Case: UNION OF INDIA Vs. ASSOCIATION OF UNIFIED TELECOM SERVICE PROVIDERS OF INDIA

Other Subsidies, Benefits and Services) Act, 2016 (18 of 2016); or (b) offline verification under the Aadhaar (Targeted Delivery of Financial and Other Subsidies, Benefits and Services) Act, 2016 (18 of 2016); or (c) use of passport issued under Section 4 of the Passports Act, 1967 (15 of 1967); or (d) use of any other officially valid document or modes of identification as may be notified by the Central Government in this behalf. (4) If any person who is granted a license under the first proviso to sub-section (1) to establish, maintain 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 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 granted to them? Whether a licence is a contractual arrangement? Whether ownership belongs to the Government of India? Whether spectrum being under contract can be subjected to proceedings under Section 18 of the Code? The question also arises whether the spectrum can be said to be in possession, which arises from ownership. What is the distinction between possession and occupation? Whether possession correlates with the ownership right? A question also arises concerning the difference between trading and insolvency proceedings. Whether a licence can be transferred under the insolvency proceedings, particularly when the trading is subjected to clearance of dues by seller or buyer, as the case may be, as provided in Guideline Nos.10 and 11; whereas in insolvency proceedings dues are wiped off. Guideline No.12 is also assumed to be of significance in case spectrum is subjected to insolvency proceedings, which must be considered. 19. It is also required to be examined that when Government has declined the permission to trade and has not issued NOC for trading on the ground of non-fulfilment of the conditions as stipulated in the Licence Agreement, the spectrum can be subjected to resolution proceedings which will have the effect of wiping off the dues of the Government, which are more than Rs.40,000 crores. Whereas the dues of the Banks are much less. Whether obtaining the DoTs permission and its approval to the resolution plan would be a substitute for Trading Guideline Nos.10, 11, and 12 ? 20. A question also arises of bona fide nature of the proceedings 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 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 comparative dues of Government, and secured creditors and bona fides of proceedings are also the questions to be considered. 23. We consider it appropriate that the aforesaid various questions should first be considered by the NCLT.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]This Court can examine the limited question in these proceedings whether the proceedings are resorted to as a subterfuge to avoid payment of AGR dues, and it is for the NCLT to decide whether the licence/spectrum can be transferred and be a part of the resolution process initiated under the provisions of the Code. Whether spectrum/licence can be subjected to resolution process as an asset belonging to the telecom service providers, and whether the AGR dues are operational dues and have to be dealt with under the provisions of the IBC by NCLT. With respect to the trading and sharing arrangement to the extent of spectrum traded or shared by different service providers under the sharing arrangement, the liability as per the guidelines, has to be borne by the respective telecom service providers.6. As per the statutory guidelines issued by the Department of Telecommunications in 2015, spectrum sharing allows the operators to pool their respective spectrum for usage in a specific geographical area. The Central Government framed spectrum sharing guidelines on 24.9.2015.8. The spectrum trading allows parties to transfer their rights and obligations to another party. In the case of spectrum sharing, the right to use spectrum remains with the respective telecom service providers, whereas in the case of spectrum trading, the right to use gets transferred from the buyer to the seller. Under spectrum trading guidelines, details of transactions which have taken place, are given.It is a natural resource, and under Section 4 of the Indian Telegraph Act, 1885, the Government has the sovereign right.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 granted to them? Whether a licence is a contractual arrangement? Whether ownership belongs to the Government of India? Whether spectrum being under contract can be subjected to proceedings under Section 18 of the Code? The question also arises whether the spectrum can be said to be in possession, which arises from ownership. What is the distinction between possession and occupation? Whether possession correlates with the ownership right? A question also arises concerning the difference between trading and insolvency proceedings. Whether a licence can be transferred under the insolvency proceedings, particularly when the trading is subjected to clearance of dues by seller or buyer, as the case may be, as provided in Guideline Nos.10 and 11; whereas in insolvency proceedings dues are wiped off. Guideline No.12 is also assumed to be of significance in case spectrum is subjected to insolvency proceedings, which must be considered.19. It is also required to be examined that when Government has declined the permission to trade and has not issued NOC for trading on the ground of non-fulfilment of the conditions as stipulated in the Licence Agreement, the spectrum can be subjected to resolution proceedings which will have the effect of wiping off the dues of the Government, which are more than Rs.40,000 crores. Whereas the dues of the Banks are much less. Whether obtaining the DoTs permission and its approval to the resolution plan would be