limited functions and powers have been vested in the Authority and that the final decision in all matters of policy have continued to remain with the Central Government. They submitted that the decision of the Central Government cannot be over-ridden by the Authority either directly or indirectly. They submitted that the Authority would not have any authority to override any contracts or rights created in favour of individuals under license issued by the Central Government.

19. On the other hand, Mr. Andhyarujina and Dr. Singhvi have submitted that this is a high powered Regulatory Authority which has been established by the Government. They submitted that the Authority had powers to "regulate" and had duties to "ensure" under Section 11. They submitted that these powers were independent of and not curtailed by the mere recommendatory functions. They submitted that these functions could be exercised by giving directions under Section 13 or making Regulations under Section 36. They submitted that if it was held that the Authority did not have powers to ensure and/or regulate, the Authority would become redundant and would have no function to perform.

20. To consider these rival submissions one has to look at Section 11 Section 11(1) can be divided thus :-

(a) Recommendatory Functions :-

(i) Under Section 11(1)(a), the Authority is to recommend the need and timing for introduction of new service provider.

(ii) Under Section 11(1)(b), it is to recommend the terms and conditions of licence to a service provider.

(iii) Under Section 11(1)(f), it is to recommend revocation of licence for non-compliance of terms and conditions of licence.

(iv) Under Section 11(1)(k), it is to inspect the equipment used in the network and recommend the type of equipment to be used by the service providers.

(v) Under Section 11(1)(o), it is to render advice to the Central Government in the matters of development of telecommunication technology and any other matter relatable to telecommunication industry in general.

21. These are matters where the Authority can only make recommendations or give advise.

22. In earlier matters, before this Court, a question had arisen whether the recommendations of the Authority were binding on the Central Government and/or whether the Authority could issue directions to the Central Government. By a Judgment dated 12th October, 1999, in amongst others, I.P.A. No. 437 of 1998 a Division Bench of this Court has held (for detailed reasons given therein) that the Authority had no power to issue any direction to the Government as a licenser. It has been held that the Central Government, being the Licensing Authority, while exercising the power to grant a licence under Sections 4 of the Telegraph Act was not bound to seek the recommendations of the Authority. An argument that the regulatory functions of the Authority as contained in Section 11(1) (c), (d), (e), (j), (k), (l), (p) and (q) would become redundant if it was held that the Authority could not issue direction to the Government as Licensor, was not accepted by this Court. It was held that the licensing power of the Government was a statutory power which could not be allowed to the impliedly interfered with or subjugated to another authority. It was held that to hold that the Authority had, by implication, power to issue directions in respect of the licensing power would clearly be in contravention of both the Statutes, namely the Telegraph Act as well as the said Act. It was held that the power to issue directions was restricted to service providers and that the Central Government while acting as a Licensor was not acting in the capacity of a service provider.

23. Not only is this Judgment binding on us but we are in complete agreement with the reasoning given in this Judgment. We are informed that an Appeal has been filed against this Judgment by one of the parties, but no stay has been granted by the Supreme Court. (b) Non-recommendatory Functions :-

24. These are set out in Sections 11(1) (c), (d), (e), (g), (h), (i), (j), (l), (m), (n), (p) and (q). These have been set out earlier when Section 11 is reproduced hereinabove. What must be noted that whilst the recommendations/advice were, obviously to the Central Government. All the other functions/powers are qua service providers only. In none of the non-recommendatory functions, does the Authority have any function or power qua the Central Government. Further sub-clauses (1), (m) and (p) specifically provide for framing of regulations whilst the others do not.

25. Not only from the above Judgment but from the provisions of the said Act, it is therefore clear that in matters such as the need and timing for introduction of new service provider, terms and conditions of licence to a service provider, revocation of licence, equipment to be used in the network by the service providers and in matters relating to the development of telecommunications technology or in any matter relatable to the telecommunications industry in general, the function of the authority is merely recommendatory and/or advisory. The Government is not bound to either seek the recommendation or advise or to follow it even if it is tendered. Thus in these matters the authority cannot impose on the Central Government (which is the Licensing Authority) its views.

