Insights
April 23, 2019 12:38 pm

THE DELHI HIGH COURT STEPS IN TO STRIKE DOWN THE ARBITRARY ACTION OF INDIA’S TELECOM REGULATOR, TRAI

Background

In September 2009, the Telecom Regulatory Authority of India (the “TRAI”) introduced mobile number portability services (“MNP Services”) in India by issuing the Telecommunication Mobile Number Portability Regulations, 2009 (the “MNP Regulations”).  MNP Services allow mobile telephone subscribers to transfer their mobile connection from one telecom service provider to another.  Simultaneously, the TRAI also issued the Telecommunication Mobile Number Portability Per Port Transaction Charge and Dipping Charge Regulations, 2009 (the “PPTC Regulations”) to regulate the compensation payable to MNP service providers.

Pursuant to the MNP Regulations, the Department of Telecom issued a license to MNP Interconnection Telecom Solutions India Private Limited (“MITS”) under a license agreement dated April 17, 2009 (the “License Agreement”).  Under the License Agreement, MITS was authorized to process MNP requests from mobile telecom subscribers across the eastern and southern regions of India for a period of ten (10) years.  Further, clause 19 of the License Agreement provided that the fee to be charged by MITS for each MNP transaction would be as notified by the TRAI.  This was notified by the TRAI as INR19 (Indian Rupees Nineteen) per port transaction.  On entering into the License Agreement, MITS incurred significant capital and operational expenditure for the installation, networking and operation of the necessary equipment, systems and infrastructure to provide MNP services in India.

In January 2018, the TRAI issued the Telecommunication Mobile Number Portability Per Port Transaction Charge and Dipping Charge (Amendment) Regulations, 2018 (the “Amendment Regulations”) reducing the fee to be charged for each MNP transaction from INR19 (Indian Rupees Nineteen) per port transaction to INR4 (Indian Rupees Four) per successful port transaction.  Prior to notifying the Amendment Regulations, the TRAI had released draft regulations to amend the PPTC Regulations and invited comments from all stakeholders.  In response to these draft regulations, MITS had raised objections against the reduction in MNP service fees on the grounds that the revised service fee would render MITS unable to recover its massive capital expenditure incurred for providing MNP services in India.  However, the TRAI did not pay any heed to these objections.

Advised by Majmudar & Partners (“Majmudar”), MITS challenged the Amendment Regulations before the Delhi High Court along with Syniverse Technologies Private Limited (“Syniverse”).

Strategies adopted by Majmudar and MITS

Majmudar advised MITS to highlight the following facts:

  • As many mergers had taken place among telecom service providers in India in 2017-18, this would lead to a sharp drop in the overall demand for MNP services in India.  Therefore, reducing MNP fees would render the Licensees’ services as commercially unviable.
  • The metric used by the TRAI to conclude that a MNP service fee of INR4 (Indian Rupees Four) was reasonable in light of prevailing market conditions was questionable, because the TRAI had selectively merged and used the data submitted by the Licensees in calculating the reasonable MNP service fee.
  • The draft amendment regulations provided a MNP service fee of INR4 (Indian Rupees Four) for every port transaction, but the Amendment Regulations provided for a MNP service fee of INR4 (Indian Rupees Four) for every successful port transaction.  As the success of a port transaction could be influenced by various factors outside the Licensees’ control, again, this would not be feasible for the Licensees.  Apart from this, the TRAI had shown a complete lack of transparency in not inviting comments on this crucial aspect of the Amendment Regulations.

The decision of the Delhi High Court

On March 8, 2019, the Delhi High Court quashed the Amendment Regulations as being ultra vires the TRAI’s powers under the Telecom Regulatory Authority of India Act, 1997 and Article 14 of the Constitution of India.  The Delhi High Court accepted all of the contentions raised by the Licensees and quashed the Amendment Regulations as being ultra vires the TRAI’s powers because:

  • In not indicating that MNP service charges would be payable only for successful port transactions in the draft regulations, the TRAI failed to act with the required transparency, and such a policy was especially problematic given that porting transactions could fail without any fault of the Licensees (as for example, when the telecom subscriber fails to provide the necessary information); and
  • In not giving due consideration to the comments submitted by the Licensees on the draft amendment regulations and in calculating the per port transaction fee of INR4 (Indian Rupees Four) on the basis of the number of porting requests received but ultimately permitting this fee only for successful porting transactions, the TRAI acted arbitrarily and unfairly.

Our Comments

The Delhi High Court’s decision is a bold one as it has stepped in and prevented the TRAI from exploiting its position as a regulator and taking arbitrary decisions.  Moreover, in advising MITS in the dispute, Majmudar & Partners’ senior partner, Mr. Neerav Merchant, deftly handled MITS’ needs, persistently presented its stand and successfully overcame the numerous obstacles which accompany the pursuit of any dispute against a regulatory body in India.  This ruling is, therefore, a tremendous success for India’s judiciary, and sends a strong message that India’s regulators cannot act arbitrarily and unilaterally to the detriment of private parties.

Please let us know if you need any clarifications or details.

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