Telcos breathe easy as DoT blocks Trai’s bank guarantee demand

Telecom companies sparring with the regulator over spam calls and messages have reason for relief: After an appeals tribunal stayed penalties on them for failing to curb spam, the Department of Telecommunication (DoT) has rejected the regulator’s request to encash bank guarantees for the same breach.

The Telecom Regulatory Authority of India (Trai) has fined telcos more than ₹140 crore over the years for failing to curb spam. The telcos secured an interim stay from the Telecom Disputes Settlement and Appellate Tribunal (TDSAT) in January on the case. Telcos told TDSAT that it is not fair to punish them for failing to curb spam given the delay in implementing long-delayed spam prevention rules.

While TDSAT is expected to hear the matter again on 17 July, Trai has moved the Delhi High Court. According to an official aware of the matter, Trai has urged the court to direct the TDSAT to expedite hearing, or direct telcos to deposit half of the penalties in the meantime. The official added that TDSAT had earlier scheduled to hear the matter on 25 June, which was postponed.

Also read: Telcos slam Trai’s satellite spectrum pricing as unfair, call for review

Queries emailed to Trai, COAI and DoT on Tuesday did not elicit any response till the press time.

Small dues

“Although curbing spam and maintaining quality of services is important, the government cannot invoke bank guarantees for such issues especially when the total bank guarantees compared to the dues of telecom operators is significantly low,” a second official said, adding that Trai should first use the means available with it. Telcos owe the government dues worth around ₹4 trillion linked to adjusted gross revenue (AGR) and spectrum fees.

The development also points to a broader disagreement between DoT and the Trai regarding their respective roles and jurisdiction in telecom governance.

Trai has also proposed that DoT should allow it to have its own pool of bank guarantees, so as to encash it when telecom operators refuse to pay penalties, the first official said. Trai has formulated penalties in case of violations, but there is no securitization mechanism to recover the amount if they fail to pay, the official added.

Queries emailed to DoT, Trai and the Cellular Operators Association of India (XOAI) remained unanswered.

Securitization

In its February recommendations on the terms and conditions of network authorizations under the Telecommunications Act, 2023, Trai said, “it is essential that a securitization mechanism, such as a bank guarantee should be in place to cover financial dues, compliance to the authorization conditions and to ensure performance under the authorization which essentially include compliance to regulations/orders/ directions issued by Trai.” 

Trai said compliance with its regulations/directions/orders is a critical component of the efficient performance of authorized entities; the DoT has not accepted the recommendations. 

Bank guarantees are required to secure telcos’ payments towards licence fees, performance fees and penalties. When guarantees are invoked, the bank is supposed to pay that much to the institution to which it was provided and the borrower has to immediately repay the bank.

Stiff fines

According to Trai’s Telecom Commercial Communications Customer Preference Regulations (TCCCPR) 2018, which were amended this year, the regulator can impose penalties as high as ₹10 lakh per instance for failure to curb spam.

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“Yes, Trai can impose financial disincentives but in case the operators do not pay such fines, the best route for Trai to recover the same is through chief metropolitan magistrate (CMM). The same, however, is a cumbersome process and undesirable as well,” said Satya N. Gupta, former principal advisor at Trai.

The Trai Act gives the regulator powers to file a complaint with the magistrate to initiate criminal proceedings if a telecom operator is in violation of Trai’s directions or regulations, and fails to comply.

The TCCCPR regulations amended in February this year mandate telcos to analyze call and SMS patterns based on parameters such as unusually high call volumes, short call durations and low incoming-to-outgoing call ratios to flag potential spammers in real time.

A third official said telcos control the network and it is their responsibility to curb the spam, which often leads to fraud. They have been penalized for the right reasons in not taking action to disconnect numbers from which spam were originating and misreporting the same, the official added.

Delayed enforcement

“As for Trai’s authority, the fact that telcos routinely approach TDSAT to challenge penalties does not inherently weaken the regulator’s powers—but it can delay enforcement. This pattern of litigation raises a valid concern about regulatory effectiveness,” said Deepika Kumari, a partner at law firm King Stubb & Kasiva.

“While Trai’s powers are intact on paper, consistent legal challenges may reduce the immediacy and impact of its directives. A clearer judicial interpretation of Trai’s powers on financial disincentives could help ensure faster compliance and reinforce regulatory accountability in the sector,” Kumari added.

Shashank Mishra, a partner at Shardul Amarchand Mangaldas & Co., said, “TDSAT exercises adjudicatory powers over telecom disputes. Trai’s exercise of regulatory functions are subject to such adjudication too. Such judicial review is necessary for the rule of law and separation of powers—two fundamental constitutional principles. Equally, Trai has the right to appeal the TDSAT order if it is unsound on law and/or procedure.”

Consent framework

In June 2023, Trai mandated a digital consent acquisition (DCA) system for telcos to manage and verify customer consent for commercial communications. The system, implemented under TCCCPR, aims to curb unsolicited commercial communications (spam) by creating a unified platform for registering and maintaining customer consent digitally. The principal entities such as banks, insurance companies, and other firms which send promotional messages to consumers, were asked to register user consent for receiving such messages.

Principal entities hire telemarketers, which need to be registered with telecom operators, to send commercial messages. However, still there are senders/principal entities, who have not onboarded on DCA.

In a meeting with the Joint Committee of Regulators (JCOR) on 25 April, Trai said the modalities for onboarding senders of commercial communication on DCA platform were deliberated. “JCOR members agreed to engage with the senders/Principal Entities within their jurisdiction to onboard them on DCA,” Trai said. JCOR includes representatives from the Reserve Bank of India, Insurance Regulatory and Development Authority of India, Pension Fund Regulatory and Development Authority, Securities and Exchange Board of India, the ministry of electronics and IT, among others.

New guidelines

Trai is soon expected to come up with detailed guidelines on the DCA framework, in a bid to expedite the implementation of the system, the third official said.

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Notably, the Cellular Operators Association of India (COAI) had in its various representations said that Trai should have brought delivery telemarketers and over-the-top (OTT) platforms under regulation to manage unlawful communication, and then release the amended rules.

“It would be critical to establish a regulatory framework to ensure accountability from all stakeholders in the ecosystem, including OTT platforms and telemarketers/principal entities,” COAI had said in a statement in February, after Trai issued amendments to TCCCPR.

“It is important for Trai to bring telemarketers under some sort of authorization framework as they are the source of spam calls and messages. If properly implemented, it will benefit the people at large,” Gupta added. Trai is currently discussing the need to bring telemarketers under such a regime.