Op EdsOP. ED.

The contours of enquiry as per the Supreme Court and NCLAT’s response

The order dated 13-4-2021 passed by National Company Law Appellate Tribunal (NCLAT) in Union of India v. Vijaykumar V. Iyer1 and connected matters, seeks to reopen questions which were settled by the  Supreme Court after multiple protracted round of litigations witnessed during 2016-2019. The aforesaid order throws open a lot of questions especially in relation to the objections/challenges that can be raised by various stakeholders in a resolution process at an advance stage or even in concluded resolution processes.

The NCLAT was seized, inter alia, of an appeal arising from an order approving the resolution plan for Aircel group. In the meantime, the Supreme Court of India (Supreme Court) in Union of India v. Association of Unified Telecom Service Providers of India,2(Unified Telecom) directed NCLAT to consider certain questions which inter alia include:

  • whether the licence to use the spectrum is a contractual relationship between Department of Telecommunications (DoT) and telecom service providers i.e. corporate debtor;
  • whether the spectrum on the basis of right to use is an asset of licensee/corporate debtor;
  • whether the spectrum can be subjected to proceedings under the Insolvency and Bankruptcy Code, 20163 (I&B Code); and
  • whether dues towards the spectrum under the licence can be said to be operational dues.

To sum up the findings, NCLAT came to the following conclusions:

  • relationship between DoT and corporate debtor is contractual;
  • spectrum is an intangible licence of the corporate debtor;
  • spectrum, being an intangible asset of the licensee i.e. corporate debtor, can be subjected to insolvency/liquidation proceeding; and
  • dues of DoT under licence are in the nature of operational debt.

NCLAT venturing beyond the scope of reference and mandate of the I&B Code

After having provided the responses to the questions framed by the  Supreme Court, the NCLAT went ahead and rendered observations on the validity of the admission order passed under Section 10 of the I&B Code4. It was observed that since the resolution plan would have the effect of wiping out the dues payable to DoT/Central Government (which was nothing but an operational creditor), the initiation of corporate insolvency resolution process (CIRP) at behest of the corporate debtor under Section 10 of the I&B Code was fraudulent. Such an application was made by the erstwhile management with the malicious intent of withholding the huge arrears payable to the Government. In particular, the NCLAT went ahead to cast a mandate on the adjudicating authorities to examine the bona fides of the applications under Section 10 of the I&B Code at the resolution plan approval stage. In this regard, the observations of the NCLAT in para 87 are of particular importance which reads as:

  1. The adjudicating authority in the given circumstances should have examined the bona fide of the Aircel entities in initiating CIRP by filing applications under Section 10 of the I&B Code which, on the face of it, aimed at monetising most of the assets for meeting obligations of the resolution applicant towards the banks which too would depend on when and how the spectrum would be sold, more so as the Aircel entities had stopped operations before initiating insolvency proceedings and the spectrum continued to go waste and unutilised.5

In our view, the NCLAT ought to have refrained from providing observations which tantamount to reopening the question of validity of initiation of the resolution process, when the entire resolution process had run its course and the resolution plan was being tested on the limited touchstone of Section 30 of the I&B Code6 read with the Regulations framed thereunder.

It seems that while providing its response to the specific queries posed by the Supreme Court, NCLAT lost sight of the contours enshrined in UnifiedTelecom7as well as the legislative intent enshrined under Sections 10, 318, 619. The NCLAT also did not take into consideration the law laid by  the Supreme Court with regard to power of NCLT/NCLAT at time of considering resolution plan under Section 31 in Essar Steel India Ltd. v. Satish Kumar Gupta10, (Essar Steel); Ghanashyam Mishra and Sons (P) Ltd. v. Edelweiss Asset Reconstruction Co. Ltd.,11(Ghanashyam Mishra) and Jaypee Kensington Boulevard Apartments Welfare Assn. v. NBCC (India) Ltd. 12(Jaypee).

