TaxTMI 
TaxTMI 
TaxTMI 
2020 (9) TMI 124
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..... 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 Providers of India and other civil appeals decide....
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....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 activities. These provisions under the TRAI Act do not affect the exclusive privilege....
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....80.00 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 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 - - 5835.85 16. MAHANAGAR TELEPHONE NIGAM LIMITED 4352.09 - 4352.09 ....
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....d, 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 precondition of trading licence that the seller pays dues of licence arrears. After that, the purchaser has to pay arrears as provided in paras 10, 11, and 12 of the guidelines. 5. The telecom service providers' stand is that the proceedings of insolvency under the Code have been triggered bona fide. This Court can examine the limited question in these proceedings whether the proceedings are resorted to as a subte....
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....nt 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 State acts as a guardian and trustee of the natural resources. (iii) The licensee does not own the spectrum and has merely been granted a right to use, which is based on fulfilment of the conditions of the contract in the form of a Licence Agreement. Thus, the spectrum cannot be subjected to transfer in proceedings under the Code as the licensee is not the owner. Section 18(f), along with its Explanation (a), mandates that only the corporate debtor's assets can ....
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....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 Telecom Regulatory Authority of India Act, 1997 by the Telecom Disputes Settlement and Appellant Tribunal. (x) Reliance has been placed on M/s. Embassy Property Development Pvt. Ltd. v. State of Karnataka [C.A.No.9170 of 2019], in which this Court held that the Code would not apply to right to mine as exclusive possession had not been granted to the corporate debtor and grant was limited to right to mine, excavate and recover iron ore and red oxide for a specified period. It was further held....
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....nal 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 that of secured creditors. Leasing of the spectrum is not permissible as per the Guidelines. The RJIL is also not proposing to buy any spectrum from the resolution applicant of RCOM or any other company. Only sharing and trading is permissible subject to the conditions specified in the Guidelines. The assets of RCOM are comprised primarily of the spectrum, real estate, and active assets. Even if this Court permitted the sale of such a spectrum, RJIL is not intending to acquire the same. (iii) RJIL has paid Rs. 195 crores on a ....
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....'. 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 under the Code cannot be nullified to realise AGR and other dues of DoT. 14. Shri Ranjit Kumar, learned senior counsel, on behalf of Committee of Creditors of Aircel Limited, Aircel Cellular Limited and Dishnet Wireless Limited argued that: (i) under the Code, UV Asset Reconstruction Company Limited has submitted a resolution plan, which has been approved by the NCLT on 9.6.2020. Aircel Entities are holders of telecom licences. The licences issued by DoT contain the format for the execution of the Tripartite Agreement between the licensor, licensee, ....
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....ndia 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 of establishing, maintaining and working telegraphs: Provided that the Central Government may grant a license, on such conditions and in consideration of such payments as it thinks fit, to any person to establish, maintain, or work a telegraph within any part of India: Provided further that the Central Government may, by rules made under this Act and published in the Official Gazette, permit, subject to such restrictions and conditions as it thinks fit, the establishment, maintenance and working- (a) of wireless telegraphs on ships within Indian territorial waters a....
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....ection (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 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 Section 2 of the Aadhaar (Targeted Delivery of Financial and Other Subsidies, Benefits and Services) Act, 2016 (18 of 2016)." 17. Section 3(10) defines 'creditor'. The term 'debt is defined in Section 3(11). The expression 'property' is defined in Section 3(27). 'Operational creditor' is defined in Section 5(20) in Part II under the head Insolvency Resolution and Liquidation for Corporate Persons. Section 5(21) defines 'operational debt'. 18. A question has been raised concerning ownership. Whether TSPs can be said to be the owner based on the right to use the spectrum under licence ....
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....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 use is not permissible without the payment of requisite fee. Whether dues under the licence can be said to be operational dues? It is also to be examined whether deferred/default payment instalment/s of spectrum acquisition cost can be termed to be operational dues besides AGR dues. Whether as per the revenue sharing regime and the provisions of the Indian Telegraph Act, 1885, the dues can be said to be operational dues? Whether natural resource would be available to use without payment of requisite dues, whether such dues can be wiped off by resorting to the proceedings under the Code and compara....
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....nt 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. Moreover, spectrum is allocated to a service provider for a service area which is a large geographical area, normally co­terminus with the state boundaries. In different cities and rural areas, the TSPs may have varying spectrum needs depending upon their customer profile. Spectrum sharing allows operators to pool their respective spectrum for usage in a specific geographical area within an LSA. The pooling of the spectrum increases the capacity of Telecom Service Providers to carry telecom traffic and may help in enhancing the quality of service. 5. It is submitted that the objective of spectrum sharin....
