Will go into liquidation if spectrum sale not allowed, RCom lenders tell SC

Financial creditors of bankrupt Reliance Communications Ltd (RCom) on Wednesday told the Supreme Court that they will have no option but to liquidate the company if sale of spectrum is not allowed under the Insolvency and Bankruptcy Code (IBC) proceedings.

Harish Salve, representing lenders to RCom, told the three-judge bench, headed by Justice Arun Mishra, that radio airwaves belong to the government and can be sold only with the permission of the department of telecommunications (DoT). State Bank of India had last week said removing spectrum from a telco’s assets for insolvency resolution process may threaten a company to not continue as a going concern.

Salve said lenders did not want to sell the spectrum to a new buyer under the insolvency resolution process of RCom but only sought transfer rights for use of the airwaves, as the Supreme Court asked if spectrum can be sold under the IBC to recover adjusted gross revenue (AGR)-related dues.

He also said UV Asset Reconstruction Co Ltd (UV ARC), which is looking to acquire RCom and Reliance Telecom Ltd’s spectrum, data centre and enterprise business and real estate assets with a bid of ₹16,000 crore through the IBC, may withdraw its offer if the DoT does not allow the sale of spectrum and retains the airwaves as national property.

The sale of spectrum of bankrupt telcos under the IBC proceedings is critical for financial creditors as a telecom operator may have little or no value without its airwaves, leaving the lenders with limited negotiation power to sell the company under insolvency and recover dues.

RCom’s total dues, as calculated under the company’s IBC proceedings, stand at ₹49,054 crore, which are nearly double of ₹25,199 crore, including spectrum usage charge and licence fees, according to the government estimates.

Salve also said no one can claim possession over spectrum. A telco does not become a trustee when it secures a spectrum licence but only gets the right to use the radio airwaves.

“As a natural resource, spectrum will always vest with the people. No one can take possession of a spectrum. Spectrum occurs. Just like no one can take possession of a river. The right to use is very different from possession,” Salve said.

According to legal experts, transfer of spectrum to a new buyer is not allowed unless past dues are cleared and will require amendments in telecom law and policies. The DoT, however, can retain the spectrum with bankrupt telcos, disallowing the sale and commercially auctioning the airwaves again.

Interestingly, Salve also told the apex court that lenders to RCom seek a clawback of nearly ₹580 crore paid by RCom to Swedish gear maker Ericsson in March 2018. The case relates to 2017, much before RCom’s bankruptcy process was initiated. Ericsson had moved a bankruptcy court in 2017 to recover dues totalling to ₹1,500 crore for signing a seven-year deal with RCom in 2013 to manage and operate the telco’s nationwide network. Live Mint