NCLAT’s observations — Impact on the scheme of the I&B Code

NCLAT categorically observed that dues payable to DoT was operational debt and DoT itself had filed its claim as operational creditor which has been factored in the resolution plan by the successful resolution applicant. However, the basis of the imputing malafides to the initiation of CIRP under Section 10 has been traced to the fact that the approved resolution plan envisages wiping out/extinguishment of operational debts.

The Supreme Court in Essar Steel13 had unequivocally pointed out that a successful resolution applicant has to necessarily commence on a fresh slate after the conclusion of CIRP meaning thereby, all/most of the resolution plans would envisage extinguishment/wiping out of claims, in some or the other form. If such is not the case, the successful resolution applicant would be faced with undecided claims i.e. the proverbial “hydra heads” would start popping up, after the implementation of the resolution plan.

If one were to proceed in terms of the dicta of the NCLAT, we are pained to say that none of the CIRPs would ever see light of the day at the end of tunnel. As a result thereof, the very aim and underlying objection of the I&B Code i.e. to (a) promote entrepreneurship and availability of credit; (b) ensure the balanced interests of all stakeholders; and (c) promote time-bound resolution of insolvency in case of corporate persons, partnership firms and individuals, would fall crumbling into the dust.

Approach of the NCLAT vis-à-vis the legislative intent

In fact, at the time of amending Section 31 of the I&B Code through the Insolvency and Bankruptcy Code (Amendment) Bill, 201914, the Finance Minister in Rajya Sabha on 29-7-2019 (which is much prior to Aircel order dated 13-4-202115 passed by NCLAT) stated as under16:

“79. … There is also this question about indemnity for successful resolution applicant. The amendment now is clearly making it binding on the Government. It is one of the ways in which we are providing that. The Government will not raise any further claim. The Government will not make any further claim after resolution plan is approved. So that is going to be a major, major sense of assurance for the people who are using the resolution plan….I would want all the hon. members to recognise this message and communicate further that this Code, therefore, gives that comfort to all new bidders. So now, they need not be scared that the taxman will come after them for the faults of the earlier promoters. No.…”

(emphasis supplied)

The above statement was relied upon by the Supreme Court in Ghanashyam Mishra17 to declare that pre-CIRP claims are governed by the approved resolution plan. Further, all such claims/dues owed to the State/Central Government or any local authority including tax authorities, which were not part of the resolution plan shall stand extinguished.

In view of the above, the treatment of government dues as operational debt is the clear legislative intent and if all other operational debt is being extinguished, government dues cannot be accorded any favourable treatment. Such a resolution plan would ex facie be in teeth of Section 30(2) of the I&B Code. Therefore, no malice to the initiation of a CIRP could be imputed on such a ground and such an extraneous criterion (which finds no mention in either Sections 718, 919 or Section 10 of the I&B Code) for determining fraud or malice would throw the otherwise settled jurisprudence, into a realm of uncertainty.

NCLAT’s observations are in teeth of doctrine of finality of a lis

We believe that the NCLAT ought to have considered the doctrine of finality in relation to a lis based on interest reipublicae ut sit finis litium and nemo debet bis vexari, si constet curiae quod sit pro una et eadem causa, before rendering its findings.

One cannot be oblivious of the provisions of Sections 10 and 61, respectively. It is only at the stage of application under Section 10 that NCLT has the power to examine whether the initiation of insolvency proceedings was fraudulent or malicious. NCLAT at the time of considering an appeal under Section 61 impugning the order admitting Section 10 application, can conduct a similar enquiry. NCLAT ought not to have lost sight of the fact that if no appeal was preferred against an order admitting Section 10 application or appeal was preferred and dismissed, neither NCLT nor NCLAT, in subsequent proceedings, have any power to re-examine any issue surrounding the initiation of the insolvency proceedings much less, the issues of malicious or fraudulent intent (and that too on its own accord).

It is pertinent to mention that NCLAT was considering the appeal against approved resolution in terms of Sections 30(2) and 31 and was not dealing with an appeal against the order admitting insolvency proceedings under Section 10. Hence, NCLAT while wearing a different jurisdictional  ought not to have ventured into the issue of fraudulent or malicious commencement of insolvency proceedings.

