In a relief to telecom firms Bharti Airtel and Vodafone Idea, the Bombay High Court on Monday quashed the Centre's 2012 decision to impose a one-time spectrum charge for spectrum held above 6.2 MHz from 2008 onwards, questioning its source of power to make such a call.

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

The bench observed the government, 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 government has no power to impose such one-time spectrum charge and that, too, retrospectively under the provisions of the Telegraph Act.

On November 8, 2012, the Union Cabinet took a decision that one-time charge would be levied for spectrum held beyond 6.2 MHz from July 2008 onwards. Consequently, demand notices were issued to the petitioners (Bharti Airtel and Vodafone Idea Ltd) specifying the amounts payable by them towards one-time spectrum charge.

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

The court, in its judgment on Monday, said it cannot be contended that since spectrum is recognized 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.

Notably, in telecommunications, spectrum refers to the invisible radio frequencies that wireless signals travel over.

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