ASSOCIATION OF UNIFIED TELECOM SERVICE PROVIDERS OF INDIA ETC.ETC. =In the Suo Motu Contempt Petition, in view of the reply filed and compliance reported, and an unconditional apology tendered, which we accept, we discharge notice issued to Shri Mandar Deshpande and drop the proceedings.

1
REPORTABLE
SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
M.A. (D) No. 9887 OF 2020 IN
CIVIL APPEAL NOS.6328­6399 OF 2015
UNION OF INDIA ..APPELLANT(S)
VERSUS
ASSOCIATION OF UNIFIED TELECOM
SERVICE PROVIDERS OF INDIA ETC.ETC. ..RESPONDENT(S)
WITH
SUO MOTU CONTEMPT PETITION [C] NO. 1 OF 2020
DIARY NO(S). 2450/2020
DIARY NO(S). 2458/2020
DIARY NO(S). 2461/2020
DIARY NO(S). 2476/2020
DIARY NO(S). 2578/2020
W.P.(C) NO. 238/2020
MA 725­796/2020 IN C.A. NO. 6328­6399/2015
M.A. NO.1464 OF 2020
J U D G M E N T
2

  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 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 sub­section (1) of Section 4 of the
    Telegraph Act shows that the Central Government has the
    exclusive privilege of establishing, maintaining and working
    telegraphs. This would mean that only the Central
    Government, and no other person, has the right to carry on
    telecommunication activities.
    x x x
  3. The proviso to sub­section (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
    3
    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 sub­section (1) of Section 4 of
    the Telegraph Act is in the nature of a contract between
    the Central Government and the licensee.
  4. 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 sub­section (1) of Section 4 of the Telegraph Act.
  5. 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 of the Central
    Government to carry on telecommunication activities nor do
    they alter the contractual nature of the licence granted under
    the proviso to sub­section (1) of Section 4 of the Telegraph
    Act.”
    (emphasis supplied)
  6. 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
    4
    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 180­181 of M.A.D. No. 9887 of 2020 (application for
    modification) in C.A. No. 6328­6399 of 2015 are taken to be as
    final amount and there can be no dispute raised about it. No
    recalculation and self­assessment can be undertaken. The
    calculations are as under :­
    “AMOUNTS RECOVERABLE FROM MAJOR TSPs AS PER
    PRILIMINARY ASSESSMENTS
    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
  7. BHARTI AIRTEL
    GROUP
    43980.00
    13004.00 18,004.00 25976.00
  8. TELENOR INDIA
    PRIVATE
    LIMITED
    5
    BHARTI GROUP 43980.00 13004.00 18004.00
  9. IDEA CELLULAR
    LTD. 58254.00 21533 (LF 14453
  • SUC7080)
    3,500.00 4. VODAFONE 54,754.00
    GROUP OF
    COMPANIES
    VODAFONE IDEA 58254.00 21533.00 3500.00 54754.00
  1. TATA GROUP OF
    COMPANIES 16798.00 2197 (LF 1720 +
    SUC 477) 4,197.00 12,601.00
  2. QUADRANT
    TELEVENTURES
    LIMITED
    189.91 25.28 0.69 189.22
  3. RELIANCE JIO
    INFOCOMM LTD.
    70.53 194.79 (LF
    148.03+SUC
    46.76)
    195.18 ­
    Sub­total (1­7) 119292.44 36954.07 25,896.87 93520.22
    TSPs under Insolvency
  4. AIRCEL GROUP
    OF COMPANIES
    12389.00 ­ 12389.00
  5. RELIANCE
    COMMUNICATIO
    N/
    RELIANCE
    TELECOM
    LIMITED
    25199.27
    3.96
    25194.58
  6. SISTEMA SHYAM
    TELESERVICES
    LTD.
    222.1 (LF
    166.1+SUC 56)
    0.73
  7. VIDEOCON
    TELECOMMUNIC
    ATIONS LTD.
    1376.00 ­ 1376.00
    Sub­total (8­10) 38964.27 ­ 4.69 38959.58
    TSPs which were not party to the litigation
  8. LOOP TELECOM
    PVT. LTD.
