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Supreme Court rules 10-year timeline for staggered payment of AGR dues effective April 1, 2021: Here are the main highlights

Supreme Court rules 10-year timeline for staggered payment of AGR dues effective April 1, 2021: Here are the main highlights

Supreme Court rules 10-year timeline for staggered payment of AGR dues effective April 1, 2021: Here are the main highlights
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By CNBCTV18.com Sept 1, 2020 12:37 PM IST (Updated)

Here are the main highlights from the Supreme Court on the AGR payments dues case from telecom companies today

The Supreme Court on Tuesday granted 10-year time to telecom firms like Vodafone Idea, Bharti Airtel and Tata Teleservices for paying the Adjusted Gross Revenue (AGR)-related dues to the Department of Telecommunications (DoT) with certain conditions. The apex court said telcos should pay 10 percent of the AGR-related dues by March 31, 2021.

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A bench headed by Justice Arun Mishra held that the demand made by the DoT and the verdict delivered by the top court in the matter is final. The bench asked the Managing Director (MDs) or Chief Executive Officer (CEOs) of telcos concerned to furnish an undertaking or personal guarantee within four weeks for payment of dues. It cautioned the telecom firms and said that failure to pay installments of AGR-related dues would incur penalty, interest and contempt of court.
The top court said that issue of sale of the spectrum by telecom companies facing insolvency proceedings shall be decided by the National Company Law Tribunal (NCLT). The bench delivered its verdict on the issues, including the timeline for staggered payment of AGR-related dues amounting to about Rs 1.6 lakh crore.
Here are the main highlights from the Supreme Court on the AGR payments dues case from telecom companies today:
  • No doubt that there will be review & curative, says Abhishek Manu Singhvi, Counsel For Bharti Airtel.
    • Bharti Airtel rose as much as 4.8 percent to Rs 539 after the verdict and Reliance Industries added 2 percent to Rs 2,121.75 on BSE after the judgment did not appear to raise any demand on Airtel and Jio for dues owed by RCom and Videocon. Meanwhile, Vodafone Idea pared morning gains to decline 10 percent to Rs 9.18. Click to continue reading
    • Kapil Sibal to CNBC: The govt was willing to give 20 years but the SC has said 10 years. Each company will decide if they want to file a review petition.
      • Key takeaways from the SC AGR judgment today: First, telecom companies get 10 years albeit with directions. Second, on demands raised for AGR – no dispute to be raised on revaluation and 10 percent payment to be effected upfront.  Third, it is to be backed by personal guarantees by MDs in 4 weeks for compliance with the SC order. Fourth, the staggered payment schedule to begin from April 1, 2021. Fifth, the existing bank guarantees to be kept alive and in case of default, interest and penalty to be levied, contempt to follow. Sixth, the issue of whether Spectrum sale can be allowed under IBC to be decided by NCLT.
        • These undertakings as per the Supreme Court order will have to be filed by MDs of the telcos.
        • Post the announcement, the telecom stocks have started to trade slightly higher. Vodafone Idea's shares are trading 2.45 percent higher at Rs 10.45 while Bharti Airtel's shares are trading 3.67 percent higher to Rs 531.95 per share, respectively on the NSE. Meanwhile, Bharti Infratel has slipped into the red zone, trading 0.33 percent lower to Rs 197.90, and Reliance Industries has turned positive, trading 0.40 percent higher to Rs 2,089.10.
        • The apex court also said that the telecom companies would have to pay 10 percent upfront. They are also required to submit an undertaking to pay AGR dues as per the apex court order. The 10-year payment timeline will begin from April 1, 2021. Any default in payments would invite interest, penalty along with contempt of court.
        • On Staggered Timeline: The SC allows 10 years to telcos for the payment of AGR dues.
        • SC Judgment: Agree that whether spectrum sale can be allowed under IBC us to be decided by NCLT. Have requested NCLT to decide as per law.
        • Justice Arun Mishra, other justices and lawyers assemble for the AGR dues case.
        • Here’s how much telcos owe to DoT in AGR dues: As per the DoT assessment, the total amount due by top telecom operators was Rs 1.19 lakh crore. Bharti Airtel owed Rs 43,989 crore, Vodafone Idea (Rs 58254 crore) and Tata Teleservices (Rs 16,798 crore). Dues for insolvent companies were also identified. As per the assessment, telecom companies that have now gone bankrupt had dues of about Rs 40,000 crore. As per the assessment, Aircel dues stand at Rs 12,289 crore, Videocon at Rs 1,376 and Reliance Communications at Rs 25,199 crore.
        • The self-assessment conundrum:  Between October 2019 and now, a lot has transpired. After the SC verdict, telcos went through a self-assessment and found that they owed half of what the DoT had sought. As per the self-assessment done by Bharti Airtel, it claimed it owned Rs 13,004 crore, Vodafone Idea said it owed Rs 21,533 crore and Tata Teleservices said it owned Rs 2,197 crore. The DoT accepted the self-assessment and moved the Supreme Court to allow (1) The admission of the self-assessed amount and (2) Payment of the amount over a staggered period of 20 years. However, in early March the SC bench slammed the DoT for even considering it. Justice Mishra made some tough comments during the hearing and said, "This is sheer fraud taking place in the face of this court. Grossest contempt has already been observed during the hearing. We will summon the DoT officials responsible for self-assessment. We would neither spare DoT nor telecom companies," Justice Mishra said. The court, however, agreed to consider the plea of staggered payment of dues.
          • Staggered payment-Issue of security and what constitutes 'reasonable' time: During the hearing spread over multiple weeks, Justice Mishra-led Supreme Court bench raised two key concerns. First, how can telecom operators guarantee that the dues will be paid and what security can they provide against it. To this, the bench sought personal guarantees of directors and promoters. The telecom operators, however, asked for the spectrum to be considered as security. Second, the other question was what constitutes a reasonable time. While DoT has stuck to its original ask of 20 years, TTSL agreed to 7-10 years and Bharti Airtel and Vodafone Idea agreed to 15 years.
          • Three key decisions that are expected by the court today include: First, staggered payments—the SC is expected to give its verdict on the time period by when these telcos need to pay the dues. DoT has sought 20 years, but TTSL has agreed to 7-10 and Bharti Airtel and Vodafone Idea have said 15 years. Second, can spectrum (or right to use spectrum) be transferred, assigned or sold under the IBC? Third, additional liabilities, if any, on Jio, Airtel for past dues of R.Comm, Videocon and Aircel. Jio had spectrum sharing and trading pacts with R.Comm. Airtel had spectrum sharing and trading pacts with Videocon, Aircel.
          • The October 2019 verdict: In a massive setback for telecom companies, the SC rejected their definition of AGR and exposed the firms to demands by the Department of Telecom (DoT) of more than Rs 1 lakh crore. The court ordered to include all revenues, except for termination fee and roaming charges, as a part of the AGR.
          • Disclosure: RIL, the promoter of Reliance Jio, also controls Network18, the parent company of CNBCTV18.com.
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