Union Of India vs Association Of Unified Telecom … on 1 September, 2020


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Supreme Court of India

Union Of India vs Association Of Unified Telecom … on 1 September, 2020

Author: Arun Mishra

                                              1


                                                                 REPORTABLE

                                   SUPREME COURT OF INDIA
                                CIVIL APPELLATE JURISDICTION

                                  M.A. (D) No. 9887 OF 2020 IN
                              CIVIL APPEAL NOS.6328­6399 OF 2015


           UNION OF INDIA                                    ..APPELLANT(S)

                                           VERSUS



           ASSOCIATION OF UNIFIED TELECOM
           SERVICE PROVIDERS OF INDIA ETC.ETC.               ..RESPONDENT(S)

                                            WITH

                         SUO MOTU CONTEMPT PETITION [C] NO. 1 OF 2020

                                    DIARY NO(S). 2450/2020

                                    DIARY NO(S). 2458/2020

                                    DIARY NO(S). 2461/2020

                                    DIARY NO(S). 2476/2020

                                    DIARY NO(S). 2578/2020

                                     W.P.(C) NO. 238/2020

                          MA 725­796/2020 IN C.A. NO. 6328­6399/2015

                                     M.A. NO.1464 OF 2020

                                        JUDGMENT

Signature Not Verified

Digitally signed by
GULSHAN KUMAR
ARORA
Date: 2020.09.01
18:27:37 IST
Reason:

2

1. This Court passed judgment and order in C.A. Nos.6328­6399 of

2015 – Union of India v. Association of Unified Telecom Service

Providers of India and other civil appeals decided by a common

judgment and order dated 24.10.2019. The Court decided regarding

the definition of the ‘AGR’ and dues to be paid thereunder.

2. The concept of AGR arose in the light of the provisions contained

in the policy framed by the Government of India and the provisions of

the Indian Telegraph Act. Under section 4(1) of the Telegraph Act, the

Central Government has the exclusive privilege of establishing,

maintaining, and working telegraphs. Section 4 of the Telegraph Act

enables the Central Government to part with the exclusive privilege in

favour of any other person by granting a licence on such conditions

and considering such terms as it thinks fit. The licence issued under

section 4(1) becomes a contract between a licensor and a licensee.

This Court considered the provisions of the Telegraph Act in AUSPI (I)

matter – (2011) 10 SCC 543 in this very case, thus:

“37. A bare perusal of sub­section (1) of Section 4 of the
Telegraph Act shows that the Central Government has the
exclusive privilege of establishing, maintaining and working
telegraphs. This would mean that only the Central
Government, and no other person, has the right to carry on
telecommunication activities.

xxx

39. The proviso to sub­section (1) of Section 4 of the Telegraph
Act, however, enables the Central Government to part with
this exclusive privilege in favour of any other person by
granting a licence in his favour on such conditions and in
consideration of such payments as it thinks fit. As the Central
3

Government owns the exclusive privilege of carrying on
telecommunication activities and as the Central Government
alone has the right to part with this privilege in favour of any
person by granting a licence in his favour on such conditions
and in consideration of such terms as it thinks fit, a licence
granted under the proviso to sub­section (1) of Section 4 of
the Telegraph Act is in the nature of a contract between
the Central Government and the licensee.

40. A Constitution Bench of this Court in State of Punjab v.
Devans Modern Breweries Ltd
., (2004) 11 SCC 26, relying on
Har Shankar case, (1975) 1 SCC 737 and Panna Lal v. State of
Rajasthan
, (1975) 2 SCC 633, has held in para 121 at p. 106
that issuance of liquor licence constitutes a contract between
the parties. Thus, once a licence is issued under the proviso to
sub­section (1) of Section 4 of the Telegraph Act, the licence
becomes a contract between the licensor and the licensee.
Consequently, the terms and conditions of the licence
including the definition of adjusted gross revenue in the
licence agreement are part of a contract between the licensor
and the licensee. We have to, however, consider whether the
enactment of the TRAI Act in 1997 has in any way affected the
exclusive privilege of the Central Government in respect of the
telecommunication activities and altered the contractual
nature of the licence granted to the licensee under the proviso
to sub­section (1) of Section 4 of the Telegraph Act.

41. Section 2(e) of the TRAI Act quoted above defines “licensee”
to mean any person licensed under sub­section (1) of Section 4
of the Telegraph Act for providing specified public
telecommunication services and Section 2(ea) defines
“licensor” to mean the Central Government or the telegraph
authority who grants a licence under Section 4 of the
Telegraph Act. Sub­section 2(k) defines “telecommunication
service” very widely so as to include all kinds of
telecommunication activities. These provisions under the TRAI
Act
do not affect the exclusive privilege of the Central
Government to carry on telecommunication activities nor do
they alter the contractual nature of the licence granted under
the proviso to sub­section (1) of Section 4 of the Telegraph
Act.”
(emphasis supplied)

3. During consideration of the matter, concerning the M.A. filed by

the Union of India for extension of time to make the payment, it was

pointed out that several telecom service providers were under
4

insolvency proceedings under The Insolvency and Bankruptcy Code,

2016 (for short “the Code”). This Court passed an order on 20.7.2020,

and the same is extracted hereunder:

“We have heard the learned counsel appearing for the parties
at length with respect to the prayer made by the Central
Government and the time frame for making the payment as
per the order passed by this Court. During course of hearing,
again an attempt was made to wriggle out of our judgment and
orders, which were passed by this Court under the guise of
reassessment and recalculation. That is not at all permissible.

In view of decision, there is no scope of raising any further
dispute with respect to any item or to raise fresh dispute. No
dispute can be raised with respect to dues and they have to be
paid. New round of litigation is prohibited. In the second
inning, we have heard the same after remand of the issues to
the TDSAT. Thereafter, there is no question of entertaining
any kind of dispute with respect to the payment and dues
worked out. No dispute shall be entertained. The calculations
which have been given and the amount to be recovered at
pages 180­181 of M.A.D. No. 9887 of 2020 (application for
modification) in C.A. No. 6328­6399 of 2015 are taken to be as
final amount and there can be no dispute raised about it. No
recalculation and self­assessment can be undertaken. The
calculations are as under :­
“AMOUNTS RECOVERABLE FROM MAJOR TSPs AS PER
PRILIMINARY ASSESSMENTS

S. Name of the Total Self Assessment Payment Received Balance Due
No. Company Demand of by Licensee till 06.03.2020 (Rs. (Rs. Cr.)
DoT pursuant to the Cr.)
incorporating Hon’ble SC
C&AG and Judgment (Rs.

