$6 billion telecom bankruptcies left hanging in India as ministries argue

Bickering among Indian government ministries and a deferred top court decision on the sale of bankrupt telecom companies’ rights to use mobile phone spectrum has derailed the resolution of the industry’s biggest bankruptcies, leaving banks waiting for $5.7 billion in payments.

India’s Supreme Court in a verdict on telecom dues earlier this month asked a lower court to first rule on the dispute raised by the telecommunications ministry against a group of government-owned banks led by State Bank of India over the legality of the sale of airwave licenses of collapsed mobile phone operators.

The case is yet another example of how government branches are delaying bankruptcy settlements in a country whose banks suffer the world’s worst bad debt ratios. Any uncertainty about lenders’ rights over the key assets of operators could also discourage lending or bank guarantees to Bharti Airtel Ltd. and Vodafone Idea Ltd.

In an interim step, the Supreme Court decided Friday that the bankruptcy appellate tribunal will decide whether banks can sell bankrupt telecom companies’ right to mobile phone spectrum in the insolvency proceedings. That’s a change from the previous order, which empowered the lower bankruptcy court. Bloomberg