"Telecom Companies Taking A Ride Without Paying For The Horse": Supreme Court On AGR Dues

Expressing concern over non-payment of the Adjusted Gross Revenue (AGR) related dues by the telecom companies which are under insolvency, the Supreme Court on Thursday said "without paying for the horse, telcos are taking a ride". The top court said it is “extremely worried” that almost the entire AGR dues will be “wiped out” in the IBC process. The top court wondered can a liability like AGR related dues be wound up, under the guise of selling spectrum under the Insolvency and Bankruptcy Code (IBC).

A bench of Justices Arun Mishra, S Abdul Nazeer and M R Shah said spectrum trading is altogether different from sale of spectrum under the IBC.

"Without paying for the horse, telecos are taking a ride. Unless dues are paid, nobody can start using the spectrum. Can a liability like AGR be wound up, under the guise of selling spectrum under the IBC," the bench said. It further observed, "We are extremely worried that almost entire AGR dues will be wiped out in the IBC process".

The bench said after the sale of spectrum, the new user will extinguish any pending demand against the spectrum in question. During the hearing, senior advocate Ravi Kadam, appearing for Aircel Monitoring Committee, told the bench that from April 8, 2016, there have been eight instances of spectrum trading with Bharti Airtel.

He said that the Department of Telecom (DOT) had approved the sale and had raised demand for the dues.

Kadam said there are no instance of spectrum sharing by Aircel with any operator.

The bench asked Kadam what has Aircel going into resolution proceedings got to do with the AGR dues. It questioned whether Airtel has paid AGR dues for spectrum bought from Aircel.

Senior advocate Kapil Sibal, appearing for Airtel, said the company has paid all relevant dues with respect to spectrum trading and have paid Rs 18,004 crore towards AGR dues.

The bench said it wants details from DOT of spectrum allocated to Reliance Communication (RCom) and Aircel since 1999. It said the court want relevant details of all instances of spectrum sharing and asked whether Aircel is looking to sell spectrum under the IBC.

Kadam said that right to use spectrum is an asset and to keep the company running, this right will be sold on approval of the resolution plan. He said the resolution process has been concluded, UV Asset Reconstruction Company (UVARC's) plan has been approved and dues of the DOT has been recognized by the Committee Of Creditors (CoC) .

Kadam said that right to use spectrum is an intangible good under IBC that can be sold and license agreement recognises right to use it as an asset. He said the company has the power to transfer the right to use the spectrum.

The hearing remained inconclusive and would continue on Friday.

On August 14, the top court had sought the details of spectrum sharing pact between RComm and Reliance Jio and said as to why the company using the spectrum of the other firm cannot be asked to pay the AGR related dues to the government. The Centre had earlier told the top court there was a difference of opinion between two of its ministers (DOT and the Ministry of Corporate Affairs) on the issue of sale of spectrum during insolvency proceedings.

Earlier, the top court had made it clear it will not hear "even for a second" the arguments on reassessment or re-calculation of the AGR related dues of telecom companies which run into about Rs 1.6 lakh crore.

The top court had in October 2019 delivered the verdict on the AGR issue for calculating government dues of telecom companies such as licence fee and spectrum usage charges.

After the top court had rejected pleas by Vodafone Idea, Bharti Airtel and Tata Teleservices seeking review of the judgement which widened the definition of AGR by including non-telecom revenues, the DoT had in March moved a plea seeking staggered payment over 20 years.