Temerity and Contempt
Updated: Mar 20
It was ten years ago that we believed that telecom companies had looted the Government of India of Rs. 1.76 lakh crores. After all, it was a constitutional authority that had pointed out that faulty spectrum allocation on a ‘first come first served’ basis had resulted in an astronomical notional loss. This idea that spectrum is always best allocated through an auction was later sanctified by the Supreme Court when it decided to cancel telecom licenses issued in 2008 en masse.
From the entire episode, we learnt several elementary lessons. But only after we had paid a high price in the form of self-inflicted economic damage. First, a Government is not required to sell everything that can be sold. As a matter of policy, valuable resources at the Government’s disposal can be used to serve the common weal in many ways other than being guided by the relatively simple notion of extracting maximum monetary value. Second, in dealing with valuable resources and large Corporations, Governments must act with complete and utter regulatory clarity and certainty. Clumsy decision-making followed by litigation in a system that is still ill-equipped to handle complex commercial disputes can have far-reaching unintended consequences. Last, institutions such as the Supreme Court should ponder deep before passing judgments and orders that have severe economic consequences. The ever-present bogey of corruption is an insufficient justification for the Court to wreak havoc in the economic space.
The order of the Supreme Court dated 14th February threatening contempt for non-payment of AGR dues evokes doubts whether we have indeed learnt these lessons. By all accounts, the AGR dispute between the Government and telecom companies was a contractual dispute between a licensor and licensees of spectrum. The dispute centered around the meaning of the terms “gross revenue” and “adjusted gross revenue” in the licensing contract. The dispute has been pending in the court system for over two decades and in a judgment delivered in October last year, the Supreme court upheld the interpretation proferred by the Department of Telecommunications. The service providers were held to be in default of license fees and it was held that interest and penalty were rightly imposed by the Department. The entire amount due from the telecom companies is said to be in the region of 1.4 lakh crores.
It is common knowledge that at least one of the major telecom companies impacted by the decision is not in good financial health. Vodafone-Idea, in respect of this very issue, has issued thinly veiled threats to the Government that it is contemplating shutting shop: an eventuality the Government is right to want to avoid, given the current state of the economy. A telecom company servicing over a hundred million subscribers and providing employment to thousands of employees winding up its business is not good news for a Government battling an economic slowdown. Therefore, soon after the judgment of the Supreme Court last year, the Government decided to give breathing room to telecom companies by announcing a slew of measures. Further, the Department of Telecommunications by an order dated 23rd January, 2020 seems to have indicated to the telecom companies that payment as per the Supreme Court order would not be insisted upon for the time being. It is this order that earned the ire of the Supreme Court, leading to the threat of contempt.
The order of the Court begins with an observation that the judgment of the Court has been violated in pith and substance. However, as pointed out above, the matter in question pertains to a contractual dispute. At the end of its adjudicatory role, the Court held that some amounts are due from the licensees to the licensor, the Union of India and that these are to be deposited within three months. The Union of India, in the present case, was evidently not keen on extracting these payments immediately. This was the position on the date of the order. However, the DoT order dated 23rd January, 2020 at the heart of the controversy, was withdrawn in great haste and recovery proceedings were initiated immediately as per an order of the Department of Telecommunications issued on 14th February.
As a licensor who had succeeded in a contractual dispute, it was open to the Government of India to restructure the payment of dues owed to it. Of course, the Government ought to have approached the Court seeking leave to offer the telecom companies a more liberal payment schedule. Nevertheless, suspending recovery of what is essentially a decretal amount in an adverse economic climate, did not deserve the sort of reaction that the Court expressed on the 14th.
The order of the Court does not indicate that it has considered the complexity of the issue before it.
Instead, the Court’s primary focus of attention is some perceived insult to its position in the constitutional hierarchy. The Court chooses to describe the officer who has issued the order as a “Desk Officer”. Some words are spent describing the ‘temerity’ of the officer in staying the order of the Supreme Court. It is not immediately clear how the rank of the concerned officer or his designation is relevant to the issue of wilful disobedience in the present case.
It is evident that the order has been passed in a fit of anger. It would seem that the fate of the entire telecom sector (apart from some companies who have relatively smaller dues) hangs by the ability of a few lawyers to placate a very angry judge. The order of the Court strikes a painful note when it records that there is scant respect for the directions of the Supreme Court. How things have to come to such a pass, first and foremost, is a question for the judges of the Court.