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....sing 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, spectrum in 1800 MHz band in 3 LSAs (Andhra Pradesh, Maharashtra and Mumbai LSAs) as per the quantum mentioned in the annexure. iii. For, Bharti Airtel Limited and Tata Teleservices Limited/Tata Teleservices (Maharashtra) Limited, spectrum in 2100 MHz band in 2 LSAs (Gujarat, Haryana, Karnataka, Kerala, Madhya Pradesh, Maharashtra and Uttar Pradesh (West) LSAs) as per the quantum mentioned in the annexure. iv. For Bharti Hexacom Limited and Tata Teleservices Limited, spectrum in Rajasthan LSA as per the quantum mentioned in the annexure. 12. It is respectfully submitted that the difference between Spectrum Sharing and Spectrum Trading, can t....
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....e 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 permitted in that band. (5). The right to share the spectrum shall be subject to the fulfillment of the relevant license conditions and nay other conditions that may be specified by the licensor/Government from time to time. (6)Both the licensees shall ensure that they fulfil the specified roll­out obligations and specified QoS norms. (7) A licensee shall not be eligible to share its spectrum if it has been established that it is in breach of terms and conditions of the licence and the licensor has ordered for revocation/termination of its licence. (8) Sharing is permitted in the following scenarios: (i). For the spectrum where both the Licensees who plan to share, possess the spectrum for which....
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....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 post­sharing 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 the licence or upto the period of right to use spectrum, whichever is earlier. (16). Both the licensees sharing the spectrum shall jointly give a prior intimation for sharing the right to use the spectrum at least 45 days before the proposed effective date of the sharing. Application format is attached along with these guidelines as Annexure­I. (17). Both the licensees shall also give an undertaking that they are in compliance with all the terms and conditions of guidelines for spectrum sharing and the licence conditions and will agree that in the event, it is established at any stage in future that either of the licensee was not in conformance with the terms and conditions of the guidelines for spectrum sharing or/and of th....
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....he 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 past dues of sharing operator/licensee covers AGR for the spectrum used by holder of licence, certain TSPs. such as Reliance came into existence later on, and as observed hereinabove, the liability of such operator of the AGR, would only be to the extent it has used the said spectrum. Shared operator TSPs. cannot be saddled with the liability to pay the past dues of AGR of licensee, that have shared the spectrum with the original licensees. In Re. Trading: 27. Coming to the question of liability of the telecom companies which are using spectrum under the Trading Guidelines with respect to the AGR dues of the telecom company, Spectrum trading is governed by the Spectrum Trading Guidelines dated 12.10.2015 and under the said Trading Guidelines, part of the sp....
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....ich 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 the LSA where trading is intended including OTSC dues for that band. In case where entire spectrum holding of the TSP in all LSAs is intended to be traded, the seller will have to clear all its pending dues including past dues. DoT will indicate status of Dues. However, the Buyer may perform due diligence. Further, the Government shall, as its own discretion, be entitled to recover the amount, if any, found recoverable subsequent to the effective date of the trade, which was not known to the parties at the time of the effective date of trade, from the buyer or seller, jointly or severally." Thus, as per para 11 of the Spectrum Trading Guidelines dated 12.10.2015, read with the clarification vide O.M. dated 12.05.2016, in case of a part of the spectrum is under sale, the liab....
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....h the Department of Telecommunications (DoT) to modify the order dated 24.10.2019 passed in C.A. Nos.6328­6399/2015 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 on 14.2.2020. 31. It is averred in the application that the sector of TSPs. has its varied features. The TSPs. who are required to make payment, are catering to the services of crores of consumers throughout India, and India's Government has examined the issue in great detail. It has shown prompt alacrity to the sector's market economy. The definition of 'AGR' has been settled after about 20 years, as such, there are huge arrears. In the event, it is found that any major service provider is impacted resulting into drastic consequences of such service providers facing proceedings under the Code. The following would be the inevitable adverse impact: (a) Impact on telecom services for a large proportion of customers. (i) Mobile Number Portability (MNP) proc....
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....ne 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 infrastructure with the current leveraged financial position. The total outstanding exposure to the telecom industry from the Indian Banks is huge. The modification in the bank guarantee mechanism pertaining to onerous clauses was also pointed out. Various other difficulties of the telecom sector were also highlighted. 33. The Union of India, after envisaging the larger interest, economic consequences on the nation and to ensure that the order of this Court is complied with in its letter and spirit, has taken a conscious decision and sought approval of this Court to a formula for recovery of past dues from the telecom service providers. The formula is placed for approval of this Court, which is arrived at after detailed and long drawn deliberations at various levels in the administrative hiera....
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....nto 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. Only for the subsequent period, some relaxation has been given as to the rate of interest, penalty, and interest on penalty, which is permissible. The arrears have accumulated for the last 20 years. It is also to be noted that some of the companies are under insolvency proceedings, validity of which is to be examined, and they were having huge arrears of AGR dues against them. For protecting the telecom sector, a decision has been taken on various considerations mentioned above, which cannot be objected to. 36. However, we consider that the period of 20 years fixed for payment is excessive. We feel that it is a revenue sharing regime, and it is grant of sovereign right to the TSPs. under the Telecom Policy. We feel that some reasonable time is to be granted, considering the financial stress and the ba....