Union of India vs Association of Unified Telecom Service Providers of India etc. etc.

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 3(10) of The Insolvency and Bankruptcy Code, 2016defines ‘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’. 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 assumed to be of significance in case spectrum is subjected to insolvency proceedings, which must be considered. 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 non-fulfilment 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? [Paras 16-19][562-C; 564-C-H; 565-A]

2.2 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. 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 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. A question of seminal significance also arises whether the spectrum is a natural resource, the Government is holding the same as cestuique 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, 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. 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. It being a jurisdictional question, it requires to be gone into at this stage itself. It is made clear that the Court has not observed on the merits of the case, and all the questions are kept open to be examined by the NCLT. [Paras 20-23][565-B-H; 566-A-B]

3. In Re. Sharing 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. On going through the entire Sharing Guidelines, it does not stipulate anything about the past dues of the sharing operators. 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. 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, 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. [Paras 24-26][566-C; 569-F; 573-C-E, G-H; 574-A-B]

4. In Re. Trading 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. Para 11 of the Spectrum Trading Guidelines was further clarified vide O.M. dated 12.05.2016. 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 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.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. 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. It was stated that they have paid dues as per the selfassessment or, in some cases, demands have not been raised. 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. [Paras 27-29][574-C; 575-G; 576-A-B, C-E]

5. Payment of dues of AGR 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 level-playing field in the interest of consumers. 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. 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. However, 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. Some reasonable time is to be granted, considering the financial stress and the banking sector’s involvement. It is deemed appropriate to grant facility of time to make payment of dues in equal yearly instalments. Rest of the decision, taken by the Cabinet, shall stand except the modifications concerning the time schedule for making payment of arrears. Further, DoT has decided to withdrawthe demands raised for licence fee based on non-telecom 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 non-telecom PSUs. [Paras 33, 35, 36, 37][578-G; 579-H; 580-A-D, H; 581-A]

6. Following directions inter alia are issued: (i) That for the demand raised by the Department of Telecom in respect of the AGR dues based on the judgment of this Court, there shall not be any dispute raised by any of the Telecom Operators and that there shall not be any re-assessment. (ii) That, at the first instance, the respective Telecom Operators shall make the payment of 10% of the total dues as demanded by DoT by 31.3.2021.

(iii) TSPs. have to make payment in yearly instalments commencing from 1.4.2021 up to 31.3.2031 payable by 31 st March of every succeeding financial year. (iv) The existing bank guarantees that have been submitted regarding the spectrum shall be kept alive by TSPs. until the payment is made. (v) 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. [Para 38][581-B-F]

Union of India v. Association of Unified Telecom Service Providers of India (2020) 3 SCC 525 : [2019] 16 SCR 672; Union of India & Anr. v. Association of Unified Telecom Service Providers of India & Ors. (2011) 10 SCC 543 : [2011] 14 SCR 657; Centre for Public Interest Litigation and Ors. v. Union of India and Ors. (2012) 3 SCC 1 : [2012] 3 SCR 147; M/s. Embassy Property Development Pvt. Ltd. v. State of

Karnataka 2019 (17) SCALE 37; Ram Dass v. Davinder (2004) 3 SCC 684 : [2004] 3 SCR 518; Committee of Creditors of Essar Steel India Limited v. Satish Kumar Gupta and Ors. (2019) SCC OnLine SC 1478 –

referred to.