"Licences after January 2008 are quashed," Justice GS Singhvi told the court in New Delhi. "The Telecom Regulatory Authority of India will make fresh allocations by auction."
Mis-selling of the second-generation (2G) mobile licences was estimated by the country's public auditor to have cost the treasury up to $40 billion in lost revenue.
The minister in charge of the sale, A Raja, is currently on trial accused of fraud and cheating, one of several corruption cases to have buffeted the government of Prime Minister Manmohan Singh.
While the cancellation order re-opens a damaging episode for the government, there was a reprieve for Home Minister P Chidambaram who activists had wanted investigated by a special court trying suspects in the case.
The Supreme Court declined to rule on the issue, saying it was up to a special court to decide if there was evidence against Chidambaram, who was finance minister at the time of the 2008 sales.
Raja, a member of the DMK, a regional party in the Congress party-led national coalition, is suspected of rigging rules over the sale of the licences to favour some firms in return for kickbacks.
Lawyer Prashant Bhushan, who brought the case to the Supreme Court, welcomed the cancellations and also the fines announced by judges for companies who were awarded the licences.
"This is a historic judgement for the reason that now these companies which were the beneficiaries of these illegal licences... will have to effectively refund the benefit," he told reporters.
"The public exchequer will be able to recover the losses, he added, saying it would send a "strong signal" to dissuade corrupt corporations and public officials from conspiring together.
Among the companies affected are Uninor, a joint venture between Norway's Telenor and India's Unitech, Tata Telecom and Swan Telecom.
Graft has become a hot political issue in India due to high-level scandals such as the so-called "2G scam" and contracts awarded for the 2010 Commonwealth Games in Delhi, as well as a street-level campaign by activist Anna Hazare.
Hazare galvanised millions of people in August last year when he held a 12-day hunger strike in New Delhi that triggered huge rallies of supporters across the country.
Many Indians complain that corruption is part of daily life for every transaction ranging from getting a driving licence to property sales. Graft is also seen as a major deterrent to international investment in India.
"This decision has multiple ramifications for the telecom sector, India's image as a destination for foreign investment and a political impact for the ruling Congress," said Jigar Shah, analyst with Kim Eng Securities.
Singh, who previously enjoyed a blemish-free reputation, has vowed to tackle the problem but his efforts to pass an anti-corruption law failed in December due to political wrangling.
The failure of the bill in the upper house was a further blow to Singh, whose administration also had to withdraw major reforms late last year to allow foreign supermarkets to operate in India.
The latest set-back for the government comes amid a flurry of local elections, including one starting next week in political heavyweight Uttar Pradesh, India's biggest state where Singh's party was hoping to make gains.
India's top federal police force, the Central Bureau of Investigation (CBI), has raided several politicians' houses as well as the nation's biggest telecom firms, Bharti Airtel and Vodafone Essar, during its probe.
COMMENTS (12)
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@ahmed,
What you say is true, but a greater problem, for all citizens of the subcontinent, India, Pakistan, Bangladesh, Nepal, is to clean up the legal system top to bottom. How that will happen, I cannot visualize. The British administration passed on some of the administrative costs of maintaining a huge land revenue system from which they derived a lot of their wealth, by making the village patwari, the tehsildar and thanedar complicit in petty corruption at their respective levels. This then worked up to the next level of land registration, the magistrate's court and that of the rural or small-town vakils. From there, it was a small step, post independece, throughout the subcontinent, to corrupt the lower courts and magistrates, who were paid a pittance. In the British scale, a judge received approximately 23X the salary of his Indian counterparts, an Indian magistrate at least 10-12X that of the lower division clerks. These pay differentials were flattened, and even the many perquisites like quarters, servants etc. were removed, post independence. The magistrate became a lowly official!
The net sufferer has been the very ordinary citizen, who is at the mercy of forged wills, malfeasance in inheritance cases, transfer of property and in almost every issue affecting his or her daily life and basic human rights, including right to life and protection of property and person.
Whether India, Pakistan or Bangladesh, this is the area where we all have failed in extraordinary measure. Women are not safe for X or Y or Z reasons in these societies, whatever they may be from place to place, region to region; they cannot walk freely at night, or without being teased. People because they belong to some specific religion, group, color or racial type feel their lives and well-being threatened at every turn and cannot turn to any civil or legal authority anywhere in the subcontinent.
So, these are some of the really major issues we need to solve before the entire region can begin to progress as a whole. Most people seek to live a life of dignity for themselves and their family. Next comes subsistence. Next a future for their children. Only then comes thoughts of prosperity, comfort and surplus. I have seen extraordinary changes in the last 50 years in India in all these areas, but I am still not sure how the future is going to unfold. I should like to hear your thoughts, if you please.
@You Said It: The GOI auditor general's report was based on speculative price index, which at the time of analysis may be correct, and the $40 billion was the maximum potential loss, and the office itself has acknowledged that in the report. It some how got lost in the shouting match.
