RCom may have to be liquidated if spectrum sale is not allowed: CoC to SC

Our Bureau New Delhi | Updated on August 19, 2020

At the hearing in the telecom adjusted gross revenue (AGR) case, the Supreme Court on Wednesday made it clear that it will not go into the “apportionment of resolution plan funds between sets of creditors”, and posted the matter for further hearing tomorrow.

The apex court also observed that “if telcos only have a right to use and don't own the spectrum, how can they sell?”

During the hearing on Tuesday, Senior Advocate Harish Salve, appearing for Reliance Jio and Reliance Communications (RCom) Committee of Creditors, submitted before the apex court that the right to use the licence for spectrum can be a subject matter of Insolvency and Bankruptcy Code (IBC) proceedings.

Salve also told the court that Jio has cleared all its dues (₹195 crore) towards AGR, including the charges incurred for using RCom’s spectrum under the spectrum-sharing agreement.

No nod to spectrum sale

Spectrum sale is allowed under trading guidelines (of DoT). But how can spectrum be sold under IBC? All resolution transactions must be as per IBC, the court said.

The trading guidelines provide that government dues need to be taken care of before the sale of spectrum is allowed. But IBC has relegated the government dues to only operational creditors, which come after banks (in the IBC waterfall mechanism). In such a scenario, how will prior dues be paid, as required by guidelines, wondered the SC.

To this, Salve said the Department of Telecommunications (DoT) had refused to grant nod to the Jio-RCom spectrum sale agreement, despite TDSAT judgment in favour of RCom. And, it was not the right stage for the Supreme Court to decide the issue of sale of spectrum.

Salve argued that any decision in relation to sale of spectrum at this stage may create legal problems in the current transactions.

He said spectrum is not owned by anyone else other than the government and the licence merely transfers the right to use and that right involves payments. Spectrum is recorded as an asset, by virtue of having been purchased in an auction and telcos own the right to use the spectrum.

If spectrum sale is not allowed, RCom will find itself going into liquidation and that won’t help anyone, he added.

Published on August 19, 2020

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