DoT faces uphill task of recovering telcos’ dues
Under IBC, financial creditors have greater right on the recovery proceeds but DoT can't be classified as a creditorWhile bankrupt telco Reliance Communications owes the DoT ₹25,199 crore, Aircel owes ₹12,389 crore
PremiumThe Supreme Court this week had expressed concerns over the recovery of dues to the government by bankrupt telcos, and asked the Centre to formulate plans to recover them. However, the classification of the government as an operational creditor in bankruptcy proceedings could make the recovery of these dues, including adjusted gross revenue (AGR), difficult.
Reliance Communications Ltd (RCom) owes ₹25,199 crore in spectrum usage charges and licence fee dues to the department of telecommunications, shows government estimates. This is nearly half of the dues of ₹49,054 crore calculated under the company’s insolvency proceedings, while Aircel owes ₹12,389 crore.
Under the Insolvency and Bankruptcy Code (IBC), financial creditors typically have greater right on the recovery proceeds and DoT does not fall under the definition of a financial creditor. This means that it may be able recover a fraction from the processes.
However, DoT has the option to retain spectrum, disallowing its sale under the IBC, and commercially auctioning the airwaves again. If DoT decides to exercise its right, RCom and Aircel may not be able to monetize the spectrum.
The Anil Ambani-led RCom and Aircel told the Supreme Court that they will transfer spectrum to the winning bidder, but DoT has said spectrum cannot be sold as it is national property. The sale of spectrum as an asset to a new buyer will require amendments in the telecom law and policies, according to legal experts.
“DoT is bound by its own laws…. It can allow transferring spectrum to new buyers only when licence requirements are complied with and past dues are cleared," said Saurav Kumar, partner, IndusLaw, adding that in case of RCom, DoT can withdraw the spectrum and auction it again.
DoT cannot be forced to enter into a new contract or continue to part with spectrum, by taking a haircut, unlike other operational creditors because of the IBC process, said Sitesh Mukherjee, a legal expert who specializes in bankruptcy law. If a telecom operator goes into liquidation, DoT will be able to get back the spectrum. The decision on whether to sell the same spectrum in the market and recover more than that offered under the resolution plan will be with DoT, Mukherjee added.
ishita.g@livemint.com
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