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Bharti Airtel gets a three-week reprieve

The Supreme Court has asked the Department of Telecommunications to not invoke any bank guarantees of Bharti Airtel Ltd. for the next three weeks.

The direction comes after the DoT sent a letter to Bharti Airtel on Aug. 17, asking it to clear Videocon Telecommunications Ltd.’s dues from the adjusted gross revenue case as per the court’s directions within a week. The letter also added that a failure will result in the DoT invoking the bank guarantees submitted by Bharti Airtel.

The issue is a fallout of the Supreme Court’s October 2019 ruling that non-core revenue must be included while calculating statutory levies. In September last year, the apex court had given telecom operators 10 years to pay their AGR dues.

Bharti Airtel had struck a spectrum-trading agreement with Videocon in March 2016. And it bought the entire spectrum of Videocon Telecommunications.

And so, the DoT moved to recover Videocon’s dues from Bharti Airtel. In it’s letter, the DoT stated that as per the apex court’s verdict, only where the part of the spectrum was sold, AGR liability will fall on the seller. But not where the entire spectrum was sold.

“It is clear that only in case where part of the spectrum is under sale the liability of the buyer with respect to past dues of the seller shall not arise. In case of the entire spectrum sale, as is the case of trading between VTL and Bharti Airtel Ltd., the past dues of the seller shall be liability of the buyer (Mis Bharti Airtel ltd.) except dues found recoverable after effective date of trade which was not known at the time of trade.”

Bharti Airtel filed an application before the top court questioning the government’s demand. The bank guarantees, the company said, were submitted for securing license fees and the other statutory dues.

It argued on Monday that as per the Supreme Court’s judgment of September 2020, it’s the seller’s responsibility to clear the liabilities which were known on the date of the agreement. In this case, AGR dues were known liabilities and therefore should be cleared by Videocon, Senior Advocate Shyam Divan argued for Bharti Airtel.

Liability known on or before the agreement has to be cleared by the seller. The adjusted gross revenue dues were known liability. The buyer is liable for future liabilities. Liabilities which are unknown can be recovered by the government from the buyer or the seller or jointly from both. This is the common understanding.

The application was heard by the top court bench of Justices L Nageswara Rao and S Abdul Nazeer and MR Shah. The bench observed that it was not going into the merits of the case.

It allowed Divan to withdraw the application and approach the appropriate forum for relief. In this case, the forum is likely to be the Telecom Disputes Settlement and Appellate Tribunal.

The top court, however, asked the government to not invoke any of the bank guarantees for three weeks. BloombergQuint

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