UNITECH WIRELESS(TAMIL NADU) PVT. LTD ( GUJRAT) Vs UNION OF INDIA

The petitioners have filed these petitions with a prayer to reduce/revise the Financial Bank Guarantee (FBG) in terms of Clause 21.2 of its UAS Licence. The petitioners have further requested for an interim prayer that pending the final order in this petition, the FBG may be reduced from Rs. 630 crores for its licenses in 22 circles to Rs. 84.50 crores.

2. The petitioners have submitted that on commencement of the service and payment of the licensee fee for two quarters, the respondent was obligated and mandated to revise the FBG as per clause 21.2 license conditions. The petitioners wrote to the respondent on 18.11.2011 and 28.02.2012, but the respondent, till date, has neither reviewed the FBG in terms of the license nor has responded to any of the letters written by the petitioners to the respondent.

It has to pay a heavy amount as Bank Charges for keeping such a huge amount as a Bank Guarantee specifically, when the telecom industry is passing through the current financial situation.

3. The petitioners have filed an affidavit, wherein it has stated that : “2. I say that after cancellation of licence by the Hon’ble Supreme Court of India, all Banks and Financial Institutions have become very wary of dealing with telecom companies specially those whose license have been cancelled. It has become increasingly difficult to raise loans and avail credit facilities from these banks and financial institutions. 3. In respect to the credit facility availed by the Company to provide Bank Guarantees to DoT, despite of numerous requests, the concerned bank has yet not renewed the said credit facilities. The existing facility agreement has expired on March 31, 2012 and we are carrying a risk of depositing 100% cash margin against these guarantees in terms of agreement. Under the present circumstances it would be difficult for the company to deposit cash with bank and this in turn may trigger default in the company’s other loan agreements also, The concerned bank is showing increased nervousness and is orally asking the Company and repeatedly insisting that almost the entire Bank Guarantees money be deposited by the company with the bank as security. This is adversely impairing the financial position of the Company, which as it is passing through an extremely bad financial state, because of the various regulatory developments.”

4. Mr. Ruchir Mishra, the learned counsel appearing on behalf of the respondent submits that licenses of the petitioner has been cancelled by an order of the Hon’ble Supreme Court in February 2012. The FBG not only covers the estimated amount for two quarters for AGR but it also covers other dues of Department of Telecommunication (DOT), if any. As licenses of the petitioners have been cancelled, the DOT has to work out and check up if any dues are outstanding against the petitioners. Besides, in accordance with the Hon’ble Supreme Court order in AGR matter, the respondent has to calculate exactly the amount to be paid by the petitioners in last 4 years. The respondent will be able to calculate all the AGR matters by July 2012.

5. A perusal of record shows that the petitioner has provided the Bank Guarantee of Rs. 630 crores for 22 circles. These FBGs were renewed from time to time and last renewed on 02.11.2011 with validity till 09.01.2013.

6. The licensee has to submit FBG valid for one year initially but, subsequently, it is reviewed based on license fee for two quarter and other dues, not otherwise securitized. The licensor may seek securitization of any other amount, as deemed fit.

Clause 21.2 of the licence reads as under : “21.2 Financial Bank Guarantee: - The LICENSEE shall submit a financial Bank Guarantee (FBG), valid for one year, from any Scheduled Bank or Public Financial Institution duly authorized to issue such Bank Guarantee, in the prescribed Performa annexed, Initially, the financial bank guarantee shall be for an amount of Rs. 50/25/5 crore (for category “A”/ “B”/ “C” service area respectively) which shall be submitted before signing the Licence agreement. Subsequently, the amount of FBG shall be equivalent to the estimated sum payable equivalent to license fee for two quarters and other dues not otherwise securities and any additional amount as deemed fit by the Licensor. The amount of FBG shall be subject to periodic review by the Licensor and shall be renewed from time to time till final clearances of all dues.”

7. In these petitions, the petitioners renewed the FBG for one year with effect from 2.1.2011. Immediately after this, it wrote to the respondent on 18.11.2011 for review of FBG and again on 28.02.2012 after the judgment of the Hon’ble Supreme Court.

8. The FBG have already been renewed in the year 2011 and they are subsisting till 9.01.2013. These FBGs are tri-partite agreement between the licensor, licensee and the bank. We are, prima facie, of the opinion that the bank cannot change the terms and conditions of the bank guarantee during its currency without the consent of all the parties.

9. Mr. Meet Malhotra, the learned senior counsel appearing for the petitioner submitted that to reduce the burden of the petitioner, as an interim measure, the Bank Guarantees may be reduced to 50% which will not prejudice the respondent.

10. At this stage, we do not have the full particulars of AGR and dues of the DOT against the petitioner. It is not possible to determine as to how much amount of FBG will cover the amount required for the dues of the respondent. There is a need to have detailed reply from the respondent as FBG is already subsisting and the licenses of the petitioners have been cancelled. Therefore, we are of the opinion that the petitioners have not made out any case for issue of any interim relief at this stage.

……………….. (S.B. Sinha) Chairperson

……………….. (P.K.Rastogi) Member

/NC/