BHARTI AIRTEL LIMITED vs UNION OF INDIA on 19 March 2019

ORDER

**A K Bhargava, Member** – Although these four petitions have been filed at different points of time, the common thread is the merger of Petitioner-2 company with Petitioner-1 company Bharti Airtel Limited (BAL). Since common issues are involved, this single order covers all the four petitions. For the sake of convenience, TP No. 181 of 2018 will be generally referred to, unless specified.

2. On 20-2-2014, Respondent Department of Telecom (DoT) issued Guidelines for Transfer/Merger of various categories of Telecommunication service licenses/authorization under Unified License (UL) on compromises, arrangements and amalgamation of the companies (referred to as merger guidelines hereinafter). Subsequently, after having obtained sanction from concerned high Court/NCLT for scheme of amalgamation, petitioners applied to DoT for taking the merger on record. Pursuant to the request for approval of merger by the petitioners, DoT raised some demands in addition to imposing few other conditions for granting approval to the proposed merger. Petitioners are aggrieved by these demands and conditions as well with some provisions of the merger guidelines. The prayers, as in TP 181 of 2018 are listed below:

- *"(i) Set aside and quash the Impugned Conditions, i.e. Condition No. (a), (b),(c), (e), and (g), as contained / imposed vide the Respondent's communication dated 17.08.2018.*

- *(ii) Set aside and quash the following specific provisions of Clause 3 (i) of the "The Guidelines for Transfer/Merger of various categories of Telecommunication service license / authorisation under Unified Licence ("UL") on compromises, arrangements and amalgamation of the companies" dated 20.02.2014:*


*"... In the event of judicial intervention in respect of the demands raised for one time spectrum charges in respect of spectrum holding beyond 4.4 MHz in GSM band / 2.5 MHz in CDMA band before merger in respect of transferee (i.e. acquiring entity) company, a bank guarantee for an amount equal to the demand raised by the Department for one time spectrum charge shall be submitted pending the final outcome of the court case."*

(iii) Set aside and quash the following specific provisions of Clause 3 (m) of the "The Guidelines for Transfer/Merger of various categories of Telecommunication service license / authorisation under Unified Licence ("UL") on compromises, arrangements and amalgamation of the companies" dated 20.02.2014:

*"... The one time spectrum charge shall be payable as per provisions in Para 3 (i) above of these guidelines."*

(iv) Direct the Respondent to forthwith taken on record the merger of the Petitioner No.1 and Petitioner No.2 companies and their respective licenses i.e. Unified Access Service Licenses and the ISP Category "A" service authorization under Unified License in the LSAs of Gujarat, Himachal Pradesh, Uttar Pradesh (East) and Uttar Pradesh (West) and allow the Petitioner No.1 to operationalize the BWA spectrum in 2300 MHz band of the Petitioner No.2 in the aforesaid LSAs forthwith;

(v) Hold and declare that the restrictions under clause 5 of the Unified Guidelines dated 19.08.2013 i.e. regarding crossholding not to exceed a one year period, will not apply to the Petitioners in the facts and circumstances of the present case and also the time period consumed in prosecuting the Company Petition No. CAA - 31 (PB) of 2018 until the Impugned Letter dated 17.08.2018 and time period consumed in prosecuting the present Petition shall not be counted while determining the one year period under clause 5 of the Unified Guidelines dated 19.08.2013 and thus no penalty can be imposed upon the Petitioners on this account;

(vi) Permit the Petitioner to make the necessary filings with the Registrar of Companies in respect of the merger of Petitioners;

(vii) Grant compensation to the Petitioners as this Hon'ble Tribunal deems fits and proper and in the facts and circumstances of the present case;

(viii) Pass such or any other order(s) in the facts and circumstances of the case."


The impugned conditions No. (a), (b), (c), (e), and (g) in aforementioned prayers are as follows:

- a. Payment of Rs. 185.625 Crore towards the difference between the entry fee payable for UASL in Gujarat, Himachal Pradesh, Uttar Pradesh (East) and Uttar Pradesh (West) services areas and the entry fee paid by M/s. BDNPL for ISP Category 'A' service authorisation under Unified License so as to facilitate the proposed merger along with the BWA spectrum in 2300 MHz band in Gujarat, Himachal Pradesh, Uttar Pradesh (East) and Uttar Pradesh (West) service areas with the respective UAS Licences/ Unified Licence, which enables M/s. Bharti Airtel Limited to provide mobile voice services also using the afore-mentioned BWA spectrum in 2300 MHz band in these service areas.

