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Need for finality for Supreme Court verdicts Should telcos get 20 more years?

More than the other arms, judicial reforms require the utmost attention. The judicial system should endeavour to clean up the mess it has created by offering the scope for timeless litigation. It should work to set timelines for disposal of fresh cases and simultaneously clear the backlog.

For long, IE has been pointing to the imperative of the judiciary settling cases to specific, short timelines. The absence of finality of litigation delivered after years has been contributing to the piling up of cases, uncertainties and revenue losses.

The recent dispute over dues from large telecom companies – Vodafone, Airtel and the Tatas-is one more instance of the humongous cost of such uncertainty. Just look at the two bizarre developments even months after the Supreme Court’s final decision: there is a difference of Rs 82,298 crore between the claim of the Department of Telecom on Adjusted Gross Revenue (AGR) and that of the self-assessments by the three private telecom companies, of just Rs 36,734 crore. Despite the strong stand taken by the Supreme Court on an immediate settlement, the Union government is favourably inclined to a repayment schedule spread over 20 years!

Two factors slap one in the face – the negligence of the government on one side and the sophistry of the telecom companies on the other. After the long travel of the case through different levels, the Supreme Court has ruled unequivocally on the liability of companies paying the AGR, plus interest, plus penalties. It was presumed that finality has reached after the firm and unanimous judgment by the highest court. But no, the government seems inclined to spend more time on this issue. The DoT indicated that it would take another 6-8 months to assess the telcos’ claims.

A CULTURE FOR PROFITING BY PROLONGING LITIGATION

There is no dearth of lawyers and chartered accountants to argue two sides. Companies have thrived on such disputes for decades. Look at this case of the 1980s: tobacco major ITC paid excise duties on the produce, valued low at the factory gate, transferred these to warehouses and then jacked up prices to the dealers. Auto companies also did the same thing. It was easy for reputed lawyers to get a stay of the cases and help the companies enjoy the huge difference in monies under dispute for years. It was worth over Rs 800 crores for ITC. With the government hungry for revenues, it was possible to look for waivers/concessions, even more possible with the advent of coalition governments and politically pliant leaders.

One also witnessed an equally bizarre practice by the multinational Renault-Nissan. Ford Motors won handsome concessions from the TN government on sales tax on vehicles sold in the state, with options to use the amounts saved over 14 years and repay these as interest-free loans over another 14 years. With ingenuous sophistry, Renault claimed concessions for all the vehicles (and not those it sold in TN) by selling all to its entity before dispatch to dealers! And as usual, litigation over this dispute took years. The company took the case even for international arbitration.

Both the parties, the telcos and the DoT, had presented their arguments strongly with enormous data at different stages of the hearing. The highest court had delivered its judgement after deep deliberation over the strengths of the submissions. There is little justification for further reviews and delays.

Vodafone Idea threatened to close down. But remember, these companies had been making exorbitant and fat profits for years, recording massive growth and none denied their prosperity. Should they complain now to pay for their past sins? The heavens are not going to fall if Vodafone Idea folds up. Bharti Airtel has much greater stakes as revealed in the quantum of payments it has been making consequent upon the judgement.

Much-needed admonition…

On 18 March, a Supreme Court bench heavily came down on the bid to further prolong the telecom-AGR issue. The bench expressed its dismay and anger in no uncertain terms: “Are we fools? How is this not sheer contempt? A re-assessment, if permitted, would be a fraud on the top court.

“Bills were raised, CAG has audited. How can self-assessments be done now? Do companies feel they are more powerful?

“Self-assessment by DoT is sheer violation of our order and sheer contempt; even the media is in grossest contempt of court.

“We won’t tolerate this. Every company is violating orders. If required, we will summon MDs of all the telecom companies… and send them to the jail from here.”
The government counsel pleaded the case of telcos: “these serve to crores of customers; adverse impact on the functioning of telecom service providers will not only adversely impact the overall economy but also seriously harm the interest of the consumers.” The court responded: “It’s public money someone is trying to pocket. The government fought tooth and nail and suggested penalties during arguments earlier. Now you want to do away with interest.”

Telecom service providers agreed to pay the government 3-5 per cent of their AGRs as spectrum usage charges and 8 per cent of AGR as licence fees. The companies argued that AGR should include only revenues generated from telecom services. The government demanded that AGR should include total revenues, including non-telecom earnings.

The Supreme Court, in its judgment delivered on 24 October 2019, ordered telecom companies to pay Rs 92,000 crore as dues within three months; that included the AGR plus interest and penalty as per the companies’ agreement with the government.

On 16 March Vodafone paid Rs 3354 crore to DOT and claimed with this it had fully paid the principal amount of AGR liability after its self-assessment. The court agreed with the DOT’s and assessment of dues with interest and penalties at Rs 53,000 crore!

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