26. It is settled law that what cannot be done directly, cannot also be done indirectly. No authority is required for this proposition, but if any authority is required the authorities in the case of Jagir Singh Vs. Ranbir Singh and Another and the case of District Collector, Chittor and Others Vs. Chittoor District Groundunt Traders" Association, Chittoor and Others are sufficient in Jagir Singh's case the Supreme Court has held that what cannot be done directly, cannot be allowed to be done indirectly as that would be an evasion of the statute. The Supreme Court has held that it is a well known principle of law that the provisions of law cannot be evaded by shift or contrivance. The Supreme Court has held that in an indirect or circuitous manner the objects of a statute cannot be defeated. In the District Collector's case a circular was issued under the Commodities Act purporting to impose restriction on movement of edible oil and oil seeds and to impose compulsory levy for supply of oil to State Government at a fixed price. The Supreme Court held that there was no power to impose levies and what could not be done directly could not be done indirectly by using the regulatory powers given to that Authority.

27. It is also well settled law that the provisions of a Statute have to be constructed harmoniously and that if there are two interpretations possible, one of which leads to harmonious interpretation whereas the other leads to a clash of the provision and/or leads to ambiguities then the interpretation which leads to harmonious construction has to be accepted.

28. Section 11(c) provides that the Authority is to ensure technical compatibility and effective inter-connection between different service providers Section 11(d) provides that the Authority is to regulate arrangement amongst service providers of sharing their revenue derived from providing telecommunications services. Similarly, under sub-clauses (e), (g), (h), (i), (j) and (q), the Authority is to ensure, regulate, lay down, facilitate and/or to protect. Mr. Andhyarujina and Dr. Singhvi have submitted that these are independent functions and powers given to the Authority and it is the duty of the Authority to so ensure, regulate, lay down facilitate and/or to protect. They submitted that these powers are independent and are not fettered by the recommendatory functions. They submitted that the Authority can thus make regulations in exercise of its nonrecommendatory functions. They submitted that the Authority can in order to perform its non-recommendatory functions issue any direction or make any regulation qua service-providers and can even, fro proper performance of its functions, vary terms and conditions of licence. They submitted that the recommendatory functions of the Authority are restricted to what is to be done by the Central Government in future. By way of example they submitted that the recommendatory function under Section 11(1)(b) is to recommend terms and conditions of future licenses. They submitted that looked at from this point of view there is no clash and the Authority can exercise all its non-recommendatory functions unfettered by the recommendatory functions. They submitted that to hold otherwise is to denude the Authority of any effective power or function and to reduce such a high powered Authority into a non-entity.

29. In our view, if such arguments were to be accepted then there would necessarily be a clash between the recommendatory powers and non-recommendatory powers given to the Authority. For example, under Section 11(a)(c), the Authority is to ensure technical compatibility and effective inter- connection. To ensure technical compatibility and effective interconnection, the Authority would have to decide what is the type of equipment or technology which is necessary to be used by the service provider. However, under Section 11(1)(o) the Authority is merely to render advice to the Central Government in matters relating to the development of telecommunication technology and matters relating to the telecommunication industry in general. If the Authority can only advice one fails to understand how it can impose on the Government the type of technology required by purporting to exercise a power under Section 11(1)(c). If Section 11(1)(c) was to be read as suggested then the purely advisory function under Section 11(1)(o) would have been indirectly converted into directory powers. To take another example under Section 11(1)(a) the Authority has merely to recommend the need and timing for introduction of a new service provider. If Section 11(1)(c) were to be an absolutely independent power, then the Authority could, in the guise of ensuring technical compatibility and effective interconnection, direct that a service provider be introduced in a particular area and thus convert the recommendatory power into a directory power.

30. Further under Section 11(1)(b) the authority merely has a power to recommend terms and conditions of a licence. We are told that many of the licenses which have been given by the Government to the Mobile operators contains a condition that the DOT will not pay any access fee to the Cellular Operators. The Cellular Operators have accepted the license on this condition. Yet in purported exercise of the power under Sec. 11(1)(d) i.e. in the guise of regulating the arrangement amongst to service provider of sharing their revenue for providing telecommunication services, the Authority has, under the impugned Regulation, purported to provided that Cellular Operators will receive 80 paise per pulse from the land line Operator. The Authority has also provided that its Regulation will prevail over all licenses. Thus, in fact the Authority has varied the terms and conditions of licence. The Authority has overridden provisions in a contract between the parties and affected the rights created by the license. The Authority has, in purported exercise of power under Section 11(1)(d), converted a recommendatory functions into directory power. It is for the Government to decide what are to be the terms and conditions of a license to a service provider. The Authority cannot either directly or indirectly vary the terms and conditions, which are laid down by the Government in a license to a service provider. What it cannot do directly, it cannot do indirectly.

