Reliance Communications’ resolution professional has filed a review petition in the Supreme Court, challenging the apex court’s February 15 verdict that spectrum allocated to telecom service providers cannot be treated as a corporate asset capable of being restructured under the Insolvency and Bankruptcy Code (IBC), and therefore was beyond the insolvency asset pool.
In its petition dated March 11, a copy of which was seen by Business Standard, the erstwhile telecom services provider’s resolution professional, Anish Niranjan Nanavaty, argued that the exclusion of spectrum would make the IBC ‘unworkable’ for the telecom sector and for all enterprises dependent on government-granted rights to use sovereign resources, including mining, hydropower, and infrastructure sectors.
“The judgment threatens to fundamentally disrupt credit markets, as banks will inevitably recalibrate their risk assessment for any project involving governmental allocation of natural resources. These far-reaching consequences flow from errors apparent on the face of the record, warranting urgent review by this Hon’ble Court,” the RP said in the petition.
The RP added that the company did not claim ownership of spectrum as a natural resource, but the legally enforceable right to use spectrum, which vests in the licensee for the duration of the licence and is capable of commercial exploitation.
“Telecom companies consistently recognise such rights in their financial statements as intangible assets forming the backbone of their enterprise value,” he argued. The SC’s decision had noted that IBC excludes any assets over which a corporate debtor has no ownership rights.
The plea highlighted that the corporate insolvency was not undertaken to modify telecom dues — as specified in the judgement — as the current process was not triggered by the company but by an operational creditor, Ericsson India Private Limited, and therefore qualifies a review.
The RP added that the Department of Telecommunications (DoT) recognised the right of telcos to use spectrum as an asset under the Tripartite Agreement, and therefore the department cannot simultaneously contend that the asset generating its dues lies outside the insolvency framework. It also added that the Corporate Debtor continued to discharge current dues during the moratorium period, thereby fulfilling the only statutory condition for continuation of right to use spectrum, under Section 14. “If the right itself is excluded from the Code, the statutory protection enacted by Parliament loses all practical meaning,” he said.
The RP added that liabilities arising from the grant of spectrum, as a sovereign resource, should also go along with the resource, but the judgement allowed DoT to reclaim spectrum as well as enforce the entire spectrum-related debt against the company. “This structural asymmetry grants de facto super-priority to DoT, contrary to the statutory waterfall mechanism and the principle of equitable treatment of creditors embedded in the Code,” said the plea.
The plea also argued that the SC’s judgement failed to determine DoT’s status while granting it ‘de facto super-priority’.
The review petition is challenging the judgment that arose from the insolvency of Aircel Limited, Aircel Cellular Limited and Dishnet Wireless Limited. After defaulting on licence fee and spectrum usage charges, the companies entered voluntary insolvency in 2018. The DoT filed claims of nearly ₹9,900 crore towards unpaid dues. Lenders led by State Bank of India argued that spectrum usage rights, reflected as intangible assets, could be dealt with under the IBC framework.
DoT is in the process of taking a legal opinion before it takes steps to terminate the licences and spectrum assignments to the companies, even as the SC judgement cleared the path for DoT to take back the airwaves.
Business Standard had reported earlier that the SC ruling could deter recovery of bank dues from corporate insolvency cases including RCom and Aircel. Aircel had bank dues worth over ₹13,500 crore, while Reliance Communications had over ₹50,000 crore.
The concerns emerged following the ruling of Justice PS Narasimha and Justice AS Chandurkar that spectrum allocated to telecom firms and shown as an “asset” in their books cannot be subjected to proceedings under IBC, in the insolvency proceedings of Aircel and RCom, where lenders had sought to monetise spectrum to recover their dues. The verdict was delivered on a batch of petitions filed by State Bank of India and the two insolvent telecom operators, challenging a 2021 order of the National Company Law Appellate Tribunal (NCLAT), which had held that spectrum could be transferred, or sold under a resolution plan only after clearing all outstanding government dues.
Source link
#RCom #files #review #plea #ruling #spectrum #asset #IBC
