Clarify stand on Jio’s liabilities: SC
QUERY FOR GOVT Top court asks Centre if Jio, which is using Rcom’s airwaves, can be held liable for its AGR dues
NEWDELHI: The Supreme Court on Monday said that the government must state its position on whether adjusted gross revenuerelated dues of bankrupt Reliance Communications Ltd (Rcom) should be recovered from Reliance Jio Infocomm Ltd since it has been using Rcom’s spectrum since 2016.
The three-judge bench, headed by Justice Arun Mishra, asked the government if Reliance Jio can be held liable for AGR and other dues as it has been generating revenue by using Rcom’s airwaves through an asset-sharing agreement. The court has adjourned the case to August 19.
“We want the government’s position on Jio sharing Rcom’s spectrum and on Jio discharging Rcom’s spectrum dues,” said Justice Mishra.
In response, solicitor general Tushar Mehta said the government will support any decision the court takes to recover the dues.
However, Reliance Jio, in a written submission, told the Supreme Court that there is no legal basis for transferring bankrupt Rcom’s dues, AGR or otherwise, to Jio as the two telecom operators are in a spectrum-sharing agreement and do not share liabilities.
Senior lawyer Harish Salve, representing Reliance Jio, said the company is neither involved in the Insolvency and Bankruptcy Code (IBC) proceedings of Rcom nor is it acquiring the bankrupt telco’s spectrum.
Interestingly, the government told the court that the department of telecommunications (DOT) and the ministry of corporate affairs (MCA) have different views on whether the spectrum with a bankrupt telecom firm can be sold under insolvency proceedings.
“People of the country are owners of spectrum held by the government in trust… This cannot be sold under IBC,” said Mehta.
The DOT also said radio airwaves cannot be a part of the IBC proceedings as “telcos do not own spectrum, contract allows only its use,” said Mehta.
Mehta also informed the bench that DOT has had a consistent position on spectrum in terms of the IBC. “The ministry of corporate affairs had sought to allow spectrum sale for maximisation of value,” added Mehta.
Rcom owes DOT ₹25,199 crore, including spectrum usage charges (SUC) and licence fees, according to government estimates. This is nearly half of ₹49,054 crore in dues calculated under the company’s insolvency proceedings. Aircel owes ₹12,389 crore to DOT. Jio cleared its relatively minuscule AGR dues of ₹195.18 crore in January, complying with the court’s October 2019 order.
The apex court on August 10 had observed that the government must draw up a plan to recover Agr-related dues from bankrupt telecom operators after flagging doubts over the government’s ability to recover any amount from their insolvency proceedings.
The Supreme Court asked Shyam Divan, the lawyer for Rcom’s resolution professional, to explain whether spectrum can be sold under IBC. According to legal experts, transfer of spect rum t o a new buyer i s not allowed unless past dues are cleared, and will require amendments in telecom law and policies.
“Spectrum is an asset in the hands of the company. It can be subjected to IBC and can be bought and sold,” Divan told the court.
DOT, however, can retain the spectrum with bankrupt telcos, disallowing the sale and commercially auctioning the airwaves again.
Lenders, too, differ on this, with State Bank of India telling the Supreme Court that spectrum is an integral asset of telecom companies.
NEW DELHI: The Telecom Regulatory Authority of India (Trai) clarified that the additional spectrum usage charge (SUC) of 0.5% of the adjusted gross revenue (AGR) will be applicable to airwaves that have been shared by two telecom operators and not to the entire spectrum holding of a licencee.
For instance, in the case of Reliance Jio Infocomm Ltd, which has been using Reliance Communications Ltd’s spectrum in the 800 megahertz band under a sharing agreement since 2016, both Reliance Jio and Rcom will have to pay an additional 0.5% spectrum usage charge on the airwaves shared and not on the other bands they hold.
“It is clarified that as per the existing spectrumsharing guidelines, an increment of 0.5% on spectrum usage charge rate should apply on the spectrum holding in a specific band in which sharing is taking place, and not on the entire spectrum holding (all bands) of the licencee,” Trai said in its recommendations on the ‘methodology of applying spectrum usage charges under the weighted-average method of SUC assessment, in cases of spectrum sharing’.
Trai also suggested that two telecom operators in a spectrum-sharing agreement should have the flexibility to exit the clause, which should be mentioned in spectrum sharing guidelines.
“To provide flexibility to the TSPS (telecom service providers) to manage their spectrum on need and commercial basis, suitable exit clause for intimation of termination of an existing spectrum-sharing arrangement by the involved TSPS should be included in the spectrum sharing guidelines,” it said.
Meanwhile, the
Supreme Court wants to understand the details of the spectrum sharing pact between Reliance Jio and Rcom. The apex court asked Jio whether it should be held liable for paying AGR dues of Rcom as India’s largest telecom operator has been using the bankrupt telco’s spectrum since 2016.
However, Jio, in a written submission, told the apex court that there is no legal basis for transferring bankrupt Rcom’s dues, AGR or otherwise, to Jio as the two telecom operators are in a spectrum-sharing agreement and do not share liabilities.
“Jio is unlikely to be impacted as most (AGR) dues of Rcom are prior to the spectrum sale...ownership and rights of spectrum in case of spectrum sharing are not transferred, and Rjio has been paying spectrum usage charge for the shared spectrum, in keeping with the regulations,” Axis Capital Ltd said in a report.