# UNION OF INDIA v. ASSOCIATION OF UNIFIED TELECOM SERVICE PROVIDERS OF INDIA ETC. ETC

- **Citation:** [2020] 11 S.C.R. 541
- **Court:** Supreme Court of India
- **Decided:** 2020-09-01
- **Case number:** Civil Appeal No. 6328-6399 of 2015
- **Bench:** Arun Mishra, S. Abdul Nazeer, M. R. Shah
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/union-of-india-v-association-of-unified-telecom-service-providers-of-india-etc-34519
- **Pages:** 42

## Headnote

Indian Telegraph Act, 1885 - Definition of Adjusted Gross
Revenue (AGR) and dues to be paid thereunder, decided by Supreme
Court in Union of India v. Association of Unified Telecom Service
Providers of India reported as [2019] 16 SCR 672 - Payment of -
Representation by telecom service providers and Indian Banks'
Association - Period of 20 years fixed by Union of India - Held:
There shall not be any dispute/re-assessment by any of the Telecom
Operators for the demand raised by Department of Telecom (DoT)
w.r.t the AGR dues based on the judgment of this Court - However,
period of 20 years fixed for payment is excessive - At first instance,
Telecom Operators to make payment of 10% of the total dues as
demanded by DoT by 31.03.2021 - Telecom Service Provider (TSPs)
to make payment in yearly instalments commencing from 01.04.2021
up to 31.03.2031 payable by 31st March of every succeeding
financial year - Any default in payment to attract interest as per
agreement with penalty and interest on penalty - Directions issued
- Insolvency and Bankruptcy Code, 2016 - Indian Wireless
Telegraphy Act, 1933 - Telecom Regulatory Authority of India Act,
1997.
Insolvency and Bankruptcy Code, 2016 - Payment of Adjusted
Gross Revenue (AGR) dues - Telecom Service Providers resorted to
insolvency proceedings - Bona fide of - Held: Said question along
with several other questions like if spectrum licence can be subjected
to such proceedings; dues under the licence can be said to be
operational dues etc., being a jurisdictional one requires to be gone
[2020] 11 S.C.R. 541
541
A
B
C
D
E
F
G
H
542
SUPREME COURT REPORTS
[2020] 11 S.C.R.
into at this stage itself - To be examined by National Company Law
Tribunal (NCLT) - Indian Telegraph Act, 1885.
Telecommunication - Spectrum sharing - Past AGR dues of
licensee - Liability of - Held: Shared operator Telecom Service
Provider (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.
Issuing directions, the Court
HELD: 1. The following three questions arise for
consideration:
(1) Whether spectrum can be subjected to proceedings
under the Code? (2) In the case of sharing, how the payment is
to be made by the Telecom Service Provider ('TSP')? and (3) In
the case of trading, how the liability of the seller and buyer is to
be determined? [Para 10][555-F]
2.1 In Re. Whether spectrum can be subjected to
proceedings under the Code?
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 3(10) of The Insolvency and Bankruptcy Code,
2016defines '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'. 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
A
B
C
D
E
F
G
H
543
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 in

## Text

_Characters 0–39,927 of 93,724. This is a partial read: ask again with offset=39927 for what follows._

A
B
C
D
E
F
G
H
541
UNION OF INDIA
v.
ASSOCIATION OF UNIFIED TELECOM SERVICE
PROVIDERS OF INDIA ETC. ETC.
