TaxTMI 
TaxTMI 
2020 (9) TMI 124
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....ngom, Adv. Mr. Karun Sharma,Adv. Mr. Kapil Sibal, Sr. Adv. Mr. Vikas Singh, Sr. Adv. Mr. Mansoor Ali Shoket, Adv. Mr. Nitin Kala,Adv. Mr. Kunal Sharma, Adv. Mr. Karun Sharma, Adv. Mr. Pukhrambam Ramesh Kumar, AOR Ms. Snenira Farid, Adv. Mr. Manjul Bajpai, Adv. Mr. Pinaki Mishra,Sr.Adv. Mr. Ramji Srinivasan, Sr. Adv. Ms. Manali Singhal, Adv. Mr. Mansoor A. Soket,Adv. Mr. Santosh Sachin, Adv. Mr. Nitin Kala,Adv. Mr. Deepak Singh Rawat, Adv. Ms. Aanchal Kapoor, Adv. Ms. Ranjeeta Rohatgi, AOR Mr. Brijender Chahar, Sr. Adv. Mr. M.S. Vishnu Sankar, Adv. Mr. Anil Kumar Mishra-I, Adv. Mr. Sriram P., AOR Mr. Tarun Johri, AOR Mr. Harsh Kaushik, AOR For Respondent(s) Mr. Shyam Divan, Sr. Adv. Mr. Anoop Rawat, Adv. Mr. Chaitanaya Safaya,Adv. Mr. Rishabh Sharma, Adv. Ms. S. Singh, Adv. Ms. Shreya Sircar, Adv. Mr. S.S. Shroff, AOR Mr. Meet Malhotra, Sr. Adv. Mr. Ravi S.S. Chauhan, Adv. Mr. Pratap Shanker, Adv. Ms. Shilpi Srivastava, Adv. Ms. Palak Singh, Adv. Mr. Swetank Shantanu, Adv. Ms. Shikha Sarin, Adv. Mr. Rahul Narayan, Adv. J U D G M E N T 1. This Court passed judgment and order in C.A. Nos.6328­6399 of 2015 - Union of India v. Association of Unified Telecom Service Provider....
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....cence is issued under the proviso to sub­section (1) of Section 4 of the Telegraph Act, the licence becomes a contract between the licensor and the licensee. Consequently, the terms and conditions of the licence including the definition of adjusted gross revenue in the licence agreement are part of a contract between the licensor and the licensee. We have to, however, consider whether the enactment of the TRAI Act in 1997 has in any way affected the exclusive privilege of the Central Government in respect of the telecommunication activities and altered the contractual nature of the licence granted to the licensee under the proviso to sub­section (1) of Section 4 of the Telegraph Act. 41. Section 2(e) of the TRAI Act quoted above defines "licensee" to mean any person licensed under sub­section (1) of Section 4 of the Telegraph Act for providing specified public telecommunication services and Section 2(ea) defines "licensor" to mean the Central Government or the telegraph authority who grants a licence under Section 4 of the Telegraph Act. Sub­section 2(k) defines "telecommunication service" very widely so as to include all kinds of telecommunication activiti....
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.... 43980.00 13004.00 18,004.00 25976.00 2. TELENOR INDIA PRIVATE LIMITED BHARTI GROUP 43980.00 13004.00 18004.00 3. IDEA CELLULAR LTD. 58254.00 21533 (LF 14453 + SUC7080) 3,500.00 54,754.00 4. VODAFONE GROUP OF COMPANIES VODAFONE IDEA 58254.00 21533.00 3500.00 54754.00 5. TATA GROUP OF COMPANIES 16798.00 2197 (LF 1720 + SUC 477) 4,197.00 12,601.00 6. QUADRANT TELEVENTURES LIMITED 189.91 25.28 0.69 189.22 7. RELIANCE JIO INFOCOMM LTD. 70.53 194.79 (LF 148.03+SUC 46.76) 195.18 - Sub-total (17) 119292.44 36954.07 25,896.87 93520.22 TSPs under Insolvency 8. AIRCEL GROUP OF COMPANIES 12389.00 - 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 liti....
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.... 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 pre­condition 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 subject­matter 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 trading of 2015, it is a....
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....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. The ....
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....the corporate debtor 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 u....
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....e proceeding under the Code and, 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.6328­6399 of 2015 were sub judice before the commencement of CIRP. A demand was raised to RCL/RTL. AGR dues amount of RCL/RTL is Rs. 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....
