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* Court orders telecom operators to pay dues by March 17
* Threatens contempt proceedings against cos, govt officials
* Banks non-performing assets could rise sharply, say
analysts
(Updates with details, analyst quotes, background)
By Suchitra Mohanty and Swati Bhat
NEW DELHI/MUMBAI Feb 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
Indian 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.
BANKS BURDENED
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.
(Additional reporting by Promit Mukherjee and Nupur Anand in
Mumbai, Sudarshan Varadhan in New Delhi, and Derek Francis in
Bengaluru;
Editing by Sanjeev Miglani, Muralikumar Anantharaman and
Philippa Fletcher)