(M.A. (D) No. 9887 of 2020)
In
(Civil Appeal No. 6328-6399 of 2015)
SEPTEMBER 01, 2020
[ARUN MISHRA, S. ABDUL NAZEER AND
M. R. SHAH, JJ.]
Indian Telegraph Act, 1885 - Definition of Adjusted Gross
Revenue (AGR) and dues to be paid thereunder, decided by Supreme
Court in Union of India v. Association of Unified Telecom Service
Providers of India reported as [2019] 16 SCR 672 - Payment of -
Representation by telecom service providers and Indian Banks'
Association - Period of 20 years fixed by Union of India - Held:
There shall not be any dispute/re-assessment by any of the Telecom
Operators for the demand raised by Department of Telecom (DoT)
w.r.t the AGR dues based on the judgment of this Court - However,
period of 20 years fixed for payment is excessive - At first instance,
Telecom Operators to make payment of 10% of the total dues as
demanded by DoT by 31.03.2021 - Telecom Service Provider (TSPs)
to make payment in yearly instalments commencing from 01.04.2021
up to 31.03.2031 payable by 31st March of every succeeding
financial year - Any default in payment to attract interest as per
agreement with penalty and interest on penalty - Directions issued
- Insolvency and Bankruptcy Code, 2016 - Indian Wireless
Telegraphy Act, 1933 - Telecom Regulatory Authority of India Act,
1997.
Insolvency and Bankruptcy Code, 2016 - Payment of Adjusted
Gross Revenue (AGR) dues - Telecom Service Providers resorted to
insolvency proceedings - Bona fide of - Held: Said question along
with several other questions like if spectrum licence can be subjected
to such proceedings; dues under the licence can be said to be
operational dues etc., being a jurisdictional one requires to be gone
[2020] 11 S.C.R. 541
541
A
B
C
D
E
F
G
H
542
SUPREME COURT REPORTS
[2020] 11 S.C.R.
into at this stage itself - To be examined by National Company Law
Tribunal (NCLT) - Indian Telegraph Act, 1885.
Telecommunication - Spectrum sharing - Past AGR dues of
licensee - Liability of - Held: Shared operator Telecom Service
Provider (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.
Issuing directions, the Court
HELD: 1. The following three questions arise for
consideration:
(1) Whether spectrum can be subjected to proceedings
under the Code? (2) In the case of sharing, how the payment is
to be made by the Telecom Service Provider ('TSP')? and (3) In
the case of trading, how the liability of the seller and buyer is to
be determined? [Para 10][555-F]
2.1 In Re. Whether spectrum can be subjected to
proceedings under the Code?
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 3(10) of The Insolvency and Bankruptcy Code,
2016defines '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'. 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
A
B
C
D
E
F
G
H
543
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. 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 DoT's permission and its approval
to the resolution plan would be a substitute for Trading Guideline
Nos.10, 11, and 12? [Paras 16-19][562-C; 564-C-H; 565-A]
2.2 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. 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. A question of seminal significance
also arises whether the spectrum is a natural resource, the
Government is holding the same as cestuique 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
UNION OF INDIA v. ASSOCIATION OF UNIFIED TELECOM
SERVICE PROVIDERS OF INDIA ETC. ETC.
A
B
C
D
E
F
G
H
544
SUPREME COURT REPORTS
[2020] 11 S.C.R.
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.
The aforesaid various questions should first be considered by
the NCLT. Let the NCLT consider the aforesaid aspects and pass
a reasoned order after hearing all the parties. It being a
jurisdictional question, it requires to be gone into at this stage
itself. It is made clear that the Court has not observed on the
merits of the case, and all the questions are kept open to be
examined by the NCLT. [Paras 20-23][565-B-H; 566-A-B]
3. In Re. Sharing Coming to the question as to the liability
of sharing operator, who is sharing the spectrum of the original
licensee of the past AGR dues of the original licensee is
concerned, that spectrum sharing is permitted and approved by
the Sharing Guidelines dated 24.09.2015. 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. On going
through the entire Sharing Guidelines, it does not stipulate
anything about the past dues of the sharing operators. According
to DoT, in case of sharing of spectrum, there is an increment of
0.5% in SUC rate, and both 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
A
B
C
D
E
F
G
H
545
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.
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, 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.
