Supreme Court Questions Vodafone’s Fresh AGR Petition
The AGR Dispute: A Long Legal Battle
One of the greatest legal and financial concerns in the Indian telecommunication industry has been the adjusted Gross Revenue (AGR). The Supreme Court is also expected to make a decision in 2019 stating that AGR should be calculated with all revenues (not only core telecom revenues) but also additional revenues (rent, interest, and dividends). This reading made the financial liability of telecom companies dramatically higher, and the total dues of which were 1.4 lakh crore.
This was a tremendous setback to Vodafone Idea. The company was already in difficulties with the number of subscribers dwindling and losses piling up in tens of thousands of crores at the time. In 2020, the Supreme Court allocated the telecom companies, including Vodafone, a deadline of 10 years to pay their AGR payables in yearly instalments. This has purchased the company much-needed time, but it has also put the company on a lengthy and difficult payment schedule with little room to invest or expand its network.
Vodafone’s New Challenge
A new petition in the Supreme Court has been filed by Vodafone, disputing a new demand by the Department of Telecommunications (DoT) of 5,606 crore for the financial year 2016-17, which incorporates penalties and interest on this count. The company claims that the Court already crystallised its liabilities, by the orders of 2019 and 2020 and cannot, at the same time, bring fresh claims on the same.
Senior Advocate Mukul Rohatgi, who represented Vodafone, made it clear that this petition was not to reopen the whole case of AGR but merely to challenge a new and purportedly illegal demand. Vodafone has insisted that it has already paid what has been decided by law and that to pay more would only dilute its already shaky finances.
Supreme Court’s Reaction
The court, headed by Chief Justice B.R. Gavai, seemed to be reluctant to hear the petition. The Court made all parties recall that it had already made a comprehensive decision in 2019 and rejected review petitions and even curative pleas. The Chief Justice remarked, There must be an end to the business, and he was reminding the Court that the business was not likely to be reopened in the near future.
Interestingly, the Solicitor General Tushar Mehta highlighted the fact that the government owns almost 50 per cent of Vodafone Idea following the conversion of part of the company dues into equity. Such is a special case in that the government is not only one of the regulators but also a shareholder, which provides a direct interest in terms of ensuring Vodafone survives, but also in terms of ensuring the preservation of public revenue at the same time.
Why This Matters
In the event the Supreme Court accepts the petition of Vodafone and quashes the new demand, it may be the first case of a court overturning the dues of other companies dealing with telephony. This can be a relief to the sector, but it might increase the number of litigation and slow down the revenue collection process by the government.
Conversely, a rejection of the petition by the Court will cement the rule that the AGR case is closed and no additional issues are going to be accepted. This would provide the government with higher confidence, but it may hurt the financial situation of Vodafone when the firm is already struggling with huge debt and stiff competition with its competitors, such as Reliance Jio and Bharti Airtel. It will be very difficult to maintain the competitive edge with them.
Lastly, the Supreme Court has released the case until it provides Vodafone and the government a chance to engage in a compromise. The decision that will be made will have massive consequences not only to the future of Vodafone but also to the well-being of the Indian telecommunication industry and the concept of finality in business disputes. Those interested, investors, subscribers, and regulators are waiting with as there livelihoods will also be drastically affected by the same.
Refference