                       Special Audit        Cr.)
                       as on October
                       2019 (Rs. Cr.)
                         (LF+SUC)
                             A               B                    C            D
                       Operational TSPs party to the litigation
1.    BHARTI AIRTEL                  13004.00               18,004.00      25976.00
      GROUP
                       43980.00
2.    TELENOR INDIA
      PRIVATE
      LIMITED
                                           5


      BHARTI GROUP         43980.00      13004.00               18004.00
3.    IDEA CELLULAR
      LTD.          58254.00             21533 (LF 14453
                                         + SUC7080)                         54,754.00
4.    VODAFONE                                                  3,500.00
      GROUP OF
      COMPANIES


                           58254.00      21533.00                3500.00    54754.00
      VODAFONE IDEA

5.    TATA GROUP OF
                                         2197 (LF 1720 +
      COMPANIES     16798.00                                    4,197.00    12,601.00
                                         SUC 477)

6.    QUADRANT
      TELEVENTURES 189.91                25.28                     0.69      189.22
      LIMITED
7.    RELIANCE JIO  70.53                194.79 (LF
      INFOCOMM LTD.                      148.03+SUC              195.18         ­
                                         46.76)
      Sub­total (1­7)      119292.44     36954.07               25,896.87   93520.22

                                   TSPs under Insolvency



8.    AIRCEL GROUP         12389.00                                    ­    12389.00
      OF COMPANIES
9.    RELIANCE
      COMMUNICATIO                                                3.96
      N/
      RELIANCE
      TELECOM                25199.27
      LIMITED                                                               25194.58

10.   SISTEMA SHYAM                         222.1 (LF             0.73
      TELESERVICES                        166.1+SUC 56)
      LTD.
11.   VIDEOCON
      TELECOMMUNIC            1376.00                                  ­    1376.00
      ATIONS LTD.
      Sub­total (8­10)       38964.27            ­                4.69      38959.58
                         TSPs which were not party to the litigation
12.   LOOP TELECOM            604.00                                   ­     604.00
      PVT. LTD.
13.   ETISALAT DB
      TELECOM
      PRIVATE
      LIMITED
                                        6


14.   S TEL PVT. LTD.
15.   BHARAT               5835.85             ­                  ­           5835.85
      SANCHAR
      NIGAM LIMITED
16.   MAHANAGAR
      TELEPHONE            4352.09                                ­           4352.09
      NIGAM LIMITED
      Sub­total (11­16)   10791.94           222.1              0.00         10791.94

        TOTAL             169048.65         37176.17         25901.56        143271.74




            Note :

1. Total Demands are inclusive of Principal, Interest, Penalty
and Interest on Penalty.

2. Total Demands have been calculated generally up to FY
2016­17. On these outstanding amounts,
Interest/Penalty/Interest on Penalty is calculated up to October,
2019.

3. All dues are subject to further revisions due to departmental
assessments, CAG audits, Special Audits, Court Cases etc.”
However, when we consider the dues of Telecom Service
Providers under insolvency, we find that there are several
companies which have dues to the extent of Rs. 38,964.27
crores, which have gone under liquidation. Since the dues are
huge, we propose to examine the bonafides of the initiation of
the proceedings under the IBC. Let all the documents of the
companies viz. Aircel Group of Companies, Reliance
Communication/Reliance Telecom Limited, Sistema Shyam
Teleservices Ltd. and Videocon Telecommunications Ltd.
relating to liquidation and orders passed in proceedings be
placed on record within 10 days from today.

We have closed the matter with respect to the prayer made
for making the payment in installments and the offer made by
the Government, the time frame thereto and how to secure the
amount. The order is reserved on that aspect.

However, we will hear the matter separately with respect to
the companies under liquidation and test the bonafides of
their action and how to ensure that the amount is recovered.
Let all the documents be placed on record within 10 days from
today and the matter be listed for hearing about these
companies on the above aspect on 10.08.2020.

Written submissions and the reply, if any, be filed on or
before 07.08.2020.”
7

This Court wanted to examine the bona fides of the telecom

service providers who have resorted to the process of insolvency,

hence, invited them to file their response. Before the 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. It declined the permission. There

were huge arrears concerning the spectrum licence, which were

required to be paid, as a pre­condition to such permission. Various

sharing arrangements made inter se telecom service providers with

respect to the spectrum also came to the fore.

4. The Union of India, Department of Telecommunications’ stand is

that the spectrum cannot be the subject­matter of the IBC proceedings

in view of the provisions in sections 14 and 18. The dues under the

licence towards the spectrum’s use cannot be put in the category of

operational dues. In contrast, the Department of Commerce holds the

opinion that the dues under the licence are operational dues, and the

provisions of the IBC are applicable. The Department of

Telecommunications also pointed out that as per guideline Nos.10, 11,

and 12 of the Guidelines relating to the trading of 2015, it is a pre­
8

condition of trading licence that the seller pays dues of licence arrears.

After that, the purchaser has to pay arrears as provided in paras 10,

11, and 12 of the guidelines.

5. The telecom service providers’ stand is that the proceedings of

insolvency under the Code have been triggered bona fide. This Court

can examine the limited question in these proceedings whether the

proceedings are resorted to as a subterfuge to avoid payment of AGR

dues, and it is for the NCLT to decide whether the licence/spectrum

can be transferred and be a part of the resolution process initiated

under the provisions of the Code. Whether spectrum/licence can be

subjected to resolution process as an asset belonging to the telecom

service providers, and whether the AGR dues are operational dues and

have to be dealt with under the provisions of the IBC by NCLT. With

respect to the trading and sharing arrangement to the extent of

spectrum traded or shared by different service providers under the

sharing arrangement, the liability as per the guidelines, has to be

borne by the respective telecom service providers.

6. As per the statutory guidelines issued by the Department of

Telecommunications in 2015, spectrum sharing allows the operators

to pool their respective spectrum for usage in a specific geographical

area. The Central Government framed spectrum sharing guidelines on

24.9.2015.

9

7. The details of sharing arrangement between different telecom

service providers have been given.

8. The “spectrum trading” allows parties to transfer their rights and

obligations to another party. In the case of “spectrum sharing”, the

right to use spectrum remains with the respective telecom service

providers, whereas in the case of spectrum trading, the right to use

gets transferred from the buyer to the seller. Under spectrum trading

guidelines, details of transactions which have taken place, are given.

9. Another aspect is that how much time is to be provided to the

telecom service providers to pay AGR dues. The Union of India on the

representation made by the telecom service providers and Indian

Banks’ Association, has decided to provide the facility of making

payment in instalments within 20 years.

10. The following three questions arise for consideration:

(1) Whether spectrum can be subjected to proceedings under

the Code?

(2) In the case of sharing, how the payment is to be made by

the Telecom Service Provider (for short, ‘TSP’)? and

(3) In the case of trading, how the liability of the seller and

buyer is to be determined?

In Re. Whether spectrum can be subjected to proceedings under
the Code?

10

11. Shri Tushar Mehta, learned Solicitor General of India on behalf

of Government of India, argued as under:

(i) Section 4 of the Indian Telegraph Act, 1885, provides that the

Central Government has the exclusive privilege of establishing,

maintaining, and working telegraphs. The DoT grants licences which

are in the form of contractual arrangements. The TSPs are bound by

the terms and conditions contained therein. As per the contractual

terms, the licence is strictly contingent upon fulfilment of the terms

and conditions, the payment being first and foremost. On failure of

payment, the licensor is entitled to take action under the Licence

Agreement, including revocation and termination.

(ii) The spectrum is a scarce recognised natural resource, and this

Court in 2G judgment [C.A.No.423 of 2010] held that the natural

resources belong to the people and cannot be subjected to proceedings

under the Code. The State acts as a guardian and trustee of the

natural resources.

(iii) The licensee does not own the spectrum and has merely been

granted a right to use, which is based on fulfilment of the conditions

of the contract in the form of a Licence Agreement. Thus, the

spectrum cannot be subjected to transfer in proceedings under the

Code as the licensee is not the owner. Section 18(f), along with its
11

Explanation (a), mandates that only the corporate debtor’s assets can

be taken into control and custody by the resolution professionals,

which is in the ownership of the corporate debtor. Explanation to

Section 18 provides that assets owned by a third party in possession

of the corporate debtor or held under contractual arrangements are

not included in the term ‘assets’ for the purpose of Section 18. It is

not an asset for Section 18. The spectrum held under a contractual

arrangement is not an asset of the corporate debtor. The spectrum

cannot be a subject matter of proceedings under the Code. The

resolution professional has no jurisdiction to prepare a resolution plan

as per Guidelines for Trading of Access Spectrum by Access Services

Providers (for short, ‘the Guidelines of 2015’) issued on 12.10.2015.

