Lenders to bankrupt Reliance Communications Ltd (RCom) and Reliance Telecom Ltd (RTL) have told the Supreme Court that spectrum is an essential and integral part of asset against which banks grant loans to telecom firms. This is contrary to the government’s stance that spectrum is national property and cannot be sold under insolvency proceedings.
In an intervention application filed by State Bank of India on behalf of the committee of creditors of RCom and RTL, the lender has sought protection of its rights and interest in the case of adjusted gross revenue (AGR)-related dues of telcos to the department of telecommunications (DoT). SBI, in the application dated 13 August, said spectrum is an asset of bankrupt telecom operators and removing this asset from the resolution process may threaten a company to not continue as a going concern.
SBI also clarified that the resolution under the Insolvency and Bankruptcy Code (IBC) does not seek transfer of spectrum to a new buyer but to have the right to use the airwaves.
“It is further respectfully submitted that the effect of an approved resolution plan under the IBC is not to cause transfer of the ownership of the license /spectrum but simply to require the transfer of right to use the spectrum as is currently vested in the corporate debtor,” SBI said in the application reviewed by Mint.
According to legal experts, transfer of spectrum is not allowed under telecom law and policies unless past dues are cleared. The DoT can retain the spectrum of bankrupt telcos, disallowing its sale under IBC and commercially selling the airwaves again. In case of RCom and RTL, the DoT has been classified as operational creditor and may recover little or next to nothing as financial creditors typically have greater right on the recovery proceeds.
The Supreme Court on 10 August had asked the DoT to draw a plan to recover dues from bankrupt telcos, including RCom, Aircel Group and Videocon Telecommunications Ltd, after raising concerns over the DoT not recovering any amount from the IBC process.
However, SBI said, “the interests of the DoT, an operational creditor are adequately protected in terms of the IBC,” with a catch that it depends on the wisdom and decision of the committee of creditors as far as payments to different classes are concerned.
RCom owes DoT ₹25,199 crore, in AGR dues including spectrum usage charges and licence fees, according to government estimates. This is nearly half of ₹49,054 crore in dues calculated under the firms’s insolvency proceedings. Aircel owes ₹12,389 crore to the DoT. LiveMint