Worried that AGR dues will be wiped out in the IBC process: SC

The Supreme Court (SC) on August 20 heard the matter pertaining to repayment of AGR dues by telecom companies.

Telecom companies, Bharti Airtel, Vodafone Idea and others had appealed to the SC to allow them to make staggered payments of their adjusted gross revenue dues. A bench led by Justice Arun Mishra heard the matter.

The matter has now been adjourned to August 21.

The apex court on August 19 said it will not go into apportionment of resolution plan funds between sets of creditors.

Vodafone Idea owes balance dues of around Rs 50,399 crore, while Bharti Airtel’s outstanding amount is Rs 25,976 crore, Solicitor General Tushar Mehta said on July 20.

SC observations:
> Has Bharti Airtel paid AGR dues for spectrum bought from Aircel?

> We want details from DoT of spectrum allocated to RCom, Aircel since 1999. We want details of all instances of spectrum sharing.

> Is Aircel looking to sell spectrum under the Insolvency and Bankruptcy Code (IBC)?

> We are extremely worried that almost entire AGR dues will be wiped out in the IBC process. And after sale of spectrum, the new user will have extinguished any pending demand against the spectrum in question.

> Spectrum trading is different from sale of spectrum in IBC. Without paying for the horse, telecom companies taking a ride. Unless dues are paid, nobody can start using the spectrum. Can a liability like AGR be wound up in this fashion, under the guise of selling spectrum under IBC?

Senior advocate Ravi Kadam for Aircel Monitoring Committee to SC:
> From April 8, 2016 there have been eight instances of spectrum trading with Bharti. DoT had approved the sale, had raised demand for dues.

> No instance of spectrum sharing with any operator by Aircel. No one is using the spectrum currently, the company is under insolvency.

> The right to use spectrum is an asset. To keep the company as a going concern, right to use will be sold on approval of the resolution plan. Resolution applicant is UVARC.

> Resolution process has concluded, UVARC plan has been approved. DOT applied as operational dues, recognised by COC. The Committee of Creditors (COC) approved the plan, following the IBC. Only a fraction will be paid, Not even 1 percent of the AGR demand will be paid. DoT was a part of the CoC meetings.

> DoT is seeking payment of deferred spectrum dues, as current dues and therefore payable. Claims of DoT for deferred spectrum dues have not been upheld to be current dues.

> Right to use spectrum is an intangible good under IBC that can be sold. The license agreement recognises right to use as an asset. Have the right to transfer the right to use the spectrum.

Senior advocate Kapil Sibal for Airtel to SC:
> Have paid all relevant dues with regard to spectrum trading, have paid Rs 18,004 crore of AGR dues.

Senior Advocate Ranjit Kumar for COC of Aircel to SC:
> Requirement to pay AGR is entirely contractual. Tripartite agreement recognises the spectrum as security before banks. Payment of dues to a company shall be decided under the law of land – IBC.

> Spectrum is raw material for telecom companies. By not allowing spectrum sale, SC will push all the insolvent cos into liquidation.

> Banks dues are the same as AGR dues for Aircel. If all proceeds are used to satisfy AGR dues, banks dealing with public money will also not get anything.

> Payment to banks after payment of AGR dues would be a violation of IBC. If the government allowed spectrum as security, it cannot back track now. Even Ministry of Corporate Affairs has sought for spectrum sale under IBC.

Here’s a quick recap of the previous hearings:
> On August 19, Senior advocate Harish Salve said Reliance Communications said it will have to go into liquidation if spectrum sale is not permitted.

> On August 10, the court had asked the government to prepare a plan for recovery of dues from telecom companies under insolvency.

> When asked about payment due on spectrum bought from Reliance Communications (RCom), Jio said it has already paid the relevant Spectrum Usage Charges (SUC).

> Both Vodafone Idea and Bharti Airtel, which owe the maximum amounts, had on July 20 revised their demand from 20 years to 15 years for the staggered payments after SC’s stringent stance on payment period.

> The SC has made it clear that it will not permit any self-assessment by the companies or re-calculation, and the DoT’s assessment will be final. Money Control