(iv) Guideline No.10 provides that for trading of right to use the

spectrum, both the licensees shall give an undertaking that they are in

compliance with the terms and conditions of the Guidelines for

spectrum trading that is seller and buyer both. In case terms and

conditions for spectrum trading are not fulfilled, the Government will

have the right to take appropriate action including annulment of

trading arrangement.

(v) As per Guideline Nos. 11 and 12 of the Guidelines of 2015, the

seller has to clear the dues. After the trading date, the Government
12

has the discretion to recover the amount from the seller or buyer,

jointly or severally.

(vi) The permission was sought to trade the licence; however, the

Government of India, DoT, declined it because arrears have to be paid,

and other conditions were not fulfilled. After that, insolvency

proceedings were initiated, which were not permissible concerning the

spectrum given provisions contained in Section 18 of the Code.

(vii) National Company Law Tribunal (for short, ‘the NCLT’), Mumbai

vide order dated 27.11.2019, held that licence is an asset of State over

which the corporate debtor has no right of ownership. The above

argument of the State Government was accepted; however, in view of

the provisions contained in Section 14 on moratorium being created,

the licence could not be revoked. An appeal was filed before the

National Company Law Appellate Tribunal (for short, ‘the NCLAT’)

against the order mentioned above, which was dismissed on the

ground of limitation. An appeal has been filed in relation to the

revocation of licence, which is pending in this Court registered as

Diary No.15564 of 2020.

(viii) The licence under Section 4 of the Indian Telegraph Act, 1885,

was granted on certain terms and conditions. The spectrum did not

construe property as defined in Section 3(27) of the Code.
13

(ix) Concerning public trust doctrine, reliance has been placed on

Centre for Public Interest Litigation and Ors. v. Union of India and Ors.

(2012) 3 SCC 1, in which it was held that natural resources must

always be used in the country’s interests, not private interests. The

corporate debtor can never be said to be in occupation of either the

licence or spectrum as per Section 14(1)(d) of the Code. Any dispute is

to be settled under the provisions of Telecom Regulatory Authority of

India Act, 1997 by the Telecom Disputes Settlement and Appellant

Tribunal.

(x) Reliance has been placed on M/s. Embassy Property

Development Pvt. Ltd. v. State of Karnataka [C.A.No.9170 of 2019], in

which this Court held that the Code would not apply to right to mine

as exclusive possession had not been granted to the corporate debtor

and grant was limited to right to mine, excavate and recover iron ore

and red oxide for a specified period. It was further held that the right

not to be dispossessed found in Section 14(1)(d) of the Code would

have nothing to do with the rights conferred by a mining lease,

especially on a Government land.

(xi) In Ram Dass v. Davinder, (2004) 3 SCC 684, it was held that

possession amounts to holding property as an owner, while occupy is

to keep possession by being present in it. Spectrum is not capable of
14

being in possession of licensee neither in the eye of law they can be

said to be in possession.

(xii) As per Regulation 32 of the Insolvency and Bankruptcy Board of

India (Insolvency Resolution Process for Corporate Persons)

Regulations, 2016, the spectrum agreement cannot be held to be

essential goods or services under Section 14(2) of the Code. Similarly,

it cannot be subjected to proceedings under Section 18 of the Code.

In the resolution plan, selling the right to use the spectrum to some

other company could not have been made. A corporate debtor cannot

create any third party right in any manner whatsoever. Against the

order dated 9.6.2020 passed by the NCLT approving the resolution

plan of UVARC, DoT has filed a petition before the NCLAT relating to

Aircel Group. Guidelines are statutory and binding. Aircel Licensee

has defaulted in making payment of Deferred Spectrum Auction.

(xiii) In the case of RCOM, W.P. (C) No.845 of 2018 was filed under

Article 32 of the Constitution of India for closure/quashing of the CIRP

initiated against it. After that, payment was made to M/s. Ericsson

India Pvt. Ltd, who initiated the proceedings under the Code. RCOM

has sought NOC to trade Reliance Jio Infocomm Limited (for short,

‘RJIL’). DoT informed it on 14.12.2018 that the Government couldn’t

give the NOC for trading. This Court decided the proceedings on
15

24.4.2019. Thereafter, the Board of Directors of RCOM decided to

continue with the proceeding under the Code and, decided to

withdraw the appeal from NCLAT. RCL/RTL defaulted in payment of

various deferred spectrum auction instalments.

(xiv) The matters of AGR being C.A. Nos.6328­6399 of 2015 were sub

judice before the commencement of CIRP. A demand was raised to

RCL/RTL. AGR dues amount of RCL/RTL is Rs.25,199.27 crores.

(xv) In the case of Videocon, DoT was not the party. DoT was not

invited to the Committee of Creditors’ meetings, in complete violation

of the provisions of the Code. The resolution professional applied

before NCLT to restrain DoT from encashing certain bank guarantees

submitted by Videocon, in which interim injunction has been granted.

12. Shri Harish Salve, learned senior counsel argued as under:

(i) The NCLT should decide the question of whether the spectrum

can be sold or not. After that, there is a provision for an appeal to

NCLAT, and then this Court can look into the matter.

(ii) Under Section 18, the spectrum can be subjected to insolvency

proceedings. This Court examined the question of recoverability of

AGR dues in preference to the dues of secured creditors on the basis

that the use of spectrum would rank in priority higher than that of
16

secured creditors. Leasing of the spectrum is not permissible as per

the Guidelines. The RJIL is also not proposing to buy any spectrum

from the resolution applicant of RCOM or any other company. Only

sharing and trading is permissible subject to the conditions specified

in the Guidelines. The assets of RCOM are comprised primarily of the

spectrum, real estate, and active assets. Even if this Court permitted

the sale of such a spectrum, RJIL is not intending to acquire the

same.

(iii) RJIL has paid Rs.195 crores on a self­assessment basis and

shall pay a further sum demanded by DoT.

13. Shri Shyam Divan and Shri Ravi Kadam, learned senior counsel

on behalf of Committee of Creditors of RCOM, Aircel Limited, and

Dishnet Wireless Limited, argued:

(i) the spectrum and telecom licences are assets of the telecom

company. Section 18(f) of the Code mandates that resolution

professional would take control and custody of any asset over which

the corporate debtor has ownership rights as recorded in the balance

sheet of the corporate debtor. Section18(f)(iv) includes intangible

assets. The telecom licence and right to use the spectrum form a part

of the intangible assets. The right to use is a valuable right. In the

financial statement, telecom licence and the right to use the spectrum
17

had been shown as an intangible asset. Without telecom licences and

spectrum, there would be no hope of reviving Aircel entities.

(ii) Clause 6 of the Licence Agreement deals with the restrictions of

transfer of licence by either directly or indirectly without the prior

written consent of the licensor. It can be transferred on fulfilment of

certain conditions.

(iii) Reliance has been placed on Consultation Paper dated 7.3.2012.

Its licence/spectrum is considered an intangible asset, and in the

Guidelines for the Reporting System on Accounting Separation

Regulations, 2016, the right to use spectrum is again shown as an

intangible asset. The Indian Accounting Standards­38 has also been

referred to indicate that an asset is a resource controlled by the entity

for further economic benefits. The spectrum and licence being assets

of the telecom company are not assets owned by a third party under a

trust.

(iv) The licence and spectrum of Aircel Entities are held in security

by the lenders in terms of the TPAs to which the DoT is also a party.

