Litigation News

AGR: "There can be no adjustment of dues", Supreme Court reserves verdict on timeframe for staggered payment of dues by telecom companies

While reserving its order in the matter, the Court reiterated that no objection as to re-assessment or recalculation of the AGR dues would be entertained.

Shruti Mahajan

The Supreme Court today reserved its verdict on the time period to be allowed to telecom companies to clear their Adjusted Gross Revenue (AGR) dues through staggered payment.

The Bench of Justices Arun Mishra, S Abdul Nazeer, and MR Shah today reserved its verdict after a detailed hearing on the financial condition of the telecom companies, and factoring in the proposals made by the companies for the timeframe of payment.

While Tata Telecom proposed a window of 7-10 years, Vodafone-Idea suggested payment over the course of 15 years, and found support from Bharti Airtel on this proposal. The Department of Telecommunications (DoT) stuck to the Union Cabinet's proposal of payment within 20 years.

The Court has fixed the next date of hearing for August 10. In the meantime, all parties are required to file their written submissions.

While reserving its order, the Court, in unequivocal terms, said it would not entertain objections regarding the assessment of dues. It recorded in its order,

"While hearing the matter an attempt was made to wriggle out of our order in the garb of reassessment or recalculation. However, there can be no adjustment regarding the dues apart from what was stated in the Supreme Court verdict. No objection will be entertained."
Supreme Court

On June 18, the Apex Court had directed the telecom companies to submit their books of accounts and other financial documents of the last ten years in order to assess and evaluate their financial condition vis-a-vis their ability to pay the AGR dues and the time that may be required for the same.

In compliance with the same, Vodafone-Idea had filed an affidavit along with its financial records. Senior Counsel Mukul Rohatgi, representing Vodafone-Idea, told the Court today that while functioning in India for over ten years, the company had lost over Rs 1 lakh crore.

"Whatever we have earned as revenues in the last 14 years has been wiped away", Rohatgi told the Court.

Vodafone-Idea's worrying financial condition prompted the Court to enquire about the contingent liabilities provisions of the telco and the reason why the company had not culled out the provision for AGR dues despite the DoT's demand.

The Bench asked Vodafone-Idea what security it could furnish, if at all, in light of a situation where no lending institution would be willing to offer a loan to the company.

Rohatgi informed the Court of the Goods and Services Tax (GST) refund that is owed to the company by the government and proposed that this amount of about Rs 8,000 crore can be retained by the government against the company's AGR dues. The Senior Counsel assured that the company would honour the Court's judgment on AGR dues, even as the Bench expressed difficulty in relying on the company in light of its financial condition.

The aspect of self-assessment of AGR dues by telcos resurfaced during today's hearing, a point on which the Court had expressed its extreme displeasure in March this year, and termed the same as contempt of court. Today, the Court yet again clarified that there was no room for self-assessment of dues, even if sought to be called with a different name under the head "re-calculation of dues".

"First you said self-assessment and now call it re-calculation. You are the Solicitor General and you cannot do this. You cannot commit contempt on this Court. What is this nonsense?"
Justice Arun Mishra said to SG Tushar Mehta

Solicitor General Tushar Mehta, appearing for the Centre, however, assured the Court that no re-assessment or re-calculation of the dues was being allowed by the government and that the the Court's order on AGR will be honoured.

"Do not think you have very big hands... We will cut it short"
Justice Arun Mishra added further

Vodafone-Idea also submitted that the company was not seeking re-assessment of dues.

Senior Counsel Kapil Sibal, representing Hughes Telecom, Senior Counsel Arvind Datar for Tata Telecom, and Senior Counsel Abhishek Manu Singhvi for Bharti Airtel also informed the Court of the respective companies' pending dues and the payments already made by them towards AGR.

Singhvi argued that the AGR dues owed by Airtel are far less than claimed by DoT. He submitted that the DoT has clubbed the Spectrum Usage Charges (SUC) with AGR dues claimed. This brought the figure of dues up to about Rs. 43,000 crore, whereas the actual dues payable stand only at about Rs. 21,000 crore. At this point, the Bench observed,

"We will not allow you (Bharti Airtel) to go in for recalculation or reassessment... You are disputing liability of over Rs. 200 billion."
Supreme Court

Datar told the Court that Tata Telecom is not challenging the calculation of dues and is not seeking re-assessment. The Court, however, still warned Datar of action against the company should the order of the Apex Court not be complied with. The Bench observed,

"Your clients (Tata Telecom) have earned too much money and now you all don't want to pay. We know how jugglery of accounts take place so don't teach us.. This is not something you should do with this country... you don't know what we can do. This country is suffering due to all of you (Telecos). We will impose costs if you don't adhere to our orders. You don't know what we are thinking."

Datar was quick to assuage the Court and said that the company has paid nearly 40 percent of the dues claimed by the DoT already.

When the Court asked when the remaining dues would be paid, Senior Counsel Mohan Parasaran, also representing Tata Telecom, replied that the company required a period of 15 years to clear the dues.

Justice Mishra shot back,

"This is the most unreasonable time period. If any country goes into liquidation, then you will not forgive yourself."
Supreme Court

The time sought was then brought down to a window of 7-10 years by Parasaran, who said that the mode and method of payment would be elaborated by the company in its affidavit.

SG Mehta informed the Court that while Videocon and Aircel were undergoing proceedings under the Insolvency and Bankrupty Code (IBC), Reliance Jio has paid full dues.

On the discussion concerning period of repayment, Rohatgi submitted that the order of the Court will be difficult to comply with, if a period of at least 15 years is not granted to the telcos. Rohatgi had, at first, proposed a period of twenty years which was shot down by the Court with the Bench asking Rohatgi to respond to the Court's query as a former Attorney General.

Come out of the shell out of your client and answer like a former Attorney General
Supreme Court said to Mukul Rohatgi

It was at this point, Rohatgi revised the request to say that a period of fifteen years would a reasonable time.

"For me, 15 years is a reasonable time. I am not meaning this as a bargain. The govt has also found that we are in deep waters"
Mukul Rohatgi responded to the Court's query

This submission found support from Singhvi, who also batted for a period of 15 years for Airtel to pay its AGR dues.

SG Mehta, however, said that he would press for the Cabinet's proposal of 20 years. He submitted,

"We will stick to the Cabinet decision. 20 years is a reasonable period for us. The government has taken this decision to save the economy from a cascading effect."

While reserving its order in the matter, the Court reiterated that no objection as to re-assessment or recalculation of the AGR dues would be entertained.

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