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Videocon’s AGR dues: SC stops DoT from encashing Bharti Airtel’s bank guarantees

The Supreme Court on Tuesday ordered the Department of Transportation not to use Bharti Airtel's bank guarantees (BGs) for three weeks in order to recover $1,376 crore in AGR-related dues from Videocon Telecom Ltd (VTL), which sold its spectrum to the Bharti group.

The Supreme Court, after rejecting Airtel's claim that VTL dues are not owed to it, allowed the telecom giant to take its concerns to the Telecom Disputes Settlement and Appellate Tribunal (TDSAT). “For the next three weeks, the Department of Transportation would not invoke Respondent (Bharti Airtel bank's) guarantee,” "In its ruling, a bench comprising of justices L. Nageswara Rao, S. Abdul Nazeer, and M. R. Shah said.

The following is the disagreement between the two parties: The DoT filed the demand notice to Bharti based on the Supreme Court's ruling on AGR dues, which said that when a telecom operator's full spectrum is traded, the dues must be paid by the buyer. However, according to Bharti, under the spectrum trading guidelines, only unpaid dues at the time of the trade that are discovered afterwards may be collected by the DoT by either party or jointly. In the case of AGR, Bharti believes that because the dues were known prior to the spectrum being traded, the seller, Videocon Telecommunications, is responsible.

The bench made it plain to senior counsel Shyam Divan, who was representing Airtel, right away that it would not tamper with the prior decision. “We are stating unequivocally that we will not interfere with the judgement and that you will be free to withdraw and seek the proper forum,” "The bench said. It also took note of Solicitor General Tushar Mehta's comments on behalf of the Department of Telecom, which stated that the DoT will be allowed to present all grounds, including any objections to the jurisdiction, before the forum to be chosen by Airtel.

According to Airtel, a Department of Transportation notification dated 17 August instructed it to pay VTL's AGR related dues within a week or face BGs. Divan used a number of papers, including the spectrum trading rules, to argue that the dues — resulting from VTL's Adjusted Gross Revenue or AGR, the seller of the spectrum — were known at the time of the transaction and that the seller, not the buyer, can be held liable. VTL has agreed to sell its spectrum to Bharti Airtel in 2016 as part of an agreement. By 31 March 2021, the Bharti group has already paid the DoT a total of Rs. 18,004 crore in AGR-related dues, which is more than 10% of its overall AGR dues of Rs 43,000 crore, he added. The Supreme Court had ordered in September of last year that telecom providers pay 10% of the total dues requested by the Department of Transportation by 31 March 2021, and the balance in annual instalments from 1 April 2021 to 31 March 2031.

Airtel, according to Divan, should not be prosecuted without being given a sufficient opportunity to air its complaints in a proper venue. “We will let him withdraw and go before the TDSAT and hold your hand for two-three weeks,” the bench advised the DoT. On 23 July the Supreme Court dismissed pleas filed by telecom giants such as Vodafone Idea and Bharti Airtel seeking to correct purported mistakes in the computation of AGR related dues owed to them.

The court led by Justice L Nageswara Rao issued the decision, saying, "All the miscellaneous applications are dismissed." The telecom firms had argued before the Supreme Court that there were arithmetical mistakes in the calculations and that there were instances of duplicate entries. In September of last year, the Supreme Court gave telecom service providers struggling to pay Rs. 93,520 crore in AGR related dues a ten-year timeframe to settle their outstanding sum with the government. There will be no objection lodged by the telcos, and there will be no re-assessment, according to the highest court, which decided that the DoT's demand for AGR dues will be final.

The Supreme Court issued its decision on the AGR case in October of this year. The Department of Transportation filed a petition before the Supreme Court in March of last year, asking for permission to enable telecoms to pay their dues over a 20-year term.

Videocon, which is now facing insolvency procedures, sold its full 30 MHz spectrum to Bharti Airtel in 2016. According to the Supreme Court's 20 July 2020 judgement, Bharti Airtel has paid Rs. 18,400 crore, or more than 10% of its entire AGR dues of Rs. 45,356 crore. The top court has yet to rule on review petitions filed by Bharti Airtel and Vodafone Idea, in which the firms sought correction or arithmetical mistakes in the DoT's AGR requests.


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