SC axes 2G licences, orders auction

Verdict: 122 franchises cancelled; ruling an embarrassment for besieged govt

In a judgment that will have huge implications for the telecom sector, the Supreme Court on Thursday ordered the cancellation of 122 licences of 2G spectrum granted to 11 companies in 2008, noting a “flaw” in the government’s first-come-first-served policy for use of natural resources.

In its order scrapping the first-come-first-served policy, the Supreme Court went beyond former telecom minister A Raja, whose actions were allegedly designed to favour a few telecom companies, indicating there was collective failure on the part of the UPA leadership. Although the court made no direct reference to Union Home Minister P Chidambaram, striking down the first-come-first-served policy is significant because as Finance minister at that time, Chidambaram had gone along with Raja on that policy and not favoured auctioning 2G spectrum. As for Janata party president Subramanian Swamy’s petition seeking directions for a probe against Chidambaram for his alleged role in the 2G scam, the apex court referred the matter to the trial court. This does not lift the cloud over Chidambaram as the Supreme Court said that the trial court should decide the matter within two weeks. The court said that its order should in no way influence the proceedings of the trial court.

The government, however, tried to put up a brave front, saying that the Supreme Court’s nixing of the first-come-first-served policy was not indictment of either Prime Minister Manmohan Singh or Chidambaram. “I repeat that the prime minister and the then finance minister (Chidambaram) are in no way responsible,” Telecom Minister Kapil Sibal said at a press conference once the judgment was pronounced. In defending the prime minister and Chidambaram, Sibal hanged Raja.

Sibal said, “The Supreme Court has clearly said that the then minister (Raja) did not heed the good advice of both Prime Minister Manmohan Singh and the finance ministry.” Sibal also sought to blame the NDA government, saying that "the court has indicted the first-come-first-serve' policy, which was the NDA government's policy. It was their policy, which was followed by the UPA when it came to power in 2004."

In a separate order on a plea for appointment of independent persons to monitor 2G case probe being undertaken by CBI, enforcement directorate and Income Tax authorities, the bench directed the investigating agencies to submit their report to the Central Vigilance Commission which would be sending its report to the court.

A bench of justices G S Singhvi and A K Ganguly directed the Telecom Regulatory Authority of India (TRAI) to make fresh recommendations for grant of licence and allocation of spectrum in 2G band by auction, as was done for allocation of spectrum in 3G band, within one month.

The court’s order, to come into operation after four months as per the direction of the bench, was viewed as a major setback for the telecom sector which had registered a massive growth in the country in the last decade or so.

In its verdict, the bench advocated strongly for auction of all natural resources, and blamed Raja for causing huge loss to the government in 2G spectrum allocation and grant of licences.  The court quashed the allocation, holding that it was done in an “illegal” manner. The 11 telecom firms which were doled out licences by the government said they will file review petitions before the Supreme Court.

“The exercise undertaken by the officers of the DoT between September, 2007 and March 2008, under the leadership of the then Minister of Communication and nformation Technology was wholly arbitrary, capricious and contrary to public interest apart from being violative of the doctrine of equality. The material produced before the court shows that the minister wanted to favour some companies at the cost of the public exchequer,” the court said.

“We have no doubt that if the method of auction had been adopted for grant of licence which could be the only rational transparent method for distribution of national wealth, the nation would have been enriched by many thousand crores,” the bench added.