[Paras 24-26][566-C; 569-F; 573-C-E, G-H; 574-A-B]
4. In Re. Trading 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 buyer's liability shall be as
per para 11 of the Spectrum Trading Guidelines dated 12.10.2015.
Para 11 of the Spectrum Trading Guidelines was further clarified
vide O.M. dated 12.05.2016. 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 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
UNION OF INDIA v. ASSOCIATION OF UNIFIED TELECOM
SERVICE PROVIDERS OF INDIA ETC. ETC.
A
B
C
D
E
F
G
H
546
SUPREME COURT REPORTS
[2020] 11 S.C.R.
O.M. dated 12.05.2016, the seller's dues prior to the concluding
of the agreement/spectrum trading shall not be upon the buyer.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. 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. It was stated that they have paid dues as per the selfassessment or, in some cases, demands have not been raised.
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 self-assessment and raise demand, if necessary, after due
verification. [Paras 27-29][574-C; 575-G; 576-A-B, C-E]
5. Payment of dues of AGR 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 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.
Some of the companies are under insolvency proceedings, validity
A
B
C
D
E
F
G
H
547
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. However, the period of 20
years fixed for payment is excessive. It is a revenue sharing
regime, and it is grant of sovereign right to the TSPs. under the
Telecom Policy. Some reasonable time is to be granted,
considering the financial stress and the banking sector's
involvement. It is deemed appropriate to grant facility of time to
make payment of dues in equal yearly instalments. Rest of the
decision, taken by the Cabinet, shall stand except the
modifications concerning the time schedule for making payment
of arrears. Further, DoT has decided to withdrawthe demands
raised for licence fee based on non-telecom revenue from the
non-telecom public sector undertakings, which are
M/s. Powergrid, GAIL, Oil India Ltd., DMRC, which constitutes
about 96% of the demand regarding non-telecom PSUs.
[Paras 33, 35, 36, 37][578-G; 579-H; 580-A-D, H; 581-A]
6. Following directions inter alia are issued: (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 re-assessment. (ii) That, at the first instance,
the respective Telecom Operators shall make the payment of
10% of the total dues as demanded by DoT by 31.3.2021.
(iii) TSPs. have to make payment in yearly instalments
commencing from 1.4.2021 up to 31.3.2031 payable by 31st March
of every succeeding financial year. (iv) The existing bank
guarantees that have been submitted regarding the spectrum shall
be kept alive by TSPs. until the payment is made. (v) In the event
of any default in making payment of annual instalments, interest
would become payable as per the agreement along with penalty
and interest on penalty automatically without reference to Court.
Besides, it would be punishable for contempt of Court.
[Para 38][581-B-F]
Union of India v. Association of Unified Telecom Service
Providers of India (2020) 3 SCC 525 : [2019] 16 SCR
672; Union of India & Anr. v. Association of Unified
UNION OF INDIA v. ASSOCIATION OF UNIFIED TELECOM
SERVICE PROVIDERS OF INDIA ETC. ETC.
A
B
C
D
E
F
G
H
548
SUPREME COURT REPORTS
[2020] 11 S.C.R.
Telecom Service Providers of India & Ors. (2011) 10
SCC 543 : [2011] 14 SCR 657; Centre for Public
Interest Litigation and Ors. v. Union of India and Ors.
(2012) 3 SCC 1 : [2012] 3 SCR 147; M/s. Embassy
Property Development Pvt. Ltd. v. State of
Karnataka 2019 (17) SCALE 37; Ram Dass v. Davinder
(2004) 3 SCC 684 : [2004] 3 SCR 518; Committee of
Creditors of Essar Steel India Limited v. Satish Kumar
Gupta and Ors. (2019) SCC OnLine SC 1478 -
referred to.
Case Law Reference
[2019] 16 SCR 672
referred to
Para 1
[2011] 14 SCR 657
referred to
Para 2
[2012] 3 SCR 147
referred to
Para 11 (ix)
[2004] 3 SCR 518
referred to
Para 11 (xi)
CIVIL APPELLATE JURISDICTION: M.A. (D) No. 9887 of
2020 in Civil Appeal No. 6328-6399 of 2015.
