SC adjourns hearing on telcos under insolvency to August 14

The Supreme Court (SC) has adjourned the hearing on telecom companies under insolvency to August 14, while observing that the government must come prepared with a plan for recovery of dues from the telcos under insolvency. The Supreme Court bench comprised of Justices Arun Mishra, S Abdul Nazeer and MR Shah heard the case.

The apex court directed the government to prepare a plan to recover adjusted gross revenue (AGR)-related dues from bankrupt telecom operators, including Reliance Communications Ltd (RCom), Aircel Group and Videocon Communications Ltd. The amount recoverable from Voda Idea is Rs 50399 crore (of which Rs 7854 has been paid) , Bharti Airtel Rs 43780 crore ( of which the company has paid Rs 18,004 crore, with the balance at Rs 25,776 crore), RCom is Rs 31,000 crore, Tata Teleservices Rs 12601 crore (of which Rs 4197 has been paid), while that from Aircel is Rs 12,389 crore. Insolvency proceedings had begun following claims made by operational creditors Ericsson and China Development Bank.

The court, however, did not mention the order reserved on the staggered payment of dues by Vodafone Idea Ltd, Bharti Airtel Ltd and Tata Teleservices. Both Vodafone and Airtel have sought 15 years to clear the dues, while Tata Teleservices wants 7-10 years.

Recovery of the dues face a major hurdle. The department of telecom (DoT) is classified as an operational creditor, RCom said in its affidavit to the apex court. This would mean DoT will be pushed lower down the pecking order in trying to recover its dues under insolvency proceedings, as financial creditors are prioritised under these proceedings. For instance, the winning bidder for RCom’s spectrum, real estate, enterprise and data centre business UV Asset Reconstruction Co., has offered ₹14,000 crore for these assets. DoT may recover next to nothing on its outstanding dues from RCom if this resolution plan is approved.

The SC had on July 20 reserved its order on permitting telecom companies to make staggered payments over 15 years.

While observing that recovery of dues may not be possible from telcos undergoing insolvency, the apex court asked the government whether spectrum can be sold under the Insolvency and Bankruptcy Code (IBC). These questions come at a time when the insolvency court has already approved asset reconstruction firm UVARCL’s proposal to buy Aircel’s assets, including spectrum, and is about to take a call on the same for RCom and its units. Interestingly, UVARCL is again the shortlisted buyer for RCom’s spectrum, fibre and data centre while Reliance Jio is expected to pick up the towers.

“If you don’t appeal quickly how will you prevent spectrum from being sold off,” Justice MR Shah, who is part of the bench, asked solicitor-general Tushar Mehta. The bench also asked if there was any delay in appealing against the decisions in the SC. “What if spectrum is sold in the meantime,” Justice Shah asked. The observations came after Mehta pointed out that though the government had filed an appeal against concurrent decisions of the National Company Law Tribunal (NCLT) and the National Company Law Appellate Tribunal (NCLAT) — allowing some of the ailing telcos to monetise all assets, including spectrum, to pay off creditors — a hearing on the issue was awaited.

Both RCom and Aircel have said that spectrum is their main asset, without which their asset monetisation plans will fall through.

The SC bench sought to know details of the entities that had initiated the resolution proceedings and what their dues were, before taking a call on whether the ailing telcos facing insolvency proceedings could be given any leeway in paying AGR dues. The ailing companies include Videocon and Sistema Shyam.

As Justice Arun Mishra is set to retire on September 3, an order on the staggered repayment time frame is likely before that.

The case has been adjourned to August 14.
CT Bureau