In view of the aforesaid, NCLAT not only travelled beyond the directions of the Supreme Court in Unified Telecom20 but also the express provisions of the I&B Code as expounded by the Supreme Court in the abovementioned catena of judgments. In our view, NCLAT ought to have, as a matter of judicial propriety, limited its inquiry to the questions framed by the Supreme Court.


*Alumni (2009-2014) National Law University Odisha. Currently working as In-house Counsel at an Indian Conglomerate and may be reached at anuragnluo@gmail.com. The views expressed herein are personal and do not represent views of any organisation.

**(2010-15) National Law University Odisha. Currently working as Managing Associate at L&L Partners Law Offices. The views expressed herein are personal and do not represent views of any organisation.

12021 SCC OnLine NCLAT 355.

2Union of India v. Assn. of Unified Telecom Service Providers of India, (2020) 9 SCC 748.

3 Insolvency and Bankruptcy Code, 2016.

4 Section 10, I&B Code.

5Union of India v. Vijaykumar V. Iyer, 2021 SCC OnLine NCLAT 355.

6 Section 30, I&B Code.

7 Union of India v. Assn. of Unified Telecom Service Providers of India, (2020) 9 SCC 748.

8 Section 31, I&B Code.

9 Section 61, I&B Code.

10(2020) 8 SCC 531.

112021 SCC OnLine SC 313.

122021 SCC OnLine SC 253.

13(2020) 8 SCC 531.

14 Insolvency and Bankruptcy Code (Amendment) Bill, 2019.

15Union of India v. Vijaykumar V. Iyer, 2021 SCC OnLine NCLAT 355.

16Ghanashyam Mishra, 2021 SCC OnLine SC 313, para 72.

17Ghanashyam Mishra, 2021 SCC OnLine SC 313, para 72.

18 Section 7, I&B Code.

19 Section 9, I&B Code.

20 Union of India v. Assn. of Unified Telecom Service Providers of India, (2020) 9 SCC 748.

Cabinet DecisionsLegislation Updates

Union Cabinet has approved the proposal for revision of the guidelines for obtaining the license for providing Direct-To-Home (DTH) broadcasting service in India. The salient features of the decision are:

  • License for the DTH will be issued for a period of 20 years in place of the present 10 years. Further the period of License may be renewed by 10 years at a time.
  • License fee has been revised from 10% of GR to 8% of AGR. AGR will be calculated by deduction of GST from GR.
  • License Fee will be collected on a quarterly basis in lieu of presently annual basis.
  • DTH operators shall be permitted to operate .to a maximum of 5% of its total channel carrying capacity as permitted platform channels. A one-time non-refundable registration fee of Rs.10,000 per PS channel shall be charged from a DTH operator.
  • Sharing of Infrastructure between DTH operators. DTH operators, willing to share DTH platform and transport stream of TV channels, on voluntary basis, will be allowed. Distributors of TV channels will be permitted to share the common hardware for their Subscriber Management System (SMS) and Conditional Access System (CAS) applications.
  • The cap of 49% FDl in the existing DTH guidelines will be aligned with the extant Government (DPIIT’s) policy on FDl as amended from time to time.
  • The decision will come into effect as per revised DTH guidelines are issued by the Ministry of Information and Broadcasting.
  • The proposed reduction is intended to align the license fee regime applicable to Telecom sector and will be prospectively applied. The difference may also enable DTH service providers to invest for more coverage leading to increased operations and higher growth and thereby enhanced and regular payment of License Fee by them. Registration fee for Platform Services is likely to bring a revenue of approximately Rs. 12 Lakhs. Sharing of infrastructure by the DTH operators may bring in more efficient use of scarce satellite resources and reduce the costs borne by the consumers. Adoption of the extant FDI policy will bring in more foreign investment into the country.

