If spectrum sale not allowed, RCom will be go into liquidation, CoC tells SC4 min read . Updated: 19 Aug 2020, 08:21 PM IST
The SBI led Committee of Creditors (CoC) for Reliance Communications (RCom) told the Supreme Court on Wednesday that if spectrum sale is not allowed, then the telecom company will find itself going into liquidation
New Delhi: The SBI led Committee of Creditors (CoC) for Reliance Communications (RCom) told the Supreme Court on Wednesday that if spectrum sale is not allowed, then the telecom company will find itself going into liquidation and it won’t help anyone.
The CoC told the top court that RCom is not seeking to run away from Adjusted Gross Revenue (AGR) related dues by hiding itself behind Insolvency and Bankruptcy Code (IBC) but the telecom company owes over ₹42,000 crore to the banks.
A bench of Justices Arun Mishra, S Abdul Nazeer and M R Shah was told by senior advocate Harish Salve, representing the CoC for RCom and Reliance Jio said that both banks and the Department of Telecom are seeking repayment of the public money.
“If spectrum sale is not allowed, RCom will find itself going into liquidation and it won’t help anyone," Salve said.
The bench observed that sale of spectrum is allowed under trading guidelines but how can it be sold under the IBC.
It said that all resolution transactions must be as per the IBC and trading guidelines provide that dues need to be taken care of before the sale of spectrum.
The bench told Salve that the IBC has relegated dues of the government behind the banks, and then in such a scenario, how will prior dues be paid, as required by the trading guidelines.
Salve, during nearly two-hour hearing, told the bench that there is no question of sale of spectrum without the nod of DoT and even the resolution applicant says the plan involves sale of right to use spectrum, only subject to DoT approval.
He said the issue of sale of spectrum is to be decided by the DoT and in the present scenario it is even possible for the highest bidder UV Asset Reconstruction Company (UVARC) to back out of the bid with DoT now saying that spectrum sale cannot be allowed under the IBC.
The senior lawyer said that DoT had refused to grant nod to the Jio-RCom spectrum sale agreement, despite TDSAT judgment in favour of RCom.
He said that it’s premature for the top court to decide whether spectrum can be sold or not as if the resolution plan succeeds, DoT will decide on the sale of spectrum at that stage.
He contended that it was not seeking to sell the spectrum, but only wants to transfer the right to use as the relationship between the telecom company and the government is akin to the relationship of landlord and lessor of property.
Spectrum is recorded as an asset, by virtue of having been purchased in an auction, Salve said, adding that the telecom company owns the right to use the spectrum, an extremely valuable right.
The bench told the senior lawyer that one can only sell anything that is in his possession but how can a telecom company which only has the right to use spectrum, sell it?
Salve replied that it's nobody's case that spectrum is owned by anyone else other than the Government and the license merely transfers the right to use by the telecom company.
Nobody can claim that spectrum belongs to him, the right to use the spectrum is with the company, he said, adding that the spectrum vests with the people of India and it defies possession.
The hearing remained inconclusive and would continue on Thursday.
On Tuesday, Reliance Jio told the top court that it has already paid ₹195 crore in AGR-related dues which included spectrum sharing charge of RCom.
It said there is no question of one operator paying the AGR related dues of another firm, as suggested by the apex court earlier, and it has cleared all its dues.
The billionaire Mukesh Ambani-led Jio told the apex court however that if still any amount remains pending from sharing of spectrum of RCom, it is willing to pay that.
The top court had said it would decide all the legal issues involved in the matter and would do it conclusively.
The CoC has contended that the insolvency proceedings against RCom were triggered by Ericsson, which could not be withdrawn even after the Swedish telecom equipment maker was paid its dues.
It had informed the court that UVARC is the top bidder for RCom, which was earlier led by Anil Ambani, and it is not fronting for anyone.
Earlier, the top court had asked Centre to clarify its stand on why Jio, which is earning revenue by sharing RCom's 800 MHz spectrum, be not asked to pay the AGR related dues to the government.
The Centre had told the top court there was a difference of opinion between two of its ministers (DOT and Ministry of Corporate Affairs) on the issue of sale of spectrum during insolvency proceedings.
On August 14, the top court had sought the details of spectrum sharing pact between RCom and Jio and said as to why the company using the spectrum of the other firm cannot be asked to pay the AGR related dues to the government.
Earlier, the top court had made it clear it will not hear "even for a second" the arguments on reassessment or re-calculation of the AGR related dues of telecom companies which run into about ₹1.6 lakh crore.
The apex court had in October 2019 delivered the verdict on the AGR issue for calculating government dues of telecom companies such as licence fee and spectrum usage charges.
After the top court had rejected pleas by Vodafone Idea, Bharti Airtel and Tata Teleservices seeking review of the judgement which widened the definition of AGR by including non-telecom revenues, the DoT had in March moved a plea seeking staggered payment over 20 years.
This story has been published from a wire agency feed without modifications to the text. Only the headline has been changed.