- b. M/s. BAL shall submit a Bank Guarantee towards One Time Spectrum Charge (OTSC) for Rs. 1441.27 Crore towards the spectrum holding beyond 4.4. MHz in GSM band as per the clause 3(i) and 3(m) of the Merger & Acquisition Guidelines dated 20.02.2014 in the prescribe format enclosed as Annexure – I. Details of the afore-mentioned OTSC are enclosed as Annexure – II.

- c. All demands relating to the licenses of the merging entities (viz. M/s. BDNPL and M/s. BAL) shall be cleared by any of the merging entities before taking the merger on record.

- e. M/s. BAL shall submit an undertaking to pay all past demands inclusive of anything remained unpaid of the past period in respect of M/s. BDNPL and M/s. BAL subject to the outcome of judicial process as per the prescribed format enclosed as Annexure – III.

- g. Pursuant to the completion of Share Purchase Agreement between BAL and BDNPL (formerly "TDNPL") in August 2017, the cross holding conditions as stipulated in clause 5 of Unified License guidelines dated 19.08.2013 (as amended from time to time) is applicable against M/s. BAL and M/s. BDNPL since August 2017 for holding Access Spectrum by both the Companies in same Service Area of Gujarat, Himachal Pradesh, Uttar Pradesh (East) and Uttar Pradesh (West) and accordingly the same shall be made consistent within a period of one year i.e. up to August, 2018."

3. Since the merger has already been effected after long and arduous legal process, many of the prayers from the aforementioned long list are not relevant today. Some demands like BG for OTSC are a subject matter of other pending litigation. Accordingly, learned senior counsel for the petitioner has pressed remaining issues, mainly that pertaining to demand towards difference in entry fee. Learned ASG appearing for the respondent has also mainly addressed us on 

the issue of difference in the entry fee. We are therefore confining our findings to the issue of difference in entry fee in respect of these petitions.

4. Before proceeding further, it will be appropriate to capture different facts in case of all the petitions. These are summarized in the Table below:

<thead> <tr> <th><b><u>Relevant Facts</u></b></th> <th><b>Telecommunication Petition No. 56 of 2015 (ABSPL Merger)</b></th> <th><b>Telecommunication Petition No. 6 of 2017 (Augere Merger)</b></th> <th><b>Telecommunication Petition No. 55 of 2018 (Telenor Merger)</b></th> <th><b>Telecommunication Petition No. 181 of 2018 (Bharti Digital Merger)</b></th> </tr> </thead> <tbody> <tr> <td></td> <td><b>BHARTI AIRTEL LIMITED</b><br/><br/>(merged into)<br/><br/>Airtel Broadband Service Pvt. Ltd.</td> <td><b>BHARTI AIRTEL LIMITED</b><br/><br/>(merged into)<br/><br/>Augere Wireless Broadband India Pvt. Ltd.</td> <td><b>BHARTI AIRTEL LIMITED</b><br/><br/>(merged into)<br/><br/>Telenor (India) Communication Pvt. Ltd.</td> <td><b>BHARTI AIRTEL LIMITED</b><br/><br/>(merged into)<br/><br/>Bharti Digital Networks Pvt. Ltd.</td> </tr> <tr> <td><b>Licensed Service Areas for which the Petitioner No. 2 had won BWA spectrum under an auction and which is now being utilized by the Petitioner No. 1 (Bharti Airtel) post the merger</b></td> <td>Delhi, Mumbai, Haryana, and Kerala</td> <td>Madhya Pradesh</td> <td>Andhra Pradesh, Assam, Bihar and Jharkhand, Maharashtra, Gujarat, UP East, and UP West</td> <td>Gujarat, Himachal Pradesh, UP East, and UP West</td> </tr> <tr> <td><b>Type of License</b></td> <td><b>Petitioner No. 1 (Bharti Airtel Limited) –</b> <ul> <li>Unified License ("UL") [Access Service Authorization (Voice Services) for the Delhi LSA + ISP Category "A" Authorization for Pan – India]</li> <li>Unified Access Service License</li> </ul> </td> <td><b>Petitioner No. 1 (Bharti Airtel Limited) –</b> <ul> <li>Unified Access Service License ("UASL") [Access Service Authorization (Voice Services) for the Madhya Pradesh LSA + ISP Category "A" Authorization</li> </ul> </td> <td><b>Petitioner No. 1 (Bharti Airtel Limited) –</b> <ul> <li>Unified License ("UL") (including NLD and ILD service authorization) + Unified Access Service License</li> </ul> <b>Telenor (India) Communication Private Limited –</b> </td> <td><b>Petitioner No. 1 (Bharti Airtel Limited) –</b> <ul> <li>Unified License ("UL") [Access Service Authorization (Voice Services) for Gujarat, UP East, and UP West LSAs]</li> <li>Unified Access Service License ("UASL") for Himachal Pradesh LSA [Access Service Authorization</li> </ul> </td> </tr> </tbody> </table>


