REGULATORY AUTHORITY IN TRAI AND IRDA

INTRODUCTION
An Act to provide for the establishment of the Telecom Regulatory Authority of India to regulate the telecommunication services, and for matters connected therewith or incidental thereto. It extended to the whole of India. It shall be deemed to have come into force on the 25th day of January, 1997. Words and expressions used and not defined in this Act but defined in the Indian Telegraph Act, 1885 or the Indian Wireless Telegraphy Act, 1933 shall have the meanings respectively assigned to them in those Acts. Any reference in this Act to a law which is not in force in the State of Jammu and Kashmir shall in relation to that State be construed as a reference to the corresponding law, if any, in that State. The Insurance Regulatory and Development Authority (IRDA) is a national agency of the Government of India, based in Hyderabad. It was formed by an act of Indian Parliament known as IRDA Act 1999.

POWERS AND FUNCTIONS OF THE AUTHORITY IN TRAI

REGULATORY FUNCTIONS OF TRAI
The regulatory functions of TRAI are as mentioned below: i. Ensure compliance of terms and conditions of license The TRAI has two-fold options to a. It can either issue directions or b. Recommend termination of license for non-compliance. TRAI has limited powers in this regard because any action under the license can only be taken by the licensor. But TRAI has the freedom to issue any kind of directions to the service providers. ii. Fix the terms and conditions of inter-connectivity between the service providers, irrespective of the terms of the license issued prior to the TRAI Amendment Act 2000 This provision makes it compulsory for the TRAI to determine the exact terms and conditions rather than mere principles for interconnection between two networks and does away with the terms of the licenses issued by the Union Government in which it is specifically stated that the terms of the interconnection would be specified by the government. However, this interconnection agreement is still not being recognized as a commercial agreement to be reached between two service providers within the frame work provided by law.
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It would have been more beneficial if TRAI had been vested with the power to formulate principles on the basis of which interconnection agreements would be entered into between service providers and also act as asupervising body to monitor the agreement taking place between them in order to ensure a fair negotiation. iii. Ensure technical compatibility and effective inter-connection between different service providers.This clause not only ensures technical compatibility between the networks, but also includes the function of making sure that there is ‘effective interconnection’ covering commercial aspects of interconnection as well. iv. Regulate arrangements amongst service providers for sharing their revenue derived from providing telecommunication services. The scope of this particular clause is not clear. From a cursory reading of the clause it seems that the service providers do not need prior consent of TRAI regarding the above mentioned arrangements but TRAI does seem to have the power to direct the service providers to alter the terms and conditions agreed to between them. v. Lay down the standards of quality of service to be provided by the service providers to ensure the quality of service and conduct periodic survey of such service providers so as to protect the interest of the consumers of telecommunication service The function vested in this clause seems to collide with the powers of the licensor under the terms of the license agreements. The only specific guideline for the exercise of this function is the protection of the interest of the consumers. vi. Lay down and ensure the time period for providing local and long distance circuits of telecommunication between different service providers. This function is linked with the function of drafting the terms and conditions for the provision of interconnection between the service providers and to make sure that there is effective interconnection between service providers. vii. Maintain register of interconnection agreements and of all other matters as may be provided in the regulations. TRAI must keep a register of interconnection agreements and agreements relating to other matters specified in the regulations which are open for inspection by any member of the public on payment of such fee and compliance with such other requirement as may be provided in the regulations. viii. Ensure effective compliance of universal service obligation. This is the only place where the term; universal service obligation; is being used in a statute governing the telecom sector. There is no clear definition provided as to what constitutes; universal service obligation; other than National Telecom Policy 1999. The concept of universal service obligation is to make available the economic and social opportunities being offered by modern communities to all.
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ix. Levy fees and other charges at such rates and in respect of such services as may be determined by regulations. x. Notwithstanding anything contained in the Telegraph Act 1885, the TRAI may, from time to time, by order, notify in the Official Gazette the rates at which the telecommunication services within and outside India shall be provided including the rates at which messages shall be transmitted to any country outside India. The TRAI may notify different rates for different persons or class of persons for similar telecommunication services after recording the reasons.

