Apex court demands DoT explain how it will recover AGR dues from bankrupt cellcos

11 Aug 2020

India’s Supreme Court has demanded that the Department of Telecommunications (DoT) explain how it expects to recover dues related to the Adjusted Gross Revenue (AGR) case from bankrupt providers Aircel and Reliance Communications (RCOM), the Economic Times reports. The court had previously stated that it suspected the two companies had declared bankruptcy to avoid paying the dues, despite both doing so long before the October 2019 ruling on AGR. Nevertheless, the bench was cited as saying that it intended to look more closely at the cause of the initiation of insolvency for the companies, and their liabilities. The court highlighted the fact that RCOM had already settled its dispute with vendor partner Ericsson prior to the insolvency filing, RCOM having previously stated that its legal battle with Ericsson was the cause for the insolvency filing. As previously reported by TeleGeography’s CommsUpdate, RCOM’s asset monetisation plans were blocked by its dispute with Ericsson, restricting its capacity to raise funds. The company’s chairman Anil Ambani only narrowly avoided a jail sentence for contempt of court for failing to pay the vendor when his brother Mukesh Ambani – the chairman of Reliance Industries Limited (RIL) and one of the world’s richest men – paid the dues on his behalf in March 2019. RCOM’s AGR dues were most-recently pegged at INR310 billion (USD4.1 billion), and the company owes around INR490 billion to its creditors.

The apex court questioned the potential sale of the spectrum holdings by the bankrupt providers, seemingly unaware of the DoT’s continued efforts to prevent such transactions. The DoT has taken the stance that the licence holders do not have the right to sell the spectrum, as it is national property. Aircel and RCOM have argued that they own rights, which are transferable, and as such are authorised to sell the frequencies. The duo have also highlighted that the spectrum resources are both companies’ key assets. The telcos’ position was upheld by the National Company Law Tribunal (NCLT) and the National Company Law Appellate Tribunal (NCLAT), but the DoT has filed an appeal before the Supreme Court, which is currently pending.