Constitutional Law Article
Considering
the constitutionality of
“Fees for licences payable by
Telcos”
By Prem Kumar Francis
Article 110
of the Constitution of India
is the famous fiscal
provision - made unique by the “special
procedure” provided by
Article 109.
By virtue of the
“special procedure”,
applicable
to
Article
110(1),
the Lok Sabha
has sole
legislative powers
on the entire
finances of the central government.
Taxation laws like Income Tax Act
1961, Central GST Act 2017, and host of
other Central tax laws and
Finance Acts come under Article 110(1).
B. Shiva
Rao,
a member of
the
Constituent
Assembly,
in his
comprehensive study of the
drawing up of our Constitution,
The
Framing
of
India’s Constitution - A Study,
points
out the
objective
behind the “special
procedure” of
Article
109:
The general principle
approved
by the
Constituent
Assembly was that financial
control over the
executive would be exercised
by the House of
the
People.
[P.427]
This principle was approved in 1949 by the Constituent Assembly to cover only items under Article 110(1).
Article 110(1) excludes items covered under clause (2), which covers;
[a]
the imposition of fines or other pecuniary penalties;
[b]
the demand or payment of fees
for
licences or fees
for services rendered; and
[c]
the imposition, abolition,
remission, alteration
or regulation of any taxes by
any local authority or
body for local purposes.
Article 110(2) covers only the above three items which are grouped together. On these items, unlike in the case of Article 110(1), the Constitution does not grant Lok Sabha the unique legislative powers.
*
Fees
for licences
is thus
clearly
mentioned in
Article 110(2):
the entire gamut of licences come
within this term. In 1990s in
India the most important of these
licences,
fees
for licences
payable by telcos emerged. (Reliance
Jio, Bharti Airtel, Vodafone
Idea are present prominent
licencees.)
Fees for licences
payable
by telcos
happened to be clubbed
with its parent fees for licences
in Article 110(2); the parent was in
existence in the Constitution
since 1949.
*
Regarding the three Article 110(2) items, including fees for licences, in my view, the apparent intention of the Constituent Assembly in 1949 to exclude them from being included in Article 110(1),must have been that these items were not looked upon as sources of revenue for the nation. In our context, originally licences were granted in terms of Section 4 of the Indian Telegraph Act 1885, “to establish, maintain or work a telegraph…” (This enactment was repealed and replaced by the comprehensive Telecommunications Act, 2023.) But the advance telecommunication technology for which licences, under the same Section 4, are required presently by the telcos, not even “born” in 1949, so to speak: the technology emerged in India sometime in 1990s. And when the advance telecommunication technology was developed it was governed by the same Act of 1885; and by virtue of the Section 4 “the Central Government owns the exclusive privilege of carrying on telecommunication activities.” As a policy the Government could part with “this privilege in favour of any person” (any telcos) “by granting a licence in his favour …”The licence is granted on such conditions and in considerations of such terms including payment of fees to the government.
The Government did not treat this sophisticated technology on a different new footing given its unique and remarkable features; insteadthe licences in this case were retrofitted within the existing older statutory framework: Thus fees for licences payable by telcos was, I believe, artificially accommodated, constitutionallyspeaking, withinthe archaic parent fees for licences of Article 110(2).
Is this constitutionally correct?
*
Fees for licences in Article 110(2)is in company of “any taxes by any local authority or body for local purposes.” Certain interesting features of fees licences payable by telcos can for be inferred from the landmark October 2019 year judgment of the Hon Supreme Court (AIRONLINE 2019 SC 1309) which went against the telcos, and upheld the Government’s stand.These features, listed below, are striking in our context (emphasis added):
[a]
At para 2 of the judgment : During the material period, considering the grievances of the telcos, the Government came up with the “National Telecom Policy, 1999 Regime” to quote from the judgment, “keeping the interests of the country and the telecom sector in mind…”
[b]
At para 26 :
The
National
Telecom
Policy 1999 gave an option
to
the
licences to
migrate from fixed licence
fee
to
revenue
sharing fee.
The Court
noted: “The
objective of
the Government was … to
create
an
efficient
infrastructure thereby
propelling
India
intoan
IT superpower …”
We must be proud that the humble fees for licences has set out such grand national objectives to achieve. But from constitutional point of view fees for licences payable by telcos certainly is incongruous to “any taxes by any local authority or body forlocal purposes.”
*
Another graphic picture of
fees for licences payable by
telcos
can be seen from a news
report
that
appeared in 2010, the year the
spectrum
auction took
place. The report by economist
Swaminathan
Anklesaria Aiyar in the Sunday Times
of
India, dated
20 June 2010, is revealing:
Finance Minister Pranab
Mukherjee is
smiling. He had
hoped to get Rs 35,000
crore from
auctions
of
spectrum
to telecom companies for
3G and
broadband
wireless
access.
In fact, the auctions
fetched a
whopping
Rs
106,000 crore.