    604.00 ­ 604.00
  9. ETISALAT DB
    TELECOM
    PRIVATE
    LIMITED
    6
  10. S TEL PVT. LTD.
  11. BHARAT
    SANCHAR
    NIGAM LIMITED
    5835.85 ­ ­ 5835.85
  12. MAHANAGAR
    TELEPHONE
    NIGAM LIMITED
    4352.09 ­ 4352.09
    Sub­total (11­16) 10791.94 222.1 0.00 10791.94
    TOTAL 169048.65 37176.17 25901.56 143271.74
    Note :
  13. Total Demands are inclusive of Principal, Interest, Penalty
    and Interest on Penalty.
  14. Total Demands have been calculated generally up to FY
    2016­17. On these outstanding amounts,
    Interest/Penalty/Interest on Penalty is calculated up to October,
    2019.
  15. 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 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.”
    7
    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 pre­condition to such permission. Various
    sharing arrangements made inter se telecom service providers with
    respect to the spectrum also came to the fore.
  16. 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 pre­
    8
    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.
  17. 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 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.
  18. 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.
    9
  19. The details of sharing arrangement between different telecom
    service providers have been given.
  20. 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.
  21. 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.
  22. 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?
    10
  23. Shri Tushar Mehta, learned Solicitor General of India on behalf
    of Government of India, argued as under:
    (i) Section 4 of the Indian Telegraph Act, 1885, provides that the
    Central Government has the exclusive privilege of establishing,
    maintaining, and working telegraphs. The DoT grants licences which
    are in the form of contractual arrangements. The TSPs are bound by
    the terms and conditions contained therein. As per the contractual
    terms, the licence is strictly contingent upon fulfilment of the terms
    and conditions, the payment being first and foremost. On failure of
    payment, the licensor is entitled to take action under the Licence
    Agreement, including revocation and termination.
    (ii) The spectrum is a scarce recognised natural resource, and this
    Court in 2G judgment [C.A.No.423 of 2010] held that the natural
    resources belong to the people and cannot be subjected to proceedings
    under the Code. The 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
    11
    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.
    (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
    12
    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.
    13
    (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 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
    14
    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
    15
    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. RCL/RTL defaulted in payment of
    various deferred spectrum auction instalments.
    (xiv) The matters of AGR being C.A. Nos.6328­6399 of 2015 were sub
    judice before the commencement of CIRP. A demand was raised to
    RCL/RTL. AGR dues amount of RCL/RTL is Rs.25,199.27 crores.
    (xv) In the case of Videocon, DoT was not the party. DoT was not
    invited to the Committee of Creditors’ meetings, in complete violation
    of the provisions of the Code. The resolution professional applied
    before NCLT to restrain DoT from encashing certain bank guarantees
    submitted by Videocon, in which interim injunction has been granted.
  24. 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
    16
    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 self­assessment basis and
    shall pay a further sum demanded by DoT.
  25. Shri Shyam Divan and Shri Ravi Kadam, learned senior counsel
    on behalf of Committee of Creditors of RCOM, Aircel Limited, and
    Dishnet Wireless Limited, argued:
    (i) the spectrum and telecom licences are assets of the telecom
    company. Section 18(f) of the Code mandates that resolution
    professional would take control and custody of any asset over which
    the corporate debtor has ownership rights as recorded in the balance
    sheet of the corporate debtor. Section18(f)(iv) includes intangible
    assets. The telecom licence and right to use the spectrum form a part
    of the intangible assets. The right to use is a valuable right. In the
    financial statement, telecom licence and the right to use the spectrum
    17
    had been shown as an intangible asset. Without telecom licences and
    spectrum, there would be no hope of reviving Aircel entities.
    (ii) Clause 6 of the Licence Agreement deals with the restrictions of
    transfer of licence by either directly or indirectly without the prior
    written consent of the licensor. It can be transferred on fulfilment of
    certain conditions.
    (iii) Reliance has been placed on Consultation Paper dated 7.3.2012.
