[AGR Dues] Timeframe to clear AGR dues by telecom companies laid down by Supreme Court
The Hon’ble Supreme Court of India Union of India V. Association of United Telecom Service Providers of India (R), allowed the telecom companies to pay AGR dues within a period of 10 years and laid down a timeframe within which the companies have to pay the AGR dues. The Three-Judge bench comprising of Hon’ble Justices Arun Mishra, S Abdul Nazeer and MR Shah issued directions in this regard, “Resultantly, we issue following directions:  
2015 Union of India v. Association of Unified Telecom Service Providers of India and other civil appeals decided by a common the definition of the AGR and dues to be paid thereunder. Central Government has the exclusive privilege of establishing section 4(1) becomes a contract between a licensor and a licensee “37. A bare perusal of sub­section of Section 4 of the Telegraph Act shows that the Central Government has the exclusive privilege of establishing maintaining and working telegraphs. This would mean that only the Central Government and no other person has the right to carry on Act however enables the Central Government to part with this exclusive privilege in favour of any other person by granting a licence in his favour on such conditions and in Government owns the exclusive privilege of carrying on telecommunication activities and as the Central Government and in consideration of such terms as it thinks fit a licence 40. A Constitution Bench of this Court in State of Punjab v Devans Modern Breweries Ltd. 11 SCC 26 relying on Rajasthan 2 SCC 633 has held in para 121 at p. 106 becomes a contract between the licensor and the licensee Consequently the terms and conditions of the licence including the definition of adjusted gross revenue in the and the licensee. We have to however consider whether the telecommunication activities and altered the contractual of the Telegraph Act for providing specified public telecommunication services and Section 2(ea) defines “licensor” to mean the Central Government or the telegraph authority who grants a licence under Section 4 of the Telegraph Act. Sub­section 2(k) defines “telecommunication service” very widely so as to include all kinds of Act do not affect the exclusive privilege of the Central Government to carry on telecommunication activities nor do the proviso to sub­section of Section 4 of the Telegraph pointed out that several telecom service providers were under at length with respect to the prayer made by the Central Government and the time frame for making the payment as orders which were passed by this Court under the guise of In view of decision there is no scope of raising any further paid. New round of litigation is prohibited. In the second the TDSAT. Thereafter there is no question of entertaining any kind of dispute with respect to the payment and dues which have been given and the amount to be recovered at pages 180­181 of M.A.D. No. 9887 of 2020 and In the case of trading how the liability of the seller and 11. Shri Tushar Mehta learned Solicitor General of India on behalf Section 4 of the Indian Telegraph Act 1885 provides that the Central Government has the exclusive privilege of establishing and conditions the payment being first and foremost. On failure of payment the licensor is entitled to take action under the Licence Court in 2G judgment held that the natural under the Code. The State acts as a guardian and trustee of the of the contract in the form of a Licence Agreement. Thus the spectrum cannot be subjected to transfer in proceedings under the Code as the licensee is not the owner. Section 18(f) along with its Explanationmandates that only the corporate debtor s assets can be taken into control and custody by the resolution professionals which is in the ownership of the corporate debtor. Explanation to cannot be a subject matter of proceedings under the Code. The iv) Guideline No.10 provides that for trading of right to use the compliance with the terms and conditions of the Guidelines for spectrum trading that is seller and buyer both. In case terms and have the right to take appropriate action including annulment of seller has to clear the dues. After the trading date the Government has the discretion to recover the amount from the seller or buyer The permission was sought to trade the licence however the Government of India DoT declined it because arrears have to be paid and other conditions were not fulfilled. After that insolvency vii) National Company Law TribunalMumbai which the corporate debtor has no right of ownership. The above argument of the State Government was accepted however in view of the licence could not be revoked. An appeal was filed before the National Company Law Appellate Tribunal The licence under Section 4 of the Indian Telegraph Act 1885 ix) Concerning public trust doctrine reliance has been placed on 2012) 3 SCC 1 in which it was held that natural resources must always be used in the country s interests not private interests. The India Act 1997 by the Telecom Disputes Settlement and Appellant Reliance has been placed on M s. Embassy Property Development Pvt. Ltd. v. State of Karnataka in not to be dispossessed found in Section 14(1)(d) of the Code would have nothing to do with the rights conferred by a mining lease In Ram Dass v. Davinder 3 SCC 684 it was held that India RJIL has paid Rs.195 crores on a self­assessment basis and 13. Shri Shyam Divan and Shri Ravi Kadam learned senior counsel on behalf of Committee of Creditors of RCOM Aircel Limited and the spectrum and telecom licences are assets of the telecom company. Section 