Case Note & Summary
The Supreme Court was hearing miscellaneous applications in the ongoing litigation concerning the definition of Adjusted Gross Revenue (AGR) and the payment of dues by telecom service providers. The background is that on 24.10.2019, the Court had delivered a judgment in Union of India v. Association of Unified Telecom Service Providers of India, which settled the definition of AGR and the amounts payable by telecom companies. Subsequently, the Union of India filed an application seeking extension of time for payment, during which it was pointed out that several telecom service providers had initiated insolvency proceedings under the Insolvency and Bankruptcy Code, 2016 (IBC). The Court, by order dated 20.7.2020, noted that the dues were final and no further disputes could be raised, and directed the companies under insolvency to produce documents to examine the bona fides of their actions. The legal issues before the Court were whether the insolvency proceedings were a subterfuge to avoid AGR dues, whether spectrum/licence can be treated as an asset in the resolution process, and whether AGR dues are operational dues under the IBC. The Union of India argued that spectrum cannot be the subject matter of IBC proceedings under sections 14 and 18, and that AGR dues are not operational dues. The telecom service providers contended that the insolvency proceedings were bona fide and that it is for the NCLT to decide on the transfer of licence/spectrum. The Court also noted the existence of spectrum sharing and trading arrangements among service providers, and that as per guidelines, the seller must pay licence arrears before trading. The Court reserved orders on the payment schedule and sought documents from the insolvent companies to test the bona fides of their actions.
Headnote
A) Telecom Law - Adjusted Gross Revenue (AGR) - Definition and Dues - Indian Telegraph Act, 1884, Section 4(1) - The Supreme Court held that the definition of AGR and dues payable are part of the licence contract between the Central Government and licensee, and no fresh dispute can be raised after final judgment. (Paras 1-3) B) Insolvency and Bankruptcy Code, 2016 - Operational Dues - Spectrum Licence - Sections 14, 18 - The Court examined whether AGR dues are operational dues and whether spectrum can be subject to IBC proceedings, noting the Union of India's stand that spectrum cannot be subject of IBC and dues are not operational. (Paras 4-5) C) Telecom Law - Spectrum Trading and Sharing - Guidelines 2015 - Pre-condition of Payment of Dues - The Court noted that as per guidelines, seller must pay licence arrears before trading spectrum, and liability under sharing arrangements is borne by respective service providers. (Paras 4, 6-8)
Issue of Consideration
Whether telecom service providers under insolvency proceedings are bona fide or using IBC as a subterfuge to avoid payment of AGR dues; whether spectrum/licence can be subjected to resolution process as an asset; whether AGR dues are operational dues under IBC
Final Decision
The Court reserved orders on the payment schedule and directed telecom service providers under insolvency (Aircel Group, Reliance Communication/Reliance Telecom Limited, Sistema Shyam Teleservices Ltd., Videocon Telecommunications Ltd.) to place all documents relating to liquidation and orders passed in proceedings within 10 days. The matter was listed for hearing on 10.08.2020 to examine bona fides of insolvency proceedings.
Law Points
- Adjusted Gross Revenue (AGR) definition
- contractual nature of telecom licence
- spectrum cannot be subject of IBC proceedings
- AGR dues are not operational dues
- no fresh dispute on AGR dues after final judgment
