Supreme Court: Telecom Service Providers To Provide Undertaking and Financial Documents

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On 18.06.2020, a Full Bench comprising of Justice Arun Mishra, Justice S. Abdul Nazeer and Justice M.R Shah presided for hearing the litigation of the AGR case. A batch of seven connected petitions were filed, collectively referred as In Re Mandar Deshpande.

Background

The Court on 11.06.2020 gave an order and clarified that their 2019 judgement did not address the Public Sector Undertakings (“PSUs”) for the Aggregated Gross Revenue (“AGR”) dues. It asked the Department of Telecom (“DoT”) to consider withdrawing such demands raised.

The Court had adjourned further hearing to June 18 to decide whether to allow Telecom Service Providers (“TSPs”) to make staggered payment for their AGR dues pending.

Arguments by the DoT

Solicitor General Tushar Mehta stated that they have acted according to the Court’s guidelines in the previous order. He stated that a decision has been taken to withdraw the demand of dues from PSUs. This is since the PSUs are not in the business of providing telecom services to the general public.

He further stated that the TSPs have given respective affidavits on securities that they can provide as guarantee. This can be considered for the grant of a staggered payment over an extended duration or timeline.

Arguments by Airtel 

Advocate Abhishek Manu Singhvi appeared for Airtel. He submitted that the company has paid approximately Rs 18,000 crore. And having fully complied with the DoT’s demand, only Rs 1,000 crore is pending to be deposited. He went on to state that Airtel’s payment constitutes 70% of the total amount collected so far, by DoT.

He also assured that its licenses and bank guarantees are far in excess of the demands made. And that the company has a spectrum of Rs 1.12 lakh crores. As Bank Guarantees of Rs 10,800 crore is pending with the DOT, they can be liquidated if the company defaults on payments.

Arguments by Vodafone-Idea 

Advocate Mukul Rohatgi appeared for Vodafone-Idea. He submitted that the company was going through an uncertain phase. Further, the parent company has losses are over 1 lakh guarantees. And owing this position, it cannot provide any fresh bank guarantees to the DoT. He stated that over Rs 10,000 crore of its bank guarantees are existing with the DOT. This can be considered as security for the dues. Taking into account their unstable condition, the only way to pay the AGR dues is through payments over 20 years in installments.

Further, he stated that assets worth Rs 42,000cr have been charged as securities, to secure borrowing of over Rs 1 lakh crores. And as the claimed dues are over Rs 50,000 cr, it would not be possible to ask independent directors to furnish personal guarantees.

Observations by the Court

The Bench asserted that there requires mutual trust for such a payment involving huge numbers. A situation of a foreign company terminating business while leaving behind the assets, cannot be ignored.

It directed Vodafone-Idea to show bonafide proof to avail the benefit of staggered payments. For the purpose, a reasonable amount needs to be deposited as down payment.

The bench stated that it cannot pass orders to allow the dues to be staggered for period of 20 years without a guarantee amount.Union of India v. Association of Unified Telecom Service Providers of India

Present order

The Court through the order directed TSPs to provide an undertaking and submit their financial documents. It also directed the DoT to consider the proposals made by the TSPs on making payment of the AGR dues. This was to be done before the next date of hearing.

The next hearing was hence, deferred to the end of third week of July.


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