<tr> <td></td> <td> <p>("UASL") for Mumbai, Haryana, and Kerala LSAs [Access Service Authorization (Voice Services) + ISP Category "A" Authorization]</p> <p><b>Petitioner No. 2 (Airtel Broadband Service Pvt. Ltd.) –</b></p> <ul> <li>ISP License (Category A – All India), but was only operating in the Madhya Pradesh LSA (1 LSA).</li> </ul> </td> <td> <p>for Pan – India]</p> <p><b>Petitioner No. 2 (Augere Wireless Broadband India Pvt. Ltd.) –</b></p> <ul> <li>ISP License (Category A – All India), but was only operating in the Madhya Pradesh LSA (1 LSA)</li> </ul> </td> <td> <ul> <li>Unified License ("UL") [Access Service Authorization (Voice Services) for Andhra Pradesh, Assam, Bihar and Jharkhand, Maharashtra, Gujarat, UP East, and UP West LSAs (7 LSAs) + NLD + ILD + ISP Category "A" Authorization for Pan – India but operating in 7 LSAs]</li> </ul> </td> <td> <p>(Voice Services) + ISP Category "A" Authorization]</p> <p><b>Petitioner No. 2 (Bharti Digital Networks Pvt. Ltd.) –</b></p> <ul> <li>Unified License ("UL") [ISP Category "A" Authorization for Gujarat, Himachal Pradesh, UP East, and UP West LSAs] (4 LSAs)</li> </ul> </td> </tr> <tr> <td><b>Sanction granted by the concerned Company Court</b></td> <td>The Hon'ble High Court of Bombay granted sanction of the scheme of amalgamation on 11.04.2014.</td> <td>The Hon'ble High Court of Delhi granted sanction of the scheme of amalgamation on 19.12.2016.</td> <td>The Hon'ble NCLT granted sanction to the scheme of amalgamation on 08.03.2018.</td> <td>The Hon'ble NCLT granted sanction to the scheme of amalgamation on 04.07.2018. The Petitioners had filed the Petition before the Hon'ble NCLT on 26.09.2017.</td> </tr> <tr> <td><b>Entry Fee Paid by the Petitioners to the Respondent</b></td> <td> <p>Petitioner No. 1 has paid <b>Rs. 364.81 crore</b> to the Respondent in respect of the LSAs of Delhi, Mumbai, Haryana, and Kerala.</p> <p>Petitioner No. 2 has paid <b>Rs. 30 lakh</b> to the Respondent (pan India).</p> </td> <td> <p>Petitioner No. 1 has paid <b>Rs. 17.45 crore</b> to the Respondent for the MP LSA.</p> <p>Petitioner No. 2 has paid <b>Rs. 30 lakh</b> (pan India).</p> </td> <td>Not applicable</td> <td> <p>Petitioner No. 1 has paid <b>Rs. 190.08 crore</b> to the Respondent in respect of the LSAs of Gujarat, Himachal Pradesh, UP East, and UP West.</p> <p>Petitioner No. 2 has paid <b>Rs. 30 lakh</b> to the Respondent (pan India).</p> </td> </tr> <tr> <td><b>Impugned Entry Fee being demanded by the Respondent</b></td> <td>differential entry fee of <b>Rs. 436.09 crores</b></td> <td>differential entry fee of <b>Rs. 17.2251 crores</b></td> <td>Not applicable</td> <td>differential entry fee of <b>Rs. 185.625 crores</b></td> </tr> </table>