31. In this behalf, it is very pertinent to note that even though Section 11 starts with a non-obstante clause which provides that the functions are to be exercised "Notwithstanding anything contained in the Indian Telegraph Act, 1985" the Section nowhere provides that the functions are to be exercised notwithstanding "any contract or any decrees or orders of Courts". It is well settled law that when the Legislature intends to confer on a body the power to vary contracts or existing private rights, it has to do so specifically. In the absence of any provision authorizing the Authority to vary private rights under existing contracts or licenses, no such power can be presumed or assumed. This is the law as laid down by the Supreme Court in the case of Indian Aluminium Company Vs. Kerala State Electricity Board reported in AIR(1975) SC 1976.

32. If arguments of Mr. Andhyarujina and Dr. Singhvi were to be accepted, it would lead to a direct clash between the recommendatory functions and non-recommendatory or regulatory powers. It would also amount to conferring on the Authority a power to vary private rights which has not been specifically conferred on the Authority by the Statue. It is not possible to accept submission that the recommendatory powers only pertain to future events. If that were so the Statute would have specifically so provided. Also as see the non-recommendatory functions are not qua the Government but only service providers. To us, it appears that the only manner in which the non-recommendatory powers can be read in harmony with the recommendatory power is to see that the regulatory powers are exercised within the frame-work of the policy and decisions taken by the Central Government and within the framework of the licenses issued by the Central Government. Thus, whatever is a recommendatory function will remain recommendatory. The Authority can only exercise or regulate within the framework as decided by the Central Government.

33. That this is so, is also clear from the provision of Section 25. This Section makes it clear that the Central Government has powers to issue directions to the Authority from time to time. Also under Section 35, the power to make rules are vested with the Central Government and not with the Authority. The power to make regulations, under Section 36, are subject to the Rules which may be made by to Government. Thus, it is clear that it is the Central Government which has retained with itself the overall power, including the power to issue directions to the Authority. What has been conferred on the Authority is the power to regulate affairs between service providers within the framework and policy as laid down by the Central Government. It must be mentioned that policy decision by the Government need not only be one conveyed to the Authority under Section 25. The policy can also be ascertained from the terms and conditions as laid down by the Government in the various licenses.

34. As was argued before the earlier Division Bench, it is also being argued before us that to give such an interpretation amounts to making redundant the recommendatory functions of the Authority. It was also submitted that if the Authority could not effectively ensure and/or regulate, then in fact the Authority would have no functions or powers. Such an argument has not been accepted by the earlier Division Bench and we also see no substance in the submission. First of all, the Authority is a creature of a Statute. It can, therefore, only exercise such functions as are conferred on it by to Statute. Secondly, in our view, the powers to make recommendations and/or advice the Central Government are not ordinary powers. These powers which are substantial power. The Authority has obviously been established so that it would independently consider what is necessary and make recommendations. Whether the recommendations are to be accepted or not is for the Central Government to decide. However, we are quite sure that recommendations when made, would always be considered by the Central Government and be given the due weight which they deserve. Further, it appears to us that the non-recommendatory powers including to power to ensure compliance of terms and conditions of license and to protect the interest of consumers of telecommunication services are important policing functions which enable the Authority to regulate among service providers and look after interest of consumers. A policy function is not an ordinary function. It is a very vital and important function.

35. It must also be mentioned that Section 11(1)(c) provides that the Authority is to ensure compliance of terms and conditions of licence. Significantly the said Act gives no power to the Authority to vary terms and conditions of licence.

36. Our above interpretation is also fortified by the fact that all the functions provided for under Section 11(1) and all the powers given to the Authority under Section 11(1) are only in respect of the service providers. Similarly, the powers given under Section 12 and the power to issue direction under Section 13 are also restricted only to a service provider. There is only one provision in the said Act which permits the Authority to issue an Order, which would be binding even on the Central Government not acting as a service provider i.e. Section 11(2). Section 11(2), is a specific provision which permits the Authority to notify by an Order, the rates on which telecommunication services are to be provided within India and outside India, including the rates on which messages are to be transmitted. This is a specific power which has been conferred on the Authority. It is significant that when this power is conferred, it is not restricted qua service providers. This power can be exercised even over Central Government. It must be mentioned that most of the licenses issued by the Government already provide that rates would be varied. Thus this power can be exercised without it being necessary to provide that it can be exercised "Notwithstanding any contract or decree or order of Court thus, when the Legislature intended to give to the Authority a power which was not to be merely recommendatory power but a directory power, the Legislature has done so specifically. Under Sections 11(1)(c), (d), (e), (g), (h), (i), (j) etc. no such specific power to override decisions of the Central Government has been conferred on the Authority.

