AGR crisis: DoT says bankrupt firms can’t sell their spectrum; Jio says not liable to pay RCom dues

The recovery of adjusted gross revenue (AGR) dues of the insolvent telecom operators like Reliance Communications and Aircel has got more complex as the Department of Telecommunications (DoT) on Monday told the Supreme Court that the spectrum of these companies belong to the government and cannot be part of the insolvency process. “Assets owned by a third party and held by the company under insolvency, in trust, cannot be sold. The people of the country are owners of the spectrum like all other natural resources and cannot be sold under insolvency and bankruptcy code (IBC). Spectrum is not defined as an asset under the IBC,” solicitor-general Tushar Mehta told a bench led by Justice Arun Mishra.

Who pays the adjusted gross revenue dues of RCom also continues to be a knotty issue, with Reliance Jio stating that it is not liable and the government not stating its position.

The court had queried on August 14 that since Reliance Jio is using RCom’s spectrum since 2016 and earning revenue from it, why should it not pay? On Monday, the apex court asked the government to clarify its stand on the matter. “Can Jio be held liable when they are generating revenue from shared spectrum? We want the government’s position on Jio sharing RCom spectrum and it discharging its spectrum dues,” the bench observed.

As reported earlier, the court is examining whether companies like RCom and Aircel filed for bankruptcy to escape paying their AGR dues. It is also examining how will the government ensure that their AGR dues are recovered, thirdly whether these insolvent firms can put their spectrum up for sale when the government will not have the first charge on the proceeds.

While RCom has AGR dues worth Rs 25,000 crore, Aircel’s is around Rs 12,389 crore.

The court has fixed August 18 as the next date of hearing.

On its part, Jio told the SC that it is not liable for RCom’s AGR dues as it is only sharing spectrum with the company for which payment of past dues is not required under the spectrum sharing guidelines. It also said that the government has never demanded any payment of past dues of Rcom from it. It remains to be seen what does the government tells the court at the next hearing. As per the spectrum trading guidelines, the DoT is empowered to charge past dues from the buyer of spectrum as well if it comes to light after spectrum has been traded. Jio has traded some portion of spectrum from Rcom and sharing some portion.

According to rough calculations, DoT can charge around Rs 13,000 crore of RCom’s dues from Jio for the traded part of the spectrum, if it wants.

The DoT has only itself to blame for the mess it has created with regard to the AGR dues of the insolvent companies. First, it did not file an appeal on time in the appellate tribunal when in November 2019 the National Company Law Tribunal (NCLT) dismissed its petition that bankrupt Aircel cannot put spectrum given by the government, up for sale as part of its resolution plan. Second, it once again delayed filing an appeal in the Supreme Court against the NCLAT order dismissing its appeal as time-barred.

The DoT filed its appeal against the March 4 order of NCLAT only on July 24, that is four days after the SC asked it to place all records regarding the AGR dues of the insolvent companies before it by August 10 to find out who pays on their behalf.

On November 27, 2019 the NCLT had ruled that Aircel can go ahead and sell spectrum as part of its resolution plan. Though the tribunal accepted DoT’s contention that Aircel does not have ownership over spectrum but said that under Insolvency and Bankruptcy Code (IBC) continuity of service needs to be maintained and for that spectrum and licences of the company cannot be terminated by the DoT. The tribunal said that since its remit is limited till the IBC, the DoT is free to move to Telecom Disputes Settlement and Appellate Tribunal or the Telecom Regulatory Authority of India (Trai) on the issue.

The DoT filed its appeal against the order in the NCLAT on February 20, 2020 which was dismissed on March 4, 2020 as appeals are time-barred.

The SC has raised the issue at a time when the NCLT has approved the resolution plan of asset reconstruction firm, UVARCL for Aircel, which includes it assets and spectrum and is in the final stages of taking a call on the assets and spectrum of RCom.