DoT moves to classify dues Aircel owes as statutory
DoT is seeking legal advice to secure public money in event of liquidation.
The department of telecommunications (DoT) has initiated an internal consultation process to classify dues arising on account of spectrum usage charges and licence fee payable by Aircel as statutory dues.
DoT is seeking legal advice for securing public money in the event of liquidation of the bankrupt telecom operator.
“We have started an internal consultation...we are still talking to our legal team whether these (operational debts) can be termed as ‘statutory dues’ as these are payable under the licence agreement under the (Indian Telegraph) Act,” one person aware of the matter said, requesting anonymity.
“Once there is clarity on the issue, these dues could go up in the hierarchy of repayment structure when creditors are repaid under the insolvency process,” said the person quoted above.
Aircel owes ₹15,545 crore to financial creditors and about ₹35,000 crore to operational creditors. According to a 25 June report in The Economic Times, Aircel owes more than ₹6,000 crore to DoT. Mint could not independently verify the amount due to DoT.
An email sent to DoT was unanswered till press time.
Meanwhile, DoT has also sent a notice to the insolvency resolution professional for Aircel, apart from other telcos, seeking special audit to check for under-reporting of revenue.
“This is a routine exercise... especially after the CAG found that companies had under-reported revenue last year,” a senior DoT official said, requesting anonymity. “We cannot arm twist companies into paying them, but we can still go ahead with our assessment and calculate dues,” said the official.
The audit could result in an increase in the amount of Aircel’s dues to the government. Hammered by intense competition, Aircel’s woes multiplied with the entry of Reliance Jio Infocomm Ltd in September 2016 with free calls and cheap data.
Things turned sour last October when Reliance Communications called off plans to merge its wireless business with Aircel, citing legal and regulatory uncertainties, as well as “intervention of vested interests to derail the deal”.
In February, Aircel filed for insolvency, citing high unsustainable debt and increased losses.
Bharti Airtel Ltd and Reliance Jio Infocomm Ltd, along with two investment firms, I Squared Capital and Aion Capital, have placed their bids for Aircel’s assets.
Under the Insolvency and Bankruptcy Code (IBC), once bids are received, the committee of creditors votes to accept or reject the resolution plans. After a majority vote is secured, the committee submits the plan to the National Company Law Tribunal, which accepts or rejects it.
“If the corporate insolvency resolution process is ongoing, statutory dues will be paid immediately after the cost of insolvency process is covered and the fee to the insolvency resolution professional is paid,” a lawyer said, requesting anonymity.
The fate of statutory dues payable to government authorities will be decided by the committee of creditors of Aircel and, thereafter, by the adjudicating authority when it considers the resolution plan. “By trying to classify the spectrum-related dues as ‘statutory dues’ the government is looking to better position itself, because right now it is an operational creditor and this category comes at the very last in the payment waterfall structure. But right now there is also no clear hierarchy for repayment of statutory dues,” a second lawyer said, requesting anonymity.
Under IBC, in the event of a liquidation of the company, first the IRP fee and cost of insolvency procedure will be covered, after which the proceeds will be distributed to cover financial creditors, wages and salary to employees, and then the operational creditors.