18(f) of the Code mandates that resolution sheet of the corporate debtor. Section18(f)(iv) includes intangible of the intangible assets. The right to use is a valuable right. In the transfer of licence by either directly or indirectly without the prior Its licence spectrum is considered an intangible asset and in the Guidelines for the Reporting System on Accounting Separation Regulations 2016 the right to use spectrum is again shown as an In the resolution plans DoT acted as an operational creditor. The NCLT asked to take the approval of the DoT for the transacting spectrum. Thus it is for the DoT to give permission. Dot has to the Committee of Creditors and the adjudicating authority of the defines operational creditor . Section 5(21) defines operational debt to include dues payable to the Government. Thus claims of DoT for vi) Reliance has been placed upon Section 31 of the Code. The the Central Government any State Government to whom a debt in respect of the payment of dues arising under any law for the time being in force. Reliance has also been placed on Committee of vii) The proceedings under the Code cannot be nullified to realise 14. Shri Ranjit Kumar learned senior counsel on behalf of Agreement between the licensor licensee and the lenders. He has to be set up by the LICENSEE pursuant to the LICENCE the terms and conditions to provide transfer assignment of LICENCE as hereinafter provided in this AGREEMENT to Aircel Entities have offered lenders spectrum as a security The Banks are in the business of lending money for the betterment of the national economy in the same manner the the conditions agreed between the licensor licensee and the lenders. referred to. Revocation of Licences permission­based on past dues is entered into a pure business transaction by granting a licence and taking fees against the grant. The spectrum is a raw material for telecom companies. If the spectrum s licence is terminated the going concern. DoT is an operational creditor. AGR dues are contractual dues and cannot have precedence over the dues of operational creditor is protected in a manner provided in the Code Section 238 of the Code contains a non­obstante clause to the effect that anything inconsistent therewith contained in any other law for the time being in force the Code shall prevail. As such the Code overrides the provisions of the Indian Telegraph Act 1885 Indian Wireless Telegraphy Act 1933 and Telecom Regulatory Authority of In the case of RCOM the resolution plan is pending consideration of the adjudicating authority under Section 31 of the 16. Whether spectrum can be subjected to proceedings under the natural resource and under Section 4 of the Indian Telegraph Act it thinks fit to any person to establish maintain or work a made under this Act and published in the Official Gazette fit the establishment maintenance and working— a) of wireless telegraphs on ships within Indian territorial waters and on aircrafts within or above India or Indian Explanation.—The payments made for the grant of a licence Central Government after considering the recommendation made in this behalf by the Telecom Regulatory Authority of India established under sub­section of Section 3 of the Gazette delegate to the telegraph authority all or any of its The exercise by the telegraph authority of any power so as the Central Government may by the notification think fit a) authentication under the Aadhaar Act Financial and Other Subsidies Benefits and Services) Act d) use of any other officially valid document or modes of 4) If any person who is granted a license under the first proviso to sub­section to establish maintain or work a telegraph within any part of India is using authentication under clause of sub­section to identify any person to identification under clauses to of sub­section also 5) The use of modes of identification under sub­section If for identification of a person authentication under information nor the Aadhaar number of the person shall be 7) Nothing contained in sub­sections (4) and shall prevent the Central Government from specifying further respect of identification of person to whom it provides its Explanation.—The expressions “Aadhaar number” and “core biometric information” shall have the same meanings as are of the Aadhaar Act 2016defines ‘creditor’. The term ‘debt is defined in head Insolvency Resolution and Liquidation for Corporate Persons 18. A question has been raised concerning ownership. Whether TSPs can be said to be the owner based on the right to use the spectrum under licence granted to them Whether a licence is a contractual arrangement Whether ownership belongs to the also arises whether the spectrum can be said to be in possession which arises from ownership. What is the distinction between possession and occupation Whether possession correlates with the ownership right A question also arises concerning the difference be transferred under the insolvency proceedings particularly when case may be as provided in Guideline Nos.10 and 11 whereas in insolvency proceedings dues are wiped off. Guideline No.12 is also assumed to be of significance in case spectrum is subjected to It is also required to be examined that when Government has Licence Agreement the spectrum can be subjected to resolution proceedings which will have the effect of wiping off the dues of the Government which are more than Rs.40 000 crores. Whereas the dues of the Banks are much less. Whether obtaining the DoT s permission and its approval to the resolution plan would be a substitute for Trading Guideline Nos.10 11 and 12 20. A question also arises of