From the Judgment and Order dated 23.04.2015 of the Telecom
Disputes Settlement and Appellate Tribunal in Petition No. 7 of 2003, P
No. 82 of 2005; P. No. 57 of 2006; P. Nos. 284, 289, 290, 291, 292 of
2007; P. Nos. 33, 34, 42, 249, 256 of 2008; P. Nos. 69, 151, 201, 233, 234,
235, 244 of 2009; P. No. 106 of 2010; P. Nos. 388, 474, 475, 476, 477,
478, 480 of 2011; P. Nos. 43, 97, 98, 99, 100, 101, 102, 103, 104, 105, 106,
107, 108, 109, 110, 111, 112, 113, 114, 115, 116, 117, 118, 150, 170, 171,
172, 173, 174, 175, 176, 177, 178, 179, 180, 181, 198, 199, 200, 201, 202,
203, 204, 205 of 2012]
With
Diary No(s). 2450, 2458, 2461, 2476, 2578 of 2020
W.P.(C) No. 238/2020,SMC(C) No. 1/2020, MA 725-796/2020 in
C.A. No. 6328-6399/2015, MA No. 1464/2020.
Tushar Mehta, SG, Ramji Srinivasan, Kapil Sibal, Ritin Rai, Shyam
Divan, Ravi Kadam, Harish Salve, K.V. Vishwanathan, Maninder Singh,
Ranjit Kumar, Sandeep Sethi, Niraj Kishan Kaul, Sr.Advs., Gurmeet
Singh Makker, Ms. Binu Tamta, Rajat Nair, Ms. Swati Ghildiyal, Kanu
Agarwal, Ashok Panigrahi, Dhruv Tamta, Ms. Manali Singhal, Mansoor
A
B
C
D
E
F
G
H
549
Ali Shoket, Santosh Sachin, Deepak S Rawat, Ms Aanchal Kapoor, Nitin
Kala, Kunal Singh, Ms. Ranjeeta Rohatgi, Harsh Kaushik, Vijayendra
Pratap Singh, Nizam Pasha, Faisal Sherwani, Gurpreet Singh Kahlon,
Mahesh Agarwal, Ms. Shally Bhasin, Victor Das, Ms. Saloni Mahajan,
E.C. Agrawala, Manjul Bajpai, Nitin Kala, Pukhrambam Ramesh Kumar,
Kunal Singh, Ms. Anupama Nagangom, Karun Sharma, Anil Kumar
Mishra, Sriram Parakkat, Anoop Rawat, Ms. Smarika Singh, Ms. Shreya
Sircar, Chaitanaya Safaya, Anuj Berry, Rishabh Sharma, Saurav Panda,
Zeeshan Khan, Ms. Salonee Kulkarni, Rishabh Jaisani, Ms. Kriti Kalyani,
Shardul S. Shroff, K.R. Sasiprabhu, Raghav Shankar, Bhavuk Agarwal,
Vishnu Sharma,Tushar Bhardwaj, Ms. Vibha Dhawan, Ms. Alvia Ahmed,
Akshat Jain, Karun Sharma, Amit Dhingra, Rohit Mahajan, Swetank
Shantanu, Ravi S Chauhan, Ankit Kumar, Ms. Shikha Sarin, Rahul
Narayan, Sameer Abhyankar, Amish Tandon, Ayush Beotra, Sanjay
Kapur, Ms. Megha Karnwal, V. M. Kannan, Sambit Panja, Harshal
Narayan, Abhay Chattopadhyay, Ms. Nikita Chitale, Atul Menon, Advs.
for the appearing parties.
