The Supreme Court (SC) on July 20 heard the plea by telecom companies to allow staggered repayment of their adjusted gross revenue (AGR) dues. A three-judge bench of Justices Arun Mishra, S Abdul Nazeer and MR Shah heard the case.
The court reserved the order on the time to be provided to telcos for the repayment of AGR dues. The next hearing in the matter has been scheduled for August 10.
The court observed that there can be no going back on AGR dues and said the calculation given by the telecom department is to be treated as final, adding that there is no scope for any re-assessment or re-calculation of said dues.
It also said that it wants to look into the bonafide of the decision to invoke insolvency on the part of several companies with AGR dues of over Rs 38,000 crore, that are currently in liquidation. Accordingly, it has asked RComm, Videocon and Aircel to submit all records and details of insolvency within seven days.
>> Did Vodafone Idea ensure provisioning for AGR liabilities? Demands had been raised by the Department Of Telecommunications (DOT), why not provided for by Vodafone Idea?
>> "With so many losses, how are we to rely on you? You are making the decision more difficult for us. How should we secure AGR dues payable by Vodafone Idea?"
>> Vodafone Idea has conceded that no bank is prepared to lend it money.
>> You are showing such a black picture, how are we supposed to see any light? Vodafone Idea needs to secure AGR dues payable.
>> "Who is the kingpin? Who is managing Vodafone idea?"
>> We want to make clear again that there is no space for self assessment. Otherwise we will have to draw serious contempt against everyone. We made it clear that there is no room for self assessment. This would a violation of our orders.
>> "It seems the DOT is allowing room for re-assessment. Who in the Govt has the temerity to do this? No one has the authority to overturn our orders. You don't know me, I will despatch people to jail from here."
>> (To Bharti Airtel) "Don't try to reopen the case, all dues are included in the AGR judgment". There is no room available for adjustment of dues payable by Bharti Airtel
>> "Airtel is looking to reopen the issue. We can't allow recalculation at this stage, we will not permit this. If we permit you to recalculate, it would be a violation of our orders."
>> "We will not allow this self-assessment by Airtel. AGR definition has been clarified by SC, don't try to review the issue."
>> Will decide on the limited issue of time to be provided; this is a waste of our time, we will impose very heavy costs. Telcos are trying to seek recalculation, trying to dilute the judgment. They "are behaving dishonestly. Why should we allow relief to telcos when they are seeking to review the figures payable".
>> Revenue of the country needs to be saved, telcos belong to this country, telcos should share the responsibility to secure the amount payable.
>> On the question of a 20-year period for repayment, the court asked, "How do you secure dues payable?"
>> We will go into the bonafides of these companies going into insolvency; Not sure if IBC is being misused by companies to escape liabilities.
>> Have heard all parties at length on time window to be allowed. An attempt was made to wriggle out of this order under the guise of re-calculation, reassessment. There can be no going back on AGR dues. No question of entertaining any objection to demand. The calculation that has been given by DoT is to be treated as final, there can be no scope of re-assessment.
SC orders: All records, insolvency details of RComm, Videocon, Aircel to be submitted within seven days; need to ensure IBC not being misused by companies to escape liabilities. Reserves order on time window to be provided. Next hearing in the matter scheduled for August 10. Issue of companies under liquidation to be considered on August 19.
Vodafone Idea counsel Mukul Rohatgi to the SC:
>> Have submitted financial documents like income tax returns. Over the last 15 years, entire networth of the company has been wiped out. Over 1 lakh crore of equity brought in by promoters has been eroded.
>> All the revenue has been spent on liabilities, tax, dues. Total revenue of over 10 years was Rs 6.27 lakh crore, of which Rs 4.95 lakh crore was Spent on expenses.
>> Will honour the judgment and the AGR dues sought from the company.
>> Not seeking re-calculation, not revisiting the demand. SC has made it clear, we will rely on the demands issued by DoT.
>> Have no assets left with company. The only asset that remains is spectrum. Goods and services tax (GST) refunds of Rs 8,000 crore accruing to us can be retained by the government.
>> Vodafone Idea accepts demand of Rs 58,000 crore; the only way to pay is to allow a 20-year payment period.
