UNION OF INDIA versus RELIANCE COMMUNICATION LIMITED & ANR. on 7 January 2020

1. Leave granted. With the consent of the learned counsel for theparties, the appeal was heard finally. The appellant/Union of India(hereafter referred to as “the Union”) is aggrieved by a direction of theTelecom Disputes Settlement and Appellate Tribunal (hereafter referredto as “TDSAT” or the “Tribunal”) to return Rs. 104.34 crores lyingunadjusted, to the respondents (collectively hereafter referred to as “RCL/RTL”).

2. The facts necessary for this judgment are that the Union had,on 30.01.2013, published a notice inviting bids (hereafter referred to as“NIA 2013”), for the auction of spectrum. Sistema Shyam TeleservicesLtd. (hereafter referred to as “Sistema”) was the successful applicantin respect of the 800 MHz band spectrum for eight circles/regions. Byorders of the court, a Scheme for Amalgamation under the erstwhileCompanies Act, 1956 was approved, by virtue of which Sistema mergedwith RCL. Resultantly, its assets and liabilities, including the spectrumlicense it had successfully bid for – to NIA 2013 devolved on RCL. TheUnion approved this transfer on 20.10.2017.

3. The Union invited bids for auction of further spectrumbandwidth in 2015; the bids of RCL and the second appellant (hereafter“RTL”) were successful in respect of three kinds of spectrum in severalregions/circles; licenses were issued to them. In terms of NIA 2013, thethird instalment of deferred spectrum charges of Rs. 281.45 crores felldue from RCL, which could not be paid by it. This led to the encashmenton 11.05.2018, of bank guarantees furnished, to the extent of Rs. 281.45crores. The total extent of bank guarantee furnished was Rs. 390.41crores. Contemporaneously, the deferred spectrum liability under theNIA 2015 @ Rs. 492.79 crores became payable on 09.04.2018. Therespondents (RCL and RTL) could not pay these charges. Consequently,the Union en-cashed Rs. 492.79 crores out of the bank guaranteesfurnished.

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A4. RCL and RTL apparently along with several other telecomservice providers faced acute economic problems which led to the Unionrevisiting certain issues and modifying the payment periods/terms towardsdeferred spectrum charges, in regard to subsisting spectrum licenses.Accordingly, letters containing such modified terms were issued on19.03.2018. These facts, coupled with the other financial problems facedBby the respondents, leading to their adopting a strategic debt restructuringscheme with their lender banks in accordance with the guidelines issuedby the RBI were mentioned by them; Formation of a joint-lenders forum(JLFs) with the objective of realizing dues payable by RCL and RTL, (tothe tune of ¹ 45,000 crores) are cited by the respondents as reasons forCdefault in fulfilling the commitments under the licenses. It is also statedthat these two respondents eventually decided to exit from the strategicdebt restructuring framework and monetize their assets, including thespectrum licenses. These circumstances led the respondents (RCL andRTL) to approach TDSAT complaining of acute financial crunch as wellas interim orders made in the course of litigation with lenders, to seekDrelief by way of extension of time towards payment of deferred spectrumcharges, (under the licenses acquired under the NIA 2013 and NIA2015). The reliefs claimed in TP 56/2018 and TP 58/2018 were declinedby TDSAT. Consequently, Civil Appeal No.4432-4433/2018 was preferredto this court which was disposed of by granting time to the respondentElicensees till 12.05.2018 for making payments towards deferred spectruminstalment charges.

5. As narrated previously, these deferred instalment charges couldnot be made within the time granted; consequently, the Union encashedbank guarantees to the tune of Rs. 908.91 crores as against the actualFamount of Rs. 774.25 crores due and payable by the respondent licensees.On 13.08.2018, the respondent licensees submitted fresh bank guaranteesfor the sum of Rs. 774.25 crores towards the next instalments of deferredspectrum liability. They also urged to release the excess of Rs. 134.66crores encashment (i.e. the difference between the amount of Rs. 908.91

crores against admitted dues of Rs. 774.25 crores). The Union hadGaccepted fresh bank guarantees towards the subsequent spectrum liability(Rs. 774.25 crores). The Union however, did not refund the excess sums.As a consequence, the respondents approached the TDSAT in executionproceedings and sought a direction for the return of Rs. 134.66 crores,i.e. the excess amounts and also the release of the bank guaranteeHamounting to Rs. 108.95 crores.

6. The Union disputed its liability before the TDSAT and reliedupon Para 4.5b(x) of the NIA 2015 and also alleged that default interestwas payable and furthermore, that RCL had defaulted in payment ofspectrum instalment to the tune of Rs. 795.77 crores in March-April2019.

7. The TDSAT, by its impugned order, partly allowed therespondent’s application after noting the Union’s reservations andobjections. The TDSAT observed as follows:

“In our considered view the request of the respondent wouldamount to a demand for enhanced bank guarantee for otherpurposes. This cannot be achieved through the method ofencashment of bank guarantees furnished for deferredSpectrum Charges.