    Its licence/spectrum is considered an intangible asset, and in the
    Guidelines for the Reporting System on Accounting Separation
    Regulations, 2016, the right to use spectrum is again shown as an
    intangible asset. The Indian Accounting Standards­38 has also been
    referred to indicate that an asset is a resource controlled by the entity
    for further economic benefits. The spectrum and licence being assets
    of the telecom company are not assets owned by a third party under a
    trust.
    (iv) The licence and spectrum of Aircel Entities are held in security
    by the lenders in terms of the TPAs to which the DoT is also a party.
    In the resolution plans, DoT acted as an operational creditor. The
    NCLT asked to take the approval of the DoT for the transacting
    spectrum. Thus, it is for the DoT to give permission. Dot has to
    approve the implementation of the resolution plan.
    18
    (v) The Code provides that the resolution plan is to be approved by
    the Committee of Creditors, and the adjudicating authority of the
    NCLT in terms of Section 31 of the Code and liquidation is to be made
    in terms of the priority set out in Section 53 of the Code. Section 5(20)
    defines ‘operational creditor’. Section 5(21) defines ‘operational debt’
    to include dues payable to the Government. Thus, claims of DoT for
    unpaid dues are operational debts, and DoT is an operational creditor.
    (vi) Reliance has been placed upon Section 31 of the Code. The
    resolution plan shall be binding on the corporate debtors, including
    the Central Government, any State Government to whom a debt in
    respect of the payment of dues arising under any law for the time
    being in force. Reliance has also been placed on Committee of
    Creditors of Essar Steel India Limited v. Satish 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.
  26. Shri Ranjit Kumar, learned senior counsel, on behalf of
    Committee of Creditors of Aircel Limited, Aircel Cellular Limited and
    Dishnet Wireless Limited argued that:
    19
    (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, and the lenders. He has
    relied upon the following paragraph:
    “With a view to help and facilitate the financing of the Project
    to be set up by the LICENSEE pursuant to the LICENCE
    referred to above, the parties hereto are desirous of recording
    the terms and conditions to provide transfer/assignment of
    LICENCE as hereinafter provided in this AGREEMENT to
    protect and secure the Lender’s interest arising out of grant of
    financial assistance to the LICENSEE.”
    (ii) Aircel Entities have offered lenders spectrum as a security
    against the loans advanced by the lenders to Aircel Entities. Thus, the
    DoT claim over the spectrum will be subservient to the claims of the
    lenders as per the Code, and DoT has to be treated as an operational
    creditor.
    (iii) The Banks are in the business of lending money for the
    betterment of the national economy, in the same manner, the
    Government is in the business of spectrum. As per Clause 6.3 of the
    Licence Agreement, licence can be transferred subject to fulfilment of
    the conditions agreed between the licensor, licensee, and the lenders.
    (iv) The right to use spectrum is an asset of the corporate debtor.
    Paras 8.4 and 8.5 of the Insolvency Law Committee Report have been
    20
    referred to. Revocation of Licences, permission­based on past dues, is
    prohibited under Section 14 after the moratorium is created. Current
    dues have to be paid during the moratorium period. He has referred
    to Sections 3(27) and 14(1).
    (v) The provisions of the Code have to prevail. The Government has
    entered into a pure business transaction by granting a licence and
    taking fees against the grant. The spectrum is a raw material for
    telecom companies. If the spectrum’s licence is terminated, the
    resolution professional will find it difficult to run the company as a
    going concern. DoT is an operational creditor. AGR dues are
    contractual dues and cannot have precedence over the dues of
    secured creditors. He has referred to Section 53 to contend that the
    operational creditor is protected in a manner provided in the Code.
    Section 238 of the Code contains a non­obstante clause to the effect
    that anything inconsistent therewith contained in any other law for
    the time being in force, the Code shall prevail. As such, the Code
    overrides the provisions of the Indian Telegraph Act, 1885, Indian
    Wireless Telegraphy Act, 1933, and Telecom Regulatory Authority of
    India Act, 1997.
  27. In the case of RCOM, the resolution plan is pending
    consideration of the adjudicating authority under Section 31 of the
    Code.
