Vodafone Idea warns of existential threat due to AGR penalty and interest in SC curative petition

A curative petition is filed by a party after the apex court dismisses their plea to review a judgment.

Telecommunication giant Vodafone Idea (VI), in its curative petition at the Supreme Court pertaining to Adjusted Gross Revenue (AGR), has stated that the penalty and the interest on the penalty levied by the Supreme Court's 2019 judgment are so substantial that they threaten the existence of the company.

According to the plea, which was filed in September 2023, "The company is already on the verge of a financial crisis, which threatens its very existence, and the judgment passed by this Hon’ble Court, prohibiting even the correction of clerical and arithmetical errors in the demands, foreclosing any reduction of the amount payable by thousands of crores of rupees and further imposing a penalty and interest on penalty, is highly unjust."

VI has also contended that these two components are more significant than the principal amount itself. VI has stated in the plea that while it is not challenging the imposition of the license fee, it has filed the petition because the judgment contains 'serious jurisdictional errors.'

According to the plea, which Moneycontrol has reviewed, VI has sought the court to reconsider the judgment on two grounds:

The judgment holds that the demands made by the Department of Telecommunication (DoT) would be final, even if there are clerical or arithmetical errors in the computation of dues. This means that the demanded amount could not be rectified, and the company would be compelled to make payments even if there are such errors.

The imposition of a penalty and interest on the penalty.

Regarding the interest on the penalty, the plea contends that the Supreme Court levied it on the wrong assumption that VI did not have a bona fide intention when it contested the definition of Gross Revenue and AGR in court. According to the plea, "There was a genuine dispute between the parties, and VI had, in exercise of its legal right to avail statutory remedies, contested the matter. The fact that the Telecoms Dispute Settlement and Appellate Tribunal (TDSAT) decided the matter in favor of the company establishes that the challenges brought were not dishonest or an abuse of process."

VI has argued that the penalty and the interest on the penalty are 'draconian' and threaten the very existence of the company. The plea states, "The rate of interest provided by the license agreement for delayed payment of the license fee is so exorbitant that it itself is in the nature of a penalty."

What is the case about?

The National Telecom Policy (NTP) of 1999 permitted telecommunication companies to pay their license fee and spectrum fee to the government as a percentage of their yearly income. However, telecom companies disputed the definition of the term Gross Revenue at the Telecom Disputes Settlement and Appellate Tribunal (TDSAT) and the Supreme Court.

Telcos contested that AGR should include only those revenues the company earns from the telecommunication business. DoT contested that the telcos must pay 8 percent of the entire revenue to the government as license and spectrum fee.

In 2015, TDSAT held that to compute AGR, DoT has to consider only the revenue from the telecommunication business of the company. In 2019, the Supreme Court overturned TDSAT's verdict and held that AGR is to be computed on the total revenue of the company, irrespective of whether it is telecommunication-related or not.

The Supreme Court's judgment imposed a penalty as "No litigant can be permitted to reap fruits on such inconsistent and untenable stands and litigate for decades in several rounds, which is not so uncommon but is a disturbing scenario projected in very many cases."

As a result of this, DoT's total demand amounted to Rs 1.19 lakh crore — Vodafone Idea owed Rs 58,254 crore, Bharti Airtel Rs 43,989 crore, and Tata Teleservices owed Rs 16,798 crore to the government.

The issue was contested by the telecom operators from 2003, both at the tribunal and at the Supreme Court, resulting in their dues to the government snowballing to a huge amount.

In 2020, the Supreme Court gave a 10-year time frame to the companies to pay the dues. In 2021, the SC rejected Vodafone Idea and Bharti Airtel's plea to recompute the dues.

What is a curative petition?

A curative petition is filed by a party after the apex court dismisses their plea to review a judgment. The petition should seek to reverse those portions of a judgment that, according to the party, would lead to a miscarriage of justice if not corrected.

The Supreme Court is empowered to use its inherent powers under Article 142 of the constitution to correct these defects. Though curative petitions are not heard in open court, VI has sought it.