AUTHORITY IN IRDA
The Insurance Regulatory and Development Authority IRDA was constituted as an autonomous body to regulate and develop the business of insurance and re-insurance in India. The Authority was constituted on April 19, 2000. The Insurance Regulatory and Development Authority Act, 1999, were enacted by Parliament. IRDA was set up in 1996 but it was formally constituted as a regulator of the insurance industry in April 2000.The objectives of IRDA are policyholder protection and healthy growth of the insurance market. IRDA has constituted the Insurance Advisory Committee and in consultation with the committee has brought out seventeen regulations. A leading consumer activist has also been inducted into the Insurance Advisory Committee. In addition, representatives of consumers, industry, insurance agents, womens organizations, and other interest groups are a part of this committee. Insurance Regulatory and Development Authority (IRDA, which was constituted by an act of parliament) specify the composition of Authority. The Authority is a ten member team consisting of (a) a Chairman;

(b) five whole-time members; (c) four part-time members,

all members are appointed by the Government of India.

DUTIES, POWER AND FUNCTIONS OF IRDA

Section of IRDA Act, 1999, lays down the duties, powers, and functions of IRDA. Subject to the provisions of this Act and any other law for the time being in force, the Authority shall have the duty to regulate, promote, and ensure orderly growth of the insurance business and re-insurance business. Without prejudice to the generality of the provisions contained in sub-section (1), the powers and functions of the authority shall include: 1) Issuing to the applicant a certificate of registration, renew, modify, withdraw, suspend or cancel such registration . 2) Protection of the interests of the policy-holders in matters concerning assigning of policy, nomination by policy holders, insurable interest, settlement of insurance claim, surrender value of policy, and other terms and conditions of conditions of contracts of insurance. 3) Specifying requisite qualifications, code of conduct and practical training for intermediary or insurance intermediaries and agents. 4) 5) Specifying the code of conduct for surveyors and loss assessors. Promoting efficiency in the conduct of insurance business.

6) Promoting and regulating professional organizations connected with the insurance and reinsurance business. 7) Levying fees and other charges for carrying out the purpose of this Act.

8) Calling for information from, undertaking inspection of, conducting inquiries and investigations, including audit of the insurer, intermediaries, insurance intermediaries, and other organizations connected with the insurance business. 9) Control and regulation of the rates, advantages, terms and conditions that may be offered by insurers in respect of general insurance business not so controlled and regulated by Tariff Advisory Committee. 10) Specifying the form and manner in which the books of account shall be maintained and statement of accounts shall be rendered by insurers and other insurance intermediaries. 11) 12) 13) Regulating investment of funds by insurance companies. Regulating maintenance of margin of solvency. Adjudication of disputes between insurers and intermediaries or insurance intermediaries.
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14)

Supervising the functioning of the Tariff Advisory Committee.

15) Specifying the percentage of premium income of the insurer to finance schemes for promoting and regulating professional organizations Referred to in clause (f). 16) Specifying the percentage of life insurance business and of general insurance business to be undertaken by the insurer in the rural or social sector, and exercising such other powers as may be prescribed.

