A) ABSTRACT / HEADNOTE

The judgment addresses the continuing ramifications of the Supreme Court’s authoritative interpretation of Adjusted Gross Revenue (AGR) under the Indian Telegraph Act, 1885, particularly concerning the enforceability, payment structure, and insolvency-related implications of AGR dues owed by Telecom Service Providers. The Court examined representations made by telecom operators and financial institutions seeking staggered payment of AGR liabilities and considered the broader economic impact on the telecom sector and banking system. A crucial dimension of the judgment involved determining whether telecom spectrum, being a natural resource held by the State in public trust, could be subjected to insolvency proceedings under the Insolvency and Bankruptcy Code, 2016. The Court consciously refrained from conclusively determining this jurisdictional issue and instead directed the National Company Law Tribunal to adjudicate upon it after examining ownership, possession, contractual rights, and statutory limitations governing spectrum usage.

The judgment further clarifies liabilities arising from spectrum sharing and spectrum trading under the 2015 Guidelines, decisively holding that sharing operators cannot be burdened with historical AGR dues of original licensees, while trading liabilities must strictly follow the allocation prescribed under the Guidelines. Importantly, while rejecting any reopening or reassessment of AGR demands, the Court moderated the Union Government’s proposed 20-year payment window, substituting it with a structured ten-year instalment mechanism, reinforced with stringent default consequences. The decision reflects judicial balancing between contractual sanctity, sovereign rights over natural resources, and systemic economic stability.

Keywords: Adjusted Gross Revenue, Telecom Licence, Spectrum Sharing, Insolvency and Bankruptcy Code, Natural Resources, Public Trust Doctrine

B) CASE DETAILS

C) INTRODUCTION AND BACKGROUND OF JUDGEMENT

The litigation arises from the prolonged dispute surrounding the definition and computation of Adjusted Gross Revenue, a concept embedded within the revenue-sharing regime introduced by the Union Government for telecom licences. The controversy has its genesis in the migration from a fixed licence fee regime to a revenue-sharing model in 1999, framed under the statutory authority of Section 4 of the Indian Telegraph Act, 1885. The Supreme Court, in its earlier decision reported in [2019] 16 SCR 672, conclusively upheld the Government’s interpretation of AGR, rejecting the telecom operators’ narrow construction and affirming that all revenue streams form part of AGR.

Following this determination, massive financial liabilities crystallised against telecom service providers, spanning nearly two decades, including principal amounts, interest, penalties, and interest on penalties. The magnitude of dues raised systemic concerns affecting the telecom sector’s viability, employment, consumer interest, and exposure of public sector banks. Representations were accordingly made by telecom operators and the Indian Banks’ Association seeking deferred payment mechanisms.

Simultaneously, several telecom companies entered insolvency proceedings, raising complex jurisdictional questions regarding the applicability of the Insolvency and Bankruptcy Code, 2016 to telecom licences and spectrum usage rights. The Government asserted that spectrum, being a sovereign natural resource, could not be subsumed within insolvency proceedings, while lenders and resolution professionals contended otherwise. The judgment under analysis thus operates at the intersection of contractual obligations, sovereign resource management, and insolvency jurisprudence, without diluting the finality of AGR determinations.

D) FACTS OF THE CASE

Telecom licences granted under Section 4(1) of the Indian Telegraph Act, 1885 operate as contractual arrangements between the Union Government and private telecom operators. Under these licences, operators are obligated to pay licence fees and spectrum usage charges calculated as a percentage of Adjusted Gross Revenue. Persistent disputes arose regarding the scope of AGR, culminating in prolonged litigation before the Telecom Disputes Settlement and Appellate Tribunal and the Supreme Court.

In its definitive judgment dated 24 October 2019, the Supreme Court affirmed the Government’s computation of AGR, leading to aggregate dues exceeding ₹1.69 lakh crores as of October 2019, inclusive of penalties and interest. Certain operators partially complied, while others defaulted or initiated insolvency proceedings under the Insolvency and Bankruptcy Code, 2016.

During subsequent proceedings, the Union Government proposed a payment formula permitting staggered recovery of dues over twenty years. This proposal was placed before the Court for approval. Concurrently, disputes arose regarding liabilities of operators involved in spectrum sharing and spectrum trading arrangements under the Spectrum Sharing Guidelines, 2015 and Spectrum Trading Guidelines, 2015.

The Court was also confronted with allegations that insolvency proceedings were being used as a stratagem to evade AGR liabilities. Given the scale of public revenue involved and the statutory character of spectrum, the Court undertook a detailed examination of these ancillary yet significant issues while preserving the binding nature of its earlier AGR ruling.

