SC AGR hearing HIGHLIGHTS: The Supreme Court adjourned the hearing on spectrum sharing case till Wednesday, August 19, 2020. A bench led by Justices Arun Mishra, S Abdul Nazeer and MR Shah heard the case. Senior advocate Harish Salve, who appeared for Reliance Jio today, said Jio isn’t acquiring Reliance Communications’ spectrum and not involved in any Insolvency and Bankruptcy Code (IBC) proceedings. Solicitor General Tushar Mehta told SC that Department of Telecommunications’ (DoT) view differs from views of Ministry of Corporate Affairs (MCA) on sale of spectrum under IBC. The view finalised by the SC is that spectrum cannot be sold under IBC. Mehta also said that spectrum is owned by the government but held by the company under insolvency, in trust, cannot be sold. People of the country are owners of the spectrum, held by the government in trust. “Tomorrow we should have details of arrears of Reliance Communications in black and white,” Justice Arun Mishra told Solicitor General.
Meanwhile, telecom companies such as Bharti Airtel, Vodafone Idea and Tata Teleservices awaited the verdict on staggered payments of adjusted gross revenue case (AGR). Reliance Jio has paid its AGR dues of Rs 198 crore. However, Jio claims that the amount paid also includes the RCom’s AGR dues for the eight circles for which it bought spectrum from it. The total AGR dues of Reliance Communications stands at Rs 25,194.58 crore.
Bharti Airtel shares ended 1.42 per cent down at Rs 521.40 apiece, as Supreme Court hearing on AGR dues was underway.
Supreme Court adjourned hearing on AGR case till Wednesday, 2 PM.
Harish Salve said that the battle is between two limbs of government - SBI on one hand and government on other side. I want to check with SBI if they want to fight out
Senior Advocate Harish Salve says 2 big issues to address - IBC applying and how spectrum issues will play out. He said that contradicting SG fills me with fear.
Bharti Airtel through Kapil Sibal said "we never shared. It was in 2300 MzH band".
"Bharti Airtel is the buyer," said Mehta. "Whether this trading arrangement was allowed by DoT?," Justice Mishra asked adding that how much AGR was to be paid
Solicitor General Tushar Mehta said that Aircel was not sharing but trading. Eight service areas including Andhra was traded
"Tomorrow we should have details of arrears of Reliance Communications in black and white," Justice Arun Mishra told Solicitor General.
SC says it does not want to hear on the priority of distribution of funds at present, says it will come later. Tell us something on Section 18. Whether you have the right to touch it (spectrum)? asked Justice Mishra.
Bharti Airtel shares ended 1.42 per cent down at Rs 521.40 apiece, as Supreme Court hearing on AGR dues was underway.
Senior Advocate Shyam Divan invites attention to the preamble of Insolvency and Bankruptcy Code (IBC).
The Supreme Court wants to see the April order of closure of Ericsson's case after payment of Rs 550 crore was made.
SC said that at the time of proposed sale to Reliance Jio, before IBC, RCom claimed assets of Rs 35,000 crore. "We want to know where the assets have gone? How has the value of assets depreciated so significantly?
"Now the value of assets has gone down. The value was around Rs 45,000 crore. How depletion happened. Would like to know what happened to net worth," SC asked.
On Feb 19, 2019, sales of assets of around Rs 35,000 crore was mentioned. Shyam Divan said that asset sale didn't go through.
Justice Arun Mishra asked "Who are the directors? What is the asset value of RCom?"
Shyam Divan said ARC plan has 100% creditors of committee's (CoC) approval. Divan informed that about 141 parties were approached as prospective buyers. Bharti Airtel, UVARCL, etc., were approached.
Shyam Divan said ARC will issue zero-coupon bonds, redeemable in 5 years to be issued to banks. Bonds can be redeemed, realised as the resolution applicant monetises the assets. Bonds of Rs 15,140 crore will be issued to banks.
Solicitor General argued that spectrum can never be a subject matter of IBC. DoT had asked RCom in March 2019 why spectrum shouldn't be revoked over pending dues. The Corporate Affairs Ministry wanted spectrum sale to maximise value. RCom's resolution plan yet to be finalised
Shyam Divan will take the Supreme Court through RP of Reliance Communications. ARC has proposed to run the business as being run by Reliance Communications.
