Litigation News

AGR: "Don't misuse our October 2019 judgment", Supreme Court asks Centre to reconsider demanding dues from PSUs

Shruti Mahajan

The Supreme Court today directed the Centre through the Department of Telecommunications (DoT) to reconsider demanding Adjusted Gross Revenue (AGR) dues from Public Sector Undertakings (PSUs).

In the meantime, the telecom companies have been directed to file affidavits to show how they propose to complete the payment of their liabilities towards AGR dues. (In Re Mandar Deshpande)

The Bench of Justices Arun Mishra, S Abdul Nazeer, and MR Shah took up the case for hearing today via video conferencing today.

On the last date of hearing on March 18, the Court had pulled up the DoT for allowing telecom companies to self-assess the dues payable by them.

The Apex Court considered two aspects of the matter in today's hearing, one relating to the demand made from the PSUs, and another on the proposed staggered payment of dues over a period of 20 years.

The Court has sought to know the mode of payment proposed to be used by the telecom companies along with the guarantees and sureties proposed to be furnished by them against payment of AGR dues. The telecom service providers are directed to file a joint affidavit in this regard within a period of five days.

Further, while fixing the next date for hearing on June 18, the Court has directed the DoT to reconsider the demand made of the PSU's for payment of AGR dues and has said,

...let the Department of Telecom reconsider the demand that has been sprung, within three days from today, and on the next date of hearing report the compliance of the action taken on the basis of this order.
Supreme Court

Solicitor General for India Tushar Mehta, appearing for the DoT, told the Court that the Centre had examined the possible impact of recovering all dues from the telecom companies in one go.

"Government has examined the telecom dues case... If all telecom dues are paid at one go then it might disrupt telecom services if some operator shuts operations."
Solicitor General Tushar Mehta

The Court sought to know from Mehta the timeframe being proposed by the government for recovering these dues.

The basis for pitching a period of 20 years as a reasonable window was also questioned by the Court. Mehta, however, explained that this proposition was made after the concerned authorities considered a number of factors involved. Mehta pressed further that the payment of Rs. 1.43 lakh crore can be made over this period of 20 years.

Senior Counsel Kapil Sibal and Mukul Rohatgi, on behalf on Hughes Communication and Vodafone-Idea respectively, sought time to reply on the issue. Senior Counsel Abhishek Manu Singhvi, arguing for Bharti Airtel, told the Court that Airtel was liable for 70 per cent of the dues payable, of which a minimal amount was remaining to be paid. Senior Counsel Arvind Datar also sought time to file an affidavit on behalf of Tata Group.

Rohatgi presented before the Court the tight financial condition Vodafone-Idea is in currently, owing to which furnishing of a bank guarantee would not be possible. Senior Advocate Shyam Divan, appearing for a group of telecom companies including Aircel, told the Court that a resolution process under the Insolvency and Bankruptcy Code (IBC) was going on.

The Court went on to rue the fact that PSUs were being roped in under the ambit of the October 2019 judgment. Justice Mishra said that this judgment was silent on PSUs, and observed that dues demanded against PSUs must be withdrawn.

"Every day I think about how our judgement has been used and misused."
Justice Arun Mishra

The Court sought to know from the concerned authorities how its judgment was "misused" against the PSUs, noting that an amount of Rs 4 lakh crore was being demanded from the PSUs on account of AGR dues. This demand must be withdrawn given that it is not in public interest, the Court observed. In its order, the Court recorded,

"It is apparent that the licences are different and our judgment in this case could not have been made the basis for raising the demand against Public Sector Undertakings. Even otherwise, the Public Sector Undertakings are not in the actual business of providing mobile services to the general public."

Offering an explanation, Mehta said that these PSUs were licence holders and demands were being made against them, so the DoT was under the impression that it was required to raise demands against PSUs as well. The SG offered to file an affidavit in this regard to explain the DoT's position.

In the previous hearing in March, the Court had made its displeasure with the telecom companies very clear, stating that the continued attempts made by these companies seeking re-assessment of the October 2019 order amounted to fraud on the Court. The Court described the request to allow self-assessment or re-assessment of AGR dues by telcos as "sheer contempt."

Alluding that the telecos were attempting to influence the Court's decision on the issue of AGR through the media, the Court in unequivocal terms said that there will be no objections to the assessment permitted.

The DoT had earlier moved a plea for modification of the Court's order seeking to allow telcos to make the payment in a staggered manner over twenty years.

The DoT says that this formula has been arrived at keeping in view "vital issues relating to financial health and viability of the telecom sector and need for maintaining competition and level playing field in the interest of consumers."

In its application, the DoT has highlighted that the telecom companies have begun to make part payments. These service providers cater to crores of consumers in the country and an immediate adverse impact on the functioning of these telcos will not only affect these consumers, but will also have a massive effect on the overall economy of the country, it stated.

In its October 2019 judgment passed by the Bench headed by Justice Arun Mishra, the Supreme Court had granted the telecom companies a period of 90 days to pay the dues in view of the new meaning attributed to Adjusted Gross Revenue.

This period of ninety days was scheduled to lapse on January 24. After the companies approached the Supreme Court seeking a modification of its order, the deadline was extended till March 17 by the Court in its order passed on February 14.

Read Order:

Vodafone vs Union of India (AGR) - 11.06.2020.pdf
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