Supreme Court threatens mobile carriers with contempt proceedings unless they pay AGR dues to government
The govt withdrew its 23 January order, in which it had decided not to take coercive action against telecom firms
NEW DELHI :
The Supreme Court on Friday pulled up mobile service operators and the department of telecommunications (DoT) for failing to comply with its verdict, which mandated telecom companies to pay the adjusted gross revenue (AGR) dues of over ₹1 trillion to the DoT by 23 January.
The development comes as a fresh blow for Vodafone Idea—once India’s largest telco by subscriber base. The company is in a parlous state after an over-three-year battle in the hyper-competitive telecom sector, which has shrunk its revenue streams and saddled it with debt.
“This case projects a very disturbing scenario. The companies have violated the order passed by this court in pith and substance. In spite of the dismissal of the review application, they have not deposited any amount so far. It appears the way in which things are happening that they have scant respect to the directions issued by this court," the Supreme Court order on Friday said.
Ending a 14-year-long court battle, the apex court on 24 October had upheld the government’s broader definition of revenue, on which it calculates levies on telecom operators. The order had dealt a body blow to the telecom industry.
Vodafone Idea, Bharti Airtel and Tata Teleservices last month filed modification pleas seeking more time to pay AGR-related dues. The DoT had on 23 January asked its officers not to take coercive action against telcos for non-payment of dues.
The judges made scathing remarks about an unnamed desk officer.
“In the circumstances, we draw contempt proceedings against the desk officer for passing the order and violating the order passed by this court. The managing directors/directors of the companies also to show cause why we should not initiate contempt proceedings against them for violating the order passed by this court by not depositing the amount, on the next date of hearing… It is made clear that in case the order passed by this court is not complied with, the above persons shall remain personally present in court on the next date of hearing," the order said.
After the court hearing on Friday, the DoT asked all telecom companies to repay AGR dues by the end of the day in order to comply with the October verdict of the Supreme Court.
“You are hereby directed to make the payment of outstanding dues of licence fee and spectrum usage charges by 11.59pm on 14 February positively," the DoT letter said.
In response, Bharti Airtel said it will deposit ₹10,000 crore as part payment for AGR dues to the DoT by 20 February and the balance before 17 March as it needs time to complete the exercise of calculating dues across 22 circles.
The government, in a separate letter, also withdrew its 23 January order, in which it had decided not to take coercive action against mobile service providers that failed to meet the court-directed deadline for paying the dues.
Mint has seen a copy of the letters by Airtel and DoT.
With this, relief hopes for operators, which wanted more time to repay AGR dues to the DoT, appear to have been crushed.
This also raises questions on the survival of Vodafone Idea and competition in the Indian telecoms market, which could see the risk of a duopoly and price rises.
Vodafone Idea’s ability to continue as a going concern is dependent on the positive outcome of the modification application filed in the apex court and the subsequent agreement with DoT for payment in instalments after some moratorium and other reliefs, the company had said on Thursday.
To be sure, Jio paid its AGR dues on 23 January. Airtel is best placed to absorb 2G and 3G subscribers of Vodafone Idea in case the telecom company shuts down, as Jio is a pure 4G network.
“If Vodafone were to invoke the insolvency provisions, then it may be likely that the DoT will be an operational creditor under the IBC (Insolvency and Bankruptcy Code). It could result in a substantial loss for the government if Vodafone were to take that route as they may not get paid much. DoT may also choose to cancel the licence due to default under the licence agreement, which may make it difficult for any prospective resolution applicant to bid for the company," said Saurav Kumar, partner, IndusLaw.
Email queries to DoT, Vodafone Idea, Bharti Airtel and Tata Teleservices were unanswered till press time.
“It is dispiriting to see the Supreme Court drawing contempt against telecom companies. For the time being, telecom companies also have to deal with contempt actions and will need to strategize on this front in addition to the demand notice. This is a challenging time for the industry and the government as no breakthrough seems to be in horizon." said Harsh Walia, partner, Khaitan and Co.