TMI Blog2020 (9) TMI 124X X X X Extracts X X X X X X X X Extracts X X X X ..... by 31st March of every succeeding financial year. (iv) Various companies through Managing Director/Chairman or other authorised officer, to furnish an undertaking within four weeks, to make payment of arrears as per the order. (v) The existing bank guarantees that have been submitted regarding the spectrum shall be kept alive by TSPs. until the payment is made. (vi) 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. (vii) Let compliance of order be reported by all TSPs. and DoT every year by 7th April of each succeeding year. - M.A. (D) No. 9887 OF 2020 IN CIVIL APPEAL NOS.63286399 OF 2015, WITH SUO MOTU CONTEMPT PETITION [C] NO. 1 OF 2020 DIARY NO(S). 2450/2020 DIARY NO(S). 2458/2020 DIARY NO(S). 2461/2020 DIARY NO(S). 2476/2020 DIARY NO(S). 2578/2020 W.P.(C) NO. 238/2020 - - - Dated:- 1-9-2020 - HON'BLE MR. JUSTICE ARUN MISHRA HON'BLE MR. JUSTICE S. ABDUL NAZEER HON'BLE MR. JUSTICE M.R. SHAH For Petitioner(s) Mr. Tushar Mehta, SG Mr. Vikramj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such terms as it thinks fit. The licence issued under section 4(1) becomes a contract between a licensor and a licensee. This Court considered the provisions of the Telegraph Act in AUSPI (I) matter ( 2011) 10 SCC 543 in this very case, thus: 37. A bare perusal of sub section (1) of Section 4 of the Telegraph Act shows that the Central Government has the exclusive privilege of establishing, maintaining and working telegraphs. This would mean that only the Central Government, and no other person, has the right to carry on telecommunication activities. x x x 39. The proviso to sub section (1) of Section 4 of the Telegraph Act, however, enables the Central Government to part with this exclusive privilege in favour of any other person by granting a licence in his favour on such conditions and in consideration of such payments as it thinks fit. As the Central Government owns the exclusive privilege of carrying on telecommunication activities and as the Central Government alone has the right to part with this privilege in favour of any person by granting a licence in his favour on such conditions and in consideration of such terms as it thinks fit, a licence granted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng for the parties at length with respect to the prayer made by the Central Government and the time frame for making the payment as per the order passed by this Court. During course of hearing, again an attempt was made to wriggle out of our judgment and orders, which were passed by this Court under the guise of reassessment and recalculation. That is not at all permissible. In view of decision, there is no scope of raising any further dispute with respect to any item or to raise fresh dispute. No dispute can be raised with respect to dues and they have to be paid. New round of litigation is prohibited. In the second inning, we have heard the same after remand of the issues to the TDSAT. Thereafter, there is no question of entertaining any kind of dispute with respect to the payment and dues worked out. No dispute shall be entertained. The calculations which have been given and the amount to be recovered at pages 180 181 of M.A.D. No. 9887 of 2020 (application for modification) in C.A. No. 6328 6399 of 2015 are taken to be as final amount and there can be no dispute raised about it. No recalculation and self assessment can be undertaken. The calculations are as under : AMOU ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12389.00 9. RELIANCE COMMUNICATION/ RELIANCE TELECOM LIMITED 25199.27 3.96 25194.58 10. SISTEMA SHYAM TELESERVICES LTD. 222.1 (LF 166.1+SUC 56) 0.73 11. VIDEOCON TELECOMMUNICATIONS LTD. 1376.00 - 1376.00 Sub-total (8-10) 38964.27 - 4.69 38959.58 TSPs which were not party to the litigation 12. LOOP TELECOM PVT. LTD. 604.00 - 604.00 13. ETISALAT DB TELECOM PRIVATE LIMITED 14. S TEL PVT. LTD. 15. BHARAT SANCHAR NIGAM LIMITED 5835.85 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r response. Before the initiation of insolvency proceedings, most of the telecom service providers who are under the insolvency proceedings had applied to the Department of Telecommunications to grant permission for trading of licence. The Central Government objected on the ground that it would not be possible for it to grant permission. It declined the permission. There were huge arrears concerning the spectrum licence, which were required to be paid, as a pre condition to such permission. Various sharing arrangements made inter se telecom service providers with respect to the spectrum also came to the fore. 4. The Union of India, Department of Telecommunications stand is that the spectrum cannot be the subject matter