2G Scam - Acquittal In Criminal Case Won't Remove The Finding That 'First Come First Serve' Policy Was Arbitrary : Supreme Court Rejects Loop Telecom's Refund Plea

The Supreme Court on Thursday dismissed the appeal filed by Loop Telecom and Trading Limited assailing the decision of TDSAT of dismissing their pleas seeking refund of Entry Fee of Rs 1454.94 crores paid for grant of Unified Access Service Licenses.The bench of Justices DY Chandrachud, Surya Kant and Vikram Nath observed that Loop Telecom was in pari delicto (equal fault) with the Department of Telecom and the then officials of the Union government and that they were beneficiary of the ―First Come First Serve policy which was intended to favour a group of private bidding entities at the cost of the public exchequer."The appellant was in pari delicto with DoT and the then officials of the Union government. The appellant was the beneficiary of the ―First Come First Serve policy which was intended to favour a group of private bidding entities at the cost of the public exchequer. The contention of the appellant that it was exculpated from any wrongdoing by the judgment of this Court in CPIL (supra) is patently erroneous. The process leading up to the award of the UASLs and the allocation of the 2G spectrum was found to be arbitrary and constitutionally infirm. The need for an open and transparent bidding process for the allocation of natural resources was substituted by a process which was designed to confer unlawful benefits on a group of selected bidders by which the appellant benefitted. The appellant has tried to obviate these findings by relying on its acquittal by the Special Judge, CBI," the Court said.Remarking that criminal trial before the Special Judge, CBI was limited to the question as to whether Loop Telecom's promoters had cheated the DoT since it was allegedly being controlled by Essar Group, the bench said, "Hence, the acquittal of the promoters of the appellant of these criminal charges does not efface or obliterate the findings which are contained in the final judgment of this Court in CPIL (supra). Hence, as a beneficiary and confederate of fraud, the appellant cannot be lent the assistance of this Court for obtaining the refund of the Entry Fee. In any event, such a course of action before the TDSAT was clearly in the teeth of the judgment of this Court in CPIL (supra)."Factual Background Loop Telecom and Trading Limited ("appellant") on September 3, 2007 had applied for grant of Unified Access Service Licenses ("UASL") for twenty-one service areas by paying Entry Fee of Rs 1.1 crores and furnished a Performance Bank Guarantee and Financial Bank Guarantee for the twenty-one areas. On March 3, 2008, appellant entered into UASL agreements with the Union which came into effect from 25 January 2008.On 2 February 2012, the Supreme Court Court by its judgment in Centre for Public Interest Litigation v. Union of India declared that the policy of the Union government for allocation of 2G spectrum on a ―First Come First Serve basis was illegal. The judgement resulted in quashing of the UASL's granted by the Union. On 25 May 2012, the appellant instituted a petition before the TDSAT seeking, among other things, a refund of the Entry Fee of Rs 1454.94 crores, inclusive of interest. On September 16, 2015, TDSAT while dismissing the appeal said that the appellant could not claim restitution under Section 65 of the Indian Contract Act, 1872 and that quashing of the appellant's licences by Top Court in CPIL judgment couldnt be brought under Indian Contract Act, since the UASL agreements had not become void under Sections 23 and 56 of the Indian Contract Act. Aggrieved by TDSAT's judgment the appellant approached Top Court but later withdrew the same with liberty to approach the Court once again if it became necessary.The appellant again approached TDSAT raising the issue of a refund of the Entry Fee, on the ground that it had been exonerated by the Special Judge, CBI which was dismissed by TDSAT on December 11, 2018 noting that the appellant had made a second attempt for claiming the same relief which had been sought earlier in the First Telecom Petition.Aggrieved with the TDSAT orders dated September 16, 2015 and December 11, 2018, Loop Telecom and Trading Limited approached the Top Court.Submission Of CounselsAppearing for Loop Telecom and Trading Limited, Senior Advocate AM Singhvi contended that since the licences of the appellant were quashed by the judgment of this Court in CPIL, the appellant was entitled to a refund of its Entry Fee based on civil, contractual and constitutional principles.Singhvi further contended that quashing of the licences by Top Court amounted to a frustration of each licence, which was in the nature of a contract, in terms of Section 56 of the Indian Contract Act. In this regard he said that the appellant was entitled to a restitution of the Entry Fee paid in terms of Section 65, as the licences were quashed not on account of the fault of the appellant but due to the culpability of the Union government.Referring to Union of India v. Karam Chand Thapar and Bros. (Coal...

2G Scam - Acquittal In Criminal Case Won't Remove The Finding That 'First Come First Serve' Policy Was Arbitrary : Supreme Court Rejects Loop Telecom's Refund Plea

Shruti Kakkar

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