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2020 (9) TMI 124 - SC - Insolvency and BankruptcyPayment of AGR Dues - Exclusive privilege of establishing, maintaining, and working telegraphs - before initiation of insolvency proceedings, most of the telecom service providers who are under the insolvency proceedings had applied to the Department of Telecommunications to grant permission for trading of licence. The Central Government objected on the ground that it would not be possible for it to grant permission - Whether spectrum can be subjected to proceedings under the Code? HELD THAT - Following directions issued (i) That for the demand raised by the Department of Telecom in respect of the AGR dues based on the judgment of this Court, there shall not be any dispute raised by any of the Telecom Operators and that there shall not be any re assessment. (ii) That, at the first instance, the respective Telecom Operators shall make the payment of 10% of the total dues as demanded by DoT by 31.3.2021. (iii) TSPs. have to make payment in yearly instalments commencing from 1.4.2021 up to 31.3.2031 payable by 31st March of every succeeding financial year. (iv) Various companies through Managing Director/Chairman or other authorised officer, to furnish an undertaking within four weeks, to make payment of arrears as per the order. (v) The existing bank guarantees that have been submitted regarding the spectrum shall be kept alive by TSPs. until the payment is made. (vi) In the event of any default in making payment of annual instalments, interest would become payable as per the agreement along with penalty and interest on penalty automatically without reference to Court. Besides, it would be punishable for contempt of Court. (vii) Let compliance of order be reported by all TSPs. and DoT every year by 7th April of each succeeding year.
Issues Involved:
1. Definition of Adjusted Gross Revenue (AGR) and dues. 2. Insolvency proceedings under the Insolvency and Bankruptcy Code (IBC). 3. Spectrum trading and sharing guidelines. 4. Payment plan for AGR dues. Issue-wise Detailed Analysis: 1. Definition of Adjusted Gross Revenue (AGR) and Dues: The Supreme Court reaffirmed its decision on the definition of AGR and the dues payable by telecom service providers (TSPs) under the policy framed by the Government of India and the provisions of the Indian Telegraph Act. The Court emphasized that the AGR dues, as calculated and demanded by the Department of Telecommunications (DoT), are final and cannot be reassessed or recalculated. The TSPs must pay these dues without raising any further disputes. 2. Insolvency Proceedings under the Insolvency and Bankruptcy Code (IBC): The Court examined whether spectrum can be subjected to proceedings under the IBC. It was argued that the spectrum, being a natural resource and not owned by the TSPs but merely licensed for use, cannot be transferred under insolvency proceedings. The Court noted that the spectrum is a contractual arrangement and not an asset of the corporate debtor, thus falling outside the purview of Section 18 of the IBC. The Court directed the National Company Law Tribunal (NCLT) to consider various questions related to the ownership and transferability of spectrum under insolvency proceedings and to pass a reasoned order within two months. 3. Spectrum Trading and Sharing Guidelines: The Court addressed the liability of TSPs involved in spectrum sharing and trading. For spectrum sharing, the Court noted that each TSP is responsible for paying AGR dues based on their respective usage, with an additional 0.5% Spectrum Usage Charge (SUC) rate applied. The Court clarified that shared spectrum does not transfer ownership, and the liability for past dues remains with the original licensee. For spectrum trading, the Court referred to the Spectrum Trading Guidelines, which state that the seller must clear all dues before trading, and any unknown dues discovered later can be recovered from either the buyer or seller, jointly or severally. 4. Payment Plan for AGR Dues: The Union of India proposed a payment plan allowing TSPs to pay the AGR dues in annual installments over 20 years, protecting the net present value of the dues using a discount rate of 8%. The Court, considering the financial stress on the telecom sector and the involvement of the banking sector, modified the proposal by reducing the payment period to ten years. The TSPs are required to pay 10% of the total dues by 31.03.2021 and the remaining in equal yearly installments by 31st March of each succeeding financial year. The Court mandated that any default in payment would attract interest, penalty, and interest on penalty as per the agreement, and would be punishable for contempt of court. Conclusion: The Supreme Court's judgment provided clarity on the definition and payment of AGR dues, the applicability of IBC proceedings to spectrum, and the responsibilities of TSPs in spectrum sharing and trading. The payment plan was adjusted to ensure compliance while considering the financial health of the telecom sector. The Court directed strict adherence to the payment schedule and compliance reporting by the TSPs and DoT.
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