bona fide nature of the proceedings under the Code. In the backdrop facts of the cases question also Code and it overrides the provisions contained in the Indian Telegraph Act 1885 Indian Wireless Telegraphy Act 1933 and In view of the fact that the licence contained an agreement between the licensor licensee and the lenders whether on the basis mode of its enforcement. Whether the Banks can enforce it in the proceedings under the Code or by the procedure as per the law of enforcement of security interest under the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities 22. A question of seminal significance also arises whether the as cestui que trust. In view of the nature of the resource it can be subjected to insolvency liquidation proceedings. Earlier licence was the TSPs as such a new revenue sharing regime was devised in 1999 the Telegraph Act 1885 in use of spectrum it can part with on certain Whether dues under the licence can be said to be operational dues It is also to be examined whether deferred default payment instalment s of spectrum acquisition cost can be termed to be operational dues besides AGR dues. Whether as per the revenue sharing regime and the provisions of the Indian Telegraph Act 1885 the dues can be said to be operational dues Whether natural under the Code and comparative dues of Government and secured 23. We consider it appropriate that the aforesaid various questions should first be considered by the NCLT. Let the NCLT consider the aforesaid aspects and pass a reasoned order after hearing all the parties. We make it clear that it being a jurisdictional question it 24. Coming to the question as to the liability of sharing operator dues of the original licensee is concerned that spectrum sharing is Telecom Policy 2012". However DOT issued and approved the final the sharing of radio access network equipment of operators. Single using both the entities spectrum. As per Spectrum Sharing spectrum need to have spectrum in the same band and the same licenced area it is also necessary that both operators have a network in the same geographical area and leasing of the spectrum is not permitted under the policy. By sharing the radio respective businesses capacity. Liability to pay necessary AGR and affidavit and compliance of the order dated 14.08.2020 stated as “4.It is respectfully submitted that as per the Guidelines pool their respective spectrum for usage in a specific geographical area thus complementing each other’s spectrum. The rationale is to facilitate optimization of growth. During the past period of 20 years or more some operators face spectrum crunch as spectrum is a scare Thus on the one hand spectrum which is a limited natural resource may remain unutilized for some Telecom Service Providers while on the other hand consumers suffer LSA. The pooling of the spectrum increases the capacity of Telecom Service Providers to carry telecom traffic and may their spectrum holdings and thereby improve spectral efficiency. It is submitted that sharing can also provide these aspects were considered by the Central Government while approving the Guidelines for Spectrum Sharing. It is submitted that Telecom Regulatory Authority of India are assessed at a by 0.5% in the Spectrum Usage Charge rate applied sharing was 3% then this will increase to 3.5% for both of iv. The use of each others spectrum by means of sharing would lead to increased licensed fee and SUC to the v. TSPs who share spectrum continue to pay and are duty 8. So far as the present case is concerned in accordance with the spectrum sharing guidelines dated 24.09.2015 the i. For Reliance Jio Infocomm Limited and Reliance 21 LSAs as per the Teleservices Limited spectrum in 1800 MHz iii. For Bharti Airtel Limited and Tata Teleservices 2100 MHz band in 2 LSAs Unified License authorization of Access Service in a Licensed Service Area LSA) where both the licensees are having spectrum in the 2). Spectrum sharing is permitted between two Telecom 3). Spectrum sharing is not permitted when both the licensees are having spectrum in different bands. Leasing of 4). All access spectrum including traded spectrum shall be shareable provided that both the licensees are having spectrum in the same band. Further if more bands such as 700 MHz are added for allocation of spectrum to Access Service Providers through auction process the sharing of 5). The right to share the spectrum shall be subject to the fulfillment of the relevant license conditions and nay other has been established that it is in breach of terms and conditions of the licence and the licensor has ordered for i). For the spectrum where both the Licensees who plan to have paid One time Spectrum Charges for their CDMA) based on reserve price auction determined price However if the said amount is not paid due to judicial the interim sharing of spectrum in such cases will also be permitted subject to submission of a bank guarantee for an spectrum acquired through auction trading or liberalized spectrum and the other has spectrum allotted are paid. Further in case of spectrum acquired in auction conditions of respective Notice Inviting Application responsible for complying with the sharing guidelines Spectrum sharing will be restricted to sharing by SUC) it shall be considered that the licensees are sharing their entire spectrum holding in the particular band in the Spectrum Usage Charges rate of each of the full one month period shall be counted for the purpose of The prescribed limits for spectrum cap shall be applicable for both the licensees individually. Further the spectrum holding of any licensee post­sharing