SC rejects telecom firms' pleas in AGR case; Vi shares plunge 10%

The rejection of the final legal remedy leaves Vodafone Idea with limited options, worsening its financial struggles amid fierce competition and heavy debt

In a major setback for telecom companies, the Supreme Court on Thursday dismissed a batch of curative petitions filed by telecom giants, including Vodafone Idea (Vi) and Bharti Airtel, in the ongoing Adjusted Gross Revenue (AGR) dispute. The pleas aimed to rectify what the companies called ‘arithmetical errors’ in the Department of Telecommunications' (DoT) calculation of AGR dues, reported The Economic Times.

A bench comprising Chief Justice DY Chandrachud, and Justices Sanjiv Khanna and BR Gavai rejected the petitions, dealing a blow to the already struggling telecom sector. Curative petitions, the final legal remedy available to litigants, are rarely entertained by the top court, and this case was no exception.

Following the ruling, Vodafone Idea’s shares nosedived, plunging nearly 10 per cent to Rs 11.61 as of 11.45 am, down from an opening price of Rs 13 on Thursday. The market reacted sharply to the decision, reflecting investor concerns over the company’s financial health.
 

Last year, Airtel and Vi had requested the Supreme Court to hear their curative petitions in an ‘open court’ setting. They sought to set aside the apex court’s October 2019 judgment to the limited extent of “imposing penalty and interest on penalty”. The telecom operators emphasised that they were not challenging the licence fee imposition but were instead urging the correction of “manifest, clerical, and arithmetical errors” in the DoT's provisional demands.

What is the AGR dispute?
 

The curative petitions stemmed from the Supreme Court’s order on September 1, 2020, which mandated telecom companies to pay their AGR arrears over 10 years. The order required an upfront payment of 10 per cent of the dues by March 31, 2021, with the remaining balance to be paid in instalments until 2031. The court made it clear that no revaluation of the AGR dues would be allowed, and any default would attract interest, penalty, and contempt of court charges.

The telecom companies were initially required to pay a total of Rs 1.47 trillion by January 2020, as ordered by the apex court. Of this amount, nearly 75 per cent comprised interest, penalty, and interest on the penalty. The licence fee dues stood at Rs 92,642 crore, while the spectrum usage charge totalled Rs 55,054 crore.

In July 2021, the Supreme Court had already dismissed pleas seeking correction of errors in the AGR dues calculation. Despite this, the telecom firms pursued curative petitions, asserting multiple errors in the computation of their dues, which exceed Rs 1 trillion.

Impact on Vodafone Idea
 

The Supreme Court’s rejection of the curative plea is a severe blow to Vodafone Idea. In 2019, the apex court confirmed the AGR demand raised by the DoT, imposing a financial burden of Rs 58,000 crore on Vi. With the addition of interest, this liability has escalated to Rs 70,320 crore as of the end of FY24.

Vodafone Idea’s curative petition sought three specific remedies: correction of errors in the AGR demand calculations, reduction of the penalty to 50 per cent of the shortfall amount, and adjustment of the interest rate on the penalty to 2 per cent above the State Bank of India’s prime lending rate. However, with the Supreme Court's rejection, the company’s options have significantly narrowed.

This ruling further complicates the financial future of Vi, which has been struggling with heavy debts and stiff competition in the telecom sector. The company now faces a daunting challenge in managing its massive AGR liabilities while striving to remain competitive in the market.