As more spectrum becoming available as the technology has progressed to 4G, it is unlikely that 2G spectrum reauctioning/ repricing would fetch upwards of $40 billion in today's market, and it was even the case then, when compared to the global auctioning price of that time. The costs to the private sector included the establishment of infrastructure at that time, and if one reads the Dept of Telecommunication recommendations they factored that into consideration.
There might have been potential losses then but Not to the tune of $40 billion. Unfortunately, this fact does not seem to stick as it is not as "gossipy".
Now, was there some underhand deal by the minister who was in charge? My gut feeling says so, but it is up to the investigation agency to prove that.
The ruling brings other issues: what about the companies who diligently played by the rules established by the department? Why should they be penalized for no criminal activities on their part?
All in all, it is a step in the right direction for transparency in government. The change is inevitable. Doubt it will have any impact in the industry besides some noise.
@John B: $40 billion is an overestimation by the GoI auditors for 2G spectrum, as the latest 3G spectrum auction itself fetched only around $15 billion.
Not quite. The $40 billion figure was computed by the CAG based on a formula that looked at the price per MHz received for the 3G spectrum and potential revenue that an operator can realize from the said spectrum. The amount of spectrum that was for sale in the 2009-10 3G auction was a fraction of the spectrum that was involved in the 2008 auction of 2G spectrum. Also, current demand for voice spectrum is much higher than that for data connectivity since existing operators are facing a spectrum crunch which is constraining their ability to expand subscribers. So the formula assumed that lower voice revenues from 2G voice (compared to 3G VAS) would be offset by more immediate ROI from 2G spectrum (as compared to longer time to realize ROI on 3G spectrum).
The reason for the dispute in that figure came about because critics charged that operators who bid for one spectrum may not have the cash to bid for other spectrum, and hence pro-rated realization from two auctions may be lower than realization from one auction.
@Dr.Salim:
SC of India is yet to opine on/substantiate the nature and extent of corruption, if any. The "Loss" of billions as you know is notional,not real. Had it been real money, India would have been in serious financial trouble. The amount is computed by Govt auditors but it still is speculative since it implies that if (and it is a huge "if") the Govt of the day had followed the practice of profit maximisation as an avowed business policy, 40 billions was the kind of profits that just may have been made. Apart from the amount itself being debatable it is a moot point whether a bureaucrat run organisation like Govt of India has the business savvy to think like a profit-obsessed corporate body.
GoI followed a pre-established "first-come-first-served" practice instead of "highest bidder takes all" approach, which led to accusations of graft. A SC Judge who probably wanted to be more than a mere footnote in the history of jurisprudence in India passed a spectacular judgement to please the gallery but did not even bother to wonder about the additional burden on consumers if higher bidding amounts were involved in case the second approach was taken.. Judge is oblivious to the obvious that if the billions of dollars would have been initially paid by the bidder a monopoly would have been created by the biggest buyer, and then a much higher amount would have been recovered from the common man-the user of the services. Everything is finally paid by the consumer, be it graft or profits!
Only when the dust & din settles we may know the truth or additional facets of truth.
$40 billion is an overestimation by the GoI auditors for 2G spectrum, as the latest 3G spectrum auction itself fetched only around $15 billion.
That said, it a good win for people of India. The SC blamed the Dept of telecommunication, and Telephone regulatory authority of India for their haphazard policy and recommendations , which apparently was in vogue prior to this congress government.
Criminal intentions were suggested against the minister who arbitrarily changed the last date of application submission and for ignoring Prime minister's suggestion of auction.
What is interesting in the verdict is that Indian SC acknowledged that it does not have jurisdiction over executive branch's decision making process but did asserted when nation's executive policies are in contradiction with the general welfare of the people, the court has jurisdiction on behalf of the people over the executive branch and the private sector.
This is interesting, overall.
These cases does not reflect that corruption is at the peak. Corruption was always at the peak. I would call it a "transparency revolution" through which India is currently going through.Now status-quo and nepotism will not work and politicians will have to pay for their misconducts. In my view it will take at least 20 years to reduce corruption by 50%. And that would be a big achievement.
Good thing is that this time even big corporate houses could not use their billions of dollors to stop cancellation of licences.
This is the perfect example of people's power and their collective ability to pressurize institutions for change.
@Dr.Salim:
Good, your statistics should be an eye opener for fellow Pakis who always punch above their weight !!!
@Justice: You can gloat as much as you can. But, the collective conscience and will of the nation is strong and as you can see, the criminals are in jail and the tainted process is being reversed.
@Justice: same old 2G case dear, not a new one. check whats new here. and read newspapers regularly.
Justice: "So, what you say now India, corruption on peak" Atleast the people behind it are behind bars and the deal has been scrapped and asked to be reworked. Better deal than what your country gets. Dont you feel. Rgds Whats in the name
So, what you say now India, corruption on peak!!
$40 billion of lost revenue ? That is like 10 years of total revenue of Pakistan.