The broader NSE Nifty 50 index was down 0.10pc at 12,161.50 and the benchmark S&P BSE Sensex was 0.42pc lower at 41,405.14, as of 06025 GMT.
India's Supreme Court ordered telecom companies to clear over $13 billion in dues, sticking to its October decision.
Shares of Vodafone Idea, which owes the government about $4 billion, fell as much as 19pc following the ruling.
The decision also weighed on the stocks of banking and financial companies that are highly exposed to Vodafone's debt.
Banks may have to take a major haircut if Vodafone Idea, which is already lugging over 1 trillion rupees ($14.01 billion)in debt, goes under, said Rusmik Oza, head of fundamental research at Kotak Securities.
"Any hangover in banking system will obviously impact the market because banking is the largest contributor in the Nifty index."
The Nifty banking index fell 0.85pc around mid-day trading with Indusind Bank, which has the highest exposure to Vodafone Idea, losing 2.4pc.
Companies such as Vodafone and Bharti Airtel have already made provisions to repay their dues, which led them to report massive quarterly losses. Billionaire Mukesh Ambani's Reliance Jio, a relatively newer player, would not have to shell out as much as the other two.
In the broader market, Yes Bank shares climbed 5.78pc to top the gainers in the blue-chip index, while Bharti Infratel, which fell nearly 5pc, was the top loser after.
MSCI's broadest index of Asia-Pacific shares outside Japan was on course to post the second straight week of gains.
Earlier in the day, Indian shares opened higher after China's health officials said the daily death toll from the coronavirus epidemic in Hubei halved and the number of new cases dropped from a record posted the day before.