Government directs telcos to pay Rs 1.5 lakh crore after Supreme Court rebuke
Bharti Airtel responded immediately, offering to pay Rs 10,000 crore by February 20 and the rest of its dues before the next date of hearing, March 17.Updated: Feb 15, 2020 01:00 IST
The government on Friday set a minute-to-midnight deadline for telecom companies, including Vodafone Idea and Bharti Airtel, to pay the Rs 1.47 lakh crore they owe towards spectrum charges and licence fees, after a livid Supreme Court took the Department of Telecommunications (DoT) and cellular operators to task over the non-enforcement of an October ruling by the top court.
“...you are hereby directed to make the payment of outstanding dues of LF and SUC (license fee and spectrum usage charges) by 14.02.2020, 11.59 pm positively,” read one DoT order sent to telecom operators, shortly after it withdrew a January 23 order that no coercive action be taken against the defaulters. The orders were sent from DoT offices at each of India’s 22 telecom circles.
The twin moves came in response to the Supreme Court warning of contempt action against the chiefs of defaulting telecom companies as well as the DoT desk officer responsible for the June 23 order that was issued in the backdrop of extreme stress in the telecom sector.
Bharti Airtel responded immediately, offering to pay Rs 10,000 crore by February 20 and the rest of its dues before the next date of hearing, March 17.
“... in compliance with the judgement of the Hon’ble Supreme Court and their direction today, we shall deposit a sum of Rs 10,000 crore (on account) by 20th February, 2020, on behalf of the Bharti Group companies,” Airtel said in a letter to member (finance) at DoT.
Airtel, which owes nearly Rs 35,586 crore by way of licence fees and spectrum usage charges, said it was in the process of completing a self assessment exercise. “You will appreciate this is a complicated process, covering 22 circles, multiple licenses and a substantial period of time and hence, is time consuming,” the letter said.
There was no immediate statement from Vodafone Idea.
On October 24, the Supreme Court allowed the central government to recover Rs 92,641 crore in adjusted gross revenue (AGR) from telecom companies in a verdict that hit Bharti Airtel and Vodafone Idea the hardest. The court accepted the government’s definition of AGR — that it includes their income from revenue lines that are not central to their main business.
Income from sales of handsets, termination and roaming charges, rent and dividends should count as part of AGR, which determines what telecom companies pay as licence fee and spectrum usage fee, the court ruled in a verdict that came at a time when debt-laden service providers were already under intense pressure because of adverse regulatory orders,hefty levies and intense competition amid a price war set off by the entry in 2016 of Mukesh Ambani’s Reliance Jio Infocomm. Vodafone Idea and Bharti Airtel both posted record losses in the September quarter.
The court order came in a 16-year-old case stemming from DoT claims that telecom companies had under-reported their revenue and thus paid less for spectrum and in the form of other levies.
On Friday, a Supreme Court bench of justices Arun Mishra, S Abdul Nazeer and MR asked telecom companies to explain why contempt proceedings should not be initiated against them and took to task the DoT desk order who issued the January 23 order that had effectively put the Supreme Court ruling in abeyance. The officer has to file his reply by March 17.
“We draw contempt proceedings against the Desk Officer for passing the order and violating the order passed by this Court. The Managing Directors/Directors of the companies also to show cause why we should not initiate contempt proceedings against them for violating the order passed by this Court by not depositing the amount, on the next date of hearing. Let the concerned Officer, sitting over the order passed by this Court, also file a reply,” the order said.
The court also directed that if its order is not complied with, the managing directors and directors of the defaulting telecom companies should be present in court on March 17, the next date of hearing.
Vodafone Idea owes over Rs 50,000 crore to DoT, while Bharti Airtel has to pay Rs 35,586 crore. Tata Teleservices, which sold its mobile services business to Airtel, has dues of Rs 14,000 crore. Jio is the only company that paid its dues. It was a small amount, only Rs 60 crore, as the company started operations relatively recently. A total of 15 companies owe DoT money on account of AGR.
In the case of Vodafone-Idea, the split of licence and spectrum fee dues is roughly Rs 28,000 crore and Rs 24,000 crore.