LEGAL BATTLE BETWEEN TRAI AND DOT

The newly appointed TRAI was plunged into a bitter confrontation between DOT and the Cellular operators. TRAI gave relief to the cellular operators who alleged that the DOT had unilaterally increased the tariffs for calls made from ordinary telephone to cellular-mobile phone. DOT took this reversal very badly. It appealed the TRAI order to the courts, inviting Delhi High Court to reconsider the case as a whole as well as to trim the TRAI scope and powers. This was the first collision between the regulator and the incumbent. In no time, within a year between a dozen and a twenty of these cases were waiting judicial clarification of the jurisdictions of TRAI and DOT. Another highly contentious case was between M/s Bharti Cellular LTD & Another v. Union of India. Entrants challenged DOT and the government with respect to a unilateral decision to introduce MNTL to offer cellular services and framing an Internet policy without the recommendation of the TRAI and also challenged DOT threatened revocation of licenses without the recommendation of TRAI. While deciding these complaints, TRAI explained at length the relationship between a comprehensive telecom environment and an independent regulation and ruled that it was mandatory for the government and DOT to have before them its recommendation with regard to matters covered under the said provisions. Upon this, DOT was predictably unhappy and concluded that TRAI was systematically biased against the public-owned operators. Justice Usha Mehra found it difficult to reconcile the TRAI act 1997 and its expression of the powers of a quasi-judicial regulatory agency and set aside TRAI decision. This judgment was criticized on legal grounds for its failure to try to reconcile the two pieces of legislation. On appeal, the Division Bench of Delhi High Court upheld the decision of J. Usha Mehra and virtually made TRAI role ;redundant. In spite of not having support from the government, the incumbent, or the courts, TRAI was pro-competitive and was successful to a certain extent in rebalancing telecom rates. TRAI also went ahead with the consultative process with various aspects of the telecom industry to introduce more competition. The Telecom Sector provided $ 5 billion in foreign direct investment, one of the highest in the Indian Economy, since the market opened in the early 1990’s. As a result, the government had little choice but to take steps to untangle the problems.
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CASE STUDY
Union Of India vs Telecom Regulatory on 16 July, 1998
The reason of the passing of the TRAI Act, 1997 as well as the relevant provisions of the Indian Telegraph Act, 1885. Major activities in the establishment of telecommunication system began to develop in India, accordingly, Government of India introduced National Telecom Policy,1994 envisaging telecommunication for all and within the reach of all. Other objective was to achieve unilateral service and quality of telecom service to be of world standard, removal of consumer complaints, dispute realisation and public interface etc. It also envisaged that India emerges as a major manufacturing base and major exporter of telecom equipments. Accordingly, a need was felt to separate regulatory functions from service providing functions of the Department of Telecommunication (in short the DOT). Thus arose the need for independent telecom regulatory body for regulation of telecom services for orderly and healthy growth of telecommunication service apart from protection of consumer interests. To achieve these objects it was considered that the Indian Telegraph Act,1885 be amended. Accordingly the Indian Telegraph (Amendment) Bill,1995 was prepared. But the same did not see the light of the day. Thereafter it was decided to have a regulatory authority which would be a cornerstone of the National bestowed to this Authority any power to grant licence. Such powers of the Government have been kept intact proving thereby that Government as Licensor is not under the control of this Authority. It is only that Department of the Government which provides service has been covered. From the report of the Standing Committee which suggested amendments intention of the Legislature can be inferred. Committee knew that even after amendments in the TRAI Bill,1996, the powers to grant licence of the Government has not been effected nor licensor's power have been made subject to TRAI Act. It is only after understanding this position that the Committee expressed hope that since "The Indian Telegraph Act,1885 and the Indian Wireless Telegraphy Act, 1933 provide for issue of licence by the Government, the Government may consider desirability of undertaking review of the provisions of these two Acts in the context of the developments in telecom sector and the proposed constitution of the Telecom Regulatory Authority of India Bill, 1996, so that a comprehensive Legislature may be enacted." The above hope as expressed by the Committee is a clear pointer to the fact that the licensing powers of the Government. This argument has a force. Grant or revocation of licence by the licensor does not fall under the adjudicatory powers of the TRAI as defined under Section 14(2) of TRAI Act. TRAI has not been conferred power or jurisdiction of a Writ Court (under Article 226 of the Constitution) or a Civil Court to grant specific relief nor it has been empowered to declare the action of the licensing Authority invalid, even assuming that there was a failure on the part of the licensor to comply with Clauses (a) (b) & (f) of Section 11(1) of the TRAI Act.

1TRAI's functions under the Act as pointed out by the Attorney General over multifarious. These can be summed up under five heads namely, (1) Advisory, (2) Regulatory (3) Adjudicatory, (4) Semi Legislative and (5) Ancillary. So far as clauses Section 11(1) are concerned, these deal with advisory functions of the TRAI. Clauses (c) (d) (e) (j) (k) (i) (p) (q) deal with regulatory functions of the TRAI. So far as regulatory functions are concerned TRAI can ensure its compliance by issuing directions either under section 12(4) or Section 13 of the Act. These directions can be issued to service providers and have a binding force. Since licensor is not a Service Provider hence TRAI has no powers to issue directions to the licensor. Section 11(2) deals with legislative functions of the TRAI. Under Section 14(2) inbuilt dispute settlement mechanism is provided. It was, therefore, urged by the Attorney General that Section 4(1) of the Telegraph Act confers planary powers upon the Government in the matter of licensing. Even though the TRAI Act,1997 came into being yet no amendments have been made to the Telegraph Act. The TRAI having admitted vide the impugned order that the Government is the licensing authority, therefore, the said planary powers of the Government cannot be made subordinate to a regulatory authority. Nor could such powers be subject to the provisions of SubSection (1) of Section. For the reasons stated above, it can safely be concluded that the Authority fell in error in concluding that the power of the Government to grant or amend the licence is subject to the recommendations of the TRAI or that these recommendations are mandatory in nature. Hence the impugned order of the Authority is hereby set aside. It is further made clear that the dispute regarding the grant or to amend the licence by the licensor is not a dispute covered under the provisions of Section 14(2). These are not the disputes which can be adjudicated by the Authority. These disputes are beyond the purview of Section 14(2). Having held that the question of grant or amendment of licence by the licensor does not fell within the jurisdiction of TRAI, I have no hesitation to hold that the impugned order suffers from legal infirmities. So far as the question whether MTNL is an existing service provider I have left this question open.With these observations, these appeals are allowed and the impugned order is hereby set aside with no order as to costs.

