How the SC demolished telecom operators plea on AGR

Our Bureau Mumbai | Updated on November 02, 2019

The Supreme Court has rejected claims made by the telecom operators on the issue of Adjusted Gross Revenue (AGR) on grounds that the operators had agreed to pay revenue share on all income, as part of a migration package in 1999.

"When Government has parted with the privilege as to revenue on sharing basis under the license, and an agreement entered into, it ought to have been precisely followed. The conduct of the licensees was highly unfair, and anyhow and somehow, they had attempted to delay the payment. It passes comprehension how they have contended that the demand has to be worked out after this Court renders the decision,"the apex court said.

The court , in its ruling today, said that the 1999 migration agreement had led to huge benefits for the industry and the operators cannot go back on it citing that there was no clarity in the definition of AGR.

“The licensees have made a futile attempt to submit that the revenue to be considered would be derived from the activities under the licence; whereas it has been held in 2011 that the revenue from activities beyond the licence have to be included in adjusted gross revenue, is binding,"the top court said.

"They cannot avoid the consequences of the contractual definition which has been accepted by the parties, and they are bound to make payment of licence fee on the basis of gross revenue, which would be the total revenue of the licensing company. As the Government has not accepted the TRAI’s recommendations, the decision of the Central Government on the point of definition of adjusted gross revenue was final and binding," the court said.

The Court has also held that TRAI and tribunal had no jurisdiction to decide on the validity of the definition of adjusted gross revenue under the licence agreement and to exclude certain items of revenue which were included in the definition of gross revenue in the licence agreement between the licensor and licensee. "The tribunal had no jurisdiction to exclude certain items on the ground of the validity of the definition of adjusted gross revenue. The finding of the tribunal in the order dated 7.7.2006 insofar as it decided that the revenue realised by the licensee from activities beyond the licence to be excluded from adjusted gross revenue in the licence agreement is without jurisdiction and is a nullity," the Supreme Court said.

It said that the the definition of gross revenue is binding, and the licensees cannot try to wriggle out of the decision by making impermissible attempts to depart from it

"Given the definition of gross revenue, the same includes revenue from activities beyond the licence,"the court said.

"The definition of gross revenue is crystal clear in the agreement. How the adjusted gross revenue to be arrived at is also evident. It cannot be submitted that the revenue has not been defined in the contract. Once the gross revenue is defined, one cannot depart from it and the very meaning is to be given to the revenue for the agreement,"the court said.

The court said that overall revenue, has to be taken into account for determination of licence fees without set off, as provided in the agreement. The same was defined to simplify it to rule out the litigation, disputes, and accounting myriads. The submission raised that the term revenue has to be interpreted as the consideration payable in keeping with commercial and financial parlance is what is intended to be avoided

" They (operators) have also contended that revenue from activities under the licence cannot be included in gross revenue, which submission has been negated by this Court in 2011, it was held that the gross revenue would include the revenue generated from nonlicensing activities. Licensees cannot be permitted to approbate and reprobate and to take inconsistent stands that they are not included in gross revenue as per AS9,"the court said/

On the question of levying penalty and interest on dues, the court said that the operators have to pay the dues and the interest because they knew what constituted revenue. "No litigant can be permitted to reap fruits on such inconsistent and untenable stands and litigate for decades in several rounds which is not so uncommon but is disturbing scenario projected in very many cases. We have examined the matter upon merits and then aforesaid conclusion indicates frivolous nature of objections,"the court said.

Published on October 24, 2019

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