1. Home
2. Legal News
3. Supreme Court seeks clarification from Jio on it’s AGR Dues from using RCom Spectrum

Supreme Court seeks clarification from Jio on it’s AGR Dues from using RCom Spectrum

Dated: August 15, 2020

                                                                                                                                                          - By Megha Bhatia

The Supreme Court on August 14, 2020 sought specifics of the spectrum sharing agreement between Reliance Communications (RCom) and Reliance Jio and claimed that the entity using the other firm’s spectrum cannot be required to pay government duties relevant to Adjusted Gross Revenue (AGR).

Reliance Jio’s four-year telecom spectrum sharing contract with Reliance Communications is not related to the latter’s previous contractual dues that relates to the time prior to 2016 when Jio was not at all in service.

Apex Court stated, “Spectrum is a government property, not private, and anyone using it is liable to pay the dues.”

In addition, Justice Mishra said, “Jio is using since 2016. Why should we not ask Jio if they are using the spectrum. Who are the beneficiaries? It is shocking state of affairs if revenue is not shared and spectrum is used by somebody else?”

A bench consisting of Justices Arun Mishra, S. Abdul Nazeer & MR Shah directed the Centre, Reliance Jio and Reliance Communication’s to bring forward all the necessary documents in order to illustrate who would be liable for Reliance Communication’s AGR dues. The bench also asked for specifics about who was using the spectrum of Aircel and Videocon. 

The Sharing Pact

As per sources, in April 2016 RJIL entered into a pact to share a part of the spectrum held by RCom and its unit Reliance Telecom Ltd (RTL). The shared spectrum was restricted to the 800 MHz range and was solely in compliance with the spectrum sharing rules of the Department of Telecom (DoT). There is no exchange of RCom’s 2G, 3G, and 4G bandwidth in 1,800 MHz channel.

RCom’s and RTL’s AGR dues are in no way related to this shared spectrum, some sources clarified, adding that both RCom / RTL and RJIL charged the AGR on revenues created from the shared spectrum.

“We have directed them to place on record the information relating to Agreement entered into with respect to using of spectrum by the respective parties. In the case of RCOM, its spectrum of 800 MAZ is being used by Reliance Jio from 2016. Let the agreement entered into between the parties be placed on record”, states the Order. 

The Apex Court has ordered the DoT to document the information on the usage of the spectrum by certain telecommunications companies, Aircel Limited, Aircel Cellular Limited and Dish-net Wireless Limited and Videocon Telecommunications Ltd. which are face insolvency and bankruptcy code (IBC) proceedings. The court wants to go into cause of initiation of insolvency for these telecom companies and wants to know about their liabilities and what was the urgency for pushing for insolvency.

“Revenue has to be shared. Person using it must pay AGR dues...Spectrum involves public property. Government revenue regime allows sharing,” said the apex court.

The AGR Dues

Before the current coronavirus-forced lockdown started in March, Telecom Department (DoT) moved to the Supreme Court to demand a phased 20-year bill for telecommunications providers to discharge their AGR dues.

The Telecommunications Department (DOT) submitted a petition in the Supreme Court for the alteration of the order of 24 October 2019 to arrive at a mechanism for recovery by telecom service providers of past duties.

The Union had stated in the instant appeal that although the Court had widened the denial of Adjusted Gross Revenue (AGR), it has left the three Telecom companies, that is to say, Vodafone Idea, Bharti Airtel and Tata Teleservices, jointly facing more than INR1.02 lakh crore in increased license fees, spectrum use fees (SUC), fines and interest.

Nonetheless, on March 18, Supreme Court lashed out at the Centre and telecom companies for doing self-assessment or reassessment of the Adjusted Gross Revenue (AGR) dues led by the apex court in its verdict. 

In April, the Supreme Court dismissed petitions by Vodafone Idea, Bharti Airtel and Tata Teleservices requesting clarification on the decision of October 24 that broadened the scope of Adjusted Gross Revenue (AGR).

On June 18, the Centre informed the Apex Court that the DoT had decided to withdraw 96 percent of the demand for AGR-related duties levied against non-telecom PSUs such as GAIL from the 4-lakh crore demand.

On July 20, the Apex Court had made it clear that it would not hear “even for a second” arguments about the reassessment or re-calculation of telecom companies’ AGR-related duties, which are about 1.6 lakh crore.

The Apex Court had stated that it was not a fair idea for the telecom companies to pay AGR dues for a duration of 15 to 20 years. The Apex Court had reported the Centre’s argument that “moratorium” had been in effect with respect to companies such as RCom and Videocon as insolvency proceedings against them had begun.

Arguments in Court

Senior lawyer Shyam Divan, who appeared for Reliance Communications, argued that one portion of the spectrum was idle and the other half was used by Jio on the basis of a commercial arrangement. He said, “There is a part of my spectrum lying idle with me. I have an asset sharing contractual arrangement with Jio and that has been reported to the DOT and the fee to liberalize such spectrum has been paid.”

Senior Lawyer KV Vishwanathan appearing for Jio submitted that “there was something called Spectrum Sharing Guidelines and Spectrum Trading Guidelines. I am sharing a part of it. AGR is paid by my side.” He sought to clarify the spectrum allocation and spectrum use requirements to the bench, and said the organization implemented all the regulations and charged the fees needed.

At this juncture, the bench led by Justice Mishra, stated that “Spectrum is owned by the Sovereign. Spectrum is nobody’s property. It is Government’s. It is public money. It is a revenue sharing regime.” 

The bench claimed it was the “Master of the Spectrum”, adding that the NCLT & NCLAT should not have allowed it to be used without adequate dues being charged.

The bench has asked the Department of Telecom (DoT) to file the requisite documents in this regard and posted the matter for further hearing on August 17, 2020.