In another case, the court stayed the operation of TRAI's show cause notice issued to the Mahanagar Telephone Nigam Ltd against its limited mobility cellular telephone service which were launched on October 3.

A division bench comprising Justice Arun Kumar and Justice DK Jain passed the stay order on MTNL's plea and sought TRAI's records in the case. The regulator was also issued a show cause notice on MTNL's petition seeking its reply by December 15, the next date of hearing. The stay will be in operation till December 15.

On Trai's powers over the government relating to issue of licences for basic services, the division bench comprising Justice Arun Kumar and Manmohan Sarin upheld an earlier judgement of the court on the same lines. It dismissed a clutch of appeals filed by private telecom operators against the earlier ruling passed by Justice Usha Mehra.

The bench said, "Licensing powers of the government are statutory powers which cannot be allowed to be impliedly interfered or subjugated to another authority". The court said the power of granting licence had been given to the government under a statute and "it is the government which alone could enjoy this power". Trai was a creation of the statute and its powers and functions were governed by the TRAI Act, the court said.

In the MTNL case, solicitor general Soli Sorabjee, representing the company's case, said TRAI had no jurisdiction in issuing the show cause and it should be quashed. In its showcause to MTNL, TRAI had said that the company had proceeded to implement the tariff for its cellular services in "blatant disregard" of the provisions of Telecommunications Tarrif Order (TTO) 1999.

Trai had stated that MTNL violated its specific directions not to go ahead with the proposed tariff and asked MTNL chairman and managing director S Rajagopalan to explain why penal action should not be taken against him under the TRAI Act.

MTNL had fixed a tariff of Rs 1.20 for three minutes for outgoing calls against the prevailing rate of Rs 6 per minute charged by private cellular operators. The private cellular service tariff is being reduced to Rs 4 per minute on outgoing calls with incoming calls being made free.

The MTNL service is being strongly opposed by private cellular operators which felt that the move raised crucial issues regarding tariffs and cross subsidisation of cellular and basic telecom services.

MTNL has promised to set up a separate subsidiary for cellular services and has agreed to pay 15 per cent of annual gross revenue to the Department of Telecom (DoT), the same condition as applicable to other cellular mobile service providers.