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Legal & Patents
Friday, January 24, 2020
DoT examining if Jan 23 legal deadline for AGR payment applies to non-telecom PSUs

The telecom department is examining the legal applicability of January 23 deadline for payment of over Rs 2.4 lakh crore statutory dues in the case of non-telecom PSUs which were not originally party to AGR matter in the Supreme Court, according to sources.

Sources in the Department of Telecom (DoT) told PTI that while the PSUs too have been asked to make payments related to statutory liabilities (after the SC in October upheld government’s position on calculation of non-core revenue for AGR dues), the larger question is whether the January 23 deadline is legally enforceable on state-owned companies that were not direct party to the dispute.

The current view that is emerging in the DoT appears to be that the court-imposed timeline may not apply to PSUs, but the matter is being legally examined for clarity.

“Of course, the court has decided the issue of principle of what is AGR, so they (PSUs) have to pay but if they do not pay by January 23 it will not be contempt as it will be in case of the parties to the case. So PSUs have to pay and we have raised demands, but if they do not pay by January 23 it will not amount to contempt of court on their part because they were not party to the case, but they have to pay,” a source added.

Another official also said that the issue of deadline for PSUs is being examined legally. Telecom companies Bharti Airtel and Vodafone Idea, on the other hand, are legally bound to comply with the payment timelines stipulated by the apex court.

Following the Supreme Court order of October last year, the DoT estimated that the total liability of 15 telecom companies, including penalties and interest, would be Rs 1.47 lakh crore.

These AGR liabilities arose after the Supreme Court in October last year upheld the government’s position on including revenue from non-telecommunication businesses for calculating the annual AGR of telecom companies, a share of which is paid as licence and spectrum fees to the exchequer.

It has estimated another over Rs 2.4 lakh crore in liability for non-telecom companies, including state-owned gas utility GAIL India Ltd and power transmission firm PowerGrid, which had taken licences to trade broadband on optic fibre running along their pipelines and transmission lines.

The DoT has sought Rs 1.72 lakh crore in past statutory dues from state-owned gas utility GAIL India Ltd following the Supreme Court’s AGR ruling. The DoT sent a letter to GAIL last month seeking these dues on IP-1 and IP-2 licences as well as Internet Service Provider (ISP) licence, in response to which, GAIL has told DoT that it owes nothing more than what it has already paid to the government.

The assessment puts PowerGrid liability at Rs 21,000 crore, and another Rs 40,000 crore liability was assessed of Oil India Ltd. However, a demand notice was served in case of Gujarat Narmada Valley Fertilizers & Chemicals Ltd for Rs 15,019 crore. (Source: The Hindu BusinessLine)

Twitter Warns Users Against Breach of Data

Twitter said it has fixed a vulnerability within its app for Android that could have allowed a bad actor to see non-public account information or control its users account such as sending Tweets or Direct Messages.

Twitter, in a blogpost on Saturday night, said prior to the fix, through a complicated process involving the insertion of malicious code into restricted storage areas of the Twitter app, it may have been possible for a bad actor to access information including Direct Messages, protected Tweets, location information from the app.

“We don’t have evidence that malicious code was inserted into the app or that this vulnerability was exploited, but we can’t be completely sure so we are taking extra caution,” it said. Twitter said the company has taken steps to fix this issue and are directly notifying people who could have been exposed to this vulnerability either through the Twitter app or by email with specific instructions to keep them safe.

The company declined to comment on whether Indian users were affected by the vulnerability.

Nine out of ten users in India use a smartphone that runs on Google's Android platform.

“We are not able to comment on the locations of those affected,” it said.

It asked users to update to the latest version of Twitter for Android. It added that the issue did not impact Twitter for iOS.

“We’re sorry this happened and will keep working to keep your information secure on Twitter. You can reach out to our Office of Data Protection through this form to request information regarding your account security,” it said. (Source: Economic Times)

Bharti Infratel-Indus Merger may not Get Govt Nod in Time

DECEMBER 24 DEADLINE Officials blame dispute with Vodafone Group over withholding tax. The government is unlikely to clear the proposed merger of Bharti Infratel with Indus Towers by the December 24 deadline, which may force the three major signatories — Bharti Airtel, Vodafone Group Plc and Vodafone Idea — to call off the deal and explore other options to monetise their stakes.

