In this submission the author analyses the two decade old dispute between the Government of India and the Telecoms. The agreed licence fee payment that was converted into Adjusted Gross Revenue (AGR) was defaulted for all these years over a disagreement of the AGR definition. The Supreme Court is firm that the companies must pay the dues. Going beyond, the author sheds light on the consequences suffered by the stakeholders.
Here is a case of mammoth default of dues against the Government of India. It is common knowledge, which has been further corroborated by the Apex Court, that the telecoms are the only industry that is faring well amidst the financial disaster. The mountain of dues, as well as the legal tangles confounding even as the Supreme Court of India that is trying to clear the mess and provide a channel of financial hope to the country reeling under the Covid-19 pandemic. It is as follows: The Bharti Airtel owes Rs 35,600 crore; while Vodafone-Idea owes Rs 53,000 crore; Reliance Communication at Rs 21,200 crore; Tata Group to pay Rs 13,800 crore. To make it short – licence fee, spectrum fee, dues and penalties make it One Lakh Forty Seven Thousand Crores only! On 24 October 2019, the Supreme Court Bench consisting of Justices Arun Mishra, Vineet Saran, S. Ravindra Bhat delivered an important judgment in the suit, Union of India versus Association of Unified Telecom Service Providers of India (AUSPI), the above mentioned defaulting telecoms.
The law states:
“The payments made for the grant of a licence under this sub-section shall include such sum attributable to the Universal Service Obligation as may be determined by the Central Government after considering the recommendation made in this behalf by the Telecom Regulatory Authority of India established under sub-section (1) of section 3 of the Telecom Regulatory Authority of India Act, 1997 (24 of 1997).” – Explanation, Section 4 (05) of the Indian Telegraph Act, 1885. The brief consists of a contract between the Department of Telecommunications of (DoT) under Ministry of Communications, Government of India, and the AUSPI. The contracting parties are signatories to clause 19.1 of the Licence Agreement granted by the Government of India to the Telecom Service Providers. The context of this agreement is the National Telecom Policy, 1994; the licences issued were as per Section 4 of the Indian Telegraph Act, 1885; accordingly an annual licence fee was payable by the service providers. As these parties found it difficult to honour their obligations, the association negotiated with DoT for a staggered payment called Adjusted Gross Revenue Sharing (AGR). Accordingly, DoT systematizes the revenue payable from the gross revenues of the service providers; it includes all revenues from both telecoms as well as non-telecom services. Gross revenue would consist of installation charges, late fees, sale proceeds of handsets, related equipment. Further, revenue on account of interest, dividend, value-added services, and supplementary services, access/interconnection charges, roaming charges, revenue from permissible sharing of infrastructure and any other miscellaneous revenue and so on would also be included. The problems were immediate: AUSPI disagreed. It said that the revenue should include only the core operations which are directly arising out of the telecom operations.
After lengthy deliberations of materials presented and the arguments from the petitioner and respondent, the Apex Court came to the following judgment: “Matter was remitted after giving finding on inclusion of the various heads in the definition of gross revenue. Even as per the case of licensees they were not validly included in definition, now reprobating that, stand has been taken that they did not form part of revenue which is not permissible. No litigant can be permitted to reap fruits on such inconsistent and untenable stands and litigate for decades in several rounds which is not so uncommon but is disturbing scenario projected in very many cases. We have examined the matter upon merits and then aforesaid conclusion indicates frivolous nature of objections. In the result, the appeals of licensees are dismissed and filed by DoT, are accordingly allowed in view of the findings recorded.”
Having lost the case AUSPI turned again to the Supreme Court for relief. The Court heard the case as on 18 June 2020 and gave the following directive: Come up with a reasonable payment plan; submit the books of account for the past ten years. The Court did not hesitate to reprimand DoT for its dereliction of duty in collecting the dues. If the reports are anything to go by AUSPI is preparing to go back again and plead for a review.
Briefly, let us consider the repercussions of the above case on the direct and indirect stakeholders in the telecoms:
1. The banks: It is clear that the Apex Court will not show any leniency; rather it will hold not only the telecoms but also DoT and other agencies related to the determination and implementation of licence and spectrum fees. Experts are of the view that the telecoms will succumb and declare bankruptcy. Consequently, the concerned public sector banks which are already reeling under NPAs, will be staring at a vacuum of above a lakh crore rupees.
2. Non-Banking Sector/Mutual Funds: This is a very large base of investors of all kinds, especially the members of the public at large. As a consequence of the telecoms these will be the ultimate sufferers.
3. The Government: Finally, it is the government that is responsible. How is it going to manage the financial conundrum in the present context of extreme recession, survival or revival packages of all and sundry caught up in the pandemic, and above all the boarders of the country being under threat?
4. Digital Economy: Just as India is stepping up its efforts to centre its economic prosperity on telecommunications and define it as digital economy, the enormous loss to the government caused by the telecoms and in real terms to the people of this country would drive the country backwards. Around these telecoms alone, businesses of all sizes and scale have spawned, whether in equipment, services or wireless technologies, etc. This would spell disaster to the related economic activities throughout the length and breadth of the country.
In conclusion, telecoms who would have been the backbone of the future of our country would be the worst losers. May be this sector would have no competitors; may be a company or two will come together and monopolize the largest telecom market in the world; or it may be we will hark back to the old system where government runs it.
In the final analysis, let us hope that telecoms understand their responsibilities towards their customers and the country in particular. Telecoms will do well to heed the words of the Mahatma, “Breach of promise is no less an act of insolvency than a refusal to pay one’s debt”
The columnist is a writer with Oxford University Press and a published author.
Email: albuquerque.daniel@gmail.com
