The Supreme Court today struck down TRAI's regulation making it mandatory for telecom companies to compensate subscribers for call drops saying it was "manifestly arbitrary" and an "unreasonable restriction" on the fundamental rights of telcos to carry on the business.
The apex court said the regulation was "ultra vires" the Telecom Regulatory Authority of India (TRAI) Act as imposition of penal liability was on an "erroneous basis" that the fault of call drop was entirely with the service provider.
"We, therefore, hold that a strict penal liability laid down on the erroneous basis that the fault is entirely with the service provider is manifestly arbitrary and unreasonable.
"Also, the payment of such penalty to a consumer who may himself be at fault, and which gives an unjustifiable windfall to such consumer, is also manifestly arbitrary and unreasonable," a bench comprising justices Kurian Joseph and R F Nariman said.
"As a result, therefore, we set aside the judgement of the Delhi High Court and allow these appeals, declaring that the impugned regulation is ultra vires the TRAI Act and violative of the appellant's fundamental rights under Articles 14 and 19(1)(g) of the Constitution," it said.
Referring to submissions made by Attorney General Mukul Rohatgi, the bench noted that cause for call drops was twofold -- one owing to the fault of the consumer, and the other owing to the fault of the service provider.
"If this is so, the impugned regulation's very basis is destroyed: the regulation is based on the fact that the service provider is 100 per cent at fault," the bench said in its 99-page judgement.
It further said, "...It is clear that the service provider is made to pay for call drops that may not be attributable to his fault, and the consumer receives compensation for a call drop that may be attributable to the fault of the consumer himself, and that makes the impugned regulation a regulation framed without intelligent care and deliberation."
The apex court passed the judgement on the appeals filed by COAI, a body of Unified Telecom Service Providers of India and various telecom operators, challenging Delhi High Court order which had upheld the TRAI's decision making it mandatory for them to compensate subscribers for call drops from this January.
The apex court, in its verdict, said, "We are afraid that
the orderly growth of the telecom sector cannot be ensured or promoted by a manifestly arbitrary or unreasonable regulation which makes a service provider pay a penalty without it being necessarily at fault."
It said whether the service providers make profits or suffer losses cannot be said to be relevant for determining whether the regulation was otherwise arbitrary or unreasonable.
The bench said it is always open to the authority to ensure "in a reasonable and non-arbitrary manner" that service providers provide the necessary funds for infrastructure development and deal with them so as to protect the interest of the consumer.
The apex court also noted that it was also not clear as to why the authority decided to limit compensation to three call drops per day or how it arrived at the figure of Rs one to compensate inconvenience caused to the consumer.
"All this betrays a complete lack of intelligent care and deliberation in framing such a regulation by the authority, rendering the impugned regulation manifestly arbitrary and unreasonable," it said.
The bench noted that as per the November 2015 technical paper shown to it, the authority has itself recognised that 36.9 per cent of call drops take place because of the fault at the consumer's end.
"Instead of having a relook at the problem in the light of the said technical paper, the authority has gone ahead with the impugned regulation, which states that the said regulation has been brought into force because of deficiency of service in service providers leading to call drops," the bench said, adding it itself shows the "manifest arbitrariness" on TRAI's part.
The apex court also observed that subject to certain well defined exceptions, "it would be a healthy functioning of our democracy if all subordinate legislation were to be 'transparent' in the manner pointed out above."
"... We would exhort Parliament to take up this issue and frame a legislation along the lines of the US Administrative Procedure Act (with certain well defined exceptions) by which all subordinate legislation is subject to a transparent process by which due consultations with all stakeholders are held, and the rule or regulation making power is exercised after due consideration of all stakeholders' submissions, together with an explanatory memorandum which broadly takes into account what they have said and the reasons for agreeing or disagreeing with them," it noted.