In the resolution plans, DoT acted as an operational creditor. The

NCLT asked to take the approval of the DoT for the transacting

spectrum. Thus, it is for the DoT to give permission. Dot has to

approve the implementation of the resolution plan.
18

(v) The Code provides that the resolution plan is to be approved by

the Committee of Creditors, and the adjudicating authority of the

NCLT in terms of Section 31 of the Code and liquidation is to be made

in terms of the priority set out in Section 53 of the Code. Section 5(20)

defines ‘operational creditor’. Section 5(21) defines ‘operational debt’

to include dues payable to the Government. Thus, claims of DoT for

unpaid dues are operational debts, and DoT is an operational creditor.

(vi) Reliance has been placed upon Section 31 of the Code. The

resolution plan shall be binding on the corporate debtors, including

the Central Government, any State Government to whom a debt in

respect of the payment of dues arising under any law for the time

being in force. Reliance has also been placed on Committee of

Creditors of Essar Steel India Limited v. Satish Kumar Gupta and Ors.,

(2019) SCC OnLine SC 1478.

(vii) The proceedings under the Code cannot be nullified to realise

AGR and other dues of DoT.

14. Shri Ranjit Kumar, learned senior counsel, on behalf of

Committee of Creditors of Aircel Limited, Aircel Cellular Limited and

Dishnet Wireless Limited argued that:

19

(i) under the Code, UV Asset Reconstruction Company Limited has

submitted a resolution plan, which has been approved by the NCLT on

9.6.2020. Aircel Entities are holders of telecom licences. The licences

issued by DoT contain the format for the execution of the Tripartite

Agreement between the licensor, licensee, and the lenders. He has

relied upon the following paragraph:

“With a view to help and facilitate the financing of the Project
to be set up by the LICENSEE pursuant to the LICENCE
referred to above, the parties hereto are desirous of recording
the terms and conditions to provide transfer/assignment of
LICENCE as hereinafter provided in this AGREEMENT to
protect and secure the Lender’s interest arising out of grant of
financial assistance to the LICENSEE.”

(ii) Aircel Entities have offered lenders spectrum as a security

against the loans advanced by the lenders to Aircel Entities. Thus, the

DoT claim over the spectrum will be subservient to the claims of the

lenders as per the Code, and DoT has to be treated as an operational

creditor.

(iii) The Banks are in the business of lending money for the

betterment of the national economy, in the same manner, the

Government is in the business of spectrum. As per Clause 6.3 of the

Licence Agreement, licence can be transferred subject to fulfilment of

the conditions agreed between the licensor, licensee, and the lenders.

(iv) The right to use spectrum is an asset of the corporate debtor.

Paras 8.4 and 8.5 of the Insolvency Law Committee Report have been
20

referred to. Revocation of Licences, permission­based on past dues, is

prohibited under Section 14 after the moratorium is created. Current

dues have to be paid during the moratorium period. He has referred

to Sections 3(27) and 14(1).

(v) The provisions of the Code have to prevail. The Government has

entered into a pure business transaction by granting a licence and

taking fees against the grant. The spectrum is a raw material for

telecom companies. If the spectrum’s licence is terminated, the

resolution professional will find it difficult to run the company as a

going concern. DoT is an operational creditor. AGR dues are

contractual dues and cannot have precedence over the dues of

secured creditors. He has referred to Section 53 to contend that the

operational creditor is protected in a manner provided in the Code.

Section 238 of the Code contains a non­obstante clause to the effect

that anything inconsistent therewith contained in any other law for

the time being in force, the Code shall prevail. As such, the Code

overrides the provisions of the Indian Telegraph Act, 1885, Indian

Wireless Telegraphy Act, 1933, and Telecom Regulatory Authority of

India Act, 1997.

15. In the case of RCOM, the resolution plan is pending

consideration of the adjudicating authority under Section 31 of the

Code.

21

16. Whether spectrum can be subjected to proceedings under the

Code is a significant question and is required to be gone into. It is a

natural resource, and under Section 4 of the Indian Telegraph Act,

1885, the Government has the sovereign right. Section 4 of the Indian

Telegraph Act, 1885 is extracted hereunder:

“4. Exclusive privilege in respect of telegraphs, and power
to grant licences.— (1) Within India, the Central Government
shall have the exclusive privilege of establishing, maintaining
and working telegraphs:

Provided that the Central Government may grant a license,
on such conditions and in consideration of such payments as
it thinks fit, to any person to establish, maintain, or work a
telegraph within any part of India:

Provided further that the Central Government may, by rules
made under this Act and published in the Official Gazette,
permit, subject to such restrictions and conditions as it thinks
fit, the establishment, maintenance and working—

(a) of wireless telegraphs on ships within Indian territorial
waters and on aircrafts within or above India, or Indian
territorial waters, and

(b) of telegraphs other than wireless telegraphs within any part
of India.

Explanation.—The payments made for the grant of a licence
under this sub­section 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 sub­section (1) of Section 3 of the
Telecom Regulatory Authority of India Act, 1997 (24 of 1997).

(2) The Central Government may, by notification in the Official
Gazette, delegate to the telegraph authority all or any of its
powers under the first proviso to sub­section (1).

The exercise by the telegraph authority of any power so
delegated shall be subject to such restrictions and conditions
as the Central Government may, by the notification, think fit
to impose.

22

(3) Any person who is granted a license under the first proviso
to sub­section (1) to establish, maintain or work a telegraph
within any part of India, shall identify any person to whom it
provides its services by—

(a) authentication under the Aadhaar (Targeted Delivery of
Financial and Other Subsidies, Benefits and Services) Act,
2016 (18 of 2016); or

(b) offline verification under the Aadhaar (Targeted Delivery of
Financial and Other Subsidies, Benefits and Services) Act,
2016 (18 of 2016); or

(c) use of passport issued under Section 4 of the Passports Act,
1967 (15 of 1967); or

(d) use of any other officially valid document or modes of
identification as may be notified by the Central Government in
this behalf.

(4) If any person who is granted a license under the first
proviso to sub­section (1) to establish, maintain or work a
telegraph within any part of India is using authentication
under clause (a) of sub­section (3) to identify any person to
whom it provides its services, it shall make the other modes of
identification under clauses (b) to (d) of sub­section (3) also
available to such person.

(5) The use of modes of identification under sub­section (3)
shall be a voluntary choice of the person who is sought to be
identified and no person shall be denied any service for not
having an Aadhaar number.

(6) If, for identification of a person, authentication under
clause (a) of sub­section (3) is used, neither his core biometric
information nor the Aadhaar number of the person shall be
stored.

(7) Nothing contained in sub­sections (3), (4) and (5) shall
prevent the Central Government from specifying further
safeguards and conditions for compliance by any person who
is granted a license under the first proviso to sub­section (1) in
respect of identification of person to whom it provides its
services.

Explanation.—The expressions “Aadhaar number” and “core
biometric information” shall have the same meanings as are
respectively assigned to them in clauses (a) and (j) of Section 2
of the Aadhaar (Targeted Delivery of Financial and Other
Subsidies, Benefits and Services) Act, 2016 (18 of 2016).”
23

17. Section 3(10) defines ‘creditor’. The term ‘debt is defined in

Section 3(11). The expression ‘property’ is defined in Section 3(27).

‘Operational creditor’ is defined in Section 5(20) in Part II under the

head Insolvency Resolution and Liquidation for Corporate Persons.

Section 5(21) defines ‘operational debt’.

18. A question has been raised concerning ownership. Whether

TSPs can be said to be the owner based on the right to use the

spectrum under licence granted to them? Whether a licence is a

contractual arrangement? Whether ownership belongs to the

Government of India? Whether spectrum being under contract can be

subjected to proceedings under Section 18 of the Code? The question

also arises whether the spectrum can be said to be in possession,

which arises from ownership. What is the distinction between

possession and occupation? Whether possession correlates with the

ownership right? A question also arises concerning the difference

between trading and insolvency proceedings. Whether a licence can

be transferred under the insolvency proceedings, particularly when

the trading is subjected to clearance of dues by seller or buyer, as the

case may be, as provided in Guideline Nos.10 and 11; whereas in

insolvency proceedings dues are wiped off. Guideline No.12 is also
24

assumed to be of significance in case spectrum is subjected to

insolvency proceedings, which must be considered.

