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AGR verdict today: All you need to know about the case

Updated : September 01, 2020 08:12 AM IST

The Supreme Court will pronounce the much-awaited verdict on AGR dues at 11:30 am today.

It's been over 10 months since the Supreme Court accepted the interpretation of adjusted gross revenue (AGR) by the Department of Telecom on October 24, 2019, and ruled that telecoms must pay outstanding dues to the DoT.

What is the AGR case?

The case in context dates back to 1999. The telecom department had issued notices to telecom companies seeking AGR dues. The dispute between the DoT and telecom operators was on the definition of AGR. DoT argued that AGR includes all revenues (before discounts) from both telecom and non-telecom services. Telecom service providers claimed that AGR should comprise just the revenue accrued from the core services and not the dividend, interest income or profit on sale of any investment or fixed assets. The companies went to various courts and forums challenging the definition of AGR and finally knocked the SC, which delivered the verdict in favour of the government and the original dues sought.

The original verdict

As per the October verdict, various revenue heads were included in the net of gross revenue, leading to a burden of over Rs 92,000 crore. The three-judge SC bench led by Justice Mishra, who is set to retire this week, will be passing its final judgement on the AGR case on September 1, which is expected to decide the fate and health of the Indian telecom sector.

Who owes how much?

As per the assessment by DoT, 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's 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?

When discussing the issue of staggered payment of dues, several arguments and counter arguments were made, but the bench had two key concerns (1) 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 spectrum to be considered as security. (2) 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.

What happens to insolvent companies?

As for the due that companies that have now gone bankrupt including Aircel, Videocon and Reliance Communications is concerned. Since Reliance Jio has spectrum sharing and trading pacts with RCOM and Airtel had spectrum sharing and trading pacts with Aircel and Videocon, the court questioned why Jio and Airtel should not be liable to pay the dues of insolvent companies.

Three decisions that are expected by the court today include:

1. 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.

2. Can spectrum (or right to use spectrum) be transferred, assigned or sold under IBC.

3. 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.

Disclaimer: Reliance Industries Ltd., which also owns Jio, is the sole beneficiary of Independent Media Trust which controls Network18 Media & Investments Ltd.

Published : September 01, 2020 06:24 AM IST

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