‘Spectrum under IBC can’t be used if dues aren’t paid’
Spectrum held by telecom operators cannot be transferred to new buyers under insolvency proceedings if government dues are not cleared, the National Company Law Appellate Tribunal ( NCLAT) ruled on Tuesday, dealing a blow to lenders to bankrupt telcos Reliance Communications Ltd (RCom), Aircel Group and Videocon Telecommunications Ltd.
The appellate tribunal clarified that spectrum, which is an intangible asset of a telecom company, can be subjected to insolvency proceedings or liquidation. However, telcos cannot use or transfer the airwaves under the Insolvency and Bankruptcy Code (IBC) without settling government dues.
It added that dues related to the Supreme Court’s order on adjusted gross revenue cannot be wiped off under bankruptcy proceedings. “Triggering of corporate insolvency resolution proceedings (CIRP) under IBC by the corporate debtor with the object of wiping- off of such dues, not being for insolvency resolution, but with malicious or fraudulent intention, would be impermissible,” the appeals court said.
The NCLAT’s judgement relates to the Supreme Court order of September 1, 2020, where the apex court directed the National Company Law Tribunal (NCLT) to consider all issues related to the sale of spectrum usage rights and adjusted gross revenue (AGR) dues of bankrupt telcos—RCom, Aircel and Videocon.
Though the top court had authorized NCLT to look into the matter, an application filed by Aircel on September 9 requested the Supreme Court to allow the NCLAT to take decisions related to its spectrum sale as nothing was pending before the NCLT. The apex court then authorised the NCLAT.
However, a two-judge bench, headed by Justice S. Abdul Nazeer, said the decision was only for Aircel as NCLT had approved UV Asset Reconstruction Co. Ltd’s (UV ARC) resolution bid for the bankrupt telco.