37. Mr. Andhyarujina and Dr. Singhvi submitted that the functions and powers under Sections 11(1) (c), (d), (e), (g), (h), (i), (j) etc. are identical to the power under Section 11(2). We are unable to accept this submission. All the functions and powers given under Section 11(1) are only qua service providers. Section 11(2) is not restricted only to a service provider. Also it is to be seen that when such a power is conferred, the manner in which that power is to be exercised has also been laid down. Section 11(2) provides that the rates are to be laid down by issuance of an Order which is to be Notified in the Official Gazette. Significantly, under section, 11(1), the functions are to be normally exercised by issuing directions under Section 13. As seen under Section 13 such directions could only be to the service providers. If arguments of Mr. Andhyarujina and Dr. Singhvi are to be accepted it would amount to saying that if the functions under Section 11(1) were to be performed by issuance of directions, it could only be qua service providers, but by way of regulation the functions could be enforced against or imposed on even the Central Government. This would lead to an absurd situation and would clearly be a method of trying to do indirectly what could not be done indirectly.

38. There is one other reason why the arguments of Mr. Andhyarujina and Dr. Singhvi cannot be accepted. It is to be seen that the Authority also has adjudicatory function under Section 14. It is settled law that the same Authority/body cannot have both Legislative as well as Adjudicative functions. If the arguments of Mr. Andhyarujina and Dr. Singhvi are to be accepted then it would amount to saying that the Authority would adjudicate on dispute arising from or as a result of its own regulations/directions. This could never have been the intention of the Legislature.

39. Mr. Andhyarujina and Dr. Singhvi submitted that Section 36 conferred on the Authority the power to make regulations. It was submitted that the regulations, which can be made, were those which were necessary to carry out the purposes of the said Act. It was submitted that the instances given under Section 36(2) were merely illustrative and not exhaustive. It was submitted that the illustration did not detract or limit the general power under Section 36(1) to lay down all such regulations as were necessary to carry out the purposes of the Act. It was submitted that therefore, the functions under Section 11(1) could also be performed by issuance of regulations under Section 36.

40. It is correct that the illustrations given under Section 36(2) are merely illustrative and not exhaustive. However, as stated above, what cannot be done directly cannot be done indirectly. Thus, even though the Authority may be free to lay down regulations necessary for the purposes of carrying out the purposes of the Act, it cannot by regulation convey a power or a function which is merely recommendatory power or into a directory power or function. Thus, for example, in the guise of a regulation, the Authority cannot lay down or vary terms and conditions of a license to a service provider nor lay down the necessity or timing for introduction of a new service provider. In the guise of regulations, the Authority cannot lay down the type of equipment which is to be used in the network nor the type of technology which is necessary for telecommunication. In the guise of regulation, the Authority cannot regulate matters related to the telecommunication industry i.e. matters in respect of which it is merely to render advice to the Government. The powers to issue regulations under Section 36 has to be exercised consistent with the provisions of the said Act and the rules framed by the Government. This power cannot be used to subvert the provisions of the said Act and to assume powers and functions not conferred by the said Act.

41. It was submitted that in order to ensure effective technical compatibility and effective interconnection between service providers, it would be absolutely necessary for the Authority to regulate arrangement amongst service providers in respect of sharing of revenue. It was submitted that there cannot be effective interconnection or technical compatibility, unless and until there was an arrangement regarding sharing of revenue. It was submitted that therefore, it was absolutely essential that the Authority provides for the manner in which revenue is to be shared by the service provider. It was submitted that if the Authority did not have the power to regulate such arrangements, it would not be able to ensure an effective interconnection. It must be noted that the Government permitted Cellular operators to operate from 1994. Right from the beginning the Cellular Operators could only operate, if they had interconnection with the land lines. Thus for all these years, there has been interconnection. For all these years, there has been no sharing of the revenue. Thus, it is clear that there is no substance in argument that there could be no effective interconnection unless and until there is an arrangement regarding sharing of revenue.