“The proposal is stuck in the DoR (Department of Revenue),” said a senior executive with direct knowledge of the matter. “We don’t expect the approvals to come in by the 24th (of December).”

A government official cited the withholding tax case against Vodafone Group as being the stumbling block.

“There are concerns over the withholding tax raised by India on Vodafone Group, which is yet to be resolved,” said the official. The merger aims to create one of the world’s largest telecom tower companies with more than 163,000 towers.

Vodafone and the Indian government are locked in an international arbitration over a longstanding ₹22,000-crore tax dispute related to the UK company’s entry into India by buying out Hutchison Whampoa’s majority stake in a telecom venture in 2007 in an $11-billion deal.

Currently, Indus Towers is a three-way joint venture between Bharti Infratel, UK-based Vodafone Group and Vodafone Idea, with the first two holding 42% each. Vodafone Idea has 11.15% and the remaining 4.85% is with private equity firm Providence. Bharti Airtel owns a majority stake (53.51%) in Bharti Infratel.

‘Spectrum Sale may Fetch Only ₹40kcr’

The Centre is expected to sell well below 10% of spectrum — worth ₹5.22 lakh crore at base price — in the March-April auction, netting just about ₹40,000 crore, say analysts. The steep price of 5G spectrum and 700 MHz airwaves may lead to tepid bidding. Kalyan Parbat reports. ››11 Deal Signed in Apr 2018

All three parties are now looking at revisiting their original plan of a transaction that includes the sale of Bharti Airtel’s controlling stake in Bharti Infratel and Vodafone Group divesting its entire 42% stake in Indus Towers along with Vodafone Idea’s 11.15% stake, said people familiar with the discussions.

A similar transaction was in the making in 2017 when the Bharti Group and Vodafone Group were in advanced discussions with a consortium of investors led by private equity firm KKR. However, the transaction fell through due to lastminute differences over price.

Bharti Airtel declined to comment. Vodafone Group and Vodafone Idea didn’t respond to queries.

The Bharti Infratel and Indus Towers merger deal was signed on April 23 last year and was to have been completed by October 24 this year. This was extended to December 24 after the companies didn’t get government clearance by the initial deadline.

The delay in closure has already hit the quantum of funds that Vodafone Idea would have generated by exiting the merged company if the deal had been completed in time.

Bharti Infratel’s shares declined to ₹253.50 at the Friday close from ₹328 on April 23 last year, and its net debt and liabilities have increased. According to a formula to calculate the cash consideration payable to any partner seeking to exit, Vodafone Idea now stands to get roughly ₹4,500 crore, compared with ₹6,500 crore, as per the April 2018 announcement.

URGENT NEED The Vodafone Group-Aditya Birla Group joint venture needs to urgently raise funds to pay more than ₹53,000 crore in adjusted gross revenue (AGR)-related dues to the government after an apex court order, the deadline for which is just over a month away. It also needs funds to expand its network and compete against Bharti Airtel and Reliance Jio Infocomm.

Besides the tower stake, Vodafone Idea is also hoping to sell its optic fibre and data centre assets.

Bharti Airtel, which has to pay more than ₹35,500 crore in AGR dues, has already announced plans to initially raise $3 billion through equity and bond sales. Sources say it’s aiming to raise funds by the first or second week of January with global roadshows having started.

Both Vodafone Idea and Airtel have filed limited review pleas in the Supreme Court, in the hope of softening the AGR blow. The court is yet to consider the pleas. “The priority is to deal with the AGR ruling… the stake sale in towers can happen later,” said a person familiar with the Bharti Group’s thinking.

If Bharti and Vodafone Group agree to the revised deal structure — which means both exit simultaneously to the same set of buyers — it will help the acquirer undertake a leveraged buyout by pledging Indus Towers’ entire ownership. “This will make the deal more attractive for the acquirer as the net cash outgo will be much lower,” said a senior banker with knowledge of the matter.

