RCom AGR dues: Why should Jio not pay, asks Supreme Court

By: |
August 15, 2020 8:00 AM

The bench directed, Jio, RCom and DoT to submit all details of the spectrum sharing deal and payments, etc, and adjourned the case till August 17.

Under the pact, the former traded and bought the spectrum of the latter in 8 circles in the 800 MHz band.Under the pact, the former traded and bought the spectrum of the latter in 8 circles in the 800 MHz band.

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.

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.

Jio continues to share 58.75 MHz of RCom’s spectrum in the 800 MHz band since January 2016.

On Friday, a three-judge bench led by Justice Arun Mishra queried why should Jio not pay for the AGR dues if it has been using the spectrum. “Jio must pay Rcomm’s AGR dues if it is actual user of spectrum….person using it must pay AGR dues…”, the bench observed.

The bench directed, Jio, RCom and DoT to submit all details of the spectrum sharing deal and payments, etc, and adjourned the case till August 17.

Different set of guidelines govern spectrum trading and spectrum sharing. While 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 of the buyer but if any past dues arises at a future date, the DoT is free to recover it from either party or from both. The parties have to give an undertaking to this effect and the deal is only then approved by the DoT.

Under spectrum sharing pact, the parties only pay spectrum usage charge, which Jio has been paying from the date it entered into the pact. There’s no clause relating to payment of past dues or any undertaking to this effect in a sharing deal.

Jio has cleared its own AGR dues of Rs 198 crore, which it says also includes the AGR dues of Rcomm’s for the 8 circles for which it bought spectrum from it. But this due has been paid from the date of the pact, that is January, 2016, not prior to it. The total AGR dues of Rcomm stands at Rs 25,194.58 crore.

Apart from the Jio-Rcomm spectrum sharing and payment liability issue, the court also directed the resolution professional of Rcomm and Aircel to place before it all details on which entities have placed bids for them under the Insolvency and Bankruptcy Code.

A company called UVARCL has received the approval of the National Company Law Tribunal for buying the assets of Aircel, which includes spectrum. The resolution plan of Rcomm is also in the final stages of approval by the NCLT.

The question which the SC is examining is whether spectrum which is a government property given on lease to the operators can be sold as part of the insolvency proceedings since in such sale the government being an operational creditor won’t be able to recover its dues as the first priority is of financial creditors like banks. The NCLT allowed the insolvent companies to sell their spectrum as part of the resolution plan despite the DoT’s objections. The DoT did appeal in NCLAT but it was dismissed on the grounds of being filed late. On July 24 it has filed an appeal in the SC also.

Get live Stock Prices from BSE, NSE, US Market and latest NAV, portfolio of Mutual Funds, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Financial Express is now on Telegram. Click here to join our channel and stay updated with the latest Biz news and updates.

Next Stories
1Air India sale: Allow bidders to quote own terms, says panel
2Potent tool: Insolvency threat triggers loan recovery of Rs 5 lakh crore
3HDFC Bank denies allegations made in US lawsuits against it