In a final verdict on the long drawn AGR (Adjusted Gross Revenue) matter, the Supreme Court has given Vodafone Idea and Bharti Airtel and Tata Teleservices 10 years to pay up the remainder of their AGR dues. This 10-year timeline applies from April 1, 2021 and will have to be paid by March 31, 2031.
A bench comprising Justices Arun Mishra, S Abdul Nazeer and MR Shah said that telecom companies have to pay 10% of their dues upfront by March 31, 2021, following which the telcos have to make payments in instalments. This time has been extended to March 31, 2021 on account of the COVID-19 pandemic, the bench said. It is after this, from April 1, 2021, that the 10 year period begins.
SC said that instalments have to be paid by February 7 of every succeeding year, and any default will accrue interest and non-payment of dues will also invite contempt of court proceedings. “In case of any default in making payment of annual instalments, interest would become payable at per agreement along with the penalty and interest on penalty and would be punishable by contempt of court,” the bench said.
The court has directed telecom companies to submit undertakings to pay AGR dues as per the SC order. The bank guarantees given by the telecom companies have to be kept alive till the payments have been made and the Managing Director of the telecom company has to give an undertaking to comply with the schedule, the bench said.
On the matter of whether spectrum can be sold and who is liable for dues of bankrupt telcos such as Reliance Communications, Aircel, etc, Justice Mishra said that the National Company Law Tribunal (NCLT) can decide at the first instance whether spectrum can be sold or not.
As things stand currently, as per dues calculated by the government, Vodafone Idea owes Rs 50,399 crore after paying Rs 7,854 crore, Airtel owes Rs 25,976 crore after paying Rs 18,004 crore, and Tata Teleservices owes Rs 12,601 crore after paying Rs 4,197 crore.
Following the verdict, the stock of Vodafone Idea plunged by nearly 10%, and was trading down 9.8% at Rs 9.20 at 11 50 am.However, Bharti Airtel stock surged by nearly 5%, trading at Rs 538.55 on the Bombay Stock Exchange.
Timeline of the AGR matter
In October 2019, the top court in its verdict calculated the dues to be paid by telecom companies such as Vodafone Idea, Bharti Airtel, Tata Teleservices and others as licence fee and spectrum usage charges.
The problem started when telecom operators migrated to a new system offered by the government in 1999 under which they agreed to share a certain percentage of revenue with the government. Operators had argued that AGR should comprise only revenue from telecom services, but the DoT insisted that it should include all revenue earned by an operator. Last year, the SC put an end to the 14-year-old legal battle.
The fate of telecom companies has since hung in the balance, especially that of Vodafone Idea, as both Vodafone Idea and Airtel posted record losses on account of AGR dues. Vodafone Idea had said that its survival as an entity depended on the top court allowing the staggered payment of dues.
In March this year, the Department of Telecom moved a plea seeking permission for staggered payment in a time period of nearly 20 years for the telecom companies.
The bench reserved the verdict on July 20 on the aspect of granting timeline to telecom operators for staggered payment of AGR- related dues by saying that it will not hear "even for a second" the arguments on reassessment or re-calculation of the AGR.
Prior to this, it had asked the telecom companies to file their books of accounts for the last ten year and give a reasonable time frame for paying the AGR dues, It later got miffed when some senior lawyers started disputing the dues being calculated by the DoT.
It had said that the period of 15-20 years sought by some of the telecom companies was not reasonable and had asked the Centre as to how it would secure the payment of dues by them.
During the course of these hearings, the government informed the court that it was withdrawing 96% of the Rs 4 Lakh crore dues pending against various PSUs, which were non-telecom.
Spectrum and IBC
On August 24, the bench had also reserved verdict on whether spectrum can be sold by the telecom companies that are currently undergoing insolvency proceedings under the Insolvency and Bankruptcy Code (IBC) and how AGR dues would be recovered from them.
Airtel had spectrum sharing and trading pacts with Videocon and Aircel, whereas Jio had with Reliance Communication.
The top court had asked the Department of Telecommunication (DoT) to share details of demand under process for raising liabilities against Airtel and Jio against the backdrop of spectrum sharing. The bench had also observed that if DoT does not provide correct position on AGR demands, then the ruling may be wrong.
DoT informed the bench that no demand has been raised against Jio, and Airtel for part dues of RCom, Videocon, and the assessment of Jio and Airtel's liability for past dues is under process.
The court questioned why the telecom companies should use the spectrum of bankrupt companies, and why they should not be liable. Senior advocate Harish Salve, appearing for the committee of creditors for RCom, contended before the bench that the right to use spectrum is an asset which can be sold, if the company wants to.
The DoT had said that assessment of dues is under process and once the Supreme Court clarifies the legal position on spectrum sharing, it will move to recover the outstanding amounts from the telecom firms.
The bench observed that according to trading guidelines, the seller of spectrum shall satisfy all pending dues, before the sale. It said it understood that upon non-payment of dues by the seller, the trading guidelines would transfer the burden on the buyer.
With inputs from agencies