India: Telecom Tribunal Denies Right To Refund Of Entry Fees For Quashed 2G Licenses

The Telecom Disputes Settlement and Appellate Tribunal ("TDSAT"), issued an order denying refund of entry fee/license fee to Loop Telecom Ltd. ("Petitioner"). By virtue of the judgment in the 2G case1 ("2G Case"), the Supreme Court had quashed 122 telecom licenses. 21 licenses of the Petitioner were quashed as a result of this order. The Petitioner had approached the TDSAT to claim refund of INR 14, 549,400,000 (approximately USD 224,859,376) and interest which it had paid as entry fee / license fee for the grant of the 21 licenses which were quashed. The TDSAT sited pending criminal trials against the Petitioner and refused to classify their claim as valid grounds for restitution under the Indian Contract Act, 1872 ("Contract Act").


  • The Supreme Court, in the 2G case quashed 122 Unified Access Service ("UAS") licenses granted to telecom licensees on grounds of irregularity and arbitrariness in the method of allocation of the 2G spectrum2.
  • 21 licenses of the Petitioner were among these licenses that were quashed in the 2G case. The Petitioner accordingly shut down its operations in the 21 service areas.
  • Parallel to the judicial review of the grant of the 2g spectrum in the 2G Case, there were criminal proceedings underway with respect to the highly unusual manner in which the licenses were granted. The report of the Comptroller and Auditor General of India dated November 8, 2010 inter alia reported that 85 of the 122 licenses granted by the DoT had gone to applicants who did not fulfill the eligibility criteria. In connection with this, the Central Bureau of Investigation had submitted a charge sheet alleging that the Petitioner was ineligible for the grant of the 21 UAS licenses. The Central Bureau of Investigation ("CBI") claims that the Petitioner was in violation of the then prevailing UAS license guidelines which prohibited an entity from having substantial equity holding in more than one telecom licensee in the same service area3: the CBI claims that the Petitioner was a front of the an entity which held substantial equity in another pan-India licensee. On the basis of the charge sheet, on December 20, 2011 the special judge framed charges against the Petitioner and the trial is underway since then ("Criminal Matter").
  • The Petitioner approached the TDSAT seeking a direction to the Department of Telecommunications, Union of India ("UoI") to refund INR 14,549,400,000 (approx. USD 224,069,780) and interest paid as entry fee/license fee for the grant of 21 UAS licenses A direction for discharge of bank guarantees given to the DoT in terms of the 21 UAS license was also sought. During the pendency of the case, the bank guarantees had expired and by an interim order passed on February 7, 2014, the Petitioner was permitted to not renew the guarantees subject to giving an undertaking that it would pay the demands raised by the DoT depending upon the outcome of the case.


  1. The Petitioner' basic claim was that the TDSAT should review the matter from a contractual point of view. The Petitioner claimed that it was forced to pay a very large amount of money for the grant of the UAS licenses which was taken away from it as a result decision in the 2G Case. The Petitioner relied upon the provisions of the Contract Act (Section 56 and 65) which provide for restitution for void contracts or contracts which become impossible to perform. . It is the contention of the Petitioner that the decision in the 2G Case made the performance of their license impossible due to which it became void, and hence the UoI is liable to refund the license fee. While making this claim, the Petitioners submitted that unlike a Constitutional Court, a tribunal cannot decline exercise of its jurisdiction on the grounds of larger public interest and the Tribunal is bound to strictly follow the provisions of the Contract Act.
  2. The Petitioner also denied that there was any link between the Petitioner's restitutionary claim before the Tribunal and the Criminal Matter against the Petitioner. It was submitted that if any of the criminal charges against the Petitioner are proved, it would face the consequences for it but that did not mean that restitution could be denied to the Petitioner on the ground of pendency of the Criminal Matter.
  3. It was also submitted by the Petitioner that it had complied with clause 8 of the UAS guidelines by providing certification to the effect that it was not in violation of the restriction which prohibited an entity from having substantial equity holding in more than one telecom licensee in the same service area. The facts that formed part of the Criminal Matter were fully known to the DoT through several complaints from members of parliament. These complaints were examined by DoT and the Department of Corporate Affairs and the Petitioner claims that there was no violation of clause 8 of the UASL guidelines in the Petitioner's applications for licenses.


  1. It was submitted on behalf of the UOI that the charge that the Petitioner was obliged to pay for was merely an entry fee and not for usage of spectrum for which there is a separate charge. A reference was made to a number of clauses in the UASL guidelines and the license itself where the entry fee is mentioned with the prefix "non-refundable".
  2. It was further submitted that some of the grantees whose licenses were quashed by the 2G Case took part in a fresh auction and were able to win spectrum and they were allowed adjustment of the licence fee deposited by them for the quashed licenses. Some of these companies were even accused in the criminal case and were facing graver charges than the Petitioner. It was submitted that a self-induced frustration of contract was brought about by the Petitioner by not participating in the fresh auctions and hence the Petitioner could not claim any relief under the Contract Act.