shall be licensee in the band being shared being added as the additional spectrum to the original spectrum held by the Spectrum sharing shall be available for upto the give a prior intimation for sharing the right to use the Both the licensees shall also give an undertaking in future that either of the licensee was not in conformance include annulment of sharing arrangement. Appropriate and Wireless Operating License to facilitate the present processing fee of Rs.50 000 ­ is to be paid. The payment is to be made by draft in favor of Pay & Accounts Licensor Government reserves the right to modify of order directions dated 21.08.2020 AGR is not calculated bandwise but from the total revenue earned by the TSP using the entire sharing of spectrum there is an increment of 0.5% in SUC rate and are sharing spectrum. Both the TSPsare required to pay this SUC on their respective AGRs. Even in the case of sharing would be to the extent of the remaining spectrum used by it Therefore there shall not be any liability of the said operator with respect to payment of the past dues of the sharing operator licensee. Even according to DoT also both the TSPs sharers) are required to pay the SUC on their respective AGRs Learned counsel appearing on behalf of the Reliance Jio to modify the order dated drawn. In view of the communication dated 23.1.2020 it was varied features. The TSPs. who are required to make payment are India s Government has examined the issue in great detail. It has of AGR has been settled after about 20 years as such there are huge arrears. In the event it is found that any major service provider is facing proceedings under the Code. The following would be the i) Mobile Number Portability process has capacity limitations this may lead to delays in porting numbers from ii) TSPs. porting in customers from TSPs not able to provide services will also need additional access Adverse impact on Quality of Service in the telecom sector. The closure of one or more TSPs and the gap being filled in by other ­ A letter dated 15.2.2020 was received from the Indian Banks e) Disruption of tax and non­tax revenue on account of licence fee connectivity in the country. E­commerce e­banking e­health etc. all k) This will have an adverse impact in rural areas particularly Aspirational Districts and the spread of digitization in backward Indian Banks Association adumbrating the aforesaid aspects of the distressed telecom sector. The issues affecting the telecom industry burden subdued operating matrix due to a steep fall in average the price war triggered by a new entrant. There was a decline in 5G financing was also mentioned for which significant additional leveraged financial position. The total outstanding exposure to the the bank guarantee mechanism pertaining to onerous clauses was 33. The Union of India after envisaging the larger interest economic dues from the telecom service providers. The formula is placed for approval of this Court which is arrived at after detailed and long following decision has been taken with respect to the mode of “1.1 All licensees impacted by the judgment of the Hon’ble be paid amount of past DoT assessed calculated dues in protecting the net present value of the said dues using a discount rate of 8% if any determined after reconciliation assessment calculation be added to adjusted against the annual installments spanning over 20 years. For any lapse a thereafter to be realised using the discounted rate of 8% which is The interest penalty and interest on penalty on the arrears as per will be protected. However for prospective arrears if any the TSPs shall be liable to interest penalty and interest on penalty for unpaid 35. Considering the various factors taken into account and the after extensive deliberations and consultations and till the date of judgment the dues have been worked out as per the decision rendered by this Court. Only for the subsequent period some relaxation has been given as to the rate of interest penalty and interest on penalty which is permissible. The arrears have to be examined and they were having huge arrears of AGR dues taken on various considerations mentioned above which cannot be 36. However we consider that the period of 20 years fixed for feel that some reasonable time is to be granted considering the financial stress and the banking sector s involvement. We deem it yearly instalments. Rest of the decision quoted above taken by the Cabinet shall stand except the modifications concerning the time schedule for making payment of arrears. But at the same time it is to time stipulated by this Court. Even a single default will attract the this Court. Pursuant to the Court s directions the matter has been re­ examined and considering the representations filed by PSUs. It is undertakings are non­telecom entities involved in providing services such as power transmission oil and gas exploration and refining Metrorail service etc. and that they are not into the business of Access Service Licence Various companies through Managing Director Chairman or other authorised officer to furnish an undertaking within four weeks The existing bank guarantees that have been submitted In the event of any default in making payment of annual instalments interest would become payable as per the agreement along with penalty and interest on penalty automatically without reference to Court. Besides it would be punishable for contempt of compliance reported and an unconditional apology tendered which Before parting with the proceedings we place on record our Mehta Solicitor General and the respective senior counsel appearing