Supreme Court AGR dues hearing latest updates: Can spectrum be bought and sold under IBC, SC asks

The Supreme Court on Monday resumed hearing on the issue of adjusted gross revenue dues from telecom companies. The three-judge SC bench led by Justice Arun Mishra had on Friday asked the government, Reliance Jio and RCom resolution professional to place on record necessary documents to ascertain who would be liable for the AGR dues of RCom. Furthermore, it asked for details of the spectrum sharing agreements entered into by all insolvent companies.

During Friday’s hearing, the apex court bench asked, “when the sovereign right is transferred for using spectrum, can dues arising be subservient to dues claimed by secured creditors Dues arising out of the use of natural, public resources cannot be merely operational dues, a matter of public money.”

Meanwhile, the wait for the timeframe for a staggered repayment of telecom companies’ AGR dues continues.

Here are the latest updates from the Supreme Court hearing on the AGR payments dues case from telecom companies today:

• The hearing will continue on August 19.
• Harish Salve (appearing for Jio) to SC: SC has raised the status of govt dues under IBC, will have vast implications. Will speak to SBI Chairperson to understand how the issue is to be decided within the govt.
• SG to SC: Govt’s official position is that any decision that SC takes to help recovery of AGR dues, the govt will support it.
• SC Observes: Jio is earning revenue by sharing R Comm spectrum. Can Jio be held liable when they are generating revenue from shared spectrum? We want the govt’s position on Jio sharing R.Comm spectrum, on Jio discharging R.Comm spectrum dues.
• SC: Can spectrum be bought and sold under IBC? RP for R.Comm: Spectrum is an asset in the hands of the company. Spectrum can be subject of IBC, can be bought and sold. Current dues are being paid to the DoT, during the IBC moratorium.
• RP for R.Comm shares with SC details of initiation of IBC proceedings for R.Comm, despite settlement reached with operational creditor Ericsson. Remember that operational creditor Ericsson had initiated IBC proceedings claiming dues of Rs 1600 crore, settled with payment of Rs 570 crore.
• RP for R.Comm to SC: In 2018-19 banks, R.Comm wanted to sell company to avoid insolvency proceedings. Sale of R.Comm did not materialise, IBC was the preferred route.
• RP for R.Comm to SC: Fair value of R.Comm is 10200cr. SC observes: At the time of proposed sale to Jio, before IBC, R.Comm claimed assets of Rs 35000 crore. We want to know where the assets have gone? How has the value of assets depreciated so significantly?
• SC Observation: We want to know the people behind the successful resolution applicant.
• R.Comm RP to SC: 141 parties had approached for R.Comm, including Bharti Airtel. UVARC was the successful resolution applicant. Plan was approved.
• R.Comm Resolution Professional (RP) to Supreme Court: Estimated value of spectrum is Rs 6500 crore to Rs 7400 crore.
• R.Comm Resolution Professional (RP) to Supreme Court: ARC will issue zero coupon bonds, redeemable in 5 years to be issued to banks. Bonds can be redeemed, realised as the ARC monetizes the assets. Bonds of Rs 15140 crore will be issued to banks.
• Solicitor General to SC: Solicitor General to SC: Spectrum can never be subject matter of IBC, consistent position of DoT. The Ministry of Corporate Affairs had sought to allow spectrum sale for maximization of value. Resolution plan for R.Comm has not yet been approved.
• Solicitor General to SC: We issued notice in March 2019 to R Comm to show cause why spectrum should not be revoked due to non-payment of dues.We want to know year wise demands raised against R.Comm.
• Solicitor General to SC: The use of the spectrum allowed to telcos under contract, ownership does not get transferred. The spectrum is not defined as an asset under the IBC. Govt continues to hold spectrum, in trust.
• Solicitor General to SC: Assets owned by third party helped by the company under insolvency, in trust, cannot be sold. The people of the country are owners of the spectrum, held by govt in trust, can’t be sold under IBC.
• Solicitor General to SC: The Supreme Court had indicated that entity using the spectrum must discharge the AGR dues. The sharing of the spectrum is different from spectrum trading. He further adds that the view of DoT differs from the views of the Ministry of Corporate Affairs on the sale of spectrum under IBC. The view finalised by SC is that the spectrum cannot be sold under IBC.
• Salve clarifies that he is appearing for Reliance Jio. He is not involved in RCom IBC proceedings.
• Justice Arun Mishra led bench assembles for AGR hearing.  Hearing to begin anytime. Meanwhile, Jio is likely to argue on AGR that there is no legal basis to making one operator liable for use of the other’s spectrum, travesty if competitors are made liable for the dues of each other. Spectrum Sharing Guidelines don’t create joint or several liabilities in relation to DOT dues.
• Solicitor General Tushar Mehta has joined the virtual hearing. Harish Salve too has joined; he is likely to argue for Reliance Jio. Justice Arun Mishra led bench yet to assemble. As per the cause list, hearing to begin at 3 PM.
• The fourth key issue is that SC is yet to decide on the staggered payment timeline for telcos. The govt had sought 20 years, Bharti Airtel, Voda-Idea sought 15 years.
• The second key issue is that SC wants the details of beneficial owners of companies bidding for insolvent telcos like RCom, Aircel. The third key issue is: Will dues owed to Govt for use of public resources take precedence over secured dues of banks under IBC.
• Lawyers have logged in. Justice Arun Mishra led SC bench yet to assemble.  There are 4 Key Issues to be heard or decided. First, Will Reliance Jio be made to R.Comm’s AGR dues of Rs 25,194 crore. The SC noted that Jio has been using RCom Spectrum since 2016. SC Observed that the user of the spectrum should pay AGR dues.
• Shares of telecom companies such as Bharti Airtel, Reliance Industries, and Vodafone Idea declined on Monday ahead of adjusted gross revenue (AGR) dues case hearing in the Supreme Court later today. Bharti Airtel stock price fell almost 2 percent while Reliance Industries with unlisted telecom subsidiary Reliance Jio fell over 2 percent. Vodafone Idea stock fell over a percent.
• On Friday, the Supreme Court had asked Government, Jio and RCOM Resolution Professional to produce necessary documents to bring to light who would be liable for AGR dues of RCOM. The matter will be heard at 3 pm on Monday. SC also observed saying that we want details of the spectrum sharing agreements entered into by all insolvent companies. We want to know who is using the spectrum of insolvent companies.
• On IBC, SC observed: When sovereign right is transferred to the telco for using spectrum, can dues arising be subservient to dues claimed by secured creditors. We can lay down the law if required for IBC. Dues arising out of the use of natural, public resources cannot be merely operational dues, a matter of public money.
• The Supreme Court on Monday dismissed public interest litigation (PIL) seeking “immediate arrangement” for recovery of the adjusted gross revenue (AGR) dues, saying it is already looking into the matter. CNBCTV18