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The decision by Reliance Communications and Reliance Jio to call off the Rs. 25,000-crore asset sale deal by RCom to RJio shows the Indian banking and regulatory systems in poor light. The deal, first announced in 2017, had to be scuttled due to multiple hurdles including lack of clearances by the Department of Telecom, complications arising out of cases filed by operational creditors and an order passed by National Company Law Appellate Tribunal (NCLAT) restricting the sale of RCom entities. But the biggest cause of concern is that RCom’s lenders themselves were not granting consent for the proposed transaction. The same lenders, in May 2017, had agreed to a standstill on repayments by RCom after the telecom company assured that it will settle its over Rs. 44,000 crore debt by selling various assets including the towers, spectrum and optical cable fibre network. RCom had then assured that it would conclude some of the asset sales by September 2017, enabling it to repay at least Rs. 25,000 crore.

The role of the banks should also be scrutinized for agreeing to extend the standstill till December 2018 after RCom failed to sell any assets before the self-imposed September 2017 deadline. The entire deal with lenders was based on the assurance that RCom will conclude asset sale to repay the debt. The lenders, therefore, need to come clear on why they agreed to offer a standstill in the first place and then refused to give consent to the deal with RJio. The NCLAT has pulled up the lenders for giving a false impression that the asset sale deal with RJio was on track. In a pointed observation, NCLAT said “You have failed. JLF (Joint Lenders’ Forum) has failed. No sale took place…You clapped with RCom and claimed that you would recover around Rs. 37,000 crore from sale of assets to Reliance Jio.” With the company now going for insolvency proceedings, lenders now stand to recover only a small fraction of that amount. The Department of Telecom should also explain its stand on the entire matter. The deal between RCom and RJio was expected to be cleared by March 2018 but it went into limbo after DoT refused to approve the deal unless RCom settled its past dues in the form of spectrum usage charges. While RCom did not have the money to pay, Reliance Jio declined to pay any past dues. Meanwhile, RCom shut down its mobile services which meant that almost all its spectrum assets have been lying idle for more than a year.

Instead of allowing the stalemate to continue, DoT should take the spectrum back from RCom and put it up for sale in the next round of auction. The revenue generated from this spectrum sale should be distributed proportionately between all RCom creditors. Putting the company through the insolvency process could lead to steep discounts and more delays as has been the case with most of the resolution cases under the bankruptcy code.―The Hindu Business Line

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