By the Modification of Licence P3 dated 5th August 1997 Conditions
and 20.2 of the Licence which stipulates criteria for adjustment inMain Tariff Items were suspended until 5th August 2002. By Clause 18.3of the Shareholder’s Agreement which is made part and parcel of theLicense, a different criteria was introduced for adjustment in the rates oramounts charged for the Main Tariff items for each of the five yearscommencing from 1 st January 1998. It also provides that the Minister ofPosts, Telecommunication and the Media (or his successor) shall approvean adjustment in the rates or amounts charged for the Main Tariff Itemsas per the percentage of increase specified for the each of the five years.Clause 18.3 further provides that such adjustment shall have effect from1 st January in the relevant year. It is evident from these provisions that
Consumers Association of Sri Lanka vs Telecommunications
Regulatory Commission of Sri Lanka and Others (Sriskandarajah, J.)
the Conditions 20.1 and 20.2 of the licence is suspended only for fiveyears and the operator was given an opportunity to propose any adjustmentwithout limitation in tariff within that five years. Even if the operator proposesadjustments without limitation at any time within the said five year periodthe Minister shall approve an adjustment subject to the limitation set outof each year in Clause 18.3 of the Share holder’s Agreement. Accordingly,the Minister’s approval in tariff adjustments are related to the relevantyears and such adjustment shall have effect from 1 st January in the relevantyear. Therefore, any tariff adjustment for the year 2002 should have beeneffected from 1 st January 2002. As the public has to be given prior noticeon tariff adjustment it cannot be effected from a retrospective date and ithas to be effected from a prospective date hence any proposal for a tariffadjustment for the year 2002 should have been made before the 1 st ofJanuary, 2002 and approved. The position of the 4th respondent is that hemade a proposal for tariff increase for the year 2002 on 31 st of July 2002.A copy of this proposal is not annexed to the 4th Respondent’s affidavitbut the Counsel admitted that the proposal contains a tariff adjustmentwhich is not in terms of the Condition 20.1 of the Licence. He submittedthat the 4th Respondent is entitled to propose any adjustment withoutlimitation before 5th August, 2002. The approval for tariff adjustment wasgranted by the 1 st Respondent based on two letters of the 4th Respondentdated 31 st July 2002 and 27th January, 2003 Copies of these letters areneither annexed to the affidavit of the 4th Respondent nor to the otherRespondents. Therefore, the Court is not in a position to ascertain whichof these letters contained the actual proposal for a tariff revision. It issignificant for the reason that no unlimited proposal for tariff revision couldbe made after 5th August, 2002. Whatever it may be the approval of theTariff revision was granted by the 1 st Respondent on 24.07.2003 4R8 anddirected to implement this revision after giving 30 days notice to itscustomers. After giving 30 days notice this revision came into effect from1 st September 2003. The approval letter of 4R8 has a caption “Fifth TariffRe-balancing” but it does not refer to the year. The Respondents submittedthat the fifth tariff re-balancing refers to the tariff revision provided for theyear 2002 in Clause 18.3 of the Shareholder’s Agreement. If that positionis correct then the Minister the 2nd Respondent or thelst Respondentcould not have approved this tariff adjustment as it cannot come intooperation on the 1 st of January of that year (2002) as provided by the 1 stproviso to Clause 18.3 of the said agreement and on the other hand it is
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very much after the 5th August, 2002. By this time the suspension on thelicence Condition 20.1 and 20.2 has been lifted and it is in full force.Therefore, any adjustment in tariff after 5th August, 2002 has to be inaccordance with the Licence Condition 20.1 and 20.2. These conditionsprovide:
The operator shall be entitled to propose such adjustments intariffs as seen in its commercial judgment suited best to promoteits objects and to fulfil the conditions of its Licence. Theseadjustments in tariffs shall be in accordance with the followingcriteria:
With respect to Main Tariff Items :
the rate of aggregate increase may be equal to or less than therate of inflation less two (2) percentage points over the periodsince the previous adjustment in Main Tariff Items ;
the rate of aggregate increase shall be determined by calculatingthe percentage increase in total revenue from the Main Tariff Itemswhich would result from the proposed adjustments in tariff to anyitem therein as specified in (iii) below on the assumption that thenumbers of subscribers and the domestic calls and the relevantcomposition thereof (call mix) are held constant;
the operator shall be entitled to propose different rates or amountsfor any item comprised in the main Tariff Items provided that theaggregate increase does not exceed the increase specified inSub-paragraph (i) as calculated in Sub-paragraphs (ii) and (iv)and provided that no item may be increased by more than therate of inflation ;
the rate of inflation specified in Paragraph (i) shall be thepercentage increase in the level of Colombo Cost of Living Indexbetween the last month of publication prior to the date of theproposed adjustment in Main Tariff Items and the month ofpublication of equivalent interval of elapsed time prior to the dateof the previous adjustments in Main Tariff Items, provided that inthe case of the first proposed adjustment, the date on which thislicence enters into force shall be deemed to be the date of theprevious adjustment in Main Tariff Items.

