Bombay HC strikes down Rs 22,000-crore spectrum levy

The judgment is significant because the bulk of the disputed amount – estimated at around Rs 12,000 crore – pertained to Bharti Airtel and Vodafone Idea. At the time the demands were raised in 2013, Vodafone India and Idea Cellular were separate entities and had not yet merged to form Vodafone Idea. Other operators that faced similar demands included Aircel, Reliance Telecom, BSNL, MTNL and Tata Teleservices.

A division bench of Justices Manish Pitale and Shreeram Shirsat held that the department of telecommunications (DoT) lacked both contractual and statutory authority to retrospectively impose the charge on spectrum that had already been allotted under existing licence arrangements.

The court ruled that neither the telecom licences nor Section 4 of the Indian Telegraph Act empowered the government to levy such a charge years after spectrum had been assigned.

The dispute dates back to November 2012, when the Union Cabinet decided that existing operators would be required to pay a one-time charge for spectrum holdings beyond 4.4 MHz and an additional retrospective charge for spectrum held beyond 6.2 MHz from July 2008 onwards. DoT subsequently issued demand notices in early 2013.

The court noted that under the revenue-sharing framework introduced through the National Telecom Policy, 1999, operators had already paid higher licence fees linked to adjusted gross revenue whenever additional spectrum was allotted. It observed that the government could not subsequently alter the financial consideration agreed under the licence arrangements and demand additional payments retrospectively.

“The respondent cannot be permitted to change the contract midway to change the goal post,” the court said while concluding that the operators had paid consideration in accordance with the terms of their licences.

The judgment also examined the policy history leading up to the levy. It noted that earlier recommendations of the Telecom Regulatory Authority of India (Trai) did not support a one-time charge on spectrum holdings up to 10 MHz and that additional spectrum allocations had already attracted enhanced revenue-sharing obligations. The operators involved in the present petitions held spectrum within that range.

The ruling, however, creates a direct judicial divergence on the issue. In 2016, the Madras High Court, while hearing petitions filed by Aircel, upheld the same one-time spectrum charge. The Madras High Court had accepted the government’s argument that spectrum is a scarce national resource held in public trust and that the Centre was entitled to determine appropriate compensation for its commercial use. It also held that operators had no vested right over additional spectrum and that licence conditions permitted such intervention in public interest.

The Bombay High Court expressly disagreed with that approach, holding that the public nature of spectrum could not override the requirement for a clear legal source of power to impose a fresh levy. It found that the government had failed to identify any provision in law or in the licence agreements authorising the retrospective charge.

The conflicting rulings now set the stage for a final determination by the Supreme Court. Appeals against the Madras High Court judgment in the Aircel matter are already pending before the apex court.

Legal experts said that with the Bombay High Court having reached the opposite conclusion on the same levy, the Supreme Court is expected to eventually settle whether the government can retrospectively impose additional charges on spectrum that had already been allotted under an existing licensing framework.

The outcome will have implications not only for Airtel and Vodafone Idea but also for other operators that were subjected to similar demands when the levy was introduced more than a decade ago.