India’s Supreme Court has cancelled 122 telecommunications licences awarded to companies in 2008.
The licences were issued by former minister A Raja, who is accused of mis-selling bandwidth in what has been called India’s biggest corruption scandal. Mr Raja denies wrongdoing.
Government auditors say the scandal cost the country about $40bn (£24.5bn).
The judges also ordered a court to decide whether Home Minister P Chidambaram should be investigated.
Opposition MPs accuse Mr Chidambaram of failing to prevent the scandal when he was finance minister. He denies any wrongdoing.
Mr Raja is currently on trial for fraud.
India is one of the world’s fastest growing markets for mobile telephones with 893 million connections.
Reports say Thursday’s verdict is likely to affect about 5% of connections used by mobile phone customers.
India’s telecom regulator says the affected subscribers can be transferred to other mobile operators.
Correspondents say the ruling is a setback for the government which has been hit by a series of corruption scandals in recent months.
‘Unfair’
“Licences after January 2008 are quashed [cancelled]. The Telecom Regulatory Authority of India will make fresh allocations by auction,” Justice GS Singhvi told the court.
Petitioner Prashant Bhushan called it a “historic judgement”.
“It will change the manner in which corruption will be examined and dealt with in the country,” he said.
Reports said some of the companies affected by the court order include Loop, Videocon, Idea Cellular, Tata Telecom, Uninor and Swan.
Uninor, the Indian joint venture of Norway’s Telenor, said it had been “unfairly treated” and “was shocked” by the court verdict.
“We will study the order in detail and exercise all options available to ensure that Uninor continues to operate in India,” the company said in a statement.
“We also expect the authorities to ensure that our 36 million customers, 17,500 workforce and 22,000 partners are not unjustly affected,” the statement said.
The court ruling is a source of further embarrassment for the government of Prime Minister Manmohan Singh which has been hit by several high-profile corruption cases in recent months.
As soon as the verdict was announced, opposition parties began calling for Mr Chidambaram to resign on “moral grounds”.
Opposition MP Subramanian Swamy alleges that decisions over the price of telecoms licences were taken jointly by Mr Chidambaram and Mr Raja.
He says Mr Chidambaram as finance minister could have prevented Mr Raja from allocating bandwidth on a “first-come-first-served” basis.
The government says Mr Swamy’s allegations are politically motivated.
On Thursday, Telecoms Minister Kapil Sibal defended the Congress Party-led coalition and blamed the opposition government that lost power in 2004 for putting in place the “faulty” policy for allocating radiowaves.
“The prime minister was in no way responsible, nor was the finance minister,” he told a press conference.
Blaming Mr Raja for the scandal, he said: “The then minister has been found to have committed irregularities in the allocation of spectrum [bandwidth] on seven accounts.”
Mr Sibal said the court verdict had brought clarity on the policy front and the telecoms regulator would prepare guidelines for the auction of radiowaves.
