AGR dues: Reliance Jio may have to pay for RCom and Airtel for Aircel

A bench led by Justice Arun Mishra is currently hearing the AGR matter relating to insolvent telecom operators like Reliance Communications and Aircel.

The Supreme Court on Friday observed that if any telecom operator has acquired spectrum through trading from another operator, then past dues need to be cleared. If the seller of spectrum does not clear the dues then the buyer has to clear them. This not only means that Reliance Jio may have to pay the adjusted gross revenue (AGR) dues of Reliance Communications for the spectrum which it bought from it, but even Bharti Airtel may have to pay a portion of dues of Aircel and Videocon as it bought spectrum in 2300 MHz and 1800 MHz bands from them.

A bench led by Justice Arun Mishra is currently hearing the AGR matter relating to insolvent telecom operators like Reliance Communications and Aircel.

This means that if these companies are selling their spectrum through the insolvency process then also the AGR dues of the government needs to be cleared before the sale is approved.

The court will further hear the matter on August 24.

The SC’s observation that AGR dues can be recovered by the buyer of spectrum also is very much in the spectrum trading guidelines of the department of telecommunications which reads: “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 licences of seller, stayed by the court of law, shall be subject to outcome of decision of such litigation”.

However, the DoT has not sent notices demanding payment of AGR dues to any of the parties so far.

“As per trading guidelines, past dues need to be paid before transfer of spectrum. If you don’t pay, Bharti Airtel, which acquired Videocon’s spectrum will have to pay,” the bench told the counsel for Videocon Telecommunications.

In 2016, Bharti Airtel had bought Aircel’s spectrum in the 2300 MHz band and Videocon’s spectrum in the 1800 Mhz band through trading.

On Friday, Bharti Airtel’s counsel Kapil Sibal told the bench that the company has not received any notice from the DoT for payment of additional dues.

As reported earlier, Reliance Jio had acquired 47.50 MHz spectrum in the 800 Mhz band from RCom through trading between January-March, 2016. The spectrum was acquired across 13 circles and is currently being used by Jio to provide 4G services. In addition, Jio is sharing spectrum with RCom in 15 circles, thus a total of 58.75 MHz spectrum of RCom in the 800 MHz band is currently being used by it.

However, on Friday, Jio’s counsel Harish Salve told the bench that the company has not received any notice from the DoT on additional payment of AGR dues.

The bench said that the DoT has not shared the details it had asked for regarding trading, sharing of spectrum and dues related to them. “We direct DoT to file details of spectrum shared by insolvent companies and if relevant dues have been paid,” the bench said.

It directed DoT to also file details of spectrum arrears that are due for payment. “DoT needs to file details of which companies are using spectrum allocated since 1999, subject to sharing and trading agreements,” the bench said.

As reported, in the earlier hearings, the SC has brushed aside technicalities related to IBC and observed that the AGR dues of insolvent companies amount to Rs 45,000 crore and someone needs to pay this. It has so far held the position that the government needs to come out with a proposal for payment of the dues or else every company will go into liquidation and dues won’t be recovered.

The apex court is examining whether companies like RCom and Aircel filed for bankruptcy to escape paying their AGR dues. It is also examining how will the government ensure that their AGR dues are recovered, thirdly whether these insolvent firms can put their spectrum up for sale when the government will not have the first charge on the proceeds.

While RCom has AGR dues worth Rs 25,000 crore, Aircel’s is around Rs 12,389 crore.