E) LEGAL ISSUES RAISED

i. Whether telecom spectrum can be subjected to insolvency proceedings under the Insolvency and Bankruptcy Code, 2016?
ii. Whether AGR dues constitute operational debt under the Code?
iii. Whether sharing operators are liable for historical AGR dues of original licensees?
iv. How liability for AGR dues is to be apportioned in cases of spectrum trading?
v. Whether the payment period of twenty years proposed by the Union Government is reasonable?

F) PETITIONER / APPELLANT’S ARGUMENTS

The counsels for the Union of India submitted that telecom spectrum is a natural resource held by the State in trust for the public, and licensees merely enjoy a conditional right to use it. It was argued that under Section 18 of the Insolvency and Bankruptcy Code, 2016, only assets owned by the corporate debtor can form part of insolvency proceedings, which excludes spectrum held under contractual licence. Reliance was placed on Centre for Public Interest Litigation v. Union of India [2012] 3 SCR 147 to reaffirm the public trust doctrine.

It was further contended that AGR dues are statutory and contractual obligations flowing from licence conditions and cannot be diluted or extinguished through insolvency mechanisms. Any attempt to reassess or reopen AGR computations was argued to be barred by the doctrine of finality.

G) RESPONDENT’S ARGUMENTS

The counsels for the telecom operators and lenders contended that the right to use spectrum constitutes an intangible asset reflected in balance sheets and capable of being dealt with under the insolvency framework. It was argued that Sections 5(20) and 5(21) of the Code categorise Government dues as operational debt, binding upon resolution plans approved under Section 31.

They further submitted that spectrum sharing and trading were policy-sanctioned commercial arrangements, and liabilities must be confined to express stipulations in the Guidelines. The proposed twenty-year payment window was justified as necessary to prevent sectoral collapse and protect consumer interest.

H) RELATED LEGAL PROVISIONS

i. Section 4, Indian Telegraph Act, 1885
ii. Sections 3(27), 5(20), 5(21), 14, 18, 31, Insolvency and Bankruptcy Code, 2016
iii. Spectrum Sharing Guidelines, 2015
iv. Spectrum Trading Guidelines, 2015

I) JUDGEMENT 

The Court categorically prohibited any reassessment or reopening of AGR dues, declaring the demands raised by the Department of Telecommunications as final and binding. However, while recognising the economic realities confronting the telecom sector, the Court modified the Government’s proposed twenty-year payment period, terming it excessive. Instead, it directed an upfront payment of 10% of total dues by 31 March 2021, followed by equal annual instalments from 1 April 2021 to 31 March 2031.

On insolvency-related issues, the Court refrained from rendering a final determination on whether spectrum can be subjected to insolvency proceedings, holding the issue to be jurisdictional and directing the National Company Law Tribunal to decide it after comprehensive consideration.

In matters of spectrum sharing, the Court unequivocally held that sharing operators cannot be saddled with past AGR liabilities of original licensees. Regarding spectrum trading, liability was held to be governed strictly by Paragraph 11 of the Trading Guidelines, distinguishing between partial and complete spectrum transfers.

a) RATIO DECIDENDI

The binding nature of AGR dues arises from contractual licence terms backed by statutory authority under the Indian Telegraph Act, 1885. Final judicial determination of AGR precludes reassessment. Spectrum sharing does not transfer ownership or historical liabilities. Payment timelines must balance sovereign revenue interests with sectoral viability.

b) OBITER DICTA

The Court observed that permitting insolvency proceedings to extinguish sovereign dues relating to natural resources would undermine public trust principles and fiscal discipline, though the issue was left open for adjudication by NCLT.

c) GUIDELINES

i. No reassessment of AGR dues permitted.
ii. Mandatory upfront payment of 10%.
iii. Annual instalments over ten years.
iv. Default to attract interest, penalty, and contempt proceedings.

J) REFERENCES

a) Important Cases Referred

i. Union of India v. Association of Unified Telecom Service Providers of India [2019] 16 SCR 672
ii. Centre for Public Interest Litigation v. Union of India [2012] 3 SCR 147
iii. Committee of Creditors of Essar Steel India Ltd. v. Satish Kumar Gupta (2019) SCC OnLine SC 1478

b) Important Statutes Referred

i. Indian Telegraph Act, 1885
ii. Insolvency and Bankruptcy Code, 2016
iii. Telecom Regulatory Authority of India Act, 1997