"Give us bifurcation of dues year-wise," Supreme Court told Solicitor General.
Spectrum is not defined as an asset under the Insolvency and Bankruptcy Code (IBC). The Supreme Court asks government to tell it by tomorrow what are the arrears.
It is for SC to decide the issue but DoT's view that spectrum cannot be subject to insolvency proceedings seems to correct as the spectrum is an asset of the country and cannot be sold in insolvency proceedings, says SG.
Solicitor General taking the Supreme Court through various Insolvency and Bankruptcy Code (IBC) provisions
Tushar Mehta said spectrum is owned by the government but held by the company under insolvency, in trust, cannot be sold. People of the country are owners of the spectrum, held by the government in trust, can not be sold under IBC.
In the previous hearing on Friday, Harish Salve appeared for State Bank of India (SBI). Today, Salve has appeared for Reliance Jio.
Solicitor General Tushar Mehta said Department of Telecommunications' (DoT) view differs from views of Ministry of Corporate affairs on sale of spectrum under IBC. View finalised by SC is that spectrum cannot be sold under IBC.
Harish Salve said Reliance Jio not acquiring Reliance Communications' spectrum and is not involved in any Insolvency and Bankruptcy Code (IBC) proceedings.
Tushar Mehta says two issues are there (1) Sharing and trading of spectrum, (2) Under IBC, whether spectrum can be subject matter
At the outset, Mehta says DoT view is the proportion of law. He says diversion of views may not remain
In Friday's hearing, RCom's resolution professional Shyam Divan informed the court that RCom-RJio deal didn't fructify as the prospective buyer refused to give the undertaking to pay RCom debts.
Reliance Jio had signed a spectrum trading as well as sharing deal with Reliance Communications in January 2016, but while the former failed in 2018, the latter continues. Different set of guidelines govern spectrum trading and sharing. In trading, spectrum is bought from a telecom player and the seller clears all dues at the time of sale. Dues after the date of sale becomes a liability to the buyer, but if any past dues arise at a future date, the DoT is free to recover it from either party or from both.
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The Supreme Court to begin hearing on adjusted gross revenue (AGR) dues of telecom companies shortly
The department of telecommunications (DoT) can charge Reliance Jio around Rs 13,000 crore as dues for adjusted gross revenues, if its wants, as the company had acquired 47.50 Mhz spectrum in the 800 Mhz band from Reliance Communications (RCom) through a trading pact between January-March, 2016. The spectrum was acquired across 13 circles and is currently being used by Jio to provide 4G services.
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Reliance Jio has paid its AGR dues of Rs 198 crore, while the total AGR dues of Reliance Communications stood at Rs 25,194.58 crore.
Telecom regulator Trai has clarified that in cases involving sharing of radio waves, the stipulated increment of 0.5 per cent on SUC rate should apply only on spectrum holding in the specific band where sharing is taking place, not on the entire spectrum holding of the licensee, PTI reports
Reliance Jio and RCom had entered into a pact in January 2016. Under the pact, the former traded and bought the spectrum of the latter in 8 circles in the 800 MHz band. For the remaining 17 circles it entered into a spectrum sharing deal in the same band. However, in 2018 the trading pact got annuled over the dispute between the two companies over giving an undertaking for any past dues which may arise in future. Jio refused to give any such undertaking and even Rcomm did not provide any such undertaking as a result of which the department of telecommunications did not approve the deal.
The Supreme Court on Friday questioned why Reliance Jio should not pay for the adjusted gross revenue (AGR) dues of Reliance Communications if it has been using the latter’s spectrum since January 2016. The development has added a new twist into the AGR case by roping in Jio, which has been out of the picture so far.
SC in previous hearing directed resolution professionals of insolvent telcos to furnish details on the use of spectrum. RP for Reliance Communications and Aircel to also share details on which entities have placed bids under IBC.
Reliance Jio’s four-year-old telecom spectrum sharing deal with Reliance Communications (RCom) is not connected with the latter’s past statutory dues that pertain to the period prior to 2016 when Jio wasn’t even in operation, sources close to the company said.
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