19. It is also required to be examined that when Government has

declined the permission to trade and has not issued NOC for trading

on the ground of non­fulfilment of the conditions as stipulated in the

Licence Agreement, the spectrum can be subjected to resolution

proceedings which will have the effect of wiping off the dues of the

Government, which are more than Rs.40,000 crores. Whereas the

dues of the Banks are much less. Whether obtaining the DoT’s

permission and its approval to the resolution plan would be a

substitute for Trading Guideline Nos.10, 11, and 12 ?

20. A question also arises of bona fide nature of the proceedings

under the Code. In the backdrop facts of the cases, question also

arises whether spectrum licence subjected to proceedings under the

Code, and it overrides the provisions contained in the Indian

Telegraph Act, 1885, Indian Wireless Telegraphy Act, 1933, and

Telecom Regulatory Authority of India Act, 1997.

21. In view of the fact that the licence contained an agreement

between the licensor, licensee, and the lenders, whether on the basis

of that, spectrum can be treated as a security interest and what is the

mode of its enforcement. Whether the Banks can enforce it in the
25

proceedings under the Code or by the procedure as per the law of

enforcement of security interest under the Securitisation and

Reconstruction of Financial Assets and Enforcement of Securities

Interest Act, 2002 (SARFAESI Act) or under any other law.

22. A question of seminal significance also arises whether the

spectrum is a natural resource, the Government is holding the same

as cestui que trust. In view of the nature of the resource, it can be

subjected to insolvency/liquidation proceedings. Earlier licence was

obtained on the payment of fees in advance that was not beneficial to

the TSPs, as such a new revenue sharing regime was devised in 1999,

and the Central Government has an exclusive right under section 4 of

the Telegraph Act, 1885 in use of spectrum, it can part with on certain

statutory guidelines, its use is not permissible without the payment of

requisite fee.

Whether dues under the licence can be said to be operational

dues? It is also to be examined whether deferred/default payment

instalment/s of spectrum acquisition cost can be termed to be

operational dues besides AGR dues. Whether as per the revenue

sharing regime and the provisions of the Indian Telegraph Act, 1885,

the dues can be said to be operational dues? Whether natural

resource would be available to use without payment of requisite dues,
26

whether such dues can be wiped off by resorting to the proceedings

under the Code and comparative dues of Government, and secured

creditors and bona fides of proceedings are also the questions to be

considered.

23. We consider it appropriate that the aforesaid various questions

should first be considered by the NCLT. Let the NCLT consider the

aforesaid aspects and pass a reasoned order after hearing all the

parties. We make it clear that it being a jurisdictional question, it

requires to be gone into at this stage itself. Let the question be decided

within the outer limits of two months. We also make it clear that we

have not observed on the merits of the case, and we have kept all the

questions open to be examined by the NCLT.

In Re. Sharing

24. Coming to the question as to the liability of sharing operator,

who is sharing the spectrum of the original licensee of the past AGR

dues of the original licensee is concerned, that spectrum sharing is

permitted and approved by the Sharing Guidelines dated 24.09.2015.

The Parliament has approved spectrum sharing as part of “National

Telecom Policy, 2012”. However, DOT issued and approved the final

guidelines in the year 2015. Spectrum sharing is a policy that permits

the sharing of radio access network equipment of operators. Single
27

radio network equipment is used to provide services by two operators

using both the entities’ spectrum. As per Spectrum Sharing

Guidelines of DoT, (i) it is a prerequisite that both operators sharing

spectrum need to have spectrum in the same band and the same

licenced area; (ii) it is also necessary that both operators have a

network in the same geographical area; and (iii) leasing of the

spectrum is not permitted under the policy. By sharing the radio

network equipment, two operators use their spectrum and create their

respective businesses’ capacity. Liability to pay necessary AGR and

licence fee remains with the respective companies. Even the DoT in its

affidavit and compliance of the order dated 14.08.2020, stated as

under so far as the spectrum sharing is concerned:

“4.It is respectfully submitted that as per the Guidelines
issued by DoT in 2015, “Spectrum sharing” allows operators to
pool their respective spectrum for usage in a specific
geographical area (LSA) thus complementing each other’s
spectrum needs and facilitating more efficient utilization of the
spectrum. The rationale is to facilitate optimization of
resources and to create a conducive environment for telecom
growth. During the past period of 20 years or more, some
operators have been able to acquire subscribers and grow at a
faster rate as compared to other operators. This results in the
spectrum lying unutilized with some of the players while other
operators face spectrum crunch as spectrum is a scare
resource.

Thus, on the one hand spectrum, which is a limited natural
resource, may remain unutilized for some Telecom Service
Providers (TSPs), while on the other hand, consumers suffer
due to poor quality of services on account of spectrum crunch
with other TSPs. Moreover, spectrum is allocated to a service
provider for a service area which is a large geographical area,
normally co­terminus with the state boundaries. In different
cities and rural areas, the TSPs may have varying spectrum
needs depending upon their customer profile.

28

Spectrum sharing allows operators to pool their respective
spectrum for usage in a specific geographical area within an
LSA. The pooling of the spectrum increases the capacity of
Telecom Service Providers to carry telecom traffic and may
help in enhancing the quality of service.

5. It is submitted that the objective of spectrum sharing was to
provide an opportunity to the Telecom Service Providers to pool
their spectrum holdings and thereby improve spectral
efficiency. It is submitted that sharing can also provide
additional network capacities in places where there is network
congestion due to shortage of spectrum. It is submitted that
these aspects were considered by the Central Government
while approving the Guidelines for Spectrum Sharing. It is
submitted that Telecom Regulatory Authority of India (TRAI)
made recommendations on ‘Guidelines on Spectrum Sharing’
on July 21, 2014, which was considered and approved by the
Telecom Commission (TC) in its meeting held on 11.06.1025
and subsequently approved by the Central Government. A
copy of Spectrum Sharing Guidelines dated 24.09.2015 is
attached herewith and marked as ANNEXURE – T2.

6. In case of sharing of spectrum both the service providers
[sharers] must be in the same band and in the same service
area. To illustrate “ it may be pointed out that if there are two
service providers holding 100 units of spectrum each in the
same band and in the same service area they can share
spectrum of each other mutually. The Spectrum Usage
Charges [SUC] will be considered for 100 units for each of the
TSPs and both will have to pay SUC for their entire spectrum
holding (100 units each) in that band and in that service area.

7. With regard to AGR dues for two TSPs sharing spectrum,
the following scenario emerges:

i. In case of sharing, the Spectrum does not change hands.
Both TSPs simultaneously use and have access to the
spectrum held by each.

ii. As per the sharing arrangement, each of the TSPs will
continue to make payment of AGR dues arising for the
spectrum that each holds.

iii. However, due to the additional spectrum which each TSP
gets to use, the AGR based dues (SUC) are assessed at a
higher rate for each of the TSPs. There is an addition/increase
by 0.5% in the Spectrum Usage Charge rate, applied
separately on both TSPs. Thus if SUC rate of each TSP prior to
sharing was 3%, then this will increase to 3.5% for both of
them.

iv. The use of each others spectrum by means of sharing
should normally lead to increase in AGR for both TSPs. This
would lead to increased licensed fee and SUC to the
Government as these are based on share of AGR.

