AGR dues: SC directs telcos to submit last 10 years’ accounts; Centre says no recovery from PSUs

In the matter regarding payment of Adjusted Gross Revenue (AGR) dues, the Supreme Court on Thursday directed telecom companies to submit their books of accounts and other financial documents of the last ten years, legal news website BarandBench.com has reported.

The Bench of Justices Arun Mishra, S Abdul Nazeer and MR Shah took up the case for hearing on Thursday via video conferencing.

At the outset, Solicitor General Tushar Mehta, appearing for the Centre, submitted that the Department of Telecommunications (DoT) had decided to withdraw its move to recover AGR dues from Public Sector Undertakings (PSUs).

Senior Advocate Abhishek Manu Singhvi, representing Bharti Airtel, told the court that the company had paid a sum of Rs. 18,000 crore out of the Rs. 21,000 crore it owed in AGR dues. He also submitted that Bharti Airtel has given DoT a bank guarantee in excess of the demand made. He added that DoT can encash the guarantee if Airtel defaults in payment of dues yet to be paid. Singhvi further endorsed the view expressed by SG Mehta as regards the plan for phased repayment of dues.

Appearing for Vodafone, Senior Advocate Mukul Rohatgi told the court that his client is in a very precarious situation, and was not in a condition to furnish any fresh bank guarantee. Vodafone has not made profits for the past many quarters, he said. "My losses are over Rs.1 lakh crore. The bank guarantee of over Rs. 15,000 crore is lying with the government and I cannot offer any more surety," he submitted.

Revealing that he has instructions for payment of AGR dues at Rs. 5,000 crore per year, Rohatgi added, "If I am asked to pay up tomorrow, the company will not remain a going concern...I have 11,000 employees who will be left with no jobs."

When the court asked about the worth of Vodafone's assets and whether it had made provisions in its books for contingent liabilities, Rohatgi submitted that the assets are worth Rs. 42,000 crore and have all been kept as surety to secure loans worth Rs. 1 lakh crore. He also offered to present the company's financials before the court.

Justice Mishra then said, "The question is for the company to show its bona fide. Even before we apply our mind, we want all the parties to come up and offer a reasonable plan for payment that can be worked out."

When Justice Shah urged the company to deposit some amount of money, Rohatgi said that it had already deposited Rs. 7,000 crore. To this, Justice Shah said, "You must deposit some money, the government needs money for public welfare during this pandemic. Your industry is the only industry that is making money during this pandemic."

Senior Advocate Arvind Datar, appearing for Tata, was next to make submissions. He said that the company has paid Rs. 36,504 crore in AGR dues so far. He said that the licence fee due is a small fraction compared to the penalty and interest on the same.

Datar urged the court to consider that furnishing a bank guarantee may have an adverse effect on investments in the sector.

The court then passed its order, proceeding to direct the telecom companies to file their books of accounts and all financial documents for the period of the last ten years.

The matter will be next heard in July.

Earlier, the court had pulled up the Department of Telecommunications (DoT) for making AGR demands from Public Sector Undertakings (PSUs), saying that its October 2019 judgment had not brought the PSU's under its purview.

The court said that its judgment was "being misused" by demanding AGR dues from the PSUs. It thus asked the DoT to reconsider its demands from PSUs for payment of AGR dues.

DoT had also batted for the telecom companies, seeking permission from the court to bring into effect a plan for staggered repayment of the dues over the course of twenty years. The court, while questioning the rationale behind the twenty-year window, had said that it was not a reasonable time frame.

The court then sought to know from the Solicitor General a proposed time frame within which the dues can be recovered by the DoT from the telecom companies. The telcos were required to inform the court of the mode and manner in which they proposed to make the payment of the dues, complete with the sureties that can be offered.

In the October 2019 judgment passed by the Bench headed by Justice Arun Mishra, the Supreme Court had granted the telecom companies a period of 90 days to pay the dues in view of the new meaning attributed to Adjusted Gross Revenue.

This period of ninety days was scheduled to lapse on January 24. After the companies approached the Supreme Court seeking a modification of its order, the deadline was extended till March 17 by an order passed on February 14.

The DoT, in March, moved a plea for modification of the court's order seeking to allow telcos to make the payment in a staggered manner over twenty years. The DoT says that this formula has been arrived at keeping in view "vital issues relating to financial health and viability of the telecom sector and need for maintaining competition and level playing field in the interest of consumers."

On March 18, the court had pulled up the DoT for allowing telecom companies to self-assess the dues payable by them. The court had made its displeasure with the telecom companies very clear, stating that the continued attempts made by these companies seeking re-assessment of the October 2019 order amounted to fraud on the court.