a substitute for Trading Guideline Nos.10, 11, and 12 ?20. A question also arises of bona fide nature of the proceedings 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 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 comparative dues of Government, and secured creditors and bona fides of proceedings are also the questions to be considered.23. We consider it appropriate that the aforesaid various questions should first be considered by the NCLT.The Parliament has approved spectrum sharing as part of National Telecom Policy, 2012. However, DOT issued and approved the final guidelines in the year 2015. Spectrum sharing is a policy that permits the sharing of radio access network equipment of operators. Single radio network equipment is used to provide services by two operators using both the entities spectrum. As per Spectrum Sharing Guidelines of DoT, (i) it is a prerequisite that both operators sharing spectrum need to have spectrum in the same band and the same licenced area; (ii) it is also necessary that both operators have a network in the same geographical area; 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.On going through the entire Sharing Guidelines, it does not stipulate anything about the past dues of the sharing operators. In the case of sharing spectrum usage charges, the rate of each of the licensees post sharing shall increase by 0.5% of adjusted gross revenue.26. That in the present case, only part of the spectrum of the licensee 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.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 spectrum of the telecom company facing insolvency – the other telecom company is using original licensee. The purchaser and buyers liability shall be as per para 11 of the Spectrum Trading Guidelines dated 12.10.2015Thus, 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 liability of the purchaser/buyer with respect to past dues of the seller shall not arise. In a case where the entire spectrum is under sale, in that case, the past dues of the seller shall be the liability of the buyer except the amount/dues, if any, found recoverable after the effective date of the trade, which was not known to the parties at the time of the effective date of trade and in such a situation the liability of such dues of the buyer and seller would be jointly or severally and the government at its discretion is entitled to recover such amount. In the present case, it is not in dispute that in some cases only part spectrum was traded, and the remaining spectrum continued with the seller. At the time of agreement for spectrum trading, the AGR dues of the seller were also known. Therefore, on a joint reading of para 11 of the Spectrum Trading Guidelines dated 12.10.2015 read with O.M. dated 12.05.2016, the sellers dues prior to the concluding of the agreement/spectrum trading shall not be upon the buyer.29. It is clear that in the case, which was decided by this Court relating to AGR dues, respondents were the parties, and they were litigating with respect to the definition of AGR 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 self-assessment or, in some cases, demands have not been raised.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 hierarchy, including the Cabinet, and keeping in view the vital issues related to financial health and viability of the telecom sector, need for ensuring competition and a level-playing field in the interest of consumers. The following decision has been taken with respect to the mode of recovery:THE MODE OF RECOVERY FOR CONSIDERATION OFTHIS HONBLE COURT1.1 All licensees impacted by the judgment of the Honble Supreme Court be allowed to pay the unpaid or remaining to be paid amount of past DoT assessed/calculated dues in annual instalments over 20 years (or less if they so opt), duly protecting the net present value of the said dues using a discount rate of 8% (based on One Year Marginal Cost of Lending Rate of SBI which is currently 7.75%). Interest on the unpaid amount, penalty, and interest on penalty in relation to the past dues as on the date of the judgment of the Honble Supreme Court (arising due to the said judgment of the Supreme Court) will not be levied beyond the date of the said judgment, and the NPV will be protected using the discount rate. However, the TSPs 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 Honble 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 self-assessment and DoTs 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 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. 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 banking sectors involvement. We deem it appropriate to grant facility of time to make payment of dues in equal yearly instalments. Rest of the decision quoted above, taken by the Cabinet, shall stand except the modifications concerning the time schedule for making payment of arrears. But, at the same time, it is to be ensured that the dues are paid in toto. The concession is granted only on the condition that the dues shall be paid punctually within the time stipulated by this Court. Even a single default will attract the dues along with interest, penalty and interest on penalty at the rate specified in the agreement.37. We also place on record that the demand of AGR was raised as against non-telecom PSUs. on the strength of the judgment passed by this Court. Pursuant to the Courts directions, the matter has been re- examined and considering the representations filed by PSUs. It is stated in the affidavit dated 18.6.2020 that non- telecom public sector undertakings are non-telecom entities involved in providing services such as power transmission, 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 non-telecom 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.