Introduction 

• This is a landmark judgment where the Supreme Court rejected the claim for restitution under Section 65 of Indian Contract Act by placing reliance on the doctrine of ‘in pari delicto’.  
• The Judgment was delivered by a 3- judge Bench consisting of Justice Dr DY Chandrachud, Justice Surya Kant and Justice Vikram Nath. 

Facts   

• Licenses Issued and Entry Fee Paid: 
  • Loop Telecom was issued 2G licenses for 21 service areas in 2008 after paying a non-refundable Entry Fee of ₹1,454.94 crores. 
• Licenses Quashed in CPIL Case (2012) 
  • The Supreme Court, in Centre for Public Interest Litigation (CPIL) v. Union of India, quashed the licenses issued under the "First Come First Serve" (FCFS) policy, declaring the policy unconstitutional and arbitrary. 
• Claim for Refund: 
  • Loop Telecom claimed a refund of the Entry Fee, citing that the licenses were cancelled due to a flawed government policy and not due to any fault or breach on its part. 
• Initial Dismissals by TDSAT: 
  • TDSAT dismissed the refund petitions twice (in 2015 and 2018), citing lack of jurisdiction and noting that the company was potentially in pari delicto (equal fault). 
• Criminal Charges and Acquittal: 
  • Loop was facing criminal proceedings, but its promoters were acquitted by the CBI Court in 2017. The CBI’s appeal was pending. 

Issues Involved  

• Whether the Entry fee should be refunded to Loop Telecom in the facts of the present case? 

Observations 

• Entry Fee Was Non-Refundable by Contract 
  • The UASL agreements and DoT guidelines clearly stated that the Entry Fee was a one-time, non-refundable charge. The Court held this term was binding. 
• CPIL Judgment Implicated Beneficiary Companies 
  • The Court reiterated that Loop Telecom was one of the companies benefiting from a manipulated policy and found to be complicit, though to a lesser extent than others. Costs of ₹50 lakhs were imposed on it in the CPIL case. 
• Restitution Under Section 65 Denied 
  • The Court held that Section 65 of the Indian Contract Act, which provides for restitution when an agreement becomes void, does not apply because Loop Telecom was not innocent and stood in pari delicto with the government. 
• No Frustration of Contract (Section 56) 
  •  The Court ruled that this was not a case of frustration under Section 56 of the Contract Act since the illegality of the policy (not a supervening event) caused the contract’s failure. 
• Discrimination Argument Rejected: 
  • The Court rejected the argument that the refund policy was discriminatory, noting that set-off was allowed only for companies that participated in the new auction. This was a policy-based economic decision aimed at ensuring continuity in telecom services. 
• TDSAT Jurisdiction Limited 
  • The Court upheld that TDSAT had no jurisdiction to direct refund since the cancellation was through the Court’s own constitutional powers, and not a contractual dispute. 
• Unjust Enrichment Argument Denied: 
  • The Court found no merit in the claim that the government was unjustly enriched, given that the licenses were obtained through an unconstitutional and tainted process. 

Conclusion 

• The Supreme Court dismissed Loop Telecom’s appeal seeking a refund of ₹1,454.94 crores. 
• It held that no refund could be granted due to the company’s complicity in the flawed license allocation process and the explicit non-refundable nature of the Entry Fee. 
• The principle of “in pari delicto” barred any equitable remedy.