The DTH is operable on the pan-India basis. DTH sector is a highly employment-intensive sector. It directly employs DTH operators as well as those in the call centres besides indirectly employing a sizeable number of installers at the grass-root level. The amended DTH guidelines, with longer license period and clarity on renewals, relaxed FDI limits, etc., will ensure a fair degree of stability and new investments in the DTH sector along with employment opportunities.


Cabinet

[Press Release dt. 23-12-2020]

Case BriefsSupreme Court

Supreme Court: Asking Telecom Operators to make the payment of 10% of the total AGR dues as by 31.3.2021, the 3-judge bench of Arun Mishra, SA Nazeer and MR Shah, JJ gave 10 years to the Telecom Service Providers (TSPs) to complete the payment of their AGR dues.

“The TSPs make payment in yearly instalments commencing from 1.4.2021 up to 31.3.2031 payable by 31st March of every succeeding financial year.”

The Union of India on the representation made by the telecom service providers and Indian Banks’ Association, had decided to provide the facility of making payment in instalments within 20 years. The Court, however, said that the period of 20 years fixed for payment is excessive.

“… it is a revenue sharing regime, and it is grant of sovereign right to the TSPs. under the Telecom Policy. We feel that some reasonable time is to be granted, considering the financial stress and the banking sector’s involvement. We deem it appropriate to grant facility of time to make payment of dues in equal yearly instalments.”

The Court, however, clarified that at the same time, it is to be ensured that the dues are paid in toto.

“The concession is granted only on the condition that the dues shall be paid punctually within the time stipulated by this Court. Even a single default will attract the dues along with interest, penalty and interest on penalty at the rate specified in the agreement.”

The Court noticed that the decision of the Cabinet is based on the various factors, and in the interest of the economy and the consumers. The decision is taken after extensive deliberations and consultations, and till the date of judgment, the dues have been worked out as per the decision rendered by this Court. Only for the subsequent period, some relaxation has been given as to the rate of interest, penalty, and interest on penalty, which is permissible.

“The arrears have accumulated for the last 20 years. It is also to be noted that some of the companies are under insolvency proceedings, validity of which is to be examined, and they were having huge arrears of AGR dues against them.  For protecting the telecom sector, a decision has been taken on various considerations mentioned above, which cannot be objected to.”

Last year, in Union of India v. Association of Unified Telecom Service Providers of India, 2019 SCC OnLine SC 1393the bench of Arun Mishra, SA Nazeer and MR Shah, JJ had refused to change the definition of gross revenue as defined in clause 19.1 of the licence agreement granted by the Government of India to the Telecom Service Providers. It had held,

“The definition in agreement is unambiguous, clear, and beyond the pale of doubt, and there is no confusion in the definition of gross revenue, which is the basis for realisation of the licence fee. Licensees have made a futile attempt to wriggle out of the definition in an indirect method, which was rejected directly in the decision of 2011 between the parties and it was held that these very heads form part of gross revenue.”

The Court, hence, noticed that is clear that in the case, which was decided by this Court relating to AGR dues, respondents were the parties, and they were litigating with respect to the definition of AGR in the second round of appeal filed before this Court.  Each of them was aware that the dispute as to the definition of AGR was pending in this Court. Thus, it is apparent that it was known to the parties that AGR dues to be finalised as per the decision of this Court in a pending matter, and lis was pending for the last 20 years.

“The liability cannot be escaped as specified in the Trading Guidelines to the extent that the seller or buyer is liable. They have to pay the AGR as per the judgment rendered by this Court. The purchasers who are not seller or buyer, shall have to pay the dues to the extent they are liable under the Guidelines, as discussed above.”

On the submission that they have paid dues as per the self-assessment or, in some cases, demands have not been raised, the Court directed DoT to complete the assessment in such cases of trade and raise demand if it has not been raised and to examine the correctness of self-assessment and raise demand, if necessary, after due verification.

“In  case demand notice has not been issued, let DoT raise the demand within six weeks from today.”

