AGR Order: A Case of Subjective Judicial Overreach?

ON September 1, 2020, a three-judge bench of the Supreme Court headed by Justice Arun Mishra finally sought to set at rest the controversy surrounding payment of Adjusted Gross Revenue (AGR) dues by telecom companies.

It may be recollected that on October 24, 2019, the Supreme Court set aside the decision of the Telecom Disputes Settlement and Appellate Tribunal and agreed with the Department of Telecom’s (DoT) interpretation concerning the definition of AGR–that it would include revenues even from non-core telecom activities. In view of this meaning and the issue being settled by the Court after 20 years, an amount of approximately Rs 1.47 lakh crore became payable by these companies to the DoT.

Initially, the Court fixed a period of 90 days for these dues to be cleared. Before this deadline lapsed on January 24, 2020, review petitions by telcos were heard and dismissed. Thereafter, citing inability pay in such a short timeframe, the telcos sought an extension from the top court. During the pendency of this plea, the DoT granted a temporary reprieve to the telcos to make payment. However, this was perceived as an attempt to scuttle the Supreme Court decision, and through an order passed on February 14, 2020, suo moto contempt proceedings were initiated against a DoT official. In addition, managing directors of the telecom companies were called upon to show cause as to why contempt proceedings should not be taken out against them for non-payment as per the Court’s previous order.

In M.P. Oil Extraction v. State of M.P. (1997), the Supreme Court held: “The power of judicial review of the executive and legislative action must be kept within the bounds of constitutional scheme so that there may not be any occasion to entertain misgivings about the role of judiciary in outstepping its limit by unwarranted judicial activism being very often talked of in these days. The democratic set-up to which the polity is so deeply committed cannot function properly unless each of the three organs appreciate the need for mutual respect and supremacy in their respective fields.”

Pertinently, although the Supreme Court directed payment to be made to the government within 90 days, the decision by the DoT to defer receipt of the money was legally tenable. The Court could not thrust payment upon an unwilling recipient, especially since the deferment was traceable to broader economic considerations such as the health of the telecom industry as a whole.

A subsequent order passed by the Court on March 18, 2020, which heavily came down on the DoT for issuing notices for reassessment of dues to the telcos, and the proposal was negated. Surprisingly, during the course of the hearing, the bench also made adverse observations and insinuations of a far-reaching nature against the media for publishing “false, misleading” reports about the AGR judgement and for reporting that “telecom companies are very powerful and that is why they are influencing the newspapers to write stories everyday”.

On March 18, 2020, in addition to the proposal for reassessment, the DoT also took out an application that the telcos be permitted to make a staggered payment of dues across 20 years. This was based on its assessment of the adverse impact of the Supreme Court’s decision on the economy, employment, market competition and on customers if the telcos were made to cough up the dues within a short period – a purely executive decision based on policy considerations.

However, even this request was initially deemed by the Supreme Court to be unreasonable, and was made subject to adjudication and “approval” of the Court. While hearing the extended payment plea on June 18, 2020, the Court called upon the telcos to submit their financial statements up to March 31, 2020 – despite the proposal being filed at the instance of the DoT and not the telecom companies (which supported the move).

It was this plea of the DoT that was finally decided on September 1, 2020. The Court essentially upheld its preliminary stance on the matter, and held that the period of 20 years for payment of AGR dues by telcos, as proposed by the DoT, was “excessive” and curtailed this period to 10 years.

Such intensive judicial scrutiny in executive policy decisions which is betrayed through the orders passed in the AGR matter, particularly the rejection of the 20-year payment plan, is disconcerting. It not only gives a go-bye to the doctrine of separation of powers, but is also contrary to various decisions of the top court which establish the rule of deterrence in interfering with policy decisions.

The Supreme Court in Premium Granites v. State of T.N. (1994), said: “It is not the domain of the court to embark upon unchartered ocean of public policy in an exercise to consider as to whether a particular public policy is wise or a better public policy can be evolved. Such exercise must be left to the discretion of the executive and legislative authorities as the case may be.”

In this context, it is pertinent to refer to the decision of the Supreme Court in Premium Granites v. State of T.N. (1994), where it voiced caution in the following terms:

“It is not the domain of the court to embark upon unchartered ocean of public policy in an exercise to consider as to whether a particular public policy is wise or a better public policy can be evolved. Such exercise must be left to the discretion of the executive and legislative authorities as the case may be. The court is called upon to consider the validity of a public policy only when a challenge is made that such policy decision infringes fundamental rights guaranteed by the Constitution of India or any other statutory right.”

Similarly, in M.P. Oil Extraction v. State of M.P. (1997), the Supreme Court reiterated its stance and held:

“The supremacy of each of the three organs of the State i.e. legislature, executive and judiciary in their respective fields of operation needs to be emphasised. The power of judicial review of the executive and legislative action must be kept within the bounds of constitutional scheme, so that there may not be any occasion to entertain misgivings about the role of judiciary in outstepping its limit by unwarranted judicial activism, being very often talked of in these days. The democratic set-up to which the polity is so deeply committed cannot function properly unless each of the three organs appreciate the need for mutual respect and supremacy in their respective fields.”

In addition, the AGR verdict also violates a Constitution Bench decision in R.K. Garg v. Union of India (1981), as applied to executive decisions by the top court inter alia in State of M.P. v. Nandlal Jaiswal (1986). In the context of telecommunications itself, the Court ought to have appreciated the ruling by a three-judge bench in Delhi Science Forum v. Union of India (1996) that “the national policies in respect of economy, finance, communications, trade, telecommunications and others have to be decided by the Parliament and the representatives of the people on the floor of the Parliament can challenge and question any such policy adopted by the ruling Government”.

During the pendency of this plea, the DoT granted temporary reprieve to the telcos to make payment of approximately Rs 1.47 lakh crore. However, this was perceived as an attempt to scuttle the Supreme Court decision, and through an order passed on February 14, 2020, suo moto contempt proceedings were initiated against a DoT official. In addition, MDs of the telecom companies were called upon to show cause as to why contempt proceedings should not be taken out against them for non-payment as per the Court’s previous order.

In the present case, it is unquestionable that the DoT’s proposal for a 20-year payment plan amounted to a policy decision. This view can be supported by the following observations made by the Supreme Court in the order on September 1, 2020:

“The Union of India, after envisaging the larger interest, economic consequences on the nation and to ensure that the order of this Court is complied with in its letter and spirit, has taken a conscious decision and sought approval of this Court to a formula for recovery of past dues from the telecom service providers. The formula is placed for approval of this Court, which is arrived at after detailed and long drawn deliberations at various levels in the administrative hierarchy, including the Cabinet, and keeping in view the vital issues related to financial health and viability of the telecom sector, need for ensuring competition and a level-playing field in the interest of consumers. …

“… we are of the opinion that the decision of the Cabinet is based on the various factors, and in the interest of the economy and the consumers. The decision is taken after extensive deliberations and consultations ….”

Despite seemingly appreciating this aspect, the DoT’s decision was not only sought to be tested by the Court, but was made subject to its “approval”. Moreover, the order of September 1, 2020 is cryptic and non-speaking, and the sole rationale on which the Court held the window period of 20 years as impermissible was to deem this period as “excessive”.

Thus, with the stroke of a pen, an objective policy decision of the executive, arrived at after “extensive deliberations”, was substituted with subjective reasonableness by the three-member Bench. While the doors appear to have closed on the AGR controversy, in future, the judiciary must distance itself from the precedent set by the verdict, lest it be accused of overreach.

(Rohan Deshpande practices as a Counsel in the Bombay High Court and writes on law and current affairs)

Originally Published in The Leaflet.