>> We are in deep waters. With folded hands prepared to accept a reasonable period of 15 years.
Solicitor General Tushar Mehta to SC:
>> No confusion about the SC Order, no room for re-assessment to be allowed. Have not submitted anything to suggest re-calculation. There is no confusion in the DoT.
>> As per DoT, Bharti Airtel owes a sum of Rs 43,780 crore, of which the company has paid Rs 18,004 crore, so the balance is Rs 25,976 crore.
>> Vodafone paid Rs 7,854 crore, balance is Rs 50,399 crore.
>> Tata Telecom paid about Rs 4,197 crore, balance due about Rs 12,601 crore.
>> Cabinet considered the issue, decided on 20 year period. Would still stand by DoT plea seeking a 20-year payout period. The government has provided for relief due to a cascading effect on the economy.>> The government says in case of a default, we can cancel the spectrum and auction it to recover dues. The government is of the view that if an extension is not given, insolvencies that SC fears will happen tomorrow. The spectrum itself acts as a security for ensuring payment of AGR dues.
Also Read: Telecom stock fly ahead of AGR hearing today
Bharti Airtel counsel Abhishek Manu Singhvi to SC:
>> Have paid Rs 18,000 crore after SC order, 60 percent of total dues paid by all telcos combined, so far. The company has Rs 21,000 crore of dues still payable towards license fee dues.
>> Govt has wrongly sought Rs 43,000 crore of total AGR dues, demand includes spectrum usage charges (SUC) dues as well. SUC dues are not a part of AGR dues, only license fee dues are a part of the calculation.
The companies had appealed to the court to allow payment over a longer period of 10 or 20 years. At the last SC hearing on the AGR case, Vodafone Idea counsel and senior advocate Mukul Rohatgi had told the court that the company is "barely afloat" and that the telco would have to shut operations if dues are to be paid upfront. “This will impact 11,000 employees,” he had noted.
>> Airtel suggests a payout of AGR dues over 15 years
Senior Advocate Mohan Parasaran for TATA to SC:
>> Tata Tele submits to SC that a 7-10 year period would be reasonable for repaying AGR dues.
Here's a summary of the previous hearings:
>> In its last hearing on June 18, the SC had asked the telecom companies to make a minimum payment to show bonafide, provide a roadmap of payments (payment plan) if allowed to stagger payments and provide books of accounts for the last decade for assessment.
>> As of the last hearing, the SC bench remained unconvinced that the telecom companies had justified the timeline requirement and said there was “no guarantee” of what could happen over 20 years.
>> Total AGR dues and repayments so far: As per DoT estimates, telecom companies owe a total of Rs 1.19 lakh crore with payments received so far at Rs 26,896 crore. The balance, therefore, is currently at Rs 92,520 crore.>> AGR dues for Vodafone Idea:
- Vodafone's self-assessment pegs dues at Rs 21,533 crore>> AGR dues for Bharti Airtel:
- Airtel's self-assessment pegs dues at Rs 13,004 crore>> AGR dues for Tata Teleservices:
- Tata Tele's self-assessment pegs dues at Rs 2,197 crore
>> The SC had, however, ordered that demand of past telecom dues from oil PSUs be withdrawn. Accordingly, the DoT withdrew a demand of over Rs 2.3 lakh crore it had made on state-owned gas utility GAIL India and Oil India (OIL) in past telecom dues.
>> Why the issue of staggered payments
>> In October last year, the SC upheld the government's position on the calculation of statutory liabilities. The government suggested the revenue from the non-core businesses should also be included in arriving at the annual AGR amount. A part of the AGR is paid by telecom companies as licence and spectrum fee to the exchequer.
>> Burdened with the highest claim from DoT, the companies had appealed to the court to provide the option of staggered payments over either 20 years or 10 years. Vodafone Idea counsel had particularly argued that the only way to repay such huge AGR dues is to 'earn and pay'.
>> SC had asked telecom companies to provide bank guarantees and a timeline of payments so that it would have ample security to grant such a long tenure for repayments.>> The apex court's argument was that the telecom companies cannot be permitted to make staggered payments of AGR dues over 20 years without providing any security.