The Supreme Court on Thursday observed that the bankruptcy process of Reliance Communications Ltd, Aircel Group and Videocon Telecommunications Ltd may completely wipe out adjusted gross revenue (AGR)-related dues that these telecom firms owe to the government.
Justice Arun Mishra, who is heading the three-judge bench hearing the AGR matter, said the successful resolution applicant for RCom and Aircel can deny paying the AGR dues after spectrum is transferred under the Insolvency and Bankruptcy Code (IBC). The observation comes as a response to Aircel’s submission that the right to use radio airwaves is an asset of a telecom operator undergoing insolvency proceedings.
“The right to use an intangible asset is covered under Section 18(1)(f) of the IBC. Spectrum belongs to everybody, but right to use is an asset… No dispute on spectrum ownership, but contract allows a right to transfer," Aircel’s monitoring committee told the court.
Aircel’s monitoring committee, which includes resolution professional and lenders, said the company’s insolvency resolution process has concluded, with UV Asset Reconstruction Co Ltd (UV ARC) emerging as the highest bidder. The committee added that the DoT has been classified as an operational creditor, implying that the government may recover little or next to nothing from the resolution of Aircel, which owes ₹12,389 crore.
The monitoring committee, through senior lawyer Ravi Kadam, said, “the DoT took part in (resolution) meetings with lenders… Only a fraction of the AGR dues will be paid, less than 1% of the total demand (of the DoT)".
UV ARC is also the winning bidder for RCom, which owes the DoT ₹25,199 crore, including spectrum usage charges and licence fees, according to government estimates. This is nearly half of ₹49,054 crore in dues calculated under the company’s IBC proceedings.
Ranjit Kumar, representing financial creditors to Aircel, said dues of banks are on par with those of the government, which has allowed spectrum as security used by banks to disburse loans to telecom operators. The government cannot “back track now" on not allowing sale of spectrum under the IBC to recover dues, Kumar added.
The Supreme Court also asked the government to furnish details of all agreements signed by two telecom operators to share spectrum. It asked the DoT the details of spectrum allocated to RCom and Aircel since 1999. The court will hear the case next on 21 August.
According to the Telecom Regulatory Authority of India’s (Trai) consultation paper on ‘methodology of applying spectrum usage charges (SUC) under the weighted average method of SUC assessment, in cases of spectrum sharing', RCom is the only bankrupt telecom company that shares its airwaves with Reliance Jio Infocomm Ltd.
Reliance Jio’s rival Bharti Airtel Ltd shares its spectrum with Tata Teleservices Ltd, showed the consultation paper, released on 22 April by Trai.
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