Supreme Court allows govt to address Vodafone Idea's AGR grievance without its intervention

New Delhi: In a big relief for Vodafone Idea Ltd, the Supreme Court on Monday allowed the government to address the grievances of the beleaguered telecom operator without the court's intervention, and reassess the demand for adjusted gross revenue (AGR) dues.

The bench of Chief Justice B.R. Gavai and Justice K. Vinod Chandran observed that the decision on any relief to the telecom operator is a policy matter.

Considering the changed circumstances in which the government itself has a substantial equity in Vodafone Idea, and since the issue may have a direct bearing on the interest of 200 million consumers, "We see no impediment in the interest of Union of India reconsidering the issue and taking appropriate decision in law," the bench observed, clarifying that the matter is within the policy domain of the Union. The written order was not available as of press time.

“If the Union, in the particular facts and circumstances, decides to take a view, there would be no reason why it should be prevented from doing so. We dispose of the petitions with these observations,” the court added.

The matter pertains to Vodafone Idea filing a petition last month challenging the Department of Telecommunications’s (DoT) demand for an additional ₹9,450 crore towards AGR dues.

India’s third-largest telecom operator has also sought a waiver of interest and penalties on its dues, arguing that the disputed components of the dues have not yet been finalised.

Shares of Vodafone Idea rose as much as 10% on the National Stock Exchange following the news. It closed 4.16% higher at ₹10.02. after rising as much as 10% during the day following the news. Shares of its peer Bharti Airtel also gained 2.65% and closed at ₹2,083.

Shares of tower company Indus Towers too rose 3.3% to ₹373.5. Vodafone Idea is one of the biggest clients of Indus Towers and the telecom operator’s stability is critical for the cash flows of Indus Towers.

Vodafone Idea's advocate Mahesh Agarwal said the court has acknowledged that AGR is a policy matter. "The government is a majority shareholder and therefore, there can be no restriction on the government, considering the grievances raised by Vodafone Idea include double payments, corrections, payment reconciliations etc."

On Monday, solicitor general Tushar Mehta handed over a proposal to the bench, noting that the Centre already holds a 49% stake in the company and may consider additional measures to support it.

The bench, however, clarified that its order is restricted to the facts and circumstances of this particular case.

During the hearing, Mehta said, “There are 20 crore consumers… that was one of the major reasons why the government took this decision. Because if this company is to suffer anything, apart from the lack of competition, it would lead to several issues for the consumers.”

Senior advocate Mukul Rohatgi, appearing for Vodafone Idea, expressed satisfaction with the government’s approach. “Yes, he (Tushar Mehta) takes care of my concerns — namely, that the government will now have a look at all our grievances. Then it should be okay,” Rohatgi said.

"We look forward to working closely with the department of telecommunications to resolve this matter in the interests of our nearly 200 million subscribers," Vodafone Idea said in an exchange filing. "This is an impetus to the Digital India vision," it said.

In April, Airtel had written to the government to convert about ₹40,000 crore in AGR dues into equity. However, according to an industry executive, since the SC's oral order centred on the government’s stakeholding, as of now, any reassessment will impact Vodafone Idea alone.

DoT's demand

The Supreme Court had, in 2020, locked Vodafone Idea’s AGR dues till 2016-17 based on DoT’s calculations, adding that no self-assessment or re-assessment of the dues would be permitted. However, DoT has now sought additional payments for up to 2018-19, Vodafone Idea stated in its petition filed on 8 September.

Of the fresh ₹9,450-crore dues sought, the additional demand raised by DoT from Idea Group and Vodafone Idea (post-merger in August 2018) was ₹2,774 crore, while the demand against Vodafone Group (pre-merger) was ₹6,675 crore, according to the petition.

The department informed the telecom operator that the licence fee dues were calculated with interest and interest on penalty up to October 2019, and were updated up to 31 March 2025, with interest calculated at an annual rate of 8%.

‘No default, no penalty’

On 19 September, the Supreme Court deferred the hearing to 26 September, but the government sought more time. The case was then deferred to 6 October and 13 October thereafter.

During the 19 September hearing, Solicitor General Tushar Mehta said that since the government now holds a significant equity stake in Vodafone Idea, a balanced solution that protects consumer interests was needed.

Vodafone Idea, however, had argued in its amended petition filed on 18 September that the Supreme Court had in 2020 only “directed inclusion of the disputed heads for the computation of AGR. Hence, till date, it cannot be said that there was any default in payment requiring imposition of penalty”.

Later, the company filed an amended petition with the Supreme Court seeking a waiver of penalties and interest on AGR dues, arguing that the disputed components of the dues have yet to be finalised.

According to the amended petition, both DoT and the telecom operator agree that the amounts need to be reconciled, corrected, and finalised. “Till the principal amount payable is not crystallized and finalized, it cannot be said that the petitioner is in default requiring payment of penalty,” Vodafone Idea said in the petition.

Threat of survival

Vodafone Idea already owes around ₹83,400 crore in AGR dues to the government, with annual payments of ₹18,000 crore starting March. Including penalties and interest, its total liabilities to the government are estimated at around ₹2 trillion.

Vodafone Idea has previously said that its cash flows were insufficient to pay the dues that have mounted over the years. Vodafone Idea’s former chief executive Akshaya Moondra said in August that early resolution of the AGR dispute was critical for the telecom operator to secure bank funding.

The telecom operator has asked the Supreme Court to quash DoT’s additional demands for FY17 and earlier, and order a comprehensive reassessment and reconciliation of all AGR dues for that period.

It warned that the hefty liability threatened its survival and “the livelihood of thousands of employees working directly or indirectly” with the company. Vodafone Idea serves about 198 million subscribers and employs over 18,000 people.

"It’s difficult to gauge the implications until the Supreme Court issues its written order. The key question is how the court balances any reconsideration with the sanctity of its 2020 judgment—unless that verdict is expressly overturned," said Parag Kar, an independent telecom analyst. “If substantial relief is granted, the rationale should become clear in the written order.”

However, such relief would logically need to apply to Bharti Airtel and others as well, potentially requiring the government to refund certain amounts to Bharti if a full reassessment and waiver of interest and penalties are allowed, Kar added.