of the IBC proceedings in view of the provisions in sections 14 and 18. The dues under the licence towards the spectrum's use cannot be put in the category of operational dues. In contrast, the Department of Commerce holds the opinion that the dues under the licence are operational dues, and the provisions of the IBC are applicable. The Department of Telecommunications also pointed out that as per guideline Nos.10, 11, and 12 of the Guidelines relating to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase of sharing, how the payment is to be made by the Telecom Service Provider (for short, TSP )? and (3) In the case of trading, how the liability of the seller and buyer is to be determined? In Re. Whether spectrum can be subjected to proceedings under the Code? 11. Shri Tushar Mehta, learned Solicitor General of India on behalf of Government of India, argued as under: (i) Section 4 of the Indian Telegraph Act, 1885, provides that the Central Government has the exclusive privilege of establishing, maintaining, and working telegraphs. The DoT grants licences which are in the form of contractual arrangements. The TSPs are bound by the terms and conditions contained therein. As per the contractual terms, the licence is strictly contingent upon fulfilment of the terms and conditions, the payment being first and foremost. On failure of payment, the licensor is entitled to take action under the Licence Agreement, including revocation and termination. (ii) The spectrum is a scarce recognised natural resource, and this Court in 2G judgment [C.A.No.423 of 2010] held that the natural resources belong to the people and cannot be subjected to proceedings under the Code. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... btor has no right of ownership. The above argument of the State Government was accepted; however, in view of the provisions contained in Section 14 on moratorium being created, the licence could not be revoked. An appeal was filed before the National Company Law Appellate Tribunal (for short, 'the NCLAT') against the order mentioned above, which was dismissed on the ground of limitation. An appeal has been filed in relation to the revocation of licence, which is pending in this Court registered as Diary No.15564 of 2020. (viii) The licence under Section 4 of the Indian Telegraph Act, 1885, was granted on certain terms and conditions. The spectrum did not construe property as defined in Section 3(27) of the Code. (ix) Concerning public trust doctrine, reliance has been placed on Centre for Public Interest Litigation and Ors. v. Union of India and Ors. (2012) 3 SCC 1, in which it was held that natural resources must always be used in the country's interests, not private interests. The corporate debtor can never be said to be in occupation of either the licence or spectrum as per Section 14(1)(d) of the Code. Any dispute is to be settled under the provisions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decided to withdraw the appeal from NCLAT. RCL/RTL defaulted in payment of various deferred spectrum auction instalments. (xiv) The matters of AGR being C.A. Nos.6328 6399 of 2015 were sub judice before the commencement of CIRP. A demand was raised to RCL/RTL. AGR dues amount of RCL/RTL is ₹ 25,199.27 crores. (xv) In the case of Videocon, DoT was not the party. DoT was not invited to the Committee of Creditors' meetings, in complete violation of the provisions of the Code. The resolution professional applied before NCLT to restrain DoT from encashing certain bank guarantees submitted by Videocon, in which interim injunction has been granted. 12. Shri Harish Salve, learned senior counsel argued as under: (i) The NCLT should decide the question of whether the spectrum can be sold or not. After that, there is a provision for an appeal to NCLAT, and then this Court can look into the matter. (ii) Under Section 18, the spectrum can be subjected to insolvency proceedings. This Court examined the question of recoverability of AGR dues in preference to the dues of secured creditors on the basis that the use of spectrum would rank in priority higher than tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on plans, DoT acted as an operational creditor. The NCLT asked to take the approval of the DoT for the transacting spectrum. Thus, it is for the DoT to give permission. Dot has to approve the implementation of the resolution plan. (v) The Code provides that the resolution plan is to be approved by the Committee of Creditors, and the adjudicating authority of the NCLT in terms of Section 31 of the Code and liquidation is to be made in terms of the priority set out in Section 53 of the Code. Section 5(20) defines 'operational creditor'. Section 5(21) defines 'operational debt' to include