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....s in terms of the TPAs to which the DoT is also a party. In the resolution 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 Ku....
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....ted, the resolution professional will find it difficult to run the company as a going concern. DoT is an operational 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 non­obstante 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 tele....
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.... may be notified by the Central Government in this behalf. (4) If any person who is granted a license under the first proviso to sub­section (1) to establish, maintain or work a telegraph within any part of India is using authentication under clause (a) of sub­section (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 sub­section (3) also available to such person. (5) The use of modes of identification under sub­section (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 sub­section (3) is used, neither his core biometric information nor the Aadhaar number of the person shall be stored. (7) Nothing contained in sub­sections (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 sub­section (1) in respect of identification of person to....
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....ngs under the Code. In the backdrop facts of the cases, question also arises whether spectrum licence subjected to proceedings under the Code, and it overrides the provisions contained in the Indian Telegraph Act, 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....
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....and (iii) leasing of the spectrum is not permitted under the policy. By sharing the radio network equipment, two operators use their spectrum and create their respective businesses' capacity. Liability to 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....
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....usly use and have access to the spectrum held by each. ii. As per the sharing arrangement, each of the TSPs will continue to make payment of AGR dues arising for the spectrum that each holds. iii. However, due to the additional spectrum 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....
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....by Access Service Providers. National Telecom Policy, 2012 envisage to move at the earliest towards liberalization of spectrum to enable use of spectrum in any band to provide any service in any technology as well as to permit spectrum pooling, sharing and later, 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 spectru....
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....r, in case of spectrum acquired in auction held in March 2013, differential amount as indicated in para 7(i) above shall be payable in respect of 800 MHz band. (9) The use of technology shall be governed by the terms and conditions of respective Notice Inviting Application (NIA)/license. (10). Both the licensees 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 post­sharing 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 ....
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....TSPs pay this incremental SUC on their respective AGRs if they are sharing spectrum. Both the TSPs (sharers) are required to pay this SUC on their respective AGRs. Even in the case of sharing spectrum, the liability of the said operator would be to the extent of using the said spectrum only, and the liability of the sharing operator would be to the extent of the remaining 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 self­assessment. 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. Si....
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.... the time of the effective date of trade, from the buyer or seller, jointly or severally. The demands, if any, relating to licenses of seller, stayed by the Court of Law, shall be subject to outcome of decision of such litigation. (12). Where an issue, pertaining to the spectrum proposed to be transferred is pending adjudication before any court of law, the seller shall ensure 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....
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....R in the second round of appeal filed in 215 before this Court. Each of them was aware that the dispute as to the definition of AGR was pending in this Court. Thus, it is apparent that it was known to the parties that AGR dues to be finalised as per the decision of this Court in a pending matter, and lis was pending for the last 20 years. The liability cannot be escaped as specified in the Trading 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 self­assessment 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 self­assessment 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 De....
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....Services Tax (GST) and loss of revenue on account of spectrum deferred instalments; (f) Locking up of valuable spectrum in Corporate Insolvency Resolution Process (CIRP); (g) Major loss of direct and indirect employment; (h) Cascading negative impact on other sectors of the economy; (i) Foreign Direct Investment (FDI) sentiment will be adversely affected; (j) The closure of one or more TSPs also adversely impacts the digital connectivity in the country. E­commerce, e­banking, e­health, etc., all part of e­governance 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 teleco....
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....SPs shall continue to be liable for interest, penalty, and interest on penalty for unpaid dues of LF and SUC which arise prospectively after the date of judgment of the Hon'ble Supreme Court (24.10.2019). 1.2 Change in amount of past dues arising from the AGR judgment (24.10.2019), if any, determined after reconciliation between TSPs' self­assessment and DoT's assessment/calculation, be added to/adjusted against the payable instalment amounts of the TSP on the same basis as given in paragraph 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 u....
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....on, oil and gas exploration, and refining, Metrorail service, etc., and that they are not into the business of providing mobile services to the general public. They are not holding Access Service Licence (ASL). The revenue received by non­telecom public sector undertakings under the head of 'telecom services' forms a very negligible and a small portion and does not form part of the total revenue, e.g., 0.0002% for GAIL, 0.00028% for DMRC and 0.001% for Oil India, etc. DoT has decided to withdraw the demands raised for licence fee based on non­telecom 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 non­telecom 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 re­assessment. (ii) That, at the first instance, the respective Telecom Operators sha....