Consumers Association of Sri Lanka us Telecommunications
Regulatory Commission of Sri Lanka and Others (Sriskandarajah, J.)
If the rate of inflation has been negative for any twelve monthsperiod following a change in Main Tariff Items, the Authority mayrequire the operator to propose changes in tariffs such that therate of decrease in Main Tariff Items is equal to or greater thanthe rate of deflection over a period since the previous adjustmentin Main Tariff Items.
In this Condition –
“Main Tariff Items” mean business rentals, domestic rentals andcall charges excluding international call charges.
The Counsel for the Respondents submitted that the approval grantedby the 1 st Respondent by 4R8 is not in conformity with or under Condition20.1 of the Licence but it was granted in lieu of the tariff adjustment the4th Respondent is entitled for the year 2002 during which year the LicenceCondition 20.1 was suspended. The 4th Respondent’s entitlement fortariff adjustment without limitation under the Shareholder’s Agreement isrestricted for the five years commencing from 1998. If it has not utilisedits entitlement within the stipulated period it cannot claim the saidentitlement after the expiration of the said five-year period. For the reasonthat the suspension of licence conditions are lifted after the said fiveyears and the Licence Conditions are in force, they impose limitation ontariff adjustments. The unlimited tariff adjustment for the year 2002 underClause 18.3 should have come into effect from the 1 st January of the year2002 but in any event, it cannot come into effect on 1 st September, 2003as it contravenes Condition 20.1 (the economic criteria) of the licence.As provided by Section 17(7) (k) of the said Act, economic criteria is laiddown in Condition 20.1 and 20.2 of the licence in accordance with theCommission shall approve tariff adjustments proposed by the operator.The approval for tariff adjustment granted to the 4th Respondent by the1 st Respondent with the consultation of the 2nd Respondent on 24.07.20034R8 contravenes the economic criteria laid down in Licence Condition20.1. Compliance of economic criteria is a mandatory requirement ingranting approval to tariff adjustments. Hence the approval granted by4R8 is unlawful.
The Counsel for the Respondents invited the court to take intoconsideration the effect of granting relief to the Petitioner by quashing thetariff increase effected on 1 st September, 2003. Over 870,000 customers
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(2006) 1 Sri L R.
have paid the revised tariff rates to the 4th Respondent and 4th Respondenthas paid tax to the Government from the amount charged from thecustomers from 1st September, 2003 to date and this will have seriousconsequences. The court also has to take into consideration that thePetitioner has filed this application in October 2003 and sought an interimorder staying the implementation of the increased tariff. In a comparablesituation in an English case, Congreve v Home Officethe Home Officehad issued many thousands of demands and had to undertake a bigoperation to repay money unlawfully received. In this case, the increasein licence fees took effect on a fixed date and it was in no way unlawful fora licence-holder to obtain a licence during the currency of their previouslicence in order to avoid the sharp increase in the licence fees before thatdate at a lower fee. The Home Office had no power to prevent this, butthey tried to enforce a policy of exacting a higher fee by resorting to theirpower to revoke licence. Lord Denning MR said ;
“But when the licensee has done nothing wrong at all, I do not thinkthe Minister can lawfully revoke the licence, at any rate, not withoutoffering him his money back and not even then except for good cause.If he should revoke it without giving reasons, or for no good reasons,the court can set aside his revocation and restore the licence. It wouldbe a misuse of power conferred on him by Parliament; and thesecourts have the authority-and, I would add, the duty-to correct a misuseof power by a Minister of his department, no matter how much he mayresent it or warn us of the consequences if we do.".
For the reasons stated above this Court issues a writ of certiorariquashing the approval of the 1 st Respondent to the 4th Respondent toincrease tariffs by its letter of 24.07.2003 and the Court allows thisapplication without cost.
IMAM, J. -1 agree.
Application allowed.