dues payable to the Government. Thus, claims of DoT for unpaid dues are operational debts, and DoT is an operational creditor. (vi) Reliance has been placed upon Section 31 of the Code. The resolution plan shall be binding on the corporate debtors, including the Central Government, any State Government to whom a debt in respect of the payment of dues arising under any law for the time being in force. Reliance has also been placed on Committee of Creditors of Essar Steel India Limited v. Satish Kumar Gupta and Ors., (2019) SCC OnLine SC 1478. (vii) The proceedings unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tional creditor. AGR dues are contractual dues and cannot have precedence over the dues of secured creditors. He has referred to Section 53 to contend that the operational creditor is protected in a manner provided in the Code. Section 238 of the Code contains a non obstante clause to the effect that anything inconsistent therewith contained in any other law for the time being in force, the Code shall prevail. As such, the Code overrides the provisions of the Indian Telegraph Act, 1885, Indian Wireless Telegraphy Act, 1933, and Telecom Regulatory Authority of India Act, 1997. 15. In the case of RCOM, the resolution plan is pending consideration of the adjudicating authority under Section 31 of the Code. 16. 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 4 of the Indian Telegraph Act, 1885 is extracted hereunder: 4. Exclusive privilege in respect of telegraphs, and power to grant licences.- (1) Within India, the Central Government shall have the exclusive privilege ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in or work a telegraph within any part of India is using authentication under clause (a) of sub section (3) to identify any person to whom it provides its services, it shall make the other modes of identification under clauses (b) to (d) of sub section (3) also available to such person. (5) The use of modes of identification under sub section (3) shall be a voluntary choice of the person who is sought to be identified and no person shall be denied any service for not having an Aadhaar number. (6) If, for identification of a person, authentication under-clause (a) of sub section (3) is used, neither his core biometric information nor the Aadhaar number of the person shall be stored. (7) Nothing contained in sub sections (3), (4) and (5) shall prevent the Central Government from specifying further safeguards and conditions for compliance by any person who is granted a license under the first proviso to sub section (1) in respect of identification of person to whom it provides its services. Explanation .-The expressions Aadhaar number and core biometric information shall have the same meanings as are respectively assigned to them in clauses (a) and (j) of Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1885, Indian Wireless Telegraphy Act, 1933, and Telecom Regulatory Authority of India Act, 1997. 21. 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. 22. A question of seminal significance also arises whether the spectrum is a natural resource, the Government is holding the same as cestui que 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 u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pay necessary AGR and licence fee remains with the respective companies. Even the DoT in its affidavit and compliance of the order dated 14.08.2020, stated as under so far as the spectrum sharing is concerned: 4. It is respectfully submitted that as per the Guidelines issued by DoT in 2015, Spectrum sharing allows operators to pool their respective spectrum for usage in a specific geographical area (LSA) thus complementing each other s spectrum needs and facilitating more efficient utilization of the spectrum. The rationale is to facilitate optimization of resources and to create a conducive environment for telecom growth. During the past period of 20 years or more, some operators have been able to acquire subscribers and grow at a faster rate as compared to other operators. This results in the spectrum lying unutilized with some of the players while other operators face spectrum crunch as spectrum is a scare resource. Thus, on the one hand spectrum, which is a limited natural resource, may remain unutilized for some Telecom Service Providers (TSPs), while on the other hand, consumers suffer due to poor quality of services on account of spectrum crunch with other TSPs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctrum which each TSP gets to use, the AGR based dues (SUC) are assessed at a higher rate for each of the TSPs. There is an addition/increase by 0.5% in the Spectrum Usage Charge rate, applied separately on both TSPs. Thus if SUC rate of each TSP prior to sharing was 3%, then this will increase to 3.5% for both of them. iv. The use of each others spectrum by means of sharing should normally lead to increase in AGR for both TSPs. This would lead to increased licensed fee and SUC to the Government as these are based on share of AGR. v. TSPs who share spectrum, continue to pay and are duty bound to pay, their AGR based dues arising from the use of spectrum. 