The Court, hence, issued the following directions:

  • 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.
  • 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.
  • 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.
  • 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.
  • The existing bank guarantees that have been submitted regarding the spectrum shall be kept alive by TSPs. until the payment is made.
  • 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.
  • Compliance of order to be reported by all TSPs and DoT every year by 7th April of each succeeding year.

[Union of India v. Association of Unified Telecom Service Providers India, 2020 SCC OnLine SC 703, decided on 01.09.2020]

Case BriefsSupreme Court

Supreme Court: In a major turnaround in the AGR case, with respect to Public Sector Undertakings, the Department of Telecommunication has decided to withdraw the demands which constitute 96% of the of the ?4 lakh crore demand. However, with respect to 4% other Public Sector Undertakings, Solicitor General Tushar Mehta told the bench of Arun Mishra, SA Nazeer and MR Shah, JJ that “the final decision shall be taken before the next date of hearing and placed on record.

The decision came after the Court pulled up the Government for misusing it’s 2019 verdict and had said that the said verdict only applied to AGR dues owed by the telecom companies and not to PSUs.

In today’s order, the Court directed the telecom operators to file audited Balance Sheets, for the last 10 years including for the Calendar year ending 31.3.2020 as well as the Income Tax Returns and the particulars of AGR deposited during the last 10 years. It also requested to make payments of reasonable amount also to show their bonafides, before the next date of hearing.

The matter is scheduled to be taken up in the 3rd week of July.

Last year, in Union of India v. Association of Unified Telecom Service Providers of India, 2019 SCC OnLine SC 1393, where it had  refused  to change the definition of gross revenue as defined in clause 19.1 of the licence agreement granted by the Government of India to the Telecom Service Providers and had said,

“The definition of revenue has been taken in a broad, comprehensive, and inclusive manner to pose fewer problems of interpretation, and exclusion of certain items was avoided.”

[In re Mandar Deshpande, 2020 SCC OnLine SC 518 , order dated 18.06.2020]


Also read:

In a big blow to the Telecom Sector, SC refuses to change AGR definition

 

 

Case BriefsSupreme Court

Supreme Court: The 3-judge bench of Arun Mishra, SA Nazeer and MR Shah, JJ has given 5 days to Telecom Service Providers to file a joint affidavit with respect to their proposal to secure the amount, which is to be paid against AGR dues. The matter will now be taken up on June 18, 2020.

The issues that are to be considered are:

  • reasonable time-frame
  • how to ensure the payment of the amount even within that time-frame
  • what kind of securities, undertakings and guarantees should be furnished to ensure that the amount is paid by the Telecom Service Providers

It was also brought into Court’s notice that how the demand was raised on the basis of it’s judgment with respect to Public Sector Undertakings when the licences were different and the judgment never dealt with the issue of Public Sector Undertakings and their agreements are quite different. Noticing that the licences are different, the Court asked the Department of Telecom reconsider the demand that has been sprung, within three days, and on the next date of hearing report the compliance of the action taken on the basis of this order.

Last year, in Union of India v. Association of Unified Telecom Service Providers of India, 2019 SCC OnLine SC 1393, the Court had refused  to change the definition of gross revenue as defined in clause 19.1 of the licence agreement granted by the Government of India to the Telecom Service Providers and had said,

“The definition of revenue has been taken in a broad, comprehensive, and inclusive manner to pose fewer problems of interpretation, and exclusion of certain items was avoided.”

[In re Mandar Deshpande, 2020 SCC OnLine SC 501, order dated 11.06.2020]


Also read:

In a big blow to the Telecom Sector, SC refuses to change AGR definition

Hot Off The PressNews

Supreme Court:  The bench of Arun Mishra and MR Shah, JJ has dismissed a petition filed by Vodafone against the levy of one-time spectrum charges (OTSC).

When Senior advocate Abhishek Manu Singhvi, appearing for Vodafone, told a bench that the charges are related to the adjusted gross revenue (AGR), a rather furious Justice Mishra said,

“Don’t pay anything… not this, not AGR. You will still not be touched,”

The Department of Telecommunications (DoT) had sought to levy a one-time spectrum charge on telecom service providers. This comes after the telecom companies paid their AGR dues to the Central government after the Supreme Court pulled them up for violating its earlier order and not paying the money on time.

