2020 Supreme(SC) 519

SUPREME COURT OF INDIA
ARUN MISHRA, S. ABDUL NAZEER, M.R. SHAH, JJ.
UNION OF INDIA – APPELLANT(S)
VERSUS
ASSOCIATION OF UNIFIED TELECOM SERVICE PROVIDERS OF INDIA ETC.ETC. – RESPONDENT(S)
M.A. (D) No. 9887 OF 2020 IN CIVIL APPEAL NOS.6328-6399 OF 2015 WITH SUO MOTU CONTEMPT PETITION [C] NO. 1 OF 2020 DIARY NO(S). 2450, 2458, 2461, 2476, 2578 of 2020, W.P.(C) NO. 238/2020 MA 725-796 of 2020 IN C.A. NO. 6328-6399 of 2015, M.A. NO.1464 OF 2020
Decided on : 01-09-2020

IMPORTANT POINT
Auction of Spectrum – Questions of seminal significance have to be considered by NCLT.

Headnote:

(A) Indian Telegraph Act, 1885 – Section 4(1) – Insolvency and Bankruptcy Code, 2016 – Sections 14 and 18 – Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 – Regulation 32 – Auction of Spectrum – Scope of scrutiny – Spectrum is a natural resource and under Section 4 of Indian Telegraph Act, 1885, Government has sovereign right – Question of seminal significance also arises whether spectrum is a natural resource, Government is holding the same as cestui que trust – In view of nature of resource, it can be subjected to insolvency/liquidation proceedings – Earlier licence was obtained on payment of fees in advance that was not beneficial to TSPs, as such a new revenue sharing regime was devised in 1999, and Central Government has an exclusive right under Section 4 of 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 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, 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 questions to be considered – Questions should first be considered by NCLT – NCLT to consider these aspects and pass a reasoned order after hearing all parties. (Paras 16, 21, 22 and 23)

(B) Indian Telegraph Act, 1885 – Section 4(1) – Insolvency and Bankruptcy Code, 2016 – Sections 14 and 18 – Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 – Regulation 32 – Auction of Spectrum – Union of India, after envisaging larger interest, economic consequences on nation and to ensure that 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 telecom service providers – Formula is placed for approval of this Court, which is arrived at after detailed and long drawn deliberations at various levels in administrative hierarchy including Cabinet, and keeping in view vital issues related to financial health and viability of telecom sector, need for ensuring competition and a level-playing field in interest of consumers – Decision of Cabinet is based on various factors and in interest of the economy and consumers – Decision is taken after extensive deliberations and consultations and till date of judgment, dues have been worked out as per decision rendered by this Court – Only for subsequent period, some relaxation has been given as to rate of interest, penalty, and interest on penalty, which is permissible – Arrears have accumulated for last 20 years – Some of 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 telecom sector, decision has been taken on various considerations which cannot be objected to – However, period of 20 years fixed for payment is excessive – It is a revenue sharing regime and it is grant of sovereign right to TSPs. under Telecom Policy – Some reasonable time is to be granted, considering financial stress and banking sector's involvement – Concession is granted only on the condition that dues shall be paid punctually within time stipulated by this Court – Even a single default will attract dues along with interest, penalty and interest on penalty at the rate specified in agreement – Directions issued. (Paras 33, 35, 36 and 38)

Facts of the case:

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? 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 provisions of the IBC are applicable.

Findings of Court:

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.

Result : Directions issued.