“...if the bank guarantees get encashed tomorrow, then the company will have to close,” Vodafone Idea’s counsel Mukul Rohatgi told a TV channel on Monday. “I hope good sense prevails over the government, that if you encash the guarantees, the banks will pay, but the company will go down.”
Officials said the telecom department (DoT) is seeking the law ministry’s opinion on whether the bank guarantees can be encashed before March 17 — the next date of hearing in the SC — to recover part of the dues. People aware of the situation said that while no guarantees were encashed on Monday, the DoT may start the process over the next few days to avoid facing contempt of court proceedings in the SC.
SC Ire Leaves Little Room for Officials
In a statement, Vodafone Idea said it will pay a further Rs 1,000 crore by the end of the week, or half of its self-assessed principle amount of Rs 7,000 crore. “The (Vodafone Idea) board will take stock of the situation to see how further additional payments can be made. An urgent oral application made this morning before the Hon’ble Supreme Court for directions to be issued to the DoT to not take any coercive steps for recovery of AGR dues was not entertained by the Hon’ble Court,” said the loss-making telco.
Airtel said it will pay the balance dues, based on its own assessment, by March 17. A Tata Teleservices official said its payment was full and final, and that it had submitted its calculations to the DoT.
The amounts deposited by the three telcos were far lower than the Rs 35,500 crore dues estimated by the telecom department for Bharti Airtel, over Rs 53,000 crore for Vodafone Idea and nearly Rs 14,000 crore for Tata Teleservices.
As ET reported on Monday, the three companies have assessed their AGR dues at about half the amount that the DoT has demanded, and it remains to be seen what the government’s next course of action will be.
The SC’s strong words against the DoT on February 14 for not recovering the AGR dues on time has left little room for officials. “The SC was very clear: The entire amount had to be paid immediately. Now, the DoT has to follow the court’s orders because it has not received any directions from the court to make provisions or negotiate,” said a person aware of the development.
Bharti Airtel recently raised $3 billion via a share sale and overseas bonds issue, and therefore has funds to pay its AGR dues.
But Vodafone Idea is in a precarious position and any move to encash its bank guarantees could be fatal. “If that (invocation of guarantees) were to happen, banks would not be in a position to re-infuse additional funds (in the form of renewed bank guarantees of similar amounts to DoT) at this stage,” said Rahul Goel, partner at IndusLaw.
Senior lawyer Anil Kher added that banks that have lent to Vodafone Idea had all the rights as financial creditors to invoke provisions under Section 7 of the Insolvency and Bankruptcy Code. “But this will happen only when Vodafone Idea fails to pay the bankers, despite them making demands,” he added.
Experts said the bank guarantees cover only two quarters of AGR-based payments — roughly Rs 2,500 crore per telco.
The telecom industry was plunged into a crisis on Friday when the Supreme Court came down heavily on telcos for not adhering to its deadline for paying AGR dues, and on the DoT for issuing an order that no coercive action should be taken against telcos for not making payments on time.
After making the payment on Monday, Airtel said, “....we have duly paid an amount of Rs 9,500 crore on behalf of Bharti Airtel (including in respect to Telenor India which was merged with Bharti Airtel) and an amount of Rs 500 crore on behalf of Bharti Hexacomm”.
In a separate statement, Tata Teleservices said Tata Teleservices Ltd and Tata Teleservices (Maharashtra) Ltd had paid a combined Rs 2,197 crore to the DoT.
Shares of Bharti Airtel closed flat at Rs 565, while those of Vodafone Idea closed at Rs 3.42, down 0.58%, on the BSE on Monday.
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14 Comments on this Story
dasgupta333 days ago
The progress of dizital India will come to a halt and create only agony and unemployment problems.Govt.should interfere and settle down the issue to stop the bad signal to the foreign investors immediately.
crusoe rob333 days ago
Is it time for Vodafone users to migrate to Airtel? If it shuts, will we loose our mobile numbers?
Chandanwood 334 days ago
all because of UPS government