Vodafone Group was hoping to free up its pledged stake in Vodafone Idea by selling shares in the Indus Towers and Bharti Infratel merged entity. (Source: Economic Times)

Google cites UPI learnings to US Federal Reserve for proposed RTGS system

Proposed FedNow likely to be introduced by 2023-2024. India’s Unified Payments Interface (UPI) has been getting global attention for quite some time. Now Google LLC has cited its example to the United States Federal Reserve for its proposed FedNow -- a new interbank gross settlement service.

“Google's integration of Google Pay with UPI, in collaboration with four of India's largest banks, demonstrates Google's commitment to innovation through collaboration with government and financial services partners,” Google LLC has said in a letter to the Fed’s Board of Governors on Novemebr 7.

In the letter seen by BusinessLine, Mark Isakowitz Vice President, Government Affairs and Public Policy, US and Canada, Google has said that UPI was thoughtfully planned and critical aspects of its designs led to its success.

He pointed out that UPI is an interbank transfer system, it is a real time system and is "open" - meaning technology companies can build applications that help users directly manage transfers into and out of their accounts held at banks.

“The approach in India attained amazing results for banks, consumers, other players within the payments ecosystem and India's central bank,” the letter said, adding that the approach in India attained amazing results for banks, consumers, other players within the payments ecosystem and India's central bank.

“This system successfully encouraged close collaboration between technology and financial services providers, and created winning opportunities across the ecosystem,” Google in the letter further said.

The US Federal Reserve had in August this year announced that it is working on FedNow RTGS, which would offer round the clock real time payment services 365 days a year. It is expected to be operational by 2023 or 2024 and would allow transactions up to $25,000.

“Google views digital commerce, and the emergence of new forms of payment systems, as essential to promoting an inclusive and more helpful payment system,” the letter from Google said, adding that the company fully supports the Federal Reserve's decision to deploy the FedNow RTGS, which can improve the accessibility and usefulness of payment systems for all Americans.

Based on its learnings from UPI, Google has suggested that industry and government should work together to grow ecosystems where payments are inclusive. It has also said it sees the future of online payments as mobile first, and also make digital payments simple and helpful. It has also recommended other measures to the US Fed including supporting real-time low-value and high-value payments, using standardised messaging protocols, low fees and open systems.

UPI, which was launched in April 2014, allows immediate money transfer through mobile device round the clock 24x7 and 365 days. By November this year, 143 banks were live on the UPI platform and the number of transactions had surged to ₹121.87 crore.

Infy-Bansal Row Closure Good for Co

Many experts feel the lingering issue is a distraction for the management of company. Infosys’ move to settle alleged offences relating to the severance pay to former chief financial officer Rajiv Bansal will allow the company to remove a distraction and focus more on business, said analysts tracking the company.

On Friday, Infosys said the company and some of its current and past executives had applied to the Registrar of Companies (RoC), seeking to settle the charges through compounding — a provision under the Companies Act that allows businesses to quickly close certain cases by paying a fine.

“It is good to close the matter. Otherwise, this is a distraction for the management,” said Siddharth Pai, who was involved in more than $20 billion of outsourcing contracts as part of an advisory firm.

The charges it wants to settle include the failure to seek prior and separate approvals from the nomination and remuneration committee, audit committee and the board of the company for the severance package, and also not making the requisite disclosures, the filing said. Infosys founder NR Narayana Murthy had raised a red flag in February 2017 over the company’s alleged failure to meet disclosure guidelines. He said the details of the severance package to Bansal had also not immediately been placed before the board.