Icici Prudential Life Insurance ... vs Department Of Income Tax on 14 September, 2012
The facts in brief are that assessee is a Public Limited Company registered under the Companies Act, 1956. The Company was incorporated on July 20, 2000 with the object of carrying on Life Insurance Business. The activities of the insurance are governed by the Insurance Act, 1938, Insurance Regulatory and Development Authority (IRDA) Act, 1999 as amended from time to time, IRDA rules and Regulations from time to time made there under. The return of income for AY 2005-06 was filed on 27.10.2005 declaring a loss of `.150,46,83,807/-. The case was selected for scrutiny and AO while accepting that assessee is in the business of life insurance considered
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that income of assesse. Since there is a surplus declared at `.35,86,92,280/- in the form I AO asked assessee to explain why the computation is not made according to the 'actuarial valuation' It was the contention of assessee that the actuarial valuation has resulted in deficit which were shown as loss whereas the Form-I represents the total surplus after transfer of assets from shareholder's account to the account as per the IRDA rules. The surplus has to be shown in order to declare dividend, bonus etc. under the rules and the amount was transferred by way of infusion of fresh capital into the company and transferred to the Policyholder's account. It was submitted that the transfer of shareholder's funds does not give rise to any income and the actuarial surplus arrived at was a deficit on which the return was filed and in case AO has to consider the surplus in Form-I, then transfer of funds from shareholder's account should be reduced from the above amount as it is only transfer of capital assets and not income. AO, however, relying on the principles laid. The matter was contested before the CIT (A) and assessee made elaborate submissions. The main contention was that Form-I is a report prepared as a part of actuarial report and abstracts under the IRDA Regulations to ascertain segment-wise cumulative allowability of actuarial valuation shown as mathematical errors. It was submitted that Form - I does not provide the Profit & Loss A/c of entire business but shows the asset- liability position of only . It was further explained that IRDA has made specific rules to segregate the account and shareholder's account and revised the form for presentation of insurance accounts as prescribed in IRDA(Preparation of Financial statements and Auditor's Report of Insurance companies) Regulations 2002. According to the Regulations, Profit & Loss A/c of life insurance company is divided into a technical account (policy holder's account) also called as revenue account and non-technical account (shareholder's account) also called Profit & Loss A/c. As per the Regulations the format for presentation of account, the impact of actuarial valuation is shown in the Revenue Account relating to for the year and the surplus/deficit is arrived at. It was submitted that in order to compute the effect for the Income Tax computation result of account and shareholder's account needs to be combined and accordingly assessee filed surplus/deficit calculated after combining the and shareholder's accounts. On the facts and in the circumstances of the case and in law, the learned CIT (A) erred in allowing the dividend income of assessee of `.78,27,74,249/- as exempted under section 10(34) of the Income Tax Act, 1961 ignoring the facts that dividend income is considered as part of income of Life Insurance Business and is included as an income by the actuary". In the result appeals filed by assessee in ITA Nos. 6854 to 6856/Mum/2010, & 6059/Mum/2011 are allowed and the Revenue appeals in ITA Nos. 7765 to 7767/Mum/2010 & 7213/Mum/2011 are dismissed.

CONCLUSION
The rules and regulations laid down in the TRAI Act yields many advantages for all the stakeholders. Not only does it reduce the capital expenditure needed for constructing dedicated infrastructure by the individual operator but also saves on operation cost. The operators can now provide mobile services to a much larger base at an economical cost. Owing to TRAI’s policies, the ultimate gainer will be the consumer who will be provided quality services at a minimum cost.

BIBLIOGRAPHY
Chapter III, TRAI Act 1997 provides for the powers and functions of TRAI and Chapter IV, TRAI Act 1997 provides for the provisions relating to the Appellate Tribunal. TRAI ACT 1997, s 11 (1) (b). TRAI Act 1997, s 11 (2). TRAI Act 1997, s 18.

REFERENCE
www.legalserviceindia.com www.indiankanoon.com