5. As can be seen from the above Table, the impugned entry fee is being demanded in all petitions, except in TP 55 of 2018 which is not being discussed in the following paras. In all the cases, BAL is having either UASL access service authorisation for voice services plus ISP category 'A' authorization or UL access service authorisation for voice services plus ISP category 'A' authorisation for Pan-India. P2 is having either ISP category 'A' license or UL with only ISP category 'A' authorisation. P2 has obtained BWA spectrum in certain LSAs through Auction in 2010. As per their license authorisation, P2 is not entitled to offer voice access service. However, in guidelines for UL, a provision for migration exists to enable offering of such services. Relevant provision in clause 8.3 (ii) is as follows *"(ii) Entry fee applicable to migration to Unified License shall be equal to entry fee for new Unified License except for Internet Service Provider with BWA spectrum. For migration of ISP with BWA spectrum to UL regime with authorization of providing access services, which enable it to provide mobile voice services also using BWA spectrum, an additional fee equal to the difference between the entry fee for UASL as per details in Annexure V and entry fee paid for ISP license shall be payable in addition to the entry fee applicable for new UL."*

It is noted that the Pan-India entry fee for all services in UASL is Rs. 1658.57 Cr, while that for Category 'A' ISP license is only Rs. 30 Lakh. It is this difference, depending upon the LSAs involved, that the respondent is proportionately demanding. Respondent also cites an example of Reliance Jio which on migration from ISP license to UASL license sought to use the spectrum allocated with the ISP license also for transmitting voice and was charged entry fee in terms of the above provision and it paid the fees as demanded by the DoT. Learned senior counsel for Petitioner Mr. Ramji Srinivasan submits that unlike the case of 

Reliance Jio, P2 here is not seeking migration from ISP license to UASL for providing voice services. Hence provision of migration under clause 8 is not applicable at all. We agree that the facts in this case are not the same as that of Reliance Jio case and the same cannot be applied as precedence to invoke clause 8 of the UL guidelines.

6. Learned senior counsel for Petitioner Mr. Ramji Srinivasan submits that the respondent's demand for differential entry fee is based on a complete misreading of the UL Guidelines. As facts stand, P2 has sought merger with P1, for which merger guidelines will be applicable. The clause 3 of merger guidelines allows for such a merger, consequent to which the licenses/authorisation of Transferor Company gets subsumed in the resultant entity. The relevant parts of the clause are follows *"(d) The merger of licenses/authorization shall be for respective service category. As access service license/authorization allows provision of internet services, the merger of ISP license/authorization with access services license/authorization shall also be permitted.*

*(e) Consequent to transfer of assets/licenses/authorization held by transferor (acquired) company to the transferee (acquiring) company, the licenses/authorization of transferor (acquired) company will be subsumed in the resultant entity."*

Mr. Srinivasan submits that the resultant entity i.e. the transferee already has the access services license/authorisation and needs no migration. Having already paid for such access service license/authorisation, it need not pay any further differential in entry fee. In fact, and such demand would actually amount to asking for a double payment.


7. Mr. Srinivasan further submits that P2 had obtained the BWA spectrum through Auction in 2010. The spectrum auctioned was de-linked with the license and could be freely put to use as per license authorisation. Mr Srinivasan further brings to our notice some "query" and "response" which form part of NIA 2010 that are binding on the respondent. Those relevant query and response are reproduced below

<tr> <td>34. Does the BWA license allow use of voice to be offered by the BWA operators? Even in VoIP form?</td> <td>There is no BWA licence. Service conditions including allowing Internet Telephony will depend on whether the winner of the BWA spectrum holds UAS or ISP licence (and the type of ISP licence).</td> </tr> <tr> <td>71. "Spectrum usage rights shall be awarded separately for specific service areas". Please clarify.</td> <td>Spectrum usage rights are based on the provisions of the applicable licence and the licences are specific to a service area. The auction is for the award of spectrum only, while award of licence is a separate process.</td> </tr> <tr> <td>86. Can a UAS licensee who wins the BWA spectrum provide voice?</td> <td>UAS licensee who wins BWA spectrum can offer any services currently allowed under the UAS licence.</td> </tr> <tr> <td>140. Can an ISP licensee who has won BWA spectrum, use the spectrum for voice? Will he have to migrate to a UAS license to do so?</td> <td>Use of spectrum is governed by licence conditions. Current licence conditions only permit eligible ISPs to provide restricted internet telephony.</td> </tr> <tr> <td>169. Will voice services be permitted for BWA, if new operators take a UASL licence subsequently?</td> <td>Provision of services will be governed by the relevant licence conditions.</td> </tr> <tr> <td>254. In C 1.1.3.3 it is clarified that services can only be offered as per terms of the license obtained by the operator.<br/>In C 4.1 it is stated that the spectrum shall not be used for any activity other than the activities for which operator has the license.<br/>Request confirmation that a BWA spectrum holder having UAS Licence can provide access for voice on the BWA spectrum.</td> <td>If the spectrum is taken under the UAS licence, then the BWA spectrum holder can provide services as per the UAS licence.</td> </tr> </table>