8. So far as the present case is concerned, in accordance with the spectrum sharing guidelines dated 24.09.2015, the requests of the following TSPs for sharing of access spectrum have been taken on record: i. For Reliance Jio Infocomm Limited (RJIL) and Reliance Communications Limited (RCL), spectrum in 800 MHz band in 21 LSAs (all except Jammu and Kashmir LSA) as per the quantum mentioned in the annexure ii. For Bharti Airtel Limited and Tata Teleservices Limited/Tata Teleservices (Maharashtra) Limited, spe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , trading to enable optimal utilization of spectrum through appropriate regulatory framework. After considering the recommendations of TRAI on spectrum sharing, the Government has decided to allow sharing of access spectrum as per guidelines given below: (1). Spectrum sharing shall be allowed only for the access service providers holding Cellular Mobile Telephone Service (CMTS)/Unified Access Service License (UASL)/Unified License (Access Services)(UL(AS)/Unified License (UL) with authorization of Access Service in a Licensed Service Area (LSA), where both the licensees are having spectrum in the same band. (2). Spectrum sharing is permitted between two Telecom Service Providers utilizing the spectrum in the same band. (3). Spectrum sharing is not permitted when both the licensees are having spectrum in different bands. Leasing of spectrum is not permitted. (4). All access spectrum including traded spectrum shall be shareable provided that both the licensees are having spectrum in the same band. Further, if more bands such as 700 MHz are added for allocation of spectrum to Access Service Providers through auction process, the sharing of spectrum shall also be pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... will be individually and collectively responsible for complying with the sharing guidelines, including interference norms. (11). Spectrum sharing will be restricted to sharing by only two licensees subject to the condition that there will be at least two independent networks provided in the same band. (12). For the purpose of charging Spectrum Usage Charges (SUC), it shall be considered that the licensees are sharing their entire spectrum holding in the particular band in the entire LSA. (13). Spectrum Usage Charges (SUC) rate of each of the licensees post sharing shall increase 0.5% of Adjusted Gross Revenue (AGR). The sharing of spectrum for part of a month, full one month period shall be counted for the purpose of levying SUC. (14). The prescribed limits for spectrum cap shall be applicable for both the licensees individually. Further, the spectrum holding of any licensee post sharing shall be counted after adding 50% of the spectrum held by the other licensee in the band being shared being added as the additional spectrum to the original spectrum held by the licensee in the band. (15). Spectrum sharing shall be available for upto the balance period of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ning 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. Even according to DoT also, both the TSPs (sharers) are required to pay the SUC on their respective AGRs. Learned counsel appearing on behalf of the Reliance Jio (shared operator), which has entered into the sharing between RCom/RTL has stated at the Bar that Reliance Jio has paid the AGR post sharing including the difference of AGR as per the decision of this Court on their own and based on self assessment. It is stated at the Bar that still anything is further held to be due and payable and AGR for the period post sharing of the said spectrum originally allotted to RCom on the assessment being done, they will make the said payment. Similar is the ground of counsel for other TSPs. as to sharing arrangement. 