This and issues concerning the acquisition of Israeli firm Panaya led to a public spat, forcing the then chairman R Seshasayee, chief executive Vishal Sikka and two board members to quit. In February, Infosys paid ₹34 lakh to Sebi to settle the market regulator’s charge that the company had not received approval from its board committees before committing to pay the former executive. Infosys said on Friday it applied for compounding “to put this legacy matter to rest”. (Source: Economic Times)

Govt Flags Risks to Payments Through Social Media Cos

WhatsApp Fallout. Centre reaching out to RBI, NPCI to discuss safety features. The government is approaching the Reserve Bank of India (RBI) and the National Payments Corporation of India (NPCI) over the risks in allowing social media platforms such as whatsApp into the digital payments space in light of the recent hack of the messaging app.

The move comes as the hacking issue is being monitored at the highest levels of government.

“We are reaching out to the NPCI and the RBI to discuss safety features and in case some extra steps need to be undertaken to ensure security of financial data is not breached,” a senior government official told ET.

The recent lawsuit filed in the US against Israeli company NSO and its software Pegasus, said to be responsible for the intrusion, had spread alarm among Indian authorities, he said. Facebookowned WhatsApp has maintained that the platform is secure thanks to end-to-end encryption, the official pointed out.

WhatsApp-MeitY Row Continues

The latest development could mean further delays in the launch of WhatsApp’s payment feature, which is yet to pass the test of compliance with India's financial authorities, experts said.

Facebook chief executive Mark Zuckerberg said recently that the company was optimistic about starting soon. The messaging app, which has about 400 million users in the country, has been testing its payment service in India since last year and will be pitted against the likes of Paytm, Google Pay and Phone Pe in the fast-growing payments space. Meanwhile, the row between WhatsApp and the Indian authorities continued with company insisting it had informed the government of the security breach, along with details. The government said the information submitted had at best been speculative in nature.

“We maintain that WhatsApp didn’t disclose entire information to us. We learnt of it through media reports,” the official said.

The government said WhatsApp did inform CERTIN about the hacking incident, but maintained that the social media app didn’t disclose the names and identities of Indian citizens affected by the breach to the authorities, which it should have. The controversy began with WhatsApp/Facebook filing a lawsuit in the US against the Israeli company NSO on October 29, within days of the Indian Supreme Court allowing the Centre to issue intermediary guidelines in three months.

The guidelines are expected to allow the government to legally bind WhatsApp and any other messaging platform to tracing the source of any message on their platforms. WhatsApp has resisted this, saying it would be impossible without compromising the encryption that supposedly guarantees user privacy. (Source: Economic Times)

Infosys was indulging in “unethical practices” to boost revenues, allege whistleblower

For India’s second largest IT services company, Infosys, whistleblowers just don't seem to be give up. In its latest incident, a whistleblower group, called Ethical Employees, has allegedly complained to the US Securities and Exchange Commission and the Infosys Board that the CEO was indulging in “unethical practices” to boost short-term revenues and profits.

In 2017 and 2018, a previous whistleblower had raised questions over corporate governance issues about Infosys.

The Indian regulator, SEBI had even set up a probe committee to find out whether the allegations were true or not. The whistleblower had questioned the ₹17.4 crore severance package of former CFO Rajiv Bansal and the financial irregularities in Infosys’ $200 million acquisition of Israeli software firm, Panaya.

Following the allegations and several developments later, the then Infosys CEO Vishal Sikka was forced to step down. He was replaced by the current CEO Salil Parekh with the co-founder of the company, Nandan Nilekani taking over as the non-executive chairman.

New allegations

This time, a whistleblower group has come out with a fresh set of allegations. It said it has recordings and mails to show that Infosys was indulging in such practices.

It has alleged that CEO Salil Parekh overlooks reviews and approvals for large deals. The report which first appeared in a financial newspaper, alleged that Parekh directs his key employees to make wrong assumptions to show margins. The group also claims that the CFO is compliant.

It alleges that several billion dollar deals of last few quarters had nil margin, and asked the company to get deal proposals, margins, undisclosed upfront commitments made and revenue recognition checked with the auditors.

Infosys apparently has placed the whistleblower complaint with the audit committee.

This time, the whistleblower’s allegations come with lot more details than the earlier one.

It talks about how the complainants were asked to not fully recognise visa costs in the quarter, and were pressurised to not immediately recognise $50 million in reversals in a contract.

