Financial creditors of bankrupt Reliance Communications Ltd (RCom) on Tuesday told the Supreme Court that the department of telecommunications (DoT)’s trading rules allow spectrum sale, in response to the apex court’s query on whether radio airwaves can be sold under IBC.
Harish Salve, representing lenders to RCom and Reliance Jio Infocomm Ltd, said the government has recognized spectrum as security that can be monetized and, thus, banks consider spectrum as an asset before disbursing loans to telcos. However, Salve said it would be premature to decide whether the spectrum held by a bankrupt telecom firm can be sold under the IBC.
Last week, SBI, on behalf of RCom’s committee of creditors, had told the top court that spectrum is an integral asset of telecom service providers that, once sold, will help creditors recover dues.
The sale of spectrum of bankrupt telcos under the IBC proceedings is critical for financial creditors, as they could recover a significant amount of dues from the sale of airwaves as part of the insolvency resolution process of telecom firms. RCom’s total dues, as calculated under the company’s IBC proceedings, stand at nearly ₹49,054 crore. UV Asset Reconstruction Co. is looking to acquire RCom and Reliance Telecom Ltd’s spectrum, data centre and enterprise business and real estate assets with a bid of ₹16,000 crore under the IBC.
“Under a tripartite licence agreement, the government has recognized the idea of spectrum as security to be used by telcos to raise funds from banks… Only when the RCom resolution applicant moves the DoT for spectrum sale, only at that stage the issue should be decided," Salve said.
According to legal experts, transfer of spectrum to a new buyer is not allowed unless past dues are cleared and will require amendments in the telecom law and policies.
DoT, however, can retain the spectrum with bankrupt telcos, disallowing the sale and commercially auctioning the airwaves again. RCom owes DoT ₹25,199 crore, including spectrum usage charge and licence fees, according to government estimates, representing half of RCom’s dues.
On Tuesday, the SC said it cannot grant telcos 20 years to pay their respective AGR dues. Vodafone Idea Ltd, which still owes over ₹50,000 crore to DoT, will be the worst hit if the court does not grant staggered payment options.
“There are huge dues payable, how can we let it go?... We had directed payment within a certain period, the government is seeking 20 years. What if telcos go into insolvency?... In 20 years, all kinds of manipulation and legal filings can take place, we can’t allow like this," said Justice Arun Mishra, who is heading the three-judge bench hearing the AGR case.
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