    21
  28. 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 and on aircrafts within or above India, or Indian
    territorial waters, and
    (b) of telegraphs other than wireless telegraphs within any part
    of India.
    Explanation.—The payments made for the grant of a licence
    under this sub­section shall include such sum attributable to
    the Universal Service Obligation as may be determined by the
    Central Government after considering the recommendation
    made in this behalf by the Telecom Regulatory Authority of
    India established under sub­section (1) of Section 3 of the
    Telecom Regulatory Authority of India Act, 1997 (24 of 1997).
    (2) The Central Government may, by notification in the Official
    Gazette, delegate to the telegraph authority all or any of its
    powers under the first proviso to sub­section (1).
    The exercise by the telegraph authority of any power so
    delegated shall be subject to such restrictions and conditions
    as the Central Government may, by the notification, think fit
    to impose.
    22
    (3) Any person who is granted a license under the first proviso
    to sub­section (1) to establish, maintain or work a telegraph
    within any part of India, shall identify any person to whom it
    provides its services by—
    (a) authentication under the Aadhaar (Targeted Delivery of
    Financial and 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 sub­section (1) to establish, maintain or work a
    telegraph within any part of India is using authentication
    under clause (a) of sub­section (3) to identify any person to
    whom it provides its services, it shall make the other modes of
    identification under clauses (b) to (d) of sub­section (3) also
    available to such person.
    (5) The use of modes of identification under sub­section (3)
    shall be a voluntary choice of the person who is sought to be
    identified and no person shall be denied any service for not
    having an Aadhaar number.
    (6) If, for identification of a person, authentication under
    clause (a) of sub­section (3) is used, neither his core biometric
    information nor the Aadhaar number of the person shall be
    stored.
    (7) Nothing contained in sub­sections (3), (4) and (5) shall
    prevent the Central Government from specifying further
    safeguards and conditions for compliance by any person who
    is granted a license under the first proviso to sub­section (1) in
    respect of identification of person to 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).”
    23
  29. 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’.
  30. 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
    24
    assumed to be of significance in case spectrum is subjected to
    insolvency proceedings, which must be considered.
  31. 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 non­fulfilment 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 ?
  32. 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.
  33. 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
    25
    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.
  34. 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,
    26
    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.
  35. We consider it appropriate that 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. We make it clear that it being a jurisdictional question, it
    requires to be gone into at this stage itself. Let the question be decided
    within the outer limits of two months. We also make it clear that we
    have not observed on the merits of the case, and we have kept all the
    questions open to be examined by the NCLT.
    In Re. Sharing
  36. 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. Single
    27
    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. Even the DoT in its
    affidavit and compliance of the order dated 14.08.2020, stated as
    under so far as the spectrum sharing is concerned:
    “4.It is respectfully submitted that as per the Guidelines
    issued by DoT in 2015, “Spectrum sharing” allows operators to
    pool their respective spectrum for usage in a specific
    geographical area (LSA) thus complementing each other’s
    spectrum needs and facilitating more efficient utilization of the
    spectrum. The rationale is to facilitate optimization of
    resources and to create a conducive environment for telecom
    growth. During the past period of 20 years or more, some
    operators have been able to acquire subscribers and grow at a
    faster rate as compared to other operators. This results in the
    spectrum lying unutilized with some of the players while other
    operators face spectrum crunch as spectrum is a scare
    resource.
    Thus, on the one hand spectrum, which 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.
    28
    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.
  37. It is submitted that the objective of spectrum sharing was to
    provide an opportunity to the Telecom Service Providers to pool
    their spectrum holdings and thereby improve spectral
    efficiency. It is submitted that sharing can also provide
    additional network capacities in places where there is network
    congestion due to shortage of spectrum. It is submitted that
    these aspects were considered by the Central Government
    while approving the Guidelines for Spectrum Sharing. It is
    submitted that Telecom Regulatory Authority of India (TRAI)
    made recommendations on ‘Guidelines on Spectrum Sharing’
    on July 21, 2014, which was considered and approved by the
    Telecom Commission (TC) in its meeting held on 11.06.1025
    and subsequently approved by the Central Government. A
    copy of Spectrum Sharing Guidelines dated 24.09.2015 is
    attached herewith and marked as ANNEXURE – T2.
