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Countering the Centre’s stand on ownership of spectrum, the Committee of Creditors (CoC) of beleaguered Reliance Communications (RCom) has moved the Supreme Court, stating that spectrum is the telecom operator’s assets and is essential for its continuance as a going concern.
Quantum of radio waves
The lenders have provided loans to telecom companies based on the quantum of radio waves operators hold, according to the petition, filed by State Bank of India (SBI), on behalf of the CoC.
“It is submitted that so far as telecom companies are concerned, the main asset of such companies is the ‘spectrum’, which is essential for the functioning of such companies. Spectrum is the security on the basis of which banks grant loans to telecom companies. The Department of Telecom has granted permission to the telecom companies to create substitution rights on the same in favour of their lenders,” the petition by SBI states.
SBI, the country’s largest bank, has sought the apex court’s approval to intervene in the proceedings coming up for hearing on Friday. Earlier, on Monday, the Supreme Court asked the government to explain if the spectrum can be sold or auctioned under the Insolvency and Bankruptcy Code (IBC). The DoT has filed an appeal in SC challenging the sale of airwaves through the IBC process. “Spectrum can never be a subject of sale in IBC proceedings,” Solicitor General Tushar Mehta told the three-Judge SC bench, headed by Justice Arun Mishra. The bench is hearing the adjusted gross revenue (AGR) case. RCom and its units have AGR dues of almost Rs 25,000 crore.
If the top court accepts DoT’s position, then it will be a blow to banks, which are trying to recover dues through the insolvency process.
The SBI petition said that spectrum is an asset of the corporate debtor and can be subject to the resolution plan, as otherwise continuance of telecom companies as going concern and their transfer as going concern as per IBC “may stand frustrated”.
According to the CoC, an approval of the resolution plan is not to transfer the ownership of the licence or spectrum, but to transfer the right of spectrum use, which is currently vested with the corporate debtor. “It is submitted that as per section 5(21) of the IBC an operational debt includes repayment of dues “payable to the Central Government”. In view of the same, the claims of the DoT have been admitted by the Resolution Professional as an Operational Debt, stated the petition representing a consortium of 38 lenders to RCom, led by SBI, and others such as ICICI Bank, Punjab National Bank, Bank of Baroda and Canara Bank, among others.
Earlier, the Mukesh Ambani-led Reliance Jio Infocomm and Delhi-based UV Asset Reconstruction Company, had emerged as the highest bidders for the assets of RCom and its subsidiaries. The combined bid amount was at ₹23,000 crore.
On August 5, RCom had informed the apex court that it had incurred losses for the past 10 years and, hence, it did not have any adjusted gross revenue AGR liability.
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