It alleged that the CEO Salil Parekh and CFO Nilanjan Roy were pressuring the finance team to show more profits in their treasury management by taking risks and making changes to policies. (Source: The Hindu Businessline)

BSNL trade unions set to go on lunch-hour protest on October 1

BSNL executive union blames FinMin for delaying revival package. BSNL’s unions and associations have called for a “lunch-hour demonstration” on October 1 to protest against salary delay and non-payment of wages to contract workers. The protest is also against the total ban on capital expenditure, along with other issues related to the revival of BSNL, union officials told BusinessLine.

The unions that are expected to take part in the protest include BSNL Employees’ Union, Sanchar Nigam Executives’ Association (SNEA), All-India BSNL Executives’ Association (AIBSNLEA), and All-India BSNL Officers’ Association, among others.

Unions and associations want the government – the principal employer and owner of the company – to pay salaries in case BSNL is not able to raise the funds. The unions’ demands include allotment of 4G spectrum and land monetisation, payment of salary on due date by BSNL or the Department of Telecommunications (DoT), payment to contract workers, and electricity and rental charges.

The demands also include the implementation of third-pay revision, financial support for loss-making rural exchanges, extention of soft loan to BSNL, among others.

The payment of pension contribution by BSNL, as per the government rule, is also part of the lunch-hour demonstration.

In February, BSNL employees across the country went on a three-day strike (February 18, 19 and 20) demanding allocation of 4G spectrum and government approvals for the loan.

BSNL is staring at another salary delay, with the ailing telecom firm expected to credit employees’ wages for September after a delay of 15-20 days.

This would be the fourth time the company would be missing the due date.

BSNL had paid the August salary after a lag of 18 days, while July wages were footed on August 5 after February salary paid later in March. The employees are expected to move BSNL management, through various unions, seeking early disbursal of salary.

As per company policy, salaries are credited on the last working day of every month. BSNL’s salary expenses come to about ₹750-850 crore, as the firm employs 1,63,902 personnel, of which, 46,597 are executives and 1,17,305 non-executives. (The Hindu BusinessLine)

Cognizant appeals against order upholding ₹2,806-cr I-T demand

The Madras High Court today allowed a writ appeal, in part, filed by Cognizant Technology Solutions against a Single Bench order in June, in a case involving a demand by the Income Tax department to the tune of ₹2,806 crore relating to buyback of shares from its shareholders.

Cognizant’s scheme of purchase was approved by the Madras High Court in April 2016. It bought back the shares and accordingly, it was treated as capital gains and a sum of ₹898.01 crore was withheld as TDS as per the return filed by it.

However, the Deputy Commissioner of Income Tax, Large Tax Payer Unit, issued an impugned order in March 2018 holding that the transactions made in pursuant of the buyback arrangement effected requires to be taxed on the premise that it would constitute dividend and not capital gain. As a consequence, Cognizant’s bank accounts were frozen.

Writ petition
Challenging the order, Cognizant filed a writ petition raising various grounds. In pursuant to the conditional interim order granted, the appellant paid a sum of ₹495 crore out of the payable demand of ₹2,806 crore. Thereafter, the writ petition was dismissed with liberty to the appellant to file an appeal.

Aggrieved over the same, the present writ appeal was filed by Cognizant before a Division bench consisting of Justices MM Sundresh and M Nirmal Kumar.

“As granted by the learned single Judge, we are inclined to grant a period of four weeks to file an appeal before the Appellate Authority. No costs. As and when such an appeal is filed, the same will have to be disposed of within a period of eight weeks thereafter.

Consequently, connected miscellaneous petition is closed. We did not find any error in the order of the single Judge with respect to the deposit made during the pendency of the interim order as erroneous.

It is only an interim arrangement directed to be made pending the appeal. In such a view of the matter, while upholding the direction of the learned single Judge with respect to the deposit and the liberty granted to file an appeal are accordingly upheld, the Bench said in its order. Cognizant’s spokesperson declined to comment saying, “We haven’t received a copy of the order yet.” (Source: The Hindu BusinessLine)

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