A bench led by Justice RF Nariman upheld TDSAT’s February 26 judgment that held that RJio cannot be held liable for dues prior to the sale of spectrum.
The Supreme Court on Tuesday dismissed the Department of Telecommunications’ appeal against a Telecom Dispute Settlement Appellate Tribunal (TDSAT) order that held that liabilities of past dues related to spectrum usage charges (SUC) rested only with Reliance Communications (the seller) and not the buyer of its 800 MHz spectrum, which then was Reliance Jio Infocomm.
A bench led by Justice RF Nariman upheld TDSAT’s February 26 judgment that held that RJio cannot be held liable for dues prior to the sale of spectrum. The tribunal had also asked the government to reconsider RCom’s plea for grant of a no-objection certificate (NoC) to the spectrum sale.
Since insolvency proceedings against RCom have already been initiated, the significance of the order is not much barring that the issue cannot be raised by DoT in the National Company Law Tribunal. However, here also DoT’s position is that the spectrum is given by the government to an operator on lease and if the company fails to pay its dues to the government, the spectrum should be surrendered before it rather than be sold through an insolvency proceeding.
Tuesday’s development comes in the backdrop of a fiercely fought legal fight between the Anil Ambani firm, DoT and RJio on the spectrum deal which fell through as the government refused to give an NoC to the spectrum sale, thus forcing RCom to go for insolvency proceedings. DoT wanted RJio to give an undertaking that it would be responsible for past liabilities of RCom as well when it buys spectrum from RCom. In December 2018, RJio had written to DoT saying that it should not be held responsible for discharging spectrum-related dues that become payable prior to the sale.
DoT in its appeal against the tribunal’s order said that the Guidelines for Trading of Access Spectrum provides that all dues have to be cleared prior to concluding any agreement for spectrum trading and any dues recoverable up to the effective date of trade shall be the liability of the buyer. “The government shall be at its discretion be entitled to recover the amount, if any, found recoverable subsequent to the date of trade,” it stated.
It further said that Clause 11 made “no distinction as to whether partial spectrum is being traded or otherwise. It gives liberty to DoT to recover all dues from the buyer or seller jointly or severally”.
According to DoT, TDSAT while interpreting the guidelines ignored the SC’s judgment in the case, RCom vs SBI, where it observed that it was for RJio to undertake the responsibilities for payment of the erstwhile debts of RCom and because the buyer refused to give an undertaking to pay the said NoC could not be given.
As part of its debt resolution plan, Anil Ambani’s RCom in December 2017 had struck a Rs 25,000-crore deal with elder brother Mukesh Ambani’s Reliance Jio for the sale of its towers, spectrum and fibre assets mortgaged with different banks to cut down its debt of around Rs 45,000 crore. The nod for the spectrum deal was crucial for the ADAG firm to pare off its Rs 46,000-crore debt. RCom’s spectrum was then valued at over Rs 7,000 crore.
The NCLAT had on April 30 resumed insolvency proceedings against RCom in the Mumbai bench of the National Company Law Tribunal (NCLT) after vacating its stay on such proceedings it had granted in May 2018.
The Mumbai bench of the NCLT had last year on May 16 admitted an insolvency petition filed by Ericsson India against RCom and its two subsidiaries — Reliance Infratel and Reliance Telecom — for failing to pay its dues.
DoT had before TDSAT insisted that RCom furnish bank guarantees worth Rs 29,000 crore and had opposed its stand to pledge land to cover the SUC dues, saying either the debt-laden firm or RJio should give an undertaking that they would clear any past liabilities that arose. The past liabilities may also include licence fee, penalties on violation of electromagnetc radiation norms, penalties on customer application/verification, etc, it said.
Earlier, Reliance Realty, a unit of RCom, had furnished redeemable preferential shares worth Rs 1,000 crore as corporate guarantee towards outstanding spectrum usage charges of Rs 2,940 crore, as per the directions of the Supreme Court. This was in addition to the land parcel that has been given as security, as directed by the TDSAT in its October 1, 2018 order. The tribunal while favouring RCom had directed it against alienating its Navi Mumbai property so as to secure the government at least for Rs 1,400 crore for the time being.