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    SC questions spectrum sale by ailing telcos, asks govt how it plans to recover AGR dues

    Synopsis

    ​​The observations that came Monday could potentially impact the resolution plans of the two telcos. The insolvency court has already approved the sale of Aircel’s assets, and was about to take a call on RCom and its units.

    Agencies
    Both RCom and Aircel have said that spectrum is their main asset, without which their asset monetisation plans will fall through.
    NEW DELHI | MUMBAI: The Supreme Court has questioned the sale of spectrum by bankrupt telcos Reliance Communications and Aircel, and sought to know from the government how it plans to recover Rs 43,000 crore of AGR dues from these companies if all their assets were sold off in the interim.

    The observations that came Monday could potentially impact the resolution plans of the two telcos. The insolvency court has already approved the sale of Aircel’s assets, and was about to take a call on RCom and its units.

    A three-judge bench of the SC, led by Justice Arun Mishra, asked why the government had not insisted on quick adjudication from the top court, where the issue is pending.

    “If you don’t appeal quickly how will you prevent spectrum from being sold off,” Justice MR Shah, who is part of the bench, asked solicitor-general Tushar Mehta. The bench also asked if there was any delay in appealing against the decisions in the SC.

    “What if spectrum is sold in the meantime,” Justice Shah asked. The observations came after Mehta pointed out that though the government had filed an appeal against concurrent decisions of the National Company Law Tribunal (NCLT) and the National Company Law Appellate Tribunal (NCLAT) — allowing some of the ailing telcos to monetise all assets, including spectrum, to pay off creditors — a hearing on the issue was awaited.

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    Both RCom and Aircel have said that spectrum is their main asset, without which their asset monetisation plans will fall through.

    “Spectrum cannot be sold, as it is national property,” the solicitor general said. “It is held by the government as a trustee of the public,” he added.

    Mehta said the resolution process had been completed in the case of Aircel and was about to be finalised for RCom. He pegged RCom’s adjusted gross revenue (AGR) dues at Rs 31,000 crore, including licensing charges and spectrum usage charges. As per the DoT’s previous filing in the top court, RCom owed the government Rs 25,194.58 crore, including the dues of Sistema Shyam Teleservices (Rs 222.1crore).

    Aircel’s dues were put at Rs 12,389 crore. These AGR dues are over and above other statutory dues. Under the Insolvency & Bankruptcy Code (IBC), financial creditors such as banks get precedence over operational creditors during recovery of dues. As an operational creditor, the government will not be able to recover AGR dues in the resolution proceedings. No contingency provisions have been made either by the companies the bankrupt telcos) for AGR dues.

    “How will you recover this big amount,” Justice Shah asked.

    SEEKING DETAILS
    The SC bench sought to know details of the entities that had initiated the resolution proceedings and what their dues were, before taking a call on whether the ailing telcos facing insolvency proceedings could be given any leeway in paying AGR dues. The ailing companies include Videocon and Sistema Shyam.

    The RCom resolution professional, through senior advocate Shyam Divan, said the company owed over Rs 49,000 crore to banks, and that spectrum was its prime asset. Divan told the apex court that Ericsson had initiated the insolvency proceedings against RCom. This prompted the SC bench to wonder how such proceedings were initiated despite payments to Ericsson under a top court order.

    Aircel, which was represented by senior advocate Ravi Kadam, argued that spectrum can be transferred and sold under the licensing agreement. The court has already reserved its judgment on a plea by the government to allow the other non-ailing telcos a 20-year window to pay AGR dues. The SC has said it would only give a reasonable window to these companies to pay up, and has insisted on payment guarantees should the telcos fail to stick to the schedule. A ruling is expected to be delivered any time before September 3, when Justice Mishra demits office.

    The court has, however, agreed to treat companies facing resolution proceedings as a separate class and is currently examining the bona fides of their bankruptcy claims as they had expressed inability to pay the dues. The court also sought all records pertaining to the bankruptcy proceedings of RCom, Sistema Shyam Teleservices, Aircel and Videocon Telecommunications (which owes Rs 1,376 crore), and said it would hear the case on August 14.
    (Catch all the Business News, Breaking News Events and Latest News Updates on The Economic Times.)

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    12 Comments on this Story

    Saradindu Basu44 days ago
    BJP HAI TO MUMKIN HAI.
    Saradindu Basu44 days ago
    Govt. of the day does npt care.
    Anil Selarka44 days ago
    it appears that Supreme Court is over extending its jurisdiction by taking unusual steps to enforce debatable judgment.
    The only function of Supreme Court is to decide "Question of Law" and announce the judgement. It is not the function of Supreme Court to interfere in post judgement process which is more of administrative and financial nature. The plaintiff and defendents are at absolute liberty to modify their agreements based on the law as decided by the Supreme Court.
    it is upto decree holder to enforce the judgement fully, partially or not at all, based on business interest.
    The Government and the Supreme Court can not say that Spectrum is a national property. The Telcos bought the Spectrum in auction process, paying several lakh crores as fees,. As such all ownership rights get transferred to Telcos in entirety.
    If the government and SC wants to seize this property (Spectrum license), it should refund entire auction proceeds with interest.
    The Economic Times