29

v. TSPs who share spectrum, continue to pay and are duty
bound to pay, their AGR based dues arising from the use of
spectrum.

8. So far as the present case is concerned, in accordance with
the spectrum sharing guidelines dated 24.09.2015, the
requests of the following TSPs for sharing of access spectrum
have been taken on record:

i. For Reliance Jio Infocomm Limited (RJIL) and Reliance
Communications Limited (RCL), spectrum in 800 MHz band in
21 LSAs (all except Jammu and Kashmir LSA) as per the
quantum mentioned in the annexure
ii. For Bharti Airtel Limited and Tata Teleservices Limited/Tata
Teleservices (Maharashtra) Limited, spectrum in 1800 MHz
band in 3 LSAs (Andhra Pradesh, Maharashtra and Mumbai
LSAs) as per the quantum mentioned in the annexure.
iii. For, Bharti Airtel Limited and Tata Teleservices
Limited/Tata Teleservices (Maharashtra) Limited, spectrum in
2100 MHz band in 2 LSAs (Gujarat, Haryana, Karnataka,
Kerala, Madhya Pradesh, Maharashtra and Uttar Pradesh
(West) LSAs) as per the quantum mentioned in the annexure.
iv. For Bharti Hexacom Limited and Tata Teleservices Limited,
spectrum in Rajasthan LSA as per the quantum mentioned in
the annexure.

12. It is respectfully submitted that the difference between
Spectrum Sharing and Spectrum Trading, can therefore be
culled out as under:

i. Spectrum sharing allows operators to pool their respective
spectrum for usage in a specific geographical area and thus
complementing each other’s needs for more efficient utilization
of the spectrum. This facilitates optimization of resources as
also creates conducive environment for the telecom growth.
ii. Spectrum trading allows parties to transfer their spectrum
rights and obligations to another party. This allows better
spectrum usages as the idle spectrum from the hands of one
service provider gets transferred to the other service provider
who may be facing spectrum crunch.

iii. In the case of spectrum sharing, the right to use spectrum
as granted by the DoT remains with the respective TSPs,
whereas in the case of spectrum trading, the right to use gets
transferred from the buyer to the seller.”

On going through the entire Sharing Guidelines, it does not

stipulate anything about the past dues of the sharing operators. In

the case of sharing spectrum usage charges, the rate of each of the
30

licensees post sharing shall increase by 0.5% of adjusted gross

revenue. Sharing Guidelines dated 24.09.2015 read as under:

“No. L­14006/04/2015­NTG

Government of India
Ministry of Communications & IT
Department of Telecommunications
WPC Wing, 6th floor, Sanchar Bhawan, New Delhi

Dated: the 24th September, 2015

Subject: Guidelines for sharing of Access Spectrum by
Access Service Providers.

National Telecom Policy, 2012 envisage to move at the
earliest towards liberalization of spectrum to enable use of
spectrum in any band to provide any service in any technology
as well as to permit spectrum pooling, sharing and later,
trading to enable optimal utilization of spectrum through
appropriate regulatory framework. After considering the
recommendations of TRAI on spectrum sharing, the
Government has decided to allow sharing of access spectrum
as per guidelines given below:

(1). Spectrum sharing shall be allowed only for the access
service providers holding Cellular Mobile Telephone Service
(CMTS)/Unified Access Service License (UASL)/Unified License
(Access Services)(UL(AS)/Unified License (UL) with
authorization of Access Service in a Licensed Service Area
(LSA), where both the licensees are having spectrum in the
same band.

(2). Spectrum sharing is permitted between two Telecom
Service Providers utilizing the spectrum in the same band.

(3). Spectrum sharing is not permitted when both the
licensees are having spectrum in different bands. Leasing of
spectrum is not permitted.

(4). All access spectrum including traded spectrum shall be
shareable provided that both the licensees are having
spectrum in the same band. Further, if more bands such as
700 MHz are added for allocation of spectrum to Access
Service Providers through auction process, the sharing of
spectrum shall also be permitted in that band.

(5). The right to share the spectrum shall be subject to the
fulfillment of the relevant license conditions and nay other
31

conditions that may be specified by the licensor/Government
from time to time.

(6) Both the licensees shall ensure that they fulfil the specified
roll­out obligations and specified QoS norms.

(7) A licensee shall not be eligible to share its spectrum if it
has been established that it is in breach of terms and
conditions of the licence and the licensor has ordered for
revocation/termination of its licence.

(8) Sharing is permitted in the following scenarios:

(i). For the spectrum where both the Licensees who plan to
share, possess the spectrum for which market price has been
paid. Further, in respect of spectrum in 800 MHz acquired in
the auction held in March 2013, sharing of spectrum shall be
permitted only if the differential of the latest auction price and
the March 2013 auction price on pro­rate basis on the balance
period of right to use the spectrum is paid.

(ii) In case both the Licensees who plan to share spectrum are
having the administratively allotted spectrum in that band, the
sharing of spectrum is permitted only when both the licensees
have paid One time Spectrum Charges (OTSC) for their
respective spectrum holdings, above 4.4 MHz (GSM) / 2.5 MHz
(CDMA) based on reserve price/auction determined price.
However if the said amount is not paid due to judicial
intervention in judicial forums barring any coercive action, in
the interim, sharing of spectrum in such cases will also be
permitted subject to submission of a bank guarantee for an
amount equal to the demand raised by the department for one
time spectrum charge pending final outcome of the court case.

(iii) In case of proposed sharing where one Licensee has
spectrum acquired through auction/trading or liberalized
spectrum and the other has spectrum allotted
administratively, sharing is permitted only after the spectrum
charges for liberalizing the administratively allocated spectrum
are paid. Further, in case of spectrum acquired in auction
held in March 2013, differential amount as indicated in para
7(i) above shall be payable in respect of 800 MHz band.

(9) The use of technology shall be governed by the terms and
conditions of respective Notice Inviting Application
(NIA)/license.

32

(10). Both the licensees will be individually and collectively
responsible for complying with the sharing guidelines,
including interference norms.

(11). Spectrum sharing will be restricted to sharing by
only two licensees subject to the condition that there will be at
least two independent networks provided in the same band.

(12). For the purpose of charging Spectrum Usage Charges
(SUC), it shall be considered that the licensees are sharing
their entire spectrum holding in the particular band in the
entire LSA.

(13). Spectrum Usage Charges (SUC) rate of each of the
licensees post­sharing shall increase 0.5% of Adjusted Gross
Revenue (AGR). The sharing of spectrum for part of a month,
full one month period shall be counted for the purpose of
levying SUC.

(14). The prescribed limits for spectrum cap shall be
applicable for both the licensees individually. Further, the
spectrum holding of any licensee post­sharing shall be
counted after adding 50% of the spectrum held by the other
licensee in the band being shared being added as the
additional spectrum to the original spectrum held by the
licensee in the band.

(15). Spectrum sharing shall be available for upto the
balance period of the licence or upto the period of right to use
spectrum, whichever is earlier.

(16). Both the licensees sharing the spectrum shall jointly
give a prior intimation for sharing the right to use the
spectrum at least 45 days before the proposed effective date of
the sharing. Application format is attached along with these
guidelines as Annexure­I.

(17). Both the licensees shall also give an undertaking
that they are in compliance with all the terms and conditions
of guidelines for spectrum sharing and the licence conditions
and will agree that in the event, it is established at any stage
in future that either of the licensee was not in conformance
with the terms and conditions of the guidelines for spectrum
sharing or/and of the licence at the time of giving intimation
for sharing of right to use the spectrum, the Government will
have the right to take appropriate action which inter­alia may
include annulment of sharing arrangement. Appropriate
modifications will be made in their respective Service License
and Wireless Operating License (WOL) to facilitate the
spectrum sharing.

