Insolvent Telecom Operators: Row over AGR dues back in Supreme Court

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April 19, 2021 8:07 AM

Court to take a call on dues of bankrupt operators Aircel & RCom and Videocon, which has shut shop

Telecom companies, AGR, Supreme Ciurt, Insolvent telecos, Videocon Telecommunications, NCLAT, AirtelNCLAT ruled last week that spectrum can be transferred as part of insolvency resolution plan but only after all the government dues are cleared.
The question as to who should pay the adjusted gross revenue (AGR) dues of bankrupt telecom operators will now come back to the Supreme Court for resolution. Legal observers said that there will be primarily two issues which the apex court will have to look into – one relating to those insolvent telcos where the resolution plans have been approved but government dues have not been cleared, and second, where the company has sold all its spectrum and has closed down but the government dues are still unpaid.
The first case relates to operators like Aircel and Reliance Communications and the second one concerns Videocon Telecommunications. Regarding the first, the NCLAT ruled last week that spectrum can be transferred as part of insolvency resolution plan but only after all the government dues are cleared. The NCLAT maintained that though the DoT which leases spectrum to the operators is an operational creditor, still the clauses relating to spectrum trading guidelines and licence agreement stipulate that government dues need to be cleared in full before spectrum is transferred and can be further used.
The order was pronounced in the matter of Aircel, where the Mumbai bench of the National Company Law Tribunal had in June, 2020 approved a Rs 6,630 crore resolution plan of UV Asset Reconstruction Company (UVARCL). The DoT had challenged this in NCLAT last year in September on the ground that spectrum does not belong to telecom operators but is given to them on lease and upon non-payment it has the right to seize it back.
Though the order relates to Aircel’s insolvency, it would have implications on similar proceedings relating to Reliance Communications where also the committee of creditors have approved UVARCL’s resolution plan. The NCLAT order is sure to be challenged in the SC by the lenders of Aircel.
The AGR dues of Aircel stands at Rs 12,389 crore, while that of RCom is of Rs 25,199.27 crore. The second matter relates to Videocon Telecommunications where its entire spectrum was bought by Bharti Airtel but its AGR dues worth Rs 1,376 crore, which came to light later remains unpaid. Though the DoT has asked Bharti to pay the amount, the latter has refused to do the same stating that it has no basis in law. The DoT has already moved the apex court on this matter.
Though a part of spectrum of Aircel was acquired by Bharti Airtel through trading and that of Rcom by Reliance Jio, they cannot be made to pay for the AGR dues as the SC had ruled that buyers can only be asked to pay the arrears if they acquire the entire spectrum, not some portion of the whole. Though Bharti had acquired the entire spectrum of Videocon Telecommunications, it has argued that any dues which comes to light after the spectrum trading has been done needs to be paid by the seller, Videocon in this case, and not the buyer, Bharti.
While settling the matter of payment of AGR dues of telecom operators like Bharti Airtel, Vodafone Idea, and Tata Teleservices last year in September, the Supreme Court had left the matter of Aircel and RCom as they were being adjudicated in the NCLT/NCLAT at that stage. The apex court had said that since the two companies were undergoing insolvency it would not be appropriate for it to interfere in the matter at that stage.
However, during the course of the hearing it had observed that government dues need to be cleared and responsibility, as to who pays them, needs to be fixed.

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