The following Judgment of the Court was delivered:
JUDGMENT
1. This Court passed judgment and order in C.A. Nos.6328-6399
of 2015 - Union of India v. Association of Unified Telecom Service
Providers of India and other civil appeals decided by a common
judgment and order dated 24.10.2019. The Court decided regarding the
definition of the 'AGR' and dues to be paid thereunder.
2. The concept of AGR arose in the light of the provisions contained
in the policy framed by the Government of India and the provisions of
the Indian Telegraph Act. Under section 4(1) of the Telegraph Act, the
Central Government has the exclusive privilege of establishing,
maintaining, and working telegraphs. Section 4 of the Telegraph Act
enables the Central Government to part with the exclusive privilege in
favour of any other person by granting a licence on such conditions and
considering such terms as it thinks fit. The licence issued under section
4(1) becomes a contract between a licensor and a licensee. This Court
considered the provisions of the Telegraph Act in AUSPI (I) matter -
(2011) 10 SCC 543 in this very case, thus:
"37. A bare perusal of sub-section (1) of Section 4 of the
Telegraph Act shows that the Central Government has the
exclusive privilege of establishing, maintaining and working
UNION OF INDIA v. ASSOCIATION OF UNIFIED TELECOM
SERVICE PROVIDERS OF INDIA ETC. ETC.
A
B
C
D
E
F
G
H
550
SUPREME COURT REPORTS
[2020] 11 S.C.R.
telegraphs. This would mean that only the Central Government,
and no other person, has the right to carry on telecommunication
activities.
x x x
39. The proviso to sub-section (1) of Section 4 of the Telegraph
Act, however, enables the Central Government to part with this
exclusive privilege in favour of any other person by granting a
licence in his favour on such conditions and in consideration of
such payments as it thinks fit. As the Central Government owns
the exclusive privilege of carrying on telecommunication activities
and as the Central Government alone has the right to part with
this privilege in favour of any person by granting a licence in his
favour on such conditions and in consideration of such terms as it
thinks fit, a licence granted under the proviso to sub-section
(1) of Section 4 of the Telegraph Act is in the nature of a
contract between the Central Government and the licensee.
40. A Constitution Bench of this Court in State of Punjab v.
Devans Modern Breweries Ltd., (2004) 11 SCC 26, relying on
Har Shankar case, (1975) 1 SCC 737 and Panna Lal v. State
of Rajasthan, (1975) 2 SCC 633, has held in para 121 at p. 106
that issuance of liquor licence constitutes a contract between the
parties. Thus, once a licence 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 sub-section (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 sub-section (1) of Section 4 of
the Telegraph Act for providing specified public telecommunication
A
B
C
D
E
F
G
H
551
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. Sub-section 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 of the Central Government
to carry on telecommunication activities nor do they alter the
contractual nature of the licence granted under the proviso to
sub-section (1) of Section 4 of the Telegraph Act."
 (emphasis supplied)
3. During consideration of the matter, concerning the M.A. filed
by the Union of India for extension of time to make the payment, it was
pointed out that several telecom service providers were under insolvency
proceedings under The Insolvency and Bankruptcy Code, 2016 (for short
"the Code"). This Court passed an order on 20.7.2020, and the same is
extracted hereunder:
"We have heard the learned counsel appearing for the parties at
length with respect to the prayer made by the Central Government
and the time frame for making the payment as per the order passed
by this Court. During course of hearing, again an attempt was
made to wriggle out of our judgment and orders, which were
passed by this Court under the guise of reassessment and
recalculation. That is not at all permissible. In view of decision,
there is no scope of raising any further dispute with respect to
any item or to raise fresh dispute. No dispute can be raised with
respect to dues and they have to be paid. New round of litigation
is prohibited. In the second inning, we have heard the same after
remand of the issues to the TDSAT. Thereafter, there is no question
of entertaining any kind of dispute with respect to the payment
and dues worked out. No dispute shall be entertained. The
calculations which have been given and the amount to be recovered
at pages 180-181 of M.A.D. No. 9887 of 2020 (application for
modification) in C.A. No. 6328-6399 of 2015 are taken to be as
final amount and there can be no dispute raised about it. No
recalculation and self-assessment can be undertaken. The
calculations are as under :-
UNION OF INDIA v. ASSOCIATION OF UNIFIED TELECOM
SERVICE PROVIDERS OF INDIA ETC. ETC.