  38. In case of sharing of spectrum both the service providers
    [sharers] must be in the same band and in the same service
    area. To illustrate “ it may be pointed out that if there are two
    service providers holding 100 units of spectrum each in the
    same band and in the same service area they can share
    spectrum of each other mutually. The Spectrum Usage
    Charges [SUC] will be considered for 100 units for each of the
    TSPs and both will have to pay SUC for their entire spectrum
    holding (100 units each) in that band and in that service area.
  39. With regard to AGR dues for two TSPs sharing spectrum,
    the following scenario emerges:
    i. In case of sharing, the Spectrum does not change hands.
    Both TSPs simultaneously use and have access to the
    spectrum held by each.
    ii. As per the sharing arrangement, each of the TSPs will
    continue to make payment of AGR dues arising for the
    spectrum that each holds.
    iii. However, due to the additional spectrum which each TSP
    gets to use, the AGR based dues (SUC) are assessed at a
    higher rate for each of the TSPs. There is an addition/increase
    by 0.5% in the Spectrum Usage Charge rate, applied
    separately on both TSPs. Thus if SUC rate of each TSP prior to
    sharing was 3%, then this will increase to 3.5% for both of
    them.
    iv. The use of each others spectrum by means of sharing
    should normally lead to increase in AGR for both TSPs. This
    would lead to increased licensed fee and SUC to the
    Government as these are based on share of AGR.
    29
    v. TSPs who share spectrum, continue to pay and are duty
    bound to pay, their AGR based dues arising from the use of
    spectrum.
  40. 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.
  41. It is respectfully submitted that the difference between
    Spectrum Sharing and Spectrum Trading, can therefore be
    culled out as under:
    i. Spectrum sharing allows operators to pool their respective
    spectrum for usage in a specific geographical area and thus
    complementing each other’s needs for more efficient utilization
    of the spectrum. This facilitates optimization of resources as
    also creates conducive environment for the telecom growth.
    ii. Spectrum trading allows parties to transfer their spectrum
    rights and obligations to another party. This allows better
    spectrum usages as the idle spectrum from the hands of one
    service provider gets transferred to the other service provider
    who may be facing spectrum crunch.
    iii. In the case of spectrum sharing, the right to use spectrum
    as granted by the DoT remains with the respective TSPs,
    whereas in the case of spectrum trading, the right to use gets
    transferred from the buyer to the seller.”
    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
    30
    licensees post sharing shall increase by 0.5% of adjusted gross
    revenue. Sharing Guidelines dated 24.09.2015 read as under:
    “No. L­14006/04/2015­NTG
    Government of India
    Ministry of Communications & IT
    Department of Telecommunications
    WPC Wing, 6th floor, Sanchar Bhawan, New Delhi
    Dated: the 24th September, 2015
    Subject: Guidelines for sharing of Access Spectrum by
    Access Service Providers.
    National Telecom Policy, 2012 envisage to move at the
    earliest towards liberalization of spectrum to enable use of
    spectrum in any band to provide any service in any technology
    as well as to permit spectrum pooling, sharing and later,
    trading to enable optimal utilization of spectrum through
    appropriate regulatory framework. After considering the
    recommendations of TRAI on spectrum sharing, the
    Government has decided to allow sharing of access spectrum
    as per guidelines given below:
    (1). Spectrum sharing shall be allowed only for the access
    service providers holding Cellular Mobile Telephone Service
    (CMTS)/Unified Access Service License (UASL)/Unified License
    (Access Services)(UL(AS)/Unified License (UL) with
    authorization of Access Service in a Licensed Service Area
    (LSA), where both the licensees are having spectrum in the
    same band.
    (2). Spectrum sharing is permitted between two Telecom
    Service Providers utilizing the spectrum in the same band.
    (3). Spectrum sharing is not permitted when both the
    licensees are having spectrum in different bands. Leasing of
    spectrum is not permitted.