42. Also in this behalf, the wording of Section 11(1)(d) become relevant Section 11(1)(d) does not provide that the function of the Authority is to ensure sharing of revenue amongst service providers. What Section 11(1)(d) provides is that the Authority is to regulate arrangement amongst service providers for sharing of revenue. This necessarily implies existence of some arrangement. The fact that there must be an arrangement before any power under 11(1)(d) could be exercised was also so understood by the Authority itself. In the Consultation Paper issued by the Authority on 4th November, 1997 it inter-alia stated as follows:-

"Inter-connection charges

27. ..........

28. Basically interconnection charges are paid either through sharing of revenues among the interconnected operators, or on the basis of the cost of the interconnection service provided (plus a reasonable profit). The latter approach is more widely used.

(c) Procedure used for Setting Interconnection charges

29. The procedures used to establish interconnection charges include :

* The regulator determines the charges, together with other essential elements of interconnection, in advance.

* The regulator sets the standard or guidelines which should be used for establishing the rates through (bilateral or multi-lateral) negotiations among the operators themselves.

* The operators set the rates through commercial agreement, without the involvement of the regulators.

* In the negotiations between the operators, the regulators stand-by as mediators/arbiters, settling the interconnection charges in case the parties involved fail to agree or if a dispute is brought to the regulator.

30. In most countries, regulators encourage the operators to settle interconnection rates through negotiations. To assist this process, the regulators normally establish guidelines or a frame-work which they consider desirable for determining interconnection charges........

Suggested Guidelines

38. Operators should be encouraged to settle interconnection charges through negotiations. Intervention by the regulators should be in the event of a difficulty or a dispute in the negotiations.

39. Interconnection charges for establishing a connection with another's infrastructure facilities should be separated from charges for using the network facilities. The set-up costs associated with establishing and maintaining intercon facilities should be shared between the interconnecting operators.........."

43. Similarly, in the consultation paper issued by the Authority on 9th September, 1998, it is inter-alia provided as follows:-

"19. Though the general principle is to propose cost based inter- connection charges, it is further proposed that interconnection charges for ancillary and supplementary services should be settled among the operators (ancillary and supplementary services include, for example, directory enquiries, operator assistance, charging and billing and complaint and emergency services.

20. ........

21. Similar to the practice in a number of other jurisdictions, the TRAI proposes to determine guidelines for interconnection. The TRAI expects the operators to normally settle the interconnection rates through bi-lateral negotiations, with its guide-lines providing a framework for these negotiations. The TRAI will, in general, intervene only in the situation when the operators are unable to reach a mutually satisfactory solution.

25. Once interconnection charges and principles have been specified, the TRAI will follow its general principle of intervening only if the operators are unable to arrive at a mutually satisfactory solution on any matter relating to interconnection.

26. All interconnection charges mutually agreed among the service providers should be notified (together with an explanation of the basis for those charges) to the TRAI at least 45 days prior to their implementation. The TRAI reserves its right to intervence, if deemed necessary...."

44. That the Authority itself so understood is also clear from the Tele- communication Interconnection (Charges and Revenue Sharing) Regulation, 1999 which was issued by the Authority and Notified on 28th May, 1999. This Regulation provides for interconnection charges. Sub-clauses (vi) to (ix) read as follows:-

"(vi) Unless specifically so provided, the Authority has forborne with respect to interconnection charges.

(vii) Where the Authority has, for the time being, forborne from specifying interconnection charges, interconnection seekers and providers shall mutually decide on such charges.

(viii) Interconnection charges mutually agreed among interconnection seeker and provider shall be based on the principles enunciated in this Section.

(ix) Where mutual agreement for interconnection charge cannot be reached within three months of initiating such a process with respect to which the Authority has forborne, the Authority may intervene to settle the matter suo-moto or on the application of either party.

Section IV sub-clauses (ii) to (iv) of Revenue Sharing also read as under:

"(ii) Unless specifically provided in the Schedules to this Regulation, the Authority forebears with respect to the revenue sharing arrangements."

(iii) Where the Authority has, for the time being, forborne from specifying revenue sharing arrangements for any telecommunication service or part thereof, service providers shall mutually decide on such arrangements.