Last year, in Union of India v. Association of Unified Telecom Service Providers of India, 2019 SCC OnLine SC 1393the bench of Arun Mishra, SA Nazeer and MR Shah, JJ had refused to change the definition of gross revenue as defined in clause 19.1 of the licence agreement granted by the Government of India to the Telecom Service Providers. It had held,

“The definition in agreement is unambiguous, clear, and beyond the pale of doubt, and there is no confusion in the definition of gross revenue, which is the basis for realisation of the licence fee. Licensees have made a futile attempt to wriggle out of the definition in an indirect method, which was rejected directly in the decision of 2011 between the parties and it was held that these very heads form part of gross revenue.”

Vodafone Idea’s total AGR dues, as estimated by the DoT stand at Rs 53,038 crore, which includes Rs 24,729 crore of spectrum dues and Rs 28,309 crore as the license fee. On the other hand, Bharti Airtel’s total AGR dues reportedly amount to Rs 35,586 crore.

(Source: ANI)

Case BriefsSupreme Court

Supreme Court: Taking a strong note of non-compliance of its order asking telecom companies to pay adjusted gross revenue of Rs 1.47 lakh crore to DoT, a bench headed by Justice Arun Mishra, JJ has issued contempt notice to the telecom companies. The managing directors of Bharti Airtel , Vodafone, MTNL, BSNL, Reliance Communications, Tata Telecommunication and others have been summoned to the court on March 17.

The Court said that the telecom companies have violated the order passed by this Court in pith and substance as in spite of the dismissal of the Review application, they have not deposited any amount so far.

“Shocked” over the non-compliance of it’s 2019 order, the bench said,

“It appears the way in which things are happening that they have scant respect to the directions issued by this court.”

The Court also issued notice to a DoT Desk Officer who asked the Attorney General to not insist on payment of dues as directed by the Supreme Court.  On this, a furious Justice Mishra said,

“A Desk Officer of the Department of Telecommunications has the temerity to pass the order to the effect of issuing a direction to the Accountant General, another Constitutional Authority”

The Desk Officer had asked the Attorney General

“not to insist for any payment pursuant to the order passed by this Court and not to take any coercive steps till further orders.”

The Court said that this kind of order was nothing but a device to scuttle order of the Supreme Court.

Last year, in Union of India v. Association of Unified Telecom Service Providers of India, 2019 SCC OnLine SC 1393the bench of Arun Mishra, SA Nazeer and MR Shah, JJ had refused to change the definition of gross revenue as defined in clause 19.1 of the licence agreement granted by the Government of India to the Telecom Service Providers. It had held,

“The definition in agreement is unambiguous, clear, and beyond the pale of doubt, and there is no confusion in the definition of gross revenue, which is the basis for realisation of the licence fee. Licensees have made a futile attempt to wriggle out of the definition in an indirect method, which was rejected directly in the decision of 2011 between the parties and it was held that these very heads form part of gross revenue.”

According to DoT, Bharti Airtel owes around Rs 23,000 crore, Vodafone Idea Rs 19,823 crore and Reliance Communications Rs 16,456 crore.

[Union of India v. Association of Unified Telecom Service Providers of India, 2020 SCC OnLine SC 182, order dated 14.02.2020]

Case BriefsSupreme Court

Supreme Court: Refusing to change the definition of gross revenue as defined in clause 19.1 of the licence agreement granted by the Government of India to the Telecom Service Providers, the 3-judge bench of Arun Mishra, SA Nazeer and MR Shah, JJ has said,

“The definition of revenue has been taken in a broad, comprehensive, and inclusive manner to pose fewer problems of interpretation, and exclusion of certain items was avoided.”

The Court agreed that to a certain extent, it cannot be disputed that to have clarity, uniformity, and definitiveness; the accounting standards lay down guidelines with respect to financial terms. It, however, said that when the financial terms in the agreement are clear in the form of definition of gross revenue governed by Clause 19.1 of the agreement, the definition of Accounting Standard­9 cannot supersede it which is a general one.