33

(18). A non refundable processing fee, as prescribed from
time to time, shall be payable individually by each licensee for
each service area at the time of intimation to WPC Wing. At
present, processing fee of Rs.50,000/­ is to be paid. The
payment is to be made by draft in favor of Pay & Accounts
Officer (HQ), DOT payable at New Delhi.

(19). Licensor/Government reserves the right to modify
the guidelines from time to time as it may deem fit.

Sd/­
(P S M Tripathi)
Assistant Wireless Adviser
for and on behalf of President of India.”

25. According to the DoT and so stated in the affidavit in compliance

of order/directions dated 21.08.2020, AGR is not calculated bandwise,

but from the total revenue earned by the TSP using the entire

spectrum (both shared and not shared). According to DoT, in case of

sharing of spectrum, there is an increment of 0.5% in SUC rate, and

both TSPs pay this incremental SUC on their respective AGRs if they

are sharing spectrum. Both the TSPs (sharers) are required to pay

this SUC on their respective AGRs. Even in the case of sharing

spectrum, the liability of the said operator would be to the extent of

using the said spectrum only, and the liability of the sharing operator

would be to the extent of the remaining spectrum used by it.

Therefore, there shall not be any liability of the said operator with

respect to payment of the past dues (post shared) of the sharing

operator – licensee. Even according to DoT also, both the TSPs

(sharers) are required to pay the SUC on their respective AGRs.

Learned counsel appearing on behalf of the Reliance Jio (shared
34

operator), which has entered into the sharing between RCom/RTL has

stated at the Bar that Reliance Jio has paid the AGR post sharing

including the difference of AGR as per the decision of this Court on

their own and based on self­assessment. It is stated at the Bar that

still anything is further held to be due and payable and AGR for the

period post sharing of the said spectrum originally allotted to RCom

on the assessment being done, they will make the said payment.

Similar is the ground of counsel for other TSPs. as to sharing

arrangement.

26. That in the present case, only part of the spectrum of the

licensee has been shared with the case of some of TSPs., which has

been approved by the DoT under the Sharing Guidelines, 2015, and

there is no provision for the liability of the past dues on the shared

operator. Even otherwise, the past dues of sharing operator/licensee

covers AGR for the spectrum used by holder of licence, certain TSPs.

such as Reliance came into existence later on, and as observed

hereinabove, the liability of such operator of the AGR, would only be

to the extent it has used the said spectrum. Shared operator TSPs.

cannot be saddled with the liability to pay the past dues of AGR of

licensee, that have shared the spectrum with the original licensees.

In Re. Trading:

35

27. Coming to the question of liability of the telecom companies

which are using spectrum under the Trading Guidelines with respect

to the AGR dues of the telecom company, Spectrum trading is

governed by the Spectrum Trading Guidelines dated 12.10.2015 and

under the said Trading Guidelines, part of the spectrum of the telecom

company facing insolvency – the other telecom company is using

original licensee. The purchaser and buyer’s liability shall be as per

para 11 of the Spectrum Trading Guidelines dated 12.10.2015, which

reads as under:

“(10). Both the licensees shall also give an undertaking that
they are in compliance with all the terms and conditions of the
guidelines for spectrum trading and the license conditions and
will agree that in the event, it is established at any stage in
future that either of the licensee was not in conformance with
the terms and conditions of the guidelines for spectrum
trading or/and of the license at the time of giving intimation
for trading of right to use the spectrum, the Government will
have the right to take appropriate action which inter­alia may
include annulment of trading arrangement.

(11). The seller shall clear all its dues prior to concluding any
agreement for spectrum trading. Thereafter, any dues
recoverable up to the effective date of trade shall be the
liability of the buyer. The Government shall, at its discretion,
be entitled to recover the amount, if any, found recoverable
subsequent to the effective date of the trade, which was not
known to the parties at the time of the effective date of trade,
from the buyer or seller, jointly or severally. The demands, if
any, relating to licenses of seller, stayed by the Court of Law,
shall be subject to outcome of decision of such litigation.

(12). Where an issue, pertaining to the spectrum proposed to
be transferred is pending adjudication before any court of law,
the seller shall ensure that its rights and liabilities are
transferred to the buyer as per the procedure prescribed under
the law and any such transfer of spectrum will be permitted
only after the interest of the Licensor has been secured.”
36

Para 11 of the Spectrum Trading Guidelines was further clarified

vide O.M. dated 12.05.2016. Certain telecom operators raised specific

questions on the Trading Guidelines dated 12.10.2015. Question No.2

in respect of para 11, seeks a clarification as to whether the transfer of

spectrum is for a specific area and reference to the dues relate to only

the spectrum being traded in the concerned area, and seeks

clarification whether the buyer will be jointly or severally liable for only

those dues if found recoverable after the effective date of trading,

which were not known to the seller at the time of the effective trade

date.

28. To the aforesaid questions, vide O.M. dated 12.05.2016, there

was a clarification or the answer relating to para 11 of the Guidelines,

which reads as under:

“The Clarification or the answer relating to para 11 of the
Guidelines states as follows:

“As per para 11 of the Guidelines, the seller must clear all its
dues pertaining to the LSA where trading is intended including
OTSC dues for that band. In case where entire spectrum
holding of the TSP in all LSAs is intended to be traded, the
seller will have to clear all its pending dues including past
dues. DoT will indicate status of Dues. However, the Buyer
may perform due diligence. Further, the Government shall, as
its own discretion, be entitled to recover the amount, if any,
found recoverable subsequent to the effective date of the trade,
which was not known to the parties at the time of the effective
date of trade, from the buyer or seller, jointly or severally.”

Thus, as per para 11 of the Spectrum Trading Guidelines dated

12.10.2015, read with the clarification vide O.M. dated 12.05.2016, in
37

case of a part of the spectrum is under sale, the liability of the

purchaser/buyer with respect to past dues of the seller shall not arise.

In a case where the entire spectrum is under sale, in that case, the

past dues of the seller shall be the liability of the buyer except the

amount/dues, if any, found recoverable after the effective date of the

trade, which was not known to the parties at the time of the effective

date of trade and in such a situation the liability of such dues of the

buyer and seller would be jointly or severally and the government at its

discretion is entitled to recover such amount. In the present case, it is

not in dispute that in some cases only part spectrum was traded, and

the remaining spectrum continued with the seller. At the time of

agreement for spectrum trading, the AGR dues of the seller were also

known. Therefore, on a joint reading of para 11 of the Spectrum

Trading Guidelines dated 12.10.2015 read with O.M. dated

12.05.2016, the seller’s dues prior to the concluding of the

agreement/spectrum trading shall not be upon the buyer.

29. It 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 in 215 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
38

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. It was stated that they have paid dues

as per the self­assessment or, in some cases, demands have not been

raised. We direct 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 self­assessment 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.

Payment of dues of AGR :

30. The Union of India has filed an application through the

Department of Telecommunications (DoT) to modify the order dated

24.10.2019 passed in C.A. Nos.6328­6399/2015 and a separate order

of even date passed in the abovesaid civil appeals. M.A. No.266/2020

was filed by the TSPs./licensees in which order dated 14.2.2020 was

passed, and the contempt proceedings against the Desk Officer were

drawn. In view of the communication dated 23.1.2020, it was

withdrawn on 14.2.2020.

39

31. It is averred in the application that the sector of TSPs. has its

varied features. The TSPs. who are required to make payment, are

catering to the services of crores of consumers throughout India, and

India’s Government has examined the issue in great detail. It has

shown prompt alacrity to the sector’s market economy. The definition

of ‘AGR’ has been settled after about 20 years, as such, there are huge

arrears. In the event, it is found that any major service provider is

impacted resulting into drastic consequences of such service providers

facing proceedings under the Code. The following would be the

inevitable adverse impact:

(a) Impact on telecom services for a large proportion of customers.