(iv) Where mutual agreement for revenue sharing cannot be reached within three months of initiating such a process for revenue sharing with respect to which the Authority has forborne, the Authority may intervene to settle the matter suo moto or on the application of either party.

45. It must be mentioned that the word "Forbearance" as per definition given in Section 2(vii) means that the Authority has for the time being not notified any interconnection charges or revenue sharing arrangement and that the service provider is free to fix any charge for such service.

46. Thus, it is clear that the Authority itself understood that its own function under Section 11(1)(d) was only to intervene in the event of the service providers not being able to arrive at an arrangement. It is clear that an arrangement does not necessarily imply an agreement. However, these are matters in which the service provider must be first given an opportunity to arrive at an arrangement amongst themselves. The question of regulation would only arise if the service providers are not able to arrive at an arrangement. The Authority may lay down guidelines regarding those arrangement, provided the guidelines are not contrary to the terms of a license or a policy decision taken by the Government.

47. Section 14 is also relevant. One of the matters on which a dispute could be adjudicated upon by the Authority is revenue sharing arrangement between service providers. If the Authority had powers to issue regulations which were binding on service providers and/or upon the Central Government then everybody would be bound to follow those regulations. If such regulation could be issued in the absence of any arrangement then there may be no arrangement. In that case, there would be no question of adjudicating dispute on a matter relating to "revenue sharing arrangement". To be noted that the adjudication is not in respect of revenue sharing between service provider. The adjudication is in respect of "revenue sharing arrangements" between the service providers.

48. For all the above reasons, it would have to be held that the Authority has no power to issue any regulation which in any manner converts the merely recommendatory or advisory function into a directory function. The directions and regulations which the Authority may issue and/or frame must necessary be within the framework of the said Act. The Authority has no power or function to change or vary rights of parties under contracts or licenses. It can only regulate within the terms and conditions of the license. As we are holding that Authority has no power to issue regulations of the nature that it has purported to do, the regulations will have to be set aside. Therefore, the Telecommunication Interconnection Charges and Revenue Sharing (first Amendment) Regulation, 1999 (3 of 99) issued on 17th September, 1999, stands quashed. Similarly Regulation 8 (of the Telecommunication Interconnection Charges and Revenue Sharing Regulation 1999) which gives to the Authority a overriding power over the terms and conditions of license would also stand quashed.

49. Mr. Mehra now submits that even though the Court has held that there is no power in the Authority the Court will still have to look into the aspect whether the monthly rentals charged by Cellular Operator should be brought down to Rs. 156/- per month and certain other prayers. There appears to be substance in this submission. The Petitions are therefore listed on 7th February, 2000, for arguments on other aspects.

50. In the meantime, it must be clarified that pending this Petition, by an ad interim order dated 20th October, 1999, this Court had stayed the implementation of the CPP Regime. The CPP Regime forms part of the Regulation which have just been struck down. The Authority had also framed a Telecommunication Tariff (fifth Amendment) Order, 1999 on the same day. A reading of the explanatory memorandum to the Tariff Order shows that the Authority has taken note of the fact that by the change in the license fee structure (introduced by the Government i.e. from a fixed license fee to a revenue sharing arrangement) there is a substantial reduction in the license fees payable by the Cellular Operators to the Government. The Authority has also noted that it was introducing a "Calling Party Pay Regime" and that there would thus be some loss of revenue to the Cellular Operators Off setting the definite benefit against the expected loss, if any, the Authority had fixed the monthly rental fixed at Rs. 475/-per month and the Air time charge have been reduced from Rs. 6/- to 4/- for outgoing calls. Now, that the Regulation is set aside the Regime cannot be introduced in its present form. The Cellular Operators are continuing to charge even for incoming calls. The license fee structure has been changed w.e.f. 1st August, 1999. Thus Cellular Operators are not paying fixed license fee but are now paying as per the revenue sharing arrangement. Admittedly, the license fees paid by them are much less than what they were paying earlier. Thus there is no loss of revenue as expected but the gain is certainly there. In our view, it is the duty and function of the Authority to ensure that the benefit which the Cellular operators have received is passed on to the consumers. As seen above, it is the function of the Authority to safe-guard the interest of the consumers. We are quite sure that the Authority will keep this in mind and issue necessary directions in this behalf.

51. We also clarify that the Authority may consider whether the CPP regime or a free incoming call regime can be introduced within the terms and conditions of existing licenses and within the policy as framed by the Government.