AGR crisis: How will you recover dues from insolvent telcos, SC asks Centre

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August 11, 2020 7:50 AM

As is known, on July 20 during the course of hearing in the AGR matter, the SC had sought all records of RComm, Aircel, and Videocon Telecommunications to ensure that these companies did not misuse the insolvency and bankruptcy code (IBC) to escape their AGR dues.

A bench led by Justices Arun Mishra told solicitor-general Tushar Mehta that he should come “prepared on Friday with a plan for recovery of dues from the companies under insolvency.

The case of bankrupt telecom operators in the adjusted gross revenue (AGR) case took a new turn on Monday when the government told the Supreme Court that the spectrum held by such firms cannot be sold as part of their resolution plans. This raises uncertainty regarding the resolution plans of Reliance Communications and Aircel, where the respective plans are at different stages.

The issue at stake is that if spectrum belongs to government and is given to the telecom operators on lease, can it be put up for monetisation as part of the resolution plan?  In such a process, the government becomes an operational creditor and the payment of its dues comes after the dues of the financial creditors like banks are paid off and therefore the chances of the government recovering its AGR dues through the insolvency process is near negligible.

A bench led by Justices Arun Mishra told solicitor-general Tushar Mehta that he should come “prepared on Friday with a plan for recovery of dues from the companies under insolvency. And whether spectrum can be sold by these telecom companies? What is the government’s stance? What is the government’s plan to recover dues from RCom? It seems the government will get nothing from the IBC process,” the bench observed. “The government will get zero,” Justice MR Shah, who was part of the three-judge bench, said, adding under IBC, if the preference is given to financial creditors, then the government will not get anything.

The court will next hear the matter on August 14.

While Reliance Communications has AGR dues worth Rs 25,000 crore, Aircel’s is around Rs 12,389 crore.

The bench also asked the SG, “If you don’t appeal quickly, how will you prevent spectrum from being sold off?” The question sprang up because the National Company Law Tribunal and the National Company Law Appellate Tribunal have allowed the respective companies to put up spectrum as part of their resolution plan and though the government disagrees with it, it has delayed in filing an appeal against such orders in the Supreme Court.

The SC has raised the issue at a time when the NCLT has approved the resolution plan of asset reconstruction firm, UVARCL, for Aircel, which includes it assets and spectrum and is in the final stages of taking a call on the assets and spectrum of Rcomm.

As is known, on July 20 during the course of hearing in the AGR matter, the SC had sought all records of RComm, Aircel, and Videocon Telecommunications to ensure that these companies did not misuse the insolvency and bankruptcy code (IBC) to escape their AGR dues. The three companies, which filed for bankruptcy, together owe around Rs 40,000 crore of the total Rs 1.67 lakh crore owed by various telecom companies as AGR dues. Companies which file for bankruptcy get a moratorium on their loans and other dues.

While Aircel has sold its 3G and 4G spectrum to Bharti Airtel, RCom has traded a large portion of its spectrum to Reliance Jio. Videocon Telecommunications has also sold its spectrum to Bharti Airtel. Under the spectrum trading agreement which is approved by the department of telecommunications, the dues after the approval date is borne by the buyer of spectrum whereas dues prior to it are the liability of the seller. The dues reflecting in the account of Aircel and Videocon are thus their liabilities prior to the sell-off date.

Senior counsel Shyam Divan, appearing on behalf of resolution professional appointed in RCom insolvency case, said that that the company’s resolution plan is pending before NCLT and has already been unanimously approved by the committee of creditors.

Divan said that RCom owes Rs 49,054 crore to banks and “spectrum will be the main asset which will be of some attraction for people who are interested in taking over the company”.

Senior advocate Ravi Kadan, appearing for monitoring committee of Aircel, said the resolution plan has been approved by the CoC and the NCLT.

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