According to Mr Srinivasan, these NIA provisions and query and response clearly establish that the same BWA spectrum after merger can be used by the transferee company for providing voice access service since the transferee company possesses the requisite license/service authorisation. Since spectrum is delinked with the license, no separate charge can be levied for usage as per the license/service authorisation.

8. Learned ASG Mr. Vikramjit Banerjee, appearing for the Respondent maintains that the demand for entry fee differential is legitimate and justified. He first contends that it is a case of migration under the garb of merger. What the petitioner cannot do directly, it is attempting to do indirectly. Therefore, the respondent is entitled to go into the real nature of the transaction which is migration to voice access service. Mr. Banerjee, however, does not have much to show for application of his assertion in this case. Both migration and merger have distinct and defined meaning as incorporated in license and merger guidelines. Petitioners have obtained sanction for such scheme of merger through appropriate court and have sought approval from the respondent directly in accordance with the provisions of the guidelines. We thus find no confusion or veil or attempt to withhold any information regarding the real nature of the transaction.

9. Mr Banerjee further contends that a transferee cannot get a better right than that of a transferor. Since transferor does not have a right to provide voice access service, transferee also cannot do so without paying the differential entry fee. He, however, omits to mention that the transferee already has such a right which does not get extinguished because the transferor did not have that right.

A circular stamp or seal is located at the bottom center of the page. It contains the letters 'TR' in a stylized, bold font. The stamp appears to be a watermark or a digital overlay.

Transferee does not have to pay again for an authorisation for which he has already made payment. We thus do not find Mr. Banerjee's contention sustainable.

**10.** Mr. Banerjee further submits that because of the public nature of the resources, it is duty of the government to maximize the revenue and not allow any windfall gains by the licensee. Transferor Company is wholly owned subsidiary of transferee and will have to pay entry fee if BWA spectrum it possesses has to be used for voice services. Post-merger, if the same spectrum is allowed to be used for voice services without paying difference in entry fee, the government would suffer a loss, which it is duty bound to recover. Mr. Srinivasan on other hand says that there is neither any windfall gain by the petitioner nor any consequent loss by the respondent. By demanding such a differential entry fee, the respondent is in fact indulging in rent seeking for signing the merger approval. We have already noted that BWA spectrum is de-linked from license and is paid for at market rate determined through auction. Spectrum can be used for any service as per the license authorisation. Hence there is no question of any loss suffered if usage changes as per license authorisation. Of course, for appropriate authorisation under license, the licensee has to pay the prescribed fee. Post-merger, transferor's license gets extinguished and transferee's license remains operative. The transferee has all the necessary authorisations for which it has paid the maximum amount prescribed by the licensor. The transferee entity is therefore entitled to use the spectrum obtained through an auction for voice access services and does not have to pay any extra fee for the purpose. Thus we find no basis on which the respondent can demand further entry fee. In any case, 

in the merger guidelines issued by the licensor, it has permitted merger of ISP license/authorisation with access services license/authorisation. Being in full knowledge of the facts involved in such situation, it could have prescribed a separate entry fee, if it thought this to be a case of windfall gain. Apparently, no separate entry fee is prescribed in the merger guidelines. Therefore, by licensee's own guidelines, no windfall gain by transferee is established.

11. In view of the above discussions, we find that the respondent's demand for entry fee differential is without any basis or justification. Accordingly, the demands of entry fee differential as mentioned in the last row of the Table in para 4 above are set aside.

12. Petitions under consideration are partially allowed limited to abovementioned direction. No cost to either party.

A circular seal or stamp containing a large, stylized letter 'R' in the center. The seal appears to be a watermark or a stamp on the document.

..... **(S.K. Singh, J)** **Chairperson**

..... **(A.K. Bhargava)** **Member**