The claim for refund by the Petitioner was denied by the TDSAT. The salient points of the Tribunal's decision are :

  1. Whether Entry Fee can be refunded at all: The TDSAT first addressed the point of whether the entry fees are non-refundable as claimed by the UoI.The Tribunal was of the view that the UoI's view could have been valid if the licenses were cancelled for violation of the terms of the license itself or were surrendered by the Petitioner on its own. In the instant case, the Petitioner's licenses were quashed by a judicial action via the 2G Case and therefore "the license did not survive for placing reliance on its provisions".

  2. Whether Petitioner had exhausted its rights by not participating in the fresh auctions: The TDSAT noted that that the soundness of the set off policy was not free from doubt especially since this policy does not find any mention, much less any approval or sanction by the Supreme Court in any of its orders relating to the 2G Case. In any case, it was difficult to reject the Petitioners claim on the basis of non-participation in the auction or to allow it on the basis of parity.

  3. Whether the TDSAT can sustain a claim of refund on the basis of contract law in this case: In order to determine whether the claim for refund by the Petitioner was sustainable, the TDSAT considered whether the decision of quashing of the 2G licenses by the Supreme Court in the 2G Case was one in the realm of contract law or whether it was in the exercise of the jurisdiction vested in the court by administrative and constitutional law principles.

    The Petitioner's claim for refund is principally based on Section 65 of the Contract Act which provides as follows:

    When an agreement is discovered to be void, or when a contract becomes void, any person who has received any advantage under such agreement or contract is bound to restore it, or to make compensation for it to the person from whom he received it.

    The question to be considered was whether the quashing of the 2G licenses by the Supreme Court had the effect of rendering the Petitioner's license agreement with the DoT void, in which case the Petitioner could claim refund on grounds of Section 65 of the Contract Act. However the Tribunal noted that the Supreme Court had not quashed the 2G licenses on account of any provisions of the Contract Act and instead, its decision was concerned with the arbitrariness in the allocation procedures followed by the DoT.

    On the basis of the fact that the decision of quashing the 2G licenses was focused on arbitrariness and mala fide in the government policy, the TDSAT noted that it is debatable whether the provisions of the Contract Act would be applicable in such constitutional matters.

  4. Whether the Contract Act is relevant in this case: The TDSAT considered various provisions of the Contract Act relating to enforceability of a contract and conditions rendering a contract void. For instance:

    • The TDSAT considered Section 23 of the Contract Act which states that

      The consideration or object of an agreement is lawful, unless—it is forbidden by law; or is of such a nature that, if permitted, it would defeat the provisions of any law; or is fraudulent; or involves or implies, injury to the person or property of another; or the Court regards it as immoral, or opposed to public policy. In each of these cases, the consideration or object of an agreement is said to be unlawful. Every agreement of which the object or consideration is unlawful is void

      The Supreme Court in the 2G Case had observed that the 2G spectrum was given to the applicants at very low prices. The TDSAT considered whether this could mean that the consideration was opposed to public policy and hence the agreement was void. The TDSAT, however, concluded that such an interpretation would be too far-fetched and highly contrived particularly because the observation was made by the Supreme Court in a completely different context and had no connection with the consideration being unlawful under Section 23 of the Contract Act. Thus, the Tribunal ruled out the possibility of the applicability of Section 23 of the Contract Act.

    • The TDSAT considered whether there was frustration of contract as contemplated under Section 564 of the Act which states as follows:

      An agreement to do an act impossible in itself is void. Contract to do act afterwards becoming impossible or unlawful: A contract to do an act which, after the contract is made, becomes impossible or, by reason of some event which the promisor could not prevent, unlawful, becomes void when the act becomes impossible or unlawful.

      The TDSAT considered the cause-effect relationship in this case. Under Section 56, the cause is the act becoming impossible either physically or legally and the result is the contract becoming void. In the instant case, the TDSAT noted, there is no question of the act under the license becoming impossible of performance either physically or legally. In the instance case, the cause is the quashing of the licenses and the effect is that the activities permitted under the license cannot be carried out. Section 56 contemplates an event which occurs outside of the contract that makes the performance impossible. In the instant case, however, the licenses were quashed and thus the works permitted under them became unlawful. The TDSAT, thus, concluded that Section 56 of the Contract Act was not applicable in this case.

    • The TDSAT analyzed if and how restitution could be awarded under Section 65, assuming but not admitting that Section 23 and Section 56 of the Act were applicable. Section 65 states

      When an agreement is discovered to be void, or when a contract becomes void, any person who has received any advantage under such agreement or contract is bound to restore, it, or to make compensation for it, to the person from whom he received it.