Thanks to
the bonanza,
government
sources claim that
the fiscal deficit will
now be
only
4.5% of GDP,
against the budget
estimate of
5.5%.
The economist continues: “Spectrum sales are being counted as revenue by the government … The government has simply sold some family silver to finance its overspending.”
In the context of the Constituent Assembly’s “general principle” of the Lok Sabha exercising financial control over the government adopted into the Constitution, troubling questions arise that are relevant even today:
[a]
Can fees for licences collected under Article 110(2) be counted as revenue by the central government?
[b]
Was fees for licences under the same constitutional provision envisaged to reduce fiscal deficit of not local municipality but of the nation to the extent of 1% of GDP?
[c]
Can “any taxes by any local authority or body for local purposes” of Article 110(2) be envisaged to deal with the following large amount of money:
[i]
Rs 1.94 lakh crore : Pertains to: “Vodafone Idea’s totally dues totalled Rs 1.94 lakh crore.”[According to Prasanta Sahu - Financial Express - 14 June 2025.]
[ii]
Rs 1.56 trillion : Pertains to: “the telcos must pay Rs 1.56 trillion…”[According to TIMESOFINDIA.COM news report of 6 June 2025.]
[iii]
Rs. 1.47 lakh crore : Pertains to: “The Supreme Court in October 2019 backed the government’s view and levied Rs. 1.47 lakh crore of AGR dues.”[According to Kiran Rathee - The Economics Times ET Prime - 31 Jan 2025.]
[iv]
Rs:42,000 crore
:
Pertains
to:
Approximate dues of
Bharati
Airtel.
[According to
financialexpress.com
news
report of 20 January
2025.](All
figures may
be verified.)
Considering
these
staggering
amounts, I
might argue, in
the
first place,
Article
110(2) items may
not
have been
conceived
togenerate with
such
large
amounts. To
generate such
large
amounts
recourse has
to be made to
the
instrumentalities
of
Article 110(1).
Therefore, I
believe and
submit, for the
Government to be
grounded only in
Article
110(2)
and
demand such
staggering
amounts,
is to
have inadequate
authority of law
for its
stand.
[d]
For passage of taxation laws in the Parliament, the Constitution lays down meticulous guidelines till the money bill becomes law. By contrast, see how the fees for licences payable by telcos is collected: the entire process of its collection, time limit for payment of the fees, or its exemption; imposition of interest and penalty or its reduction or totally waiver, and every other aspect related to the fees is determined largely behind closed doors by the Executive, that is the Central Government. Lok Sabha is not consulted or its inputs in the matter is not sought by the Government. Nor has the Lok Sabha laid down guidelines for the Executive to follow.
Is such absence of norms contemplated by the Constituent Assembly?
[e]
Thanks to the
licences granted
bythe
Central
Government, the manifold
benefitsof this
advance
technology, as provided by
telcos (the
licencees), is enjoyed by
more
than 1000
million
subscribers (or
customers)livingeverywhere
in
this vast sub-continent of
Bharat
thatis India.
Is Article 110(2)
designed to
involve
such large
and expansive
enterprise?
[f]
The Constituent Assembly, I believe, did not conceive and design Article 110(2) –
[i]
to generate large streams of national revenue – like that produced by fees for licences payable telcos;
[ii]
and keep the source of that stream, and that national revenue outside the purview of Lok Sabha’s powers bestowed under Article 109.
*
We must acknowledge that due to technological leaps and bounds in the telecom sector fees for licences when it comes to amounts payable by the telcos has been transformed to such an extent that it ill-fits the box of Article 110(2).In fact even the Government, through the Ministry of Communications press release of 5th July 2024, accepted that there has been “huge technical advancements in the telecom sector and technologies.”And when that transformation takes place, the Central Government on its own shouldconstitutionally treat fees for licences payable by telcos as revenue of the state under Article 110(1), mandating the scrutiny and exclusive authorisation of the Lok Sabha under Article 109 for its lawful and proper levy and collection.
Then the Constitution’s “general principal approved by the Constituent Assembly” of “financial control over the executive” would in this case be seen to be exercised by the Lok Sabha.
*
If this view is tenable,a few questions remain to be answered: Does it mean the mode of imposition and collection of fees for licences payable by telcos, so far undertaken, is violative of, and contrary to the requirements of Article 110(1) read with Article 109 and Article 117, and Article 265?
Further, does it mean the Lok Sabha has collectively abdicated its constitutional duty to uphold “the general principle” approved by the Constituent Assembly, and incorporated into the Constitution, of exercising “financial control over the executive”?
And further, is the fees payable under the Hon Supreme Court order of 2019, and the undisputed amounts already paid, is liable to be held as amounts charged and collected (or yet to be collected) without the authority of constitutional law?
I request that these issues be examined,and if found to involve substantial questions of constitutional law, then most respectfully I pray the Hon Supreme Court of India may be pleased to consider and appropriately answer them.
For this act of kindness We the People of Bharat that is India will, truly,be forever grateful.
o0o