    (4). All access 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
    31
    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 market price has been
    paid. Further, in respect of spectrum in 800 MHz acquired in
    the auction held in March 2013, sharing of spectrum shall be
    permitted only if the differential of the latest auction price and
    the March 2013 auction price on pro­rate basis on the balance
    period of right to use the spectrum is paid.
    (ii) In case both the Licensees who plan to share spectrum are
    having the administratively allotted spectrum in that band, the
    sharing of spectrum is permitted only when both the licensees
    have paid One time Spectrum Charges (OTSC) for their
    respective spectrum holdings, above 4.4 MHz (GSM) / 2.5 MHz
    (CDMA) based on reserve price/auction determined price.
    However if the said amount is not paid due to judicial
    intervention in judicial forums barring any coercive action, in
    the interim, sharing of spectrum in such cases will also be
    permitted subject to submission of a bank guarantee for an
    amount equal to the demand raised by the department for one
    time spectrum charge pending final outcome of the court case.
    (iii) In case of proposed sharing where one Licensee has
    spectrum acquired through auction/trading or liberalized
    spectrum and the other has spectrum allotted
    administratively, sharing is permitted only after the spectrum
    charges for liberalizing the administratively allocated spectrum
    are paid. Further, in case of spectrum acquired in auction
    held in March 2013, differential amount as indicated in para
    7(i) above shall be payable in respect of 800 MHz band.
    (9) The use of technology shall be governed by the terms and
    conditions of respective Notice Inviting Application
    (NIA)/license.
    32
    (10). Both the licensees will be individually and collectively
    responsible for complying with the sharing guidelines,
    including interference norms.
    (11). Spectrum sharing will be restricted to sharing by
    only two licensees subject to the condition that there will be at
    least two independent networks provided in the same band.
    (12). For the purpose of charging Spectrum Usage Charges
    (SUC), it shall be considered that the licensees are sharing
    their entire spectrum holding in the particular band in the
    entire LSA.
    (13). Spectrum Usage Charges (SUC) rate of each of the
    licensees post­sharing shall increase 0.5% of Adjusted Gross
    Revenue (AGR). The sharing of spectrum for part of a month,
    full one month period shall be counted for the purpose of
    levying SUC.
    (14). The prescribed limits for spectrum cap shall be
    applicable for both the licensees 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 the licence at the time of giving intimation
    for sharing of right to use the spectrum, the Government will
    have the right to take appropriate action which inter­alia may
    include annulment of sharing arrangement. Appropriate
    modifications will be made in their respective Service License
    and Wireless Operating License (WOL) to facilitate the
    spectrum sharing.
    33
    (18). A non refundable processing fee, as prescribed from
    time to time, shall be payable individually by each licensee for
    each service area at the time of intimation to WPC Wing. At
    present, processing fee of Rs.50,000/­ is to be paid. The
    payment is to be made by draft in favor of Pay & Accounts
    Officer (HQ), DOT payable at New Delhi.
    (19). Licensor/Government reserves the right to modify
    the guidelines from time to time as it may deem fit.
    Sd/­
    (P S M Tripathi)
    Assistant Wireless Adviser
    for and on behalf of President of India.”
  42. According to the DoT and so stated in the affidavit in compliance
    of order/directions dated 21.08.2020, AGR is not calculated bandwise,
    but from the total revenue earned by the TSP using the entire
    spectrum (both shared and not shared). 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 of the remaining spectrum used by it.
    Therefore, there shall not be any liability of the said operator with
    respect to payment of the past dues (post shared) of the sharing
    operator – licensee. Even according to DoT also, both the TSPs
    (sharers) are required to pay the SUC on their respective AGRs.
    Learned counsel appearing on behalf of the Reliance Jio (shared
    34
    operator), which has entered into the sharing between RCom/RTL has
    stated at the Bar that Reliance Jio has paid the AGR post sharing
    including the difference of AGR as per the decision of this Court on
    their own and based on self­assessment. It is stated at the Bar that
    still anything is further held to be due and payable and AGR for the
    period post sharing of the said spectrum originally allotted to RCom
    on the assessment being done, they will make the said payment.