At the Hindustan Times Leadership Summit on December 6, Aditya Birla Group chairman Kumar Mangalam Birla sounded a stark warning, saying Vodafone Idea, a joint venture between Vodafone (which has the majority stake) and his group, would have to shut shop if no relief is forthcoming from the government to soften the blow from the Supreme Court verdict that telecom operators pay DoT the dues they owe in three months.
Birla,who is also chairman of Vodafone Idea, said he is hopeful the company doesn’t find itself in a situation where it needs to exit from the market.
“But, at the same time, if you ask me specifically, it is true we will shut shop if we don’t get relief. Because there is no company in the world that can pay that kind of fine in three months, it just doesn’t work like that,” Birla said at the time.
Friday’s observations by the Supreme Court came during a hearing on applications by telecom companies seeking extension of the time for paying their dues.
When the matter was taken up for hearing on Friday, justice Mishra observed that no payment had been made by the telecom companies. “Not even a penny has been deposited so far by the companies and a stay by a desk officer (ensued). The judicial system of this country has been taken away,” he said.
The scenario was disturbing because it reflected scant respect for the directions of the top court, the bench said.
“The companies have violated the order passed by this Court in pith and substance. In spite of the dismissal of the Review application, they have not deposited any amount so far. It appears the way in which things are happening that they have scant respect to the directions issued by this court,” the order passed by the court said.
The apex court said that the office direction by DoT issued on January 23 (seeking no “coercive action” against the companies for non-payment) was a device to scuttle the order of the top court and such a direction should not have been passed at all.
“A Desk Officer of the Department of Telecommunications has the temerity to pass the order to the effect of issuing a direction to the Accountant General, another Constitutional Authority, not to insist for any payment pursuant to the order passed by this Court and not to take any coercive steps till further orders. This is nothing but a device to scuttle order of this Court. This kind of order should not have been passed by the Desk Officer at all,” the order stated.
The notification of January 23, Mishra said, should be withdrawn immediately or the concerned DoT officer will have to face penal action. “If he does not withdraw it within an hour, he will go to jail today itself,” the judge said.
Immediately after the order of the court, the DoT withdrew the controversial office direction of January 23. It also ordered that steps be taken to comply with the October judgment of the apex court.
“The office letter dated 23.01.2020 stands withdrawn with immediate effect. It is directed to take immediate necessary action in compliance with the judgment dated 24.10.2019 of the Hon’ble Supreme Court,” the fresh direction issued by DoT on Friday said.
According to an official from the telecom ministry, who asked not to be named, the January 23 order was issued without the secretary or the minister being aware of it. “We are now looking into why that order was issued,” this person said, asking not to be named.
The cumulative burden on 16 telecom companies following the top court’s order came to around Rs 92,461 crore. Out of the Rs 92,461 crore, the principle amount was only Rs 23,188 crore and the interest component, penalty and interest on penalty accounted for the remaining Rs 69,273 crore.
Review petitions against the judgment were dismissed by the court on January 16. Subsequently, at least four telecom companies, Vodafone Idea, Bharti Airtel, Tata Teleservices and Hughes Communications India, filed applications in the Supreme Court seeking an extension of the three-month deadline to pay the dues.
The dispute concerns the license fee payable by the telecom companies, which in turns depends on the gross revenue of the company. Gross revenue was defined under clause 19 of the licensing agreement between the central government and telecom companies which provided for exclusion of revenues under certain heads so as calculate AGR.
When the DoT raised demands from telecom providers, they approached the Telecom Disputes Settlement and Appellate Tribunal (TDSAT) arguing that the DoT illegally included elements of income in the definition of AGR that do not accrue from their operations under the license like dividend income, interest income on short term investment, discounts on calls, revenues from other activities separately licensed, reimbursements under the Universal Service Fund (USF), and so on.
After various rounds of litigation, the matter eventually reached the Supreme Court which in October ruled against the telecom companies.
Besides private telecom companies, various state-owned firms including GAIL India, Power Grid Corporation, Oil India, and Gujarat Narmada Valley Fertilisers that held telecom licenses for internal communications were also hit by the Supreme Court judgment.
Vodafone Idea’s shares closed 23.21% lower at Rs 3.44 on the Bombay Stock Exchange on Friday. Bharti Airtel’s shares rose 4.69% to a record Rs 565.10 because investors felt it was in a better position to pay off its debt. Shares of banks with exposure to the telecom sector also fell, with the BSE Bankex falling 1.1% to 35,359.65 points.