The existing charges against the petitioner have alreadybeen taken note of and an amount of Rs.30.33 crores approx.has been adjusted out of the encashed amount of Rs.908crores. The remaining amount of Rs.104.34 crores is lyingand unadjusted amount should be returned to the petitionerwithout prejudice to the rights of either of the parties for anyother charges which the petitioner may be found to be liableto pay. Since the petitioner has reservations against theadjusted amount of Rs.30.33 crores, it may file its reply byway of rejoinder within three weeks.

Post the matter under the same head on 29.1.2019.”

Post the matter under the same head on 29.1.2019.”

8. The Union contends that TDSAT’s impugned order is contraryto clause 4.5b(ix) of NIA 2013 under the corresponding provision, i.e.Clause 4.5b(x) of NIA 2015 as well as other conditions such as clauses13.1 and 13.2 of the license agreement. It further contends that therespondents could not have been granted relief given the fact that theywent into liquidation and were continuously defaulting in spectrumdeferred payments; the Union also cites the default to the extent of ¹21.53 crores – with overdue interest amount working out to Rs. 27.63crores as on 03.03.2019. It, therefore, contended that the question ofrefund of excess amounts retained could not arise. It was lastly contendedthat in any case, these issues could not have been gone in executionproceedings but were properly the subject matter of substantiveproceedings.

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A9. The respondents argue that the Union’s refusal to refund themoney amounts to its unjust enrichment at their cost. The Union has noright over the excess money directed to be refunded by the Tribunal. Itis submitted that despite the directions of the TDSAT, the Union hasrefused to refund the money. It is further submitted that encashment ofthe bank guarantees in respect of the subsequent default of the deferredBspectrum instalments for the year 2019 was stayed by the NCLAT(National Company Law Appellate Tribunal). Thereafter, the moratoriumwas revived qua the Respondents and therefore, the appropriate remedyavailable to the Union was under the IBC (Insolvency and BankruptcyCode). The Union, it is stated, has already filed its claim before theCresolution professional for the said deferred spectrum instalments forthe year 2019. Therefore, it cannot be permitted to claim adjustment ofthe unlawfully encashed amount towards subsequent deferred spectrumliabilities. The respondents also urge that a subsequent default of thedeferred spectrum instalment for the year 2019, is a separate cause ofaction and the Union has remedies in law to recover those so calledDdues. It cannot arbitrarily and illegally withhold return of excess amount,despite there being a judicial order to the effect.

10. The facts narrated above show that the respondent-licenceesfaced financial constraints; apparently telecom service providers as aclass also faced some financial stress, which triggered the Union toErevisit its policy and ultimately modify the terms of payment of deferredpayment charges and consequently, the letter of 19.03.2018. Despitethese, the respondent licensees could not fulfil the conditions of thelicenses held by them (i.e. NIA 2013 and NIA 2015) vis-à-vis paymentof deferred spectrum charges; they approached the TDSAT, but withoutFsuccess. Their appeals to this court fared better; the time for makingpayment was extended somewhat. Upon default (in payment of thecharges), the Union invoked guarantees under the sets of licenses. Therespondent licencees pointed out to the Union repeatedly, that despitethe furnishing of requisite guarantees (to the extent of Rs. 774.25 crores)later (on 19[th] August, 2018) the excess amounts i.e. amount after adjustingGthe invoked guarantees towards the deferred charges had to be refunded.The Union did not do so; consequently RCL/RTL approached TDSATfor a direction in execution proceedings. Their claim was acceptedinasmuch as the impugned direction was issued.

11. On a recapitulation of all circumstances, and the various termsof NIA 2013 and NIA 2015, this court is of the opinion that the order ofthe TDSAT does not call for any interference. The Union nowheredisputes that the respondent licensees’ liability toward payment of deferredspectrum charges, in May, 2018, was to the tune of Rs. 774.25 crores.The total amount realized upon encashment of the bank guaranteesfurnished by the respondents, however, was to the extent of Rs. 908.91crores. It is also a matter of record that the respondents furnished anotherbank guarantee to the tune of Rs. 774.25 crores. There is consequentlylogic and merit in the contention of RCL/RTL that the Union unreasonablyrefused to refund the excess amounts. The Union’s argument that therewere subsequent defaults or short payments in respect of liability towardslater periods, or its objection that the impugned directions could not havebeen issued in execution proceedings, are insubstantial. As noticed earlier,the bank guarantees for the later periods were furnished by therespondents (to the extent of Rs. 774.25 crores). In these circumstances,there is no rationale for the Union to resist the demand for refund ofexcess amounts. The TDSAT, in the opinion of this court, exercised itsdiscretion, with respect, circumspectly, because the entire amount ofRs. 134.66 crores claimed in the application was not allowed; rather thedirection issued was in respect of Rs. 104. 34 crores.

12. In view of the foregoing discussion, it is held that there is nomerit in the present appeal, which is dismissed without costs.

Ankit Gyan

Appeal dismissed.

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