“The definition in agreement is unambiguous, clear, and beyond the pale of doubt, and there is no confusion in the definition of gross revenue, which is the basis for realisation of the licence fee. Licensees have made a futile attempt to wriggle out of the definition in an indirect method, which was rejected directly in the decision of 2011 between the parties and it was held that these very heads form part of gross revenue.”

The Court further noticed that the parties had agreed to various inclusions in the agreement and have willingly switched over to revenue­ sharing regime under the National Telecom Policy, 1999. TSPs agreed to interpretation and accepted it as held by this Court in 2011 judgment.

“The deliberations were held with the licensees, experts, and then finally migration package, revenue sharing regime is being consented to, was worked out in which the definition of adjusted gross revenue as a part of the financial condition of the licence is mentioned.”

Going through the chequered history on the case, the Court noticed:

  • The demand was raised for the first time in the year 2003 despite the fact that the definition of gross revenue was clear. Licensees were aware that these items concerning which they have raised the dispute were included in the definition of gross revenue, as such, they had initially questioned inclusion on the basis of the validity of the definition of gross revenue. The challenge was found to be sans any basis by this Court.
  • The objections raised concerning the validity of the gross revenue, were wholly unsustainable and on the face of it, were liable to be rejected, and came to be rejected finally and conclusively by this Court in the year 2011.
  • After that, again the objections have been repeated to exclude those very revenue items which were held to be included once over an effort has been made to get rid of the definition of gross revenue. The objections which have been raised pertained to the definition of gross revenue for which the court held they are part of revenue.

“Now, relying upon AS­9 standards, an attempt has been made by an indirect method for excluding items, which are expressly included in the definition of gross revenue. Objections are too tenuous, and, as a matter of fact, there was no scope to raise such objections in 2003 itself.”

In the over 150 pages long verdict, the Court has discussed at length the various revenue heads not being revenue and has held that they all fall within the purview of gross revenue.

[Union of India v. Association of Unified Telecom Service Providers of India, 2019 SCC OnLine SC 1393, decided on 24.10.2019]

Hot Off The PressNews

The Union Cabinet has approved two key measures in telecom sector to facilitate investments, consolidation in the sector and enhancing ease of doing business. These include restructuring the  deferred payment liabilities of spectrum auction of telecom service providers and revising the limit of the cap for spectrum holding for telecom service providers.

1.Restructuring of Deferred Payment Liabilities of telecom Service providers for spectrum

By giving one-time opportunity to opt for higher number of instalment (max. 16 instalment) apart from currently permitted 10 instalments. The increased instalment is based upon the principle that the Net Present Value (NPV) of the Payment Due is protected as per respective notice inviting application for auction of spectrum from 2012. The total amount received will be higher by Rs. 74446.01 crore till 2034-35.

2.Revision of limits of cap for spectrum holding

Based upon the recommendations of TRAI and Telecom Commission, the Cabinet also approved the revision of limits of cap for spectrum holding as follows:

  • The overall spectrum cap is revised from the current limit of 25% to 35%.
  • The current intra-band cap is removed. Instead, there is a cap of 50% on the combined spectrum holding in the sub-1 GHz bands (700 MHz, 800 MHz and 900 MHz bands).
  • There will be no cap for individual or combined spectrum holding in above 1 GHz band.
  • The revised spectrum caps limits may be revisited after Final Acts of World Radiocommunication Conference (WRC) 2019.

TRAI had recommended revision in the existing limits of cap for spectrum holding taking into consideration the technological advancement, efficient use of spectrum, measures to facilitate consolidation etc.

Impact: With the restructuring of the deferred payment liability, the cash flow for the telecom service providers will increase in the immediate timeframe providing them some relief.  Revising the limit for the spectrum cap holding will facilitate consolidation of telecom licensees and may encourage the participation in the future auction.

Ministry of Communications