(i) Mobile Number Portability (MNP) process has capacity

limitations; this may lead to delays in porting numbers from

non­operational to operational TSP, and consequent disruption

of services for customers.

(ii) TSPs. porting in customers from TSPs not able to provide

services will also need additional access (and backhaul)

spectrum to maintain Quality of Service (QoS), Access spectrum

is acquired through auction.

(b) Adverse impact on competition in the Telecom Sector with adverse

consequences for the consumers;

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(c) Adverse impact on Quality of Service in the telecom sector. The

closure of one or more TSPs and the gap being filled in by other

remaining TSPs will not be seamless.

(d) Implications for the banking sector:

­ A letter dated 15.2.2020 was received from the Indian Banks

Association on the subject of distress in the Telecom Sector and

Ease of Business. The letter highlighted the issues affecting the

Telecom Sector and resultant implications on the banks lending

to the Telecom Sector along with suggestions for consideration.

(e) Disruption of tax and non­tax revenue on account of licence fee

(LF), spectrum usage charges (SUC) and Goods and Services Tax (GST)

and loss of revenue on account of spectrum deferred instalments;

(f) Locking up of valuable spectrum in Corporate Insolvency Resolution

Process (CIRP);

(g) Major loss of direct and indirect employment;

(h) Cascading negative impact on other sectors of the economy;

(i) Foreign Direct Investment (FDI) sentiment will be adversely affected;

(j) The closure of one or more TSPs also adversely impacts the digital

connectivity in the country. E­commerce, e­banking, e­health, etc., all

part of e­governance are affected;

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(k) This will have an adverse impact in rural areas, particularly

Aspirational Districts, and the spread of digitization in backward

regions of India.

32. In this regard, a letter dated 15.2.2020 had been written by the

Indian Banks Association, adumbrating the aforesaid aspects of the

distressed telecom sector. The issues affecting the telecom industry

and companies and the resultant stress on bank lending in this sector

were pointed out, culminating into a high incidence of tax and heavy

burden, subdued operating matrix due to a steep fall in average

revenue per customer. The telecom services remained subdued due to

the price war triggered by a new entrant. There was a decline in

revenue. The drastic cut in data tariffs has led to a spike in data usage

for the last one year, primarily on the 4G network. The vicious circle

would adversely affect the capex spending of the service providers and,

in turn, impact the revenue earning capabilities. Banks’ approach to

5G financing was also mentioned for which significant additional

investment is required for 5G related infrastructure with the current

leveraged financial position. The total outstanding exposure to the

telecom industry from the Indian Banks is huge. The modification in

the bank guarantee mechanism pertaining to onerous clauses was

also pointed out. Various other difficulties of the telecom sector were

also highlighted.

42

33. The Union of India, after envisaging the larger interest, economic

consequences on the nation and to ensure that the order of this Court

is complied with in its letter and spirit, has taken a conscious decision

and sought approval of this Court to a formula for recovery of past

dues from the telecom service providers. The formula is placed for

approval of this Court, which is arrived at after detailed and long

drawn deliberations at various levels in the administrative hierarchy,

including the Cabinet, and keeping in view the vital issues related to

financial health and viability of the telecom sector, need for ensuring

competition and a level­playing field in the interest of consumers. The

following decision has been taken with respect to the mode of

recovery:

‘THE MODE OF RECOVERY FOR CONSIDERATION OF
THIS HON’BLE COURT
“1.1 All licensees impacted by the judgment of the Hon’ble
Supreme Court be allowed to pay the unpaid or remaining to
be paid amount of past DoT assessed/calculated dues in
annual instalments over 20 years (or less if they so opt), duly
protecting the net present value of the said dues using a
discount rate of 8% (based on One Year Marginal Cost of
Lending Rate of SBI which is currently 7.75%). Interest on the
unpaid amount, penalty, and interest on penalty in relation to
the past dues as on the date of the judgment of the Hon’ble
Supreme Court (arising due to the said judgment of the
Supreme Court) will not be levied beyond the date of the said
judgment, and the NPV will be protected using the discount
rate. However, the TSPs shall continue to be liable for interest,
penalty, and interest on penalty for unpaid dues of LF and
SUC which arise prospectively after the date of judgment of the
Hon’ble Supreme Court (24.10.2019).

1.2 Change in amount of past dues arising from the AGR
judgment (24.10.2019), if any, determined after reconciliation
between TSPs’ self­assessment and DoT’s
43

assessment/calculation, be added to/adjusted against the
payable instalment amounts of the TSP on the same basis as
given in paragraph 1.1 above.”

34. A prayer has also been made to pay the remaining dues through

annual installments spanning over 20 years. For any lapse, a

provision has been made to protect the net present value as per the

order passed by this Court up to the date of judgment and the dues

thereafter, to be realised using the discounted rate of 8%, which is

based on one marginal MCLR rate of SBI which is currently at 7.75%.

The interest, penalty, and interest on penalty on the arrears as per

agreement not to be levied beyond the date of judgment, and the NPV

will be protected. However, for prospective arrears, if any, the TSPs.

shall be liable to interest, penalty, and interest on penalty for unpaid

dues as per agreement after the date of judgment of this Court.

35. Considering the various factors taken into account and the

letters written by the Indian Banks Association, we are of the opinion

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
44

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.

36. However, we consider that the period of 20 years fixed for

payment is excessive. We feel that 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. Rest of the decision quoted above, taken by the

Cabinet, shall stand except the modifications concerning the time

schedule for making payment of arrears. But, 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.

45

37. We also place on record that the demand of AGR was raised as

against non­telecom PSUs. on the strength of the judgment passed by

this Court. Pursuant to the Court’s directions, the matter has been re­

examined and considering the representations filed by PSUs. It is

stated in the affidavit dated 18.6.2020 that non­ telecom public sector

undertakings are non­telecom entities involved in providing services

such as power transmission, oil and gas exploration, and refining,

Metrorail service, etc., and that they are not into the business of

providing mobile services to the general public. They are not holding

Access Service Licence (ASL). The revenue received by non­telecom

public sector undertakings under the head of ‘telecom services’ forms

a very negligible and a small portion and does not form part of the

total revenue, e.g., 0.0002% for GAIL, 0.00028% for DMRC and

0.001% for Oil India, etc. DoT has decided to withdraw the demands

raised for licence fee based on non­telecom revenue from the non­

telecom public sector undertakings, which are M/s. Powergrid, GAIL,

Oil India Ltd., DMRC, which constitutes about 96% of the demand

regarding non­telecom PSUs. In this regard orders have been issued

on 13.7.2020 and 14.7.2020.

38. Resultantly, we issue following directions:

(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
46

shall not be any dispute raised by any of the Telecom Operators and

that there shall not be any re­assessment.

(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 31 st 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.

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In the Suo Motu Contempt Petition, in view of the reply filed and

compliance reported, and an unconditional apology tendered, which

we accept, we discharge notice issued to Shri Mandar Deshpande and

drop the proceedings.

Before parting with the proceedings, we place on record our

appreciation for the fair and able assistance provided by Shri Tushar

Mehta, Solicitor General, and the respective senior counsel appearing

on behalf of respective parties.

Accordingly, the pending interlocutory applications are disposed

of in terms of the aforesaid order/directions.

All the previous orders stand modified accordingly.

…………………….J.

(Arun Mishra)

…….……………….J.

(S. Abdul Nazeer)

…….……………….J.

(M.R. Shah)
New Delhi;

September 1, 2020.



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