Aircel lenders, UVARCL to move Supreme Court as NCLAT bars spectrum sale

Lenders to Aircel and UV Asset Reconstruction, which was to take over the defunct telco’s assets under the insolvency process, are planning to approach the Supreme Court after an appellate tribunal barred sale of its spectrum until government dues are cleared.

Lenders, led by State Bank of India, and UVARCL fear that the resolution plans of troubled telcos Aircel and will go kaput if the National Company Law Appellate Tribunal’s order is not set aside, three people aware with the development told ET.

A three-judge bench of NCLAT on Wednesday upheld an appeal by the telecom department (DoT) against an insolvency court order approving the Aircel resolution plan, which included transfer of spectrum to UVARCL.

Lenders were hoping to recover ₹25,000-30,000 crore from Aircel and RCom resolution plans under the Insolvency and Bankruptcy Code (IBC) against their claims of over ₹1,16,000 crore.

“This is a big setback for us,” said a banker involved in the process. “If no reprieve is given to us, these companies are surely headed to liquidation as the resolution applicants or the defunct telcos are in no position to pay spectrum dues.”

Aircel and RCom owe more than ₹38,000 crore to the government as adjusted gross revenue (AGR)-related dues at ₹12,389 crore and ₹26,000 crore, respectively. Videocon Telecommunications, another defunct telco under the resolution process, has AGR dues of ₹1,376 crore.

Besides AGR dues, DoT has also claimed ₹14,000 crore from Aircel, which includes defaults on non-payment of instalments for the right to use spectrum, as an operational creditor.


Under UVARCL’s plan for Aircel, operational creditors, including dues to the government, are provided only ₹28.50 crore — or, 0.16% of the ₹17,462 crore claimed.

“The bankruptcy code accords primacy to dues of financial creditors, and that should be honoured by all stakeholders,” said the banker quoted earlier. “The DoT should understand that it has operational creditor status as per the IBC.”

However, the NCLAT has backed DoT’s stance that spectrum is a national asset that cannot be transferred to a third party, unless statutory dues are paid and after it gives approval as per airwave trading rules.

“The spectrum cannot be utilised without payment of requisite dues, which cannot be wiped off by triggering CIRP (corporate insolvency resolution procedure) under the I&B Code (Insolvency and Bankruptcy Code)… Defaulting licensees/ telcos cannot be permitted to wriggle out of their liabilities...,” the appellate tribunal said in its order.

Deloitte, the resolution professional of Aircel and RCom, and lenders had argued that spectrum was a natural resource that cannot be kept idle and that they were well within their rights to reassign it to recover the dues.

The insolvent telcos had said lenders, including public sector banks, will be hit if the airwaves aren’t allowed to be transferred.

If Aircel and RCom are pushed into liquidation, , the lead lender, would be hurt the most, having loaned ₹12,000 crore to the two telcos. The likes of Bank of India, Canara Bank, Syndicate Bank and Industrial and Commercial Bank of China (ICBC) are among over 40 lenders having exposure to the two carriers.

Hence the lenders’ decision to move the top court against the NCLAT order.

A person directly aware of the development said UVARCL, too, will move the Supreme Court. “This is especially because the order will impact RCom resolution as well, which is still pending in NCLT (National Company Law Tribunal) and they (DoT) may use NCLAT order as reference,” the person said.

SBI and UVARCL did not respond to ETs query as of press time Wednesday. Deloitte declined to comment on client-specific matters.

Kumar Saurabh Singh, partner at law firm Khaitan & Co, said NCLAT’s reasoning may not stand ground in the SC, given how the insolvency rules work.

“The IBC does not make any distinction on treatment of a creditor supplying natural resource, neither does it treat government and private sector dues differently,” Singh said. “In the waterfall arrangement, the interests of financial creditors are given precedence over the operational ones. We have seen in numerous cases where listed companies, being operational creditors have seen complete write off of their claims. There, too, public interest argument can be made,” he said.

The appellate tribunal ruling will in any case delay the close of the resolution process, further eroding the value of Aircel's and RCom’s assets, spectrum being the most valuable as the expiry date of the permit to use the airwaves comes closer, experts said.