      Section 65 contemplates a situation where an agreement becomes void after formation; thereby implying that it was valid at the time of formation. By this logic, where the agreement is unlawful since inception, it cannot be said that it was 'discovered' to be void or it 'became' void. In the instant case, if the Petitioner is convicted in the Criminal Matter, Section 65 would not be applicable.

      With respect to the Criminal Matter, the Petitioner had also claimed that they had provided due certification in accordance with the provisions of the then existing UASL Guidelines. However the TDSAT noted that the CBI was of the opinion that the Petitioner had obtained the licenses by submitting a false certificate regarding compliance with clause 8 of UASL Guidelines.

An important observation made by the Tribunal in this respect was that the defects that rendered the license illegal and liable to be quashed are totally different from the elements and causes contemplated under the Contract Act for rendering an agreement void or voidable.

Accordingly the Tribunal held that the quashing of the licenses did not fit into the provisions of the Contract Act. The principle of 'in pari delicto' rest condition defenditis (in equal fault, better is the condition of the possessor) was applied and the Tribunal stated that until the Petitioner was exonerated of the charges against it in the Criminal Matter that were pending, an order of refund could not be made in favor of the Petitioners.

With respect to the claim of discharge of bank guarantees, the TDSAT has noted that the UoI had a claim amounting to INR 58, 70, 00, 000(approximately USD 9,072,020) plus the claim for license fee against the Petitioner up to June 1, 2012. The DoT was thus ordered to raise its demands against the Petitioner within two months from the date of the order in the instant case and in case the Petitioner made the payment, the bank guarantees/undertaking were to stand discharged.


Principles of restitution are well settled that 'an act of court shall prejudice no man' (Actus curiae neminem gravabit)5. It is also equally settled that a Plaintiff will be unable to pursue legal remedy if it arises in connection with his own illegal act (Ex turpi causa non oritur actio)6.

It is pertinent to discuss the TDSAT's order of July 2015 in S Tel Private Limited v. Union of India7. In 2007, S Tel was awarded 3G spectrum pursuant to an auction process in three service areas for which S Tel paid INR 3,376,700,000 (approx. USD 52,003,273) as spectrum allocation charges. One of the pre-requisites for taking part in the 3G auction process was a UAS license. Pursuant to the quashing of the licenses in the 2G case, S Tel lost its UAS license in those areas for which it had also won 3G spectrum,. Therefore, S Tel lost the legal competence to use the 3G spectrum which it had acquired through a valid auction process. After representations before the government to permit an assignment of the spectrum to it or to allow use by creation of wholly owned subsidiaries were disregarded, the Government put the spectrum to auction again and allocated it to some other party. The TDSAT held that this made the performance of the contract impossible and hence by virtue of Section 56 of the Act, restitution was permissible. It is noteworthy, that the S Tel case mainly deals with the 3G spectrum unlike the instant case that deals with a company that is claiming refund of license fees paid for allocating the 2G spectrum. Furthermore, there were no criminal proceedings pending against S Tel with regard to the 2G spectrum as are pending against the Petitioner in the instant case. Hence the question of applicability of 'in pari delicto' does not arise.

In this case, the TDSAT has rightly denied the claim of the Petitioner to refund of entry fees in light of the pending Criminal Matter. If the Petitioner is convicted in the Criminal Matter, there is no ground for Petitioner to claim refund on the basis of any provision of the Contract Act.


1 Centre of Public Interest Litigation v. Union of India (2012) 3 SCC 1

2 Our hotline on this judgment is available at]

3 Clause 8 of the Guidelines For Unified Access Services Licence dated December 14, 2005 (No.10-21/2005-BS.I(Vol.II)/49)

4 Section 56- Agreement to do impossible act:

An agreement to do an act impossible in itself is void.

Contract to do act afterwards becoming impossible or unlawful.-

A contract to do an act which, after the contract is made, becomes impossible, or, by reason of some event which the promisor could not prevent, unlawful, becomes void when the act becomes impossible or unlawful.

Compensation for loss through non-performance of act known to be impossible or unlawful.-

Where one person has promised to do something which he knew, or, with reasonable diligence, might have known, and which the promisee did not know, to be impossible or unlawful, such promisor must make compensation to such promisee for any loss which such promisee sustains through the non-performance of the promise.

5 S.V.R. Mudaliar (Dead) by Lrs. and Ors. V Rajabu F. Buhari (Mrs) (Dead) by Lrs. and Ors AIR1995SC1607

6 Oswal Agro Furane Ltd. and Anr. V Oswal Agro Furane Workers Union and Ors. AIR2005SC1555

7 Decided by the TDSAT on July 7, 2015. Our analysis of this order is available at []

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Vivek Kathpalia
In association with
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.