A
B
C
D
E
F
G
H
552
SUPREME COURT REPORTS
[2020] 11 S.C.R.
S.
No.
Name of the Company
Total Demand
of DoT
incorporating
C&AG and
Special Audit
as on October
2019 (Rs. Cr.)
(LF+SUC)
Self Assessment
by Licensee
pursuant to the
Hon'ble SC
Judgment (Rs. Cr.)
Payment Received
till 06.03.2020 (Rs.
Cr.)
Balance Due
(Rs. Cr.)
A
B
C
D
Operational TSPs party to the litigation
1.
BHARTI AIRTEL GROUP
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 (1-7)
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
"AMOUNTS RECOVERABLE FROM MAJOR TSPs AS PER
PRILIMINARY ASSESSMENTS
A
B
C
D
E
F
G
H
553
Note :
1. Total Demands are inclusive of Principal, Interest, Penalty
and Interest on Penalty.
2. Total Demands have been calculated generally up to FY
2016-17. On these outstanding amounts, Interest/Penalty/
Interest on Penalty is calculated up to October, 2019.
3. All dues are subject to further revisions due to departmental
assessments, CAG audits, Special Audits, Court Cases etc."
However, when we consider the dues of Telecom Service
Providers under insolvency, we find that there are several
companies which have dues to the extent of Rs. 38,964.27 crores,
which have gone under liquidation. Since the dues are huge, we
propose to examine the bonafides of the initiation of the
proceedings under the IBC. Let all the documents of the companies
viz. Aircel Group of Companies, Reliance Communication/Reliance
Telecom Limited, Sistema Shyam Teleservices Ltd. and Videocon
Telecommunications Ltd. relating to liquidation and orders passed
in proceedings be placed on record within 10 days from today.
We have closed the matter with respect to the prayer made
for making the payment in installments and the offer made by the
Government, the time frame thereto and how to secure the amount.
The order is reserved on that aspect.
However, we will hear the matter separately with respect
to the companies under liquidation and test the bonafides of their
action and how to ensure that the amount is recovered. Let all the
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
Sub-total (11-16)
10791.94
222.1
0.00
10791.94
TOTAL
169048.65
37176.17
25901.56
143271.74
UNION OF INDIA v. ASSOCIATION OF UNIFIED TELECOM
SERVICE PROVIDERS OF INDIA ETC. ETC.
A
B
C
D
E
F
G
H
554
SUPREME COURT REPORTS
[2020] 11 S.C.R.
documents be placed on record within 10 days from today and
the matter be listed for hearing about these companies on the
above aspect on 10.08.2020.
Written submissions and the reply, if any, be filed on or
before 07.08.2020."
This Court wanted to examine the bona fides of the telecom service
providers who have resorted to the process of insolvency, hence, invited
them to file their response. Before the initiation 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 pre-condition 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 subject-matter 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 pre-condition
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 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
A
B
C
D
E
F
G
H
555
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.
7. The details of sharing arrangement between different telecom
service providers have been given.
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.
9. Another aspect is that how much time is to be provided to the
telecom service providers to pay AGR dues. The Union of India on the
representation made by the telecom service providers and Indian Banks'
Association, has decided to provide the facility of making payment in
instalments within 20 years.
10. The following three questions arise for consideration:
(1) Whether spectrum can be subjected to proceedings under
the Code?
(2) In the case of sharing, 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:
UNION OF INDIA v. ASSOCIATION OF UNIFIED TELECOM
SERVICE PROVIDERS OF INDIA ETC. ETC.
