With RCom undergoing insolvency, DoT, which is an operational creditor, is likely to be paid after financial creditors as per the IBC rules.
With Anil Ambani’s Reliance Communications (RCom) filing for insolvency proceedings under the Insolvency and Bankruptcy Code (IBC), the government might be staring at a potential loss of spectrum dues worth Rs 2,900 crore. RCom owes the Department of Telecommunication (DoT) Rs 2,900 crore for spectrum, against which it had given a corporate guarantee of Rs 1,400 crore.
The company last week decided to approach National Company Law Tribunal (NCLT) under Section 10 of the IBC. The resolution process would remain the same as in the case of proceedings initiated by an operational creditor, which means that DoT — an operation creditor — is likely to be paid after financial creditors as per the IBC rules, Punit Dutt Tyagi, Executive Partner, Lakshmikumaran & Sridharan, told Financial Express Online.
“In case of a resolution, the spectrum would be considered as the assets of RCom and the resolution professional will have a right to use the same; in case of liquidation, spectrum will go back to DoT but the telecom department will fall even below unsecured financial creditors,” Punit Dutt Tyagi said. However, the question of selling RCom assets, or liquidation, would come only if the resolution fails.
RCom said it took the decision to file for insolvency as the proposed asset monetisation plan with Reliance Jio failed to make any progress. The DoT had refused to clear the deal as none of the two parties — RCom or Jio — was taking payment liability for the guarantee.
The decision to move National Company Law Tribunal (NCLT) has been taken following DoT’s refusal to clear the spectrum sale deal between RCom and Reliance Jio. RCom, which owes DoT Rs 2,900 crore and had given a corporate guarantee of Rs 1,400 crore in compliance with the Supreme Court order in order to get the department’s approval to proceed with the spectrum sale plan.
However, with Mukesh Ambani’s Reliance Jio reportedly refusing to take any payment liability of RCom after the deal, DoT refused to give its nod.
The department had been of the opinion that under the circumstance where both the parties are not in the position to take the responsibility of payment of dues, the telecom department cannot take the deal on record, news agency PTI reported.
Last year, RCom signed a deal with Reliance Jio for sale of wireless spectrum, tower, fibre, and media convergence nodes assets – the proceeds of which were to be used to clear Rs 45,000 crore debt. So far, the company has completed the sale of optical fibre assets worth Rs 3,000 crore and sale of its media convergence nodes worth Rs 2,000 crore.