    Similar is the ground of counsel for other TSPs. as to sharing
    arrangement.
  43. 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.
    In Re. Trading:
    35
  44. 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 buyer’s liability shall be as per
    para 11 of the Spectrum Trading Guidelines dated 12.10.2015, which
    reads as under:
    “(10). Both the licensees shall also give an undertaking that
    they are in compliance with all the terms and conditions of the
    guidelines for spectrum trading and the license 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
    trading or/and of the license at the time of giving intimation
    for trading of right to use the spectrum, the Government will
    have the right to take appropriate action which inter­alia may
    include annulment of trading arrangement.
    (11). The seller shall clear all its dues prior to concluding any
    agreement for spectrum trading. Thereafter, any dues
    recoverable up to the effective date of trade shall be the
    liability of the buyer. The Government shall, at its 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. The demands, if
    any, relating to licenses of seller, stayed by the Court of Law,
    shall be subject to outcome of decision of such litigation.
    (12). Where an issue, pertaining to the spectrum proposed to
    be transferred is pending adjudication before any court of law,
    the seller shall ensure that its rights and liabilities are
    transferred to the buyer as per the procedure prescribed under
    the law and any such transfer of spectrum will be permitted
    only after the interest of the Licensor has been secured.”
    36
    Para 11 of the Spectrum Trading Guidelines was further clarified
    vide O.M. dated 12.05.2016. Certain telecom operators raised specific
    questions on the Trading Guidelines dated 12.10.2015. Question No.2
    in respect of para 11, seeks a clarification as to whether the transfer of
    spectrum is for a specific area and reference to the dues relate to only
    the spectrum being traded in the concerned area, and seeks
    clarification whether the buyer will be jointly or severally liable for only
    those dues if found recoverable after the effective date of trading,
    which were not known to the seller at the time of the effective trade
    date.
  45. 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
    37
    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 seller’s dues prior to the concluding of the
    agreement/spectrum trading shall not be upon the buyer.
  46. 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
    38
    be finalised as per the decision of this Court in a pending matter, and
    lis was pending for the last 20 years. The liability cannot be escaped
    as specified in the Trading Guidelines to the extent that the seller or
    buyer is liable. They have to pay the AGR as per the judgment
    rendered by this Court. The purchasers who are not seller or buyer,
    shall have to pay the dues to the extent they are liable under the
    Guidelines, as discussed above. It was stated that they have paid dues
    as per the self­assessment or, in some cases, demands have not been
    raised. We direct DoT to complete the assessment in such cases of
    trade and raise demand if it has not been raised and to examine the
    correctness of self­assessment and raise demand, if necessary, after
    due verification. In case demand notice has not been issued, let DoT
    raise the demand within six weeks from today.
    Payment of dues of AGR :
  47. The Union of India has filed an application through 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.
    39
  48. 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) process has capacity
    limitations; this may lead to delays in porting numbers from
    non­operational to operational TSP, and consequent disruption
    of services for customers.
    (ii) TSPs. porting in customers from TSPs not able to provide
    services will also need additional access (and backhaul)
    spectrum to maintain Quality of Service (QoS), Access spectrum
    is acquired through auction.
    (b) Adverse impact on competition in the Telecom Sector with adverse
    consequences for the consumers;
    40
    (c) Adverse impact on Quality of Service in the telecom sector. The
    closure of one or more TSPs and the gap being filled in by other
    remaining TSPs will not be seamless.
    (d) Implications for the banking sector:
    ­ A letter dated 15.2.2020 was received from the Indian Banks
    Association on the subject of distress in the Telecom Sector and
    Ease of Business. The letter highlighted the issues affecting the
    Telecom Sector and resultant implications on the banks lending
    to the Telecom Sector along with suggestions for consideration.