26. That in the present case, only part of the spectrum of thelicensee 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 pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that its rights and liabilities are transferred to the buyer as per the procedure prescribed under the law and any such transfer of spectrum will be permitted only after the interest of the Licensor has been secured. Para 11 of the Spectrum Trading Guidelines was further clarified vide O.M. dated 12.05.2016. Certain telecom operators raised specific questions on the Trading Guidelines dated 12.10.2015. Question No.2 in respect of para 11, seeks a clarification as to whether the transfer of spectrum is for a specific area and reference to the dues relate to only the spectrum being traded in the concerned area, and seeks clarification whether the buyer will be jointly or severally liable for only those dues if found recoverable after the effective date of trading, which were not known to the seller at the time of the effective trade date. 28. To the aforesaid questions, vide O.M. dated 12.05.2016, there was a clarification or the answer relating to para 11 of the Guidelines, which reads as under: The Clarification or the answer relating to para 11 of the Guidelines states as follows: As per para 11 of the Guidelines, the seller must clear all its dues pertaining to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding 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, as discussed above. It was stated that they have paid dues as per the self assessment or, in some cases, demands have not been raised. We direct 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. In case demand notice has not been issued, let DoT raise the demand within six weeks from today. Payment of dues of AGR : 30. The Union of India has filed an application through the Department of Telecommunications (DoT) to modify the order dated 24.10.2019 passed in C.A. Nos.6328 6399/2015 and a separate order of even date passed in the abovesaid civil appeals. M.A. No.266/2020 was filed by the TSPs./licensees in which order dated 14.2.2020 was passed, and the contempt proceedings against the Desk Officer were drawn. In view of the communication dated 23.1.2020, it was withdrawn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al connectivity in the country. E commerce, e banking, e health, etc., all part of e governance are affected; (k) This will have an adverse impact in rural areas, particularly Aspirational Districts, and the spread of digitization in backward regions of India. 32. In this regard, a letter dated 15.2.2020 had been written by the Indian Banks Association, adumbrating the aforesaid aspects of the distressed telecom sector. The issues affecting the telecom industry and companies and the resultant stress on bank lending in this sector were pointed out, culminating into a high incidence of tax and heavy burden, subdued operating matrix due to a steep fall in average revenue per customer. The telecom services remained subdued due to the price war triggered by a new entrant. There was a decline in revenue. The drastic cut in data tariffs has led to a spike in data usage for the last one year, primarily on the 4G network. The vicious circle would adversely affect the capex spending of the service providers and, in turn, impact the revenue earning capabilities. Banks approach to 5G financing was also mentioned for which significant additional investment is required for 5G related i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ragraph 1.1 above. 34. A prayer has also been made to pay the remaining dues through annual installments spanning over 20 years. For any lapse, a provision has been made to protect the net present value as per the order passed by this Court up to the date of judgment and the dues thereafter, to be realised using the discounted rate of 8%, which is based on one marginal MCLR rate of SBI which is currently at 7.75%. The interest, penalty, and interest on penalty on the arrears as per agreement not to be levied beyond the date of judgment, and the NPV will be protected. However, for prospective arrears, if any, the TSPs. shall be liable to interest, penalty, and interest on penalty for unpaid dues as per agreement after the date of judgment of this Court. 35. Considering the various factors taken into account and the letters written by the Indian Banks Association, we are of the opinion that 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aised for licence fee based on non telecom revenue from the nontelecom public sector undertakings, which are M/s. Powergrid, GAIL, Oil India Ltd., DMRC, which constitutes about 96% of the demand regarding non telecom PSUs. In this regard orders have been issued on 13.7.2020 and 14.7.2020. 38. Resultantly, we issue following directions: (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 31st March of every succeeding financial year. (iv) Various companies through Managing Director/Chairman or other authorised officer, to furnish an undertaking within four weeks, to make payment of arrears as per the order. (v) The existing bank guarantees that have been submitted regarding the spectrum shall be kept alive by TSPs. until ..... X X X X Extracts X X X X X X X X Extracts X X X X
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