SC: Telecom Companies to Pay AGR Dues Over the Next 10 Years

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The Supreme Court heard the case of Union of India v Association of Unified Telecom Service Providers of India. The Bench comprised Hon’ble Justice Arun Mishra, Hon’ble Justice S Abdul Nazeer, and Hon’ble Justice M.R. Shah.

Brief Facts

All Telecom companies in India pay a part of their revenues as license fee and spectrum charges to the Department of Telecommunication (hereinafter “DoT”). The payment is for using the spectrum owned by the government.

The present case started in 1999 when DoT issued notices to telecom companies seeking AGR dues. The conflict arose concerning the definition of AGR. DoT argued that AGR includes all revenues generated from telecom as well as non-telecom services. Inversely, telecom service providers submitted that AGR should only consist of the revenue accrued from the core services which does not include dividend, interest income, or profit on the sale of any investment.

Subsequently, the company went to different Courts and forums to challenge the definition of AGR presented by the DoT and ultimately sought recourse from the Apex Court.

Court’s Observation

The Bench had two major concerns – 

(1) How can Telecom operators guarantee that they will pay the dues and what security should they provide against it?

(2) What constitutes ‘reasonable time’?

Judgment

Regarding the first question, the telecom operators wanted the Court to consider the spectrum as security. However, the Court ordered for personal guarantee by the promoters and directors as security. Further, the DoT proposed 20 years to clear the dues but the Apex Court deemed 10 years to be fit for the clearance. 

According to the assessment by DoT, the total amount to be duly paid by leading telecom operators is Rs 1.19 lakh crore. Additionally, the dues of insolvent companies are 40,000 crores. 

The Supreme Court accepted the definition given by the DoT and ruled that telecom companies such as Airtel, Vodafone Idea, and Tata will have to pay 10 percent of their AGR dues by 31st March 2021. Subsequently, the remaining amount shall be duly paid in instalments over the next 10 years.

Further, concerning Telecom companies facing insolvency, the Court stated that the issue of sale of spectrum under the Insolvency and Bankruptcy Code shall be further decided by the National Company Law Tribunal.

The Court also ordered the Managing Directors or Chief Executive Officers of the telecom companies to submit an undertaking that they will pay the AGR dues according to the Order given by the Court. It also stated that the demands of the DoT and the Court’s verdict is final and any failure in payment would yield penalty, interest, and be in contempt of the Court.


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