    (e) Disruption of tax and non­tax revenue on account of licence fee
    (LF), spectrum usage charges (SUC) and Goods and Services Tax (GST)
    and loss of revenue on account of spectrum deferred instalments;
    (f) Locking up of valuable spectrum in Corporate Insolvency Resolution
    Process (CIRP);
    (g) Major loss of direct and indirect employment;
    (h) Cascading negative impact on other sectors of the economy;
    (i) Foreign Direct Investment (FDI) sentiment will be adversely affected;
    (j) The closure of one or more TSPs also adversely impacts the digital
    connectivity in the country. E­commerce, e­banking, e­health, etc., all
    part of e­governance are affected;
    41
    (k) This will have an adverse impact in rural areas, particularly
    Aspirational Districts, and the spread of digitization in backward
    regions of India.
  49. In this regard, a letter dated 15.2.2020 had been written by the
    Indian Banks Association, adumbrating the aforesaid aspects of the
    distressed telecom sector. The issues affecting the telecom industry
    and companies and the resultant stress on bank lending in this sector
    were pointed out, culminating into a high incidence of tax and heavy
    burden, subdued operating matrix due to a steep fall in average
    revenue per customer. The telecom services remained subdued due to
    the price war triggered by a new entrant. There was a decline 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.
    42
  50. 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 level­playing 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 OF
    THIS HON’BLE COURT
    “1.1 All licensees impacted by the judgment of the Hon’ble
    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 Hon’ble
    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
    Hon’ble Supreme Court (24.10.2019).
    1.2 Change in amount of past dues arising from the AGR
    judgment (24.10.2019), if any, determined after reconciliation
    between TSPs’ self­assessment and DoT’s
    43
    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.”
  51. 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.
  52. 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
    44
    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.
  53. 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 sector’s 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.
    45
  54. We also place on record that the demand of AGR was raised as
    against non­telecom PSUs. on the strength of the judgment passed by
    this Court. Pursuant to the Court’s directions, the matter has been reexamined and considering the representations filed by PSUs. It is
    stated in the affidavit dated 18.6.2020 that non­ telecom public sector
    undertakings are non­telecom 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 non­telecom
    public sector undertakings under the head of ‘telecom services’ forms
    a very negligible and a small portion and does not form part of the
    total revenue, e.g., 0.0002% for GAIL, 0.00028% for DMRC and
    0.001% for Oil India, etc. DoT has decided to withdraw the demands
    raised for licence fee based on non­telecom revenue from the nontelecom public sector undertakings, which are M/s. Powergrid, GAIL,
    Oil India Ltd., DMRC, which constitutes about 96% of the demand
    regarding non­telecom PSUs. In this regard orders have been issued
    on 13.7.2020 and 14.7.2020.
  55. Resultantly, we issue following directions:
    (i) That for the demand raised by the Department of Telecom in
    respect of the AGR dues based on the judgment of this Court, there
    46
    shall not be any dispute raised by any of the Telecom Operators and
    that there shall not be any re­assessment.
    (ii) That, at the first instance, the respective Telecom Operators
    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) Various companies through Managing Director/Chairman or
    other authorised officer, to furnish an undertaking within four weeks,
    to make payment of arrears as per the order.
    (v) The existing bank guarantees that have been submitted
    regarding the spectrum shall be kept alive by TSPs. until the payment
    is made.
    (vi) 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.
    (vii) Let compliance of order be reported by all TSPs. and DoT every
    year by 7th April of each succeeding year.
    47
    In the Suo Motu Contempt Petition, in view of the reply filed and
    compliance reported, and an unconditional apology tendered, which
    we accept, we discharge notice issued to Shri Mandar Deshpande and
    drop the proceedings.
    Before parting with the proceedings, we place on record our
    appreciation for the fair and able assistance provided by Shri Tushar
    Mehta, Solicitor General, and the respective senior counsel appearing
    on behalf of respective parties.
    Accordingly, the pending interlocutory applications are disposed
    of in terms of the aforesaid order/directions.
    All the previous orders stand modified accordingly.
    …………………….J.
    (Arun Mishra)
    …….……………….J.
    (S. Abdul Nazeer)
    …….……………….J.
    (M.R. Shah)
    New Delhi;
    September 1, 2020.