AGR Hearing Updates: SC says AGR dues will be wiped out in IBC deals; nobody can use spectrum unless dues paid

“Once the plan is approved, it is binding on all including central and state governments,” Ramji Srinivasan, appearing for Tata, said.

SC asks SG to reply if Bharti Airtel has undertaken to pay spectrum liability. However, senior lawyer Kapil Sibal denied.

NK Kaul appearing for Videocon Telecom’s resolution professional. “DoT put AGR dues of Videocon at Rs 1,512 crore,” according to Kaul.

NK Kaul has to come back on the question who will pay AGR dues as spectrum is transferred to Bharti Airtel.

“Business is nil at the moment. Spectrum has been transferred to Bharti Airtel in 2016 and DoT has verified that,” said NK Kaul.

Ranjit Kumar concluded his argument saying, “Section 238 of IBC says it prevails over any other law, TRAI, Telegraph Act”.

“If the raw material is taken away to fulfil government dues and a liquidation vale is attached, PSBs will get nothing. Teleco will go into liquidation,” Ranjit Kumar said.

“IBC is complete code in itself and resolution plan should be given effect to,” Ranjit Kumar said.

Ranjit Kumar was discussing fair and liquidation values. 

Ranjit Kumar, appearing for CoC of Aircel, is repeating Harish Salve’s argument of how spectrum is important for a teleco to be sold as a going concern. 

Ranjit Kumar is telling the Supreme Court that how the funds are to be distributed.

Ranjit Kumar, appearing for CoC of Aircel, taking the Supreme Court through Insolvency and Bankruptcy Code (IBC).

“Why should a bank not able to make a profit? Bank will spend on economic purposes. Both have to coexist. It is a case of coexistence,” said Ranjit Kumar.

The Supreme Court asked what is more profitable for the government? 

“If it is contractual then why one contract should not get anything. If spectrum should go to the government, then basic raw material of a teleco goes and it will go into liquidation,” Kumar told SC.

“Should they not be treated equitably? I am also the government. Why did I expose myself to give a loan? It lent because the spectrum was kept as a security interest. The government allowed this. If it allowed, it becomes some sort of a government guarantee,” says Kumar.

“If my exposure is the same as AGR, then I should not get any money and all the money will go for satisfying the government dues when IBC says my dues are important,” Senior counsel Ranjit Kumar, on behalf of CoC of Aircel, said.

“The government dues are being taken care of under IBC. There is a regime in place. SBI is the lead banker,” says Ranjit Kumar

Senior counsel Ranjit Kumar, on behalf of CoC of Aircel, said that the spectrum is a raw material for a telecom company.

“AGR judgment says rights are contractual in nature. Therefore, it is a business transaction between government, telecom service provider and banks,” said Kumar.

“The Supreme Court has laid down the law that it is purely contractual. This very licence allows trading. It allows Tripartite agreement with the President of India. This agreement becomes part of the licence,” said Ranjit Kumar, appearing for CoC of Aircel.

“For the purpose of companies, there were insolvency laws in India since 1919. Then companies act, BiFr, DRT, then securitisation Act. And not we have IBC. There is a regime. Law has been evolving,” said Ranjit Kumar.

“We are doing our respective businesses. In businesses, as is know there can be profits and losses. You gain some you lose some,” said Ranjit Kumar.

“The government itself is trading in the spectrum. It is a business proposition. It is auctioning the right to use. The banks are in the business of lending money,” said Ranjit Kumar.

Senior lawyer Ravi Kadam concludes. Senior counsel Ranjit Kumar, on behalf of CoC of Aircel, starts arguments.

“Licence fee and spectrum fee to be treated as an intangible asset, Trai has said,” says Ravi Kadam.

Ravi Kadam, appearing for monitoring committee of Aircel while concluding his arguments said that Trai consultation paper also states that spectrum is an intangible asset, which should be shown in the balance sheet

Senior lawyer, appearing for Reliance Jio, Harish Salve said the bridge will be crossed when DoT’s permission is sought

“After spectrum sale, the new user will deny pending demands against the said spectrum,” Justice Arun Mishra said.

“A person is not paying but is riding the horse. You must pay the price. Until one pays, you can’t use it,” Justice Arun Mishra said

“What bothers us is if remain unpaid. In case dues are not paid then the spectrum must be surrendered,” Justice Arun Mishra said.

“We are examining jurisdiction of IRP and Insolvency and Bankruptcy Code (IBC),” said the Supreme Court.

“You can use it for 30 years, but payment has to be made. You don’t have an unfettered right. But that is not the law,” said Justice Arun Mishra.

“We are extremely worried that almost entire AGR dues will be wiped out in the IBC process. And after the sale of spectrum, the new user will have extinguished any pending demand against the spectrum in question,” said Justice Arun Mishra.

The Supreme Court asked senior lawyer Ravi Kadam to read the explanation to section 18.

“Right to use is an intangible asset falling under Section 18F of the act. Therefore, the right to use will not remain with the company. It is an asset,” Kadam said to SC. 

The Supreme Court said, “We assure you that we won’t read so much as the note is in two volumes”.

“DoT never treated them as current dues. They never raised any demand,” said Ravi Kadam.

“Correct answer is that liability arose on the date of sale. These are deferred as the companies chose to trade on different dates. It doesn’t mean it is subsequent or current dues, as claimed by DoT,” said Kadam