New Delhi: The Supreme Court today expressed its concern regarding payment of AGR dues by telecommunication companies, observing that the AGR dues might be wiped out in the IBC process. The Court also stated that once the spectrum is sold, the new user will have extinguished any pending demand against the spectrum in question.
The court has been hearing the telecommunications companies undergoing IBC proceedings on the larger question of whether Spectrum can be sold under IBC proceedings and liability of Companies towards AGR dues of companies whose spectrum they are sharing.
A three-judge Bench of Justices Arun Mishra, S. Abdul Nazeer and M.R. Shah heard the matter regarding staggered payment of adjusted gross revenue (AGR) related dues by telecom giants including Vodafone Idea, Bharti Airtel and Tata Teleservices. The Court was hearing question of whether Spectrum can be sold under IBC proceedings.
The Court has yet not decided the reasonable period for staggered payment of AGR dues. While the government had proposed 20 years, Telecoms like Airtel and Vodafone had asked for atleast 15 years. Airtel’s AGR demand was Rs 43989 crores out of which it paid Rs 18004 crores, and Voda Idea have paid 7854 crores out of its total AGR demand of 58254 crores.
During the hearing today, Ravi Kadam for Aircel Monitoring Committee informed that the Court that there has been no instance of spectrum sharing by Aircel with any operator.
“What has Aircel going into resolution proceedings got to do with AGR dues? Has Airtel paid AGR dues for spectrum bought from Aircel?” The Court asked.
The Court sought details of all spectrum sharing agreements by telcos and Department of Telecommunications submitted the details of spectrum allocated to RComm Care, Aircel since 1999.
The Court questioned Aircel if its looking to sell spectrum under IBC. Kadam on behalf of Aircel Monitoring Committee submitted before the Court that DOT is seeking payment of deferred spectrum dues, as current dues and the 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. Since License agreement recognises right to use spectrum as an asset Aircel has the right to transfer the right to use the spectrum.
Kadam stated that the right to use spectrum is an asset and the right to use it will be sold on approval of the resolution plan. It added that the resolution process is done and UVARC plan has been approved. COC has approved the plan, following the IBC.
The Court also questioned Aircel regarding its AGR dues and how much has it paid. Kadam responded by saying that only a fraction will be paid and not even 1% of the AGR demand will be paid.
The Court observed that its worried that almost the entire AGR dues might be wiped out in the IBC process and once the spectrum is sold, 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, the telcos are taking a ride. Unless dues are paid, nobody can start using the spectrum. Can a liability like AGR be wound up in, under the guise of selling spectrum under IBC? “ the Court remarked
Senior Counsel Ranjit Kumar appearing on behalf of the Committee of Creditors (COC) for Aircel addressed the court on rights of telcos to transfer the right of usage of the spectrum, as recognised under the tripartite license agreement.
“Requirement to pay AGR is entirely contractual. Tripartitie agreement recognises the spectrum as security before banks.Payment of dues to a company shall be decided under the law of land” he said.
Kumar also submitted that spectrum is raw material for telcos and by not allowing its sale, the Court will push all the insolvent companies into liquidation.
According to Mr Kumar, the bank dues are the same as AGR dues for Aircel and 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. Even the Ministry of Corporate Affairs has sought for spectrum sale under IBC.
Advocate NK Kaul appearing for Videocon Telecom‘s resolution professional informed the Court that the DoT had put their AGR dues at 1512 crores and the Spectrum was transferred to Bharti Airtel in 2016. While Videocon’s business is nil as of now, the resolution process is on. The Court has asked Solicitor General Mehta to reply if Bharti Airtel has undertaken to pay the spectrum liability.
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The Supreme Court on July 20th had reserved its order on the timeline of staggered payment AGR related dues by telecom giants including Vodafone Idea, Bharti Airtel and Tata Teleservices. The Court had heard parties on liability and time frame for making the payment and noted that while hearing the matter, attempts were made to wriggle out of the liability like asking for reassessment and recalculations. The bench had also said that as a huge amount of AGR dues is remaining, they will examine the bonafide of RCom going into insolvency. The bench had asked for the details of RCom, Sistema Shyam Teleservices, Videocon to be submitted within 7 days.
-India Legal Bureau