 "Madras HC upholds DoT's rights to claim share on income from non-telecom activities")
A Division Bench of the Madras High Court has dismissed the petition of Aircel Cellular, upholding the rights of the department of telecommunication (DoT) to claim share on adjusted gross revenue (AGR), including the non-telecom activities income. The court also held that the levy of one-time spectrum charge (OTSC) is justified and enforceable.
The petitioners — Aircel, Aircel Cellular and Dishnet Wireless — had also challenged the DoT's decision to put conditions for merger of licence of Aircel and Aircel Cellular.
The court observed the petitioners, being a company with legal expertise, entered into migration package with the DoT, and the latter has granted benefit of revenue sharing towards licence fee, the period of licence was extended from 10 years to 20 years in favour of the licensee, which was done through an amendment.
"The petitioners, with open eyes, having accepted the extension of term from 10 years to20 years and also accepted that the licence fee will be a percentage of share of the revenue, without any embargo, cannot now come before this Court and plead that what is accepted by them is violative of Articles 14 and 19 (1) (g) of the Constitution," said an order, issued by judges Huluvadi G Ramesh and M V Muralidaran.
"The licensee, with open eyes, had accepted the terms of the agreement, which was to their advantage as well and now their contention that revenue generated from other activities, which are not part of the licence agreement, stands demarcated and would not fall within the definition of AGR is far fetched," added the order.
The Bench observed that any revenue generation by means of imposition of OTSC, in exercise of the right vested on clause 13 (ii) of the licence agreement would very well stand the test of legal scrutiny, as such imposition is within the power of the licensor. The power vested under clause 13 (ii) of the licence agreement, empowers the Government to modify the terms of the agreement in select situations.
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"Once the term "modify" occurring in clause 13 (ii) of the licence agreement brings within itself the power of addition, more specifically in the interest of general public, the levy of OTSC by the Government on the service providers cannot be held to be in violation of the licence agreement or against the contractual obligations. The word "modify" as depicted in the above clause could only be termed as changes made by way of improvement for the effectiveness and overall benefit of the public at large," added the Bench.
The Court dismissed the petitions filed by the company and held that the company is bound to pay the amount, which is due to the department as a share of AGR on the non-telecom activities. The DoT has to quantify the share of AGR on non-telecom activities, which remains unpaid and issue a fresh demand notice within a period of one month from the date of receipt of a copy of the order and the company shall pay the amount within a period of one month from the date of receipt of the demand notice.
In case of any dispute as to the quantification of the demand or the period of demand, the petitioners are granted liberty to take up only that portion of the dispute before the Tribunal. The issue relating to Adjusted Gross Revenue is pending before the Supreme Court at the instance of the Central Government. In such view of the matter, it is open to the Department to proceed further in the matter after adjudication of the matter by Supreme Court.
Sustaining the levy of OTSC, while the additional solicitor general that an amount to the tune of around more than Rs 3,273 crore is due from the petitioners to the DoT, the court said that DoT shall issue fresh notice within one month from the date of receipt of a copy of the order quantifying the amount and the company shall pay the same according to the demand within one month from the date of receipt of the notice.
The Court also directed the companies to furnish an undertaking as sought by the DoT, regarding the merger of license, within a period of one month from the date of receipt of a copy of the order and once they furnish the said undertaking, shall grant necessary approval for the merger and issue a fresh licence according to the regulation.