Adjusted gross revenue: Supreme Court tells telecom companies to pay government ₹92,000 crore

Fight it out: The Minister had refused to intervene on pricing as tariffs are to be market-driven.   | Photo Credit: V.V. Krishnan

In a blow to telecom service providers, the Supreme Court on Thursday upheld the Department of Telecom’s move to recover adjusted gross revenue (AGR) of about ₹92,000 crore from them. 

A Bench, led by Justice Arun Mishra, said the sector had long reaped the fruits of the Centre’s liberalised mode of payment by the revenue sharing regime. “It has benefited immensely under the scheme as apparent from the gross revenue trend from 2004 to 2015,” he said. 

However, the service providers failed to fulfil their obligations to the government and raised frivolous objections.

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“The telecom service providers, in spite of the financial benefits of the package, started to ensure that they do not pay the licence fee to the public exchequer based on an agreed AGR,” the Supreme Court observed in a 153-page judgment.

The Supreme Court dismissed the telecom service providers’ objection to the government’s formulation of AGR. 

The judgment said the gross revenue shall be inclusive of installation charges, late fees, sale proceeds of handsets (or any other terminal equipment, etc.), revenue on account of interest, dividend, value-added services, supplementary services, access or interconnection charges, roaming charges, revenue from permissible sharing of infrastructure and any other miscellaneous revenue, without any set-off for related item of expense, etc.

The court explained that the government intended to pump revenue from its share of telecom gross revenue into developing remote and uncovered areas.

But all it ended up doing was incur a colossal amount of ₹49.120 crore under the Universal Service Obligation Fund (USOF) and a committed liability of ₹59,774 crore for ongoing projects including laying of optical fibre cables up to gram panchayat areas under ‘Digital India Mission’.

As a sign of the liberalisation allowed in the sector, the court highlighted how the 15% AGR, fixed as license fee under revenue sharing, was reduced to 13% and lastly to 8% in 2013. 

“Out of the 8%, a substantial portion of 5% is spent by the Central Government under the USOF,” the court pointed out.

Justice Mishra, writing for the Bench comprising Justices S. Abdul Nazeer and M.R. Shah, upheld the DoT’s definition of AGR.

“We are of the considered opinion that interest and penalty have rightly been levied. Once an amount of shortfall has not been paid, it has to carry 50% of the penalty on defaulted amount, as agreed. Thus, we find no substance in the submission that interest, penalty, and interest on penalty cannot be realised. It is as per the agreement. In the facts and circumstances, we find no ground to reduce the same, considering the nature of untenable objections raised on behalf of the licensees," the Supreme Court held.

Justice Mishra observed that “no litigant can be permitted to reap fruits on such inconsistent and untenable stands and litigate for decades in several rounds which is not so uncommon but is disturbing scenario projected in very many cases. We have examined the matter upon merits and then aforesaid conclusion indicates frivolous nature of objections”.

The litigation involved a dispute raised by telecom service providers on the definition of gross revenue as in clause 19.1 of the licence agreement granted by the Government of India to themtelecom service providers.

“The case has a chequered history and the scenario projected is that even after the licensees agreeing with the revenue sharing regime under the Telecom Policy of 1999 for the last two decades, definition of gross revenue has been litigated upon, though the intendment was to keep it free disputes,” the judgment said.

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Printable version | Jun 12, 2021 5:58:32 PM |

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