A
B
C
D
E
F
G
H
556
SUPREME COURT REPORTS
[2020] 11 S.C.R.
(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 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 be taken into control
and custody by the resolution professionals, which is in the ownership of
the corporate debtor. Explanation to Section 18 provides that assets
owned by a third party in possession of the corporate debtor or held
under contractual arrangements are not included in the term 'assets' for
the purpose of Section 18. It is not an asset for Section 18. The spectrum
held under a contractual arrangement is not an asset of the corporate
debtor. The spectrum cannot be a subject matter of proceedings under
the Code. The resolution professional has no jurisdiction to prepare a
resolution plan as per Guidelines for Trading of Access Spectrum by
Access Services Providers (for short, 'the Guidelines of 2015') issued
on 12.10.2015.
(iv) Guideline No.10 provides that for trading of right to use the
spectrum, both the licensees shall give an undertaking that they are in
compliance with the terms and conditions of the Guidelines for spectrum
trading that is seller and buyer both. In case terms and conditions for
spectrum trading are not fulfilled, the Government will have the right to
take appropriate action including annulment of trading arrangement.
A
B
C
D
E
F
G
H
557
(v) As per Guideline Nos. 11 and 12 of the Guidelines of 2015, the
seller has to clear the dues. After the trading date, the Government has
the discretion to recover the amount from the seller or buyer, jointly or
severally.
(vi) The permission was sought to trade the licence; however, the
Government of India, DoT, declined it because arrears have to be paid,
and other conditions were not fulfilled. After that, insolvency proceedings
were initiated, which were not permissible concerning the spectrum given
provisions contained in Section 18 of the Code.
(vii) National Company Law Tribunal (for short, 'the NCLT'),
Mumbai vide order dated 27.11.2019, held that licence is an asset of
State over which 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 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
UNION OF INDIA v. ASSOCIATION OF UNIFIED TELECOM
SERVICE PROVIDERS OF INDIA ETC. ETC.
A
B
C
D
E
F
G
H
558
SUPREME COURT REPORTS
[2020] 11 S.C.R.
oxide for a specified period. It was further held that the right not to be
dispossessed found in Section 14(1)(d) of the Code would have nothing
to do with the rights conferred by a mining lease, especially on a
Government land.
(xi) In Ram Dass v. Davinder, (2004) 3 SCC 684, it was held that
possession amounts to holding property as an owner, while occupy is to
keep possession by being present in it. Spectrum is not capable of being
in possession of licensee neither in the eye of law they can be said to be
in possession.
(xii) As per Regulation 32 of the Insolvency and Bankruptcy Board
of India (Insolvency Resolution Process for Corporate Persons)
Regulations, 2016, the spectrum agreement cannot be held to be essential
goods or services under Section 14(2) of the Code. Similarly, it cannot
be subjected to proceedings under Section 18 of the Code. In the
resolution plan, selling the right to use the spectrum to some other
company could not have been made. A corporate debtor cannot create
any third party right in any manner whatsoever. Against the order dated
9.6.2020 passed by the NCLT approving the resolution plan of UVARC,
DoT has filed a petition before the NCLAT relating to Aircel Group.
Guidelines are statutory and binding.Aircel Licensee has defaulted in
making payment of Deferred Spectrum Auction.
(xiii) In the case of RCOM, W.P. (C) No.845 of 2018 was filed
under Article 32 of the Constitution of India for closure/quashing of the
CIRP initiated against it. After that, payment was made to M/s. Ericsson
India Pvt. Ltd, who initiated the proceedings under the Code. RCOM
has sought NOC to trade Reliance Jio Infocomm Limited (for short,
'RJIL'). DoT informed it on 14.12.2018 that the Government couldn't
give the NOC for trading. This Court decided the proceedings on
24.4.2019. Thereafter, the Board of Directors of RCOM decided to
continue with the proceeding under the Code and, decided to withdraw
the appeal from NCLAT.