A television journalist sets his camera inside the premises of the Supreme Court in New Delhi February 18, 2014. REUTERS/Anindito Mukherjee/FILE PHOTO
NEW DELHI/MUMBAI, Feburary 14 (Reuters) - India's Supreme Court threatened mobile carriers on Friday with contempt proceedings unless they pay billions of dollars in court-ordered dues to the government by March 17 and also slammed officials for failing to enforce the ruling.
The court, which had ordered companies including Vodafone Idea and Bharti Airtel to pay 920 billion rupees ($12.89 billion) in overdue levies and interest by Jan. 23, last month rejected petitions seeking a review of the order it issued back in October.
"This is pure contempt, 100% contempt," Justice Arun Mishra told lawyers for the companies and the government on Friday.
The companies had contested the government's definition of revenues subject to tax and Vodafone Idea and Bharti Airtel both flagged ongoing concern risks following the October order. They did not immediately respond to calls seeking comment on the new ruling.
The two companies, along with Reliance Jio, which is backed by Asia's richest man, Mukesh Ambani, control more than 90% of India's mobile market.
Jio, a relatively new entrant that has disrupted the market with its cut-price offerings, has paid its dues.
Shares in Vodafone Idea, in which Britain's Vodafone Group owns a sizable stake, closed down 24.4% after the order, as the company's future is in doubt with Vodafone Group having said it has no plans to commit any more equity into India.
Shares in Bharti Airtel rose 4.64% on Friday, as many expect it will be able to pay off the dues and survive, leaving it and Jio with an opportunity to potentially capture market share and enjoy an effective duopoly in the sector.
Justice Mishra rebuked the government for having failed to implement the court order on collecting the dues. "A desk officer in the government stays a Supreme Court order...Is there any law left in the country?," he said.
"We will draw up contempt against everyone," he said, implying that both company and government officials could be fined or jailed if the dues are not paid by March 17.
An official from the department of telecommunication of the government said they would comment only after reading the full court verdict.
Analysts said the court's move could harm the government more broadly as well as the companies.
"It can't be in anybody's interest if a company as high profile as Vodafone-Idea shuts shop. Also, the government's own dues from the sector are at risk," said Mahesh Uppal, director at ComFirst, a telecom consultancy firm.
Indian banks are burdened with nearly $140 billion of bad loans and face another huge hit if Vodafone Idea is forced into bankruptcy.
Banks in India are owed roughly 300 billion rupees ($4.21 billion) by Vodafone Idea, according to a Macquarie report from last year.
"Banks were yet to make additional provisioning for these loans as they were expecting some sort of a relief from the court," said Siddharth Purohit, an analyst at SMC Institutional Equities.
Banks that have the highest exposure to Vodafone include State Bank of India, Punjab National Bank, Canara Bank and Bank of India, among others the Macquarie report said.
Vodafone Idea, which owes the government about $4 billion in dues related to the ruling, has seen its shares slide more than 40% since the court ruling in October.
The broader Indian stock market also reversed early gains to trade lower after the ruling as investors were worried about the fallout. India's Bank Nifty index fell 1.2% during late afternoon trading.
Still, some analysts remained hopeful the government could appeal to the court to review its decision.
"Let's see how the government reacts and what they do. If the government appeals to the court they could still settle it out, and we may see some positives emerge for everyone," said a senior industry analyst, who asked not to be named.