Supreme Court pursuing Airtel, Jio for defunct cellcos’ AGR dues

24 Aug 2020

India’s Supreme Court has indicated that it may require cellcos that have used the spectrum of bankrupt providers to pay the Adjusted Gross Revenue (AGR)-related dues of those ailing companies, the Economic Times reports. In a series of hearings over the weekend the apex court reaffirmed its intention to enforce the collection of dues from its October 2019 resolution of a decade-spanning argument over AGR calculations. India’s telcos pay a portion of their AGR in licence fees and spectrum charges, but many of the providers named in last year’s decision have long-since closed, whilst two more – Reliance Communications (RCOM) and Aircel – have been declared bankrupt and are undergoing insolvency proceedings.

As it has become increasingly apparent that neither of the bankrupt cellcos nor the other defunct providers will be able to pay the dues – which include not only the outstanding licence and spectrum fees but also penalties and interest – the court has begun looking for other parties to pay the dues. The Supreme Court has turned its attention to the spectrum rights of the two companies, as the insolvency process hinges on the concessions. The value of both firms is tied to their spectrum rights and any hope for creditors to recoup their expenses relies on the sale of their airwaves, but the Department of Telecommunications (DoT) has claimed the companies cannot sell their permissions on the basis that the spectrum is owned by the Indian state. Regardless of the outcome, though, the DoT is unlikely to be able to collect any dues. If it blocks the sales, the companies will be forced into liquidation but if it permits the transactions to go ahead, it will not be entitled to the proceeds from the sales due to its classification as an operational creditor

As such, the court has begun looking into the use of the spectrum rights held by the bankrupt cellcos, arguing that operators that used the frequencies via sharing agreements should be made to pay the dues instead. In a similar vein, the court has looked to reclaim the dues of shuttered companies from the entities that now hold their former spectrum rights. On Friday, the court claimed that Bharti Airtel should pay the outstanding AGR dues for Aircel and Videocon Telecommunication – totalling INR123.9 billion (USD1.67 billion) and INR13.76 billion respectively – as the cellco purchased spectrum from the two companies, and neither firm had paid the dues prior to their bankruptcy and closure. Similarly, the bench claimed that Reliance Jio Infocomm (Jio) is liable to pay the AGR dues of RCOM (around INR252 billion) as it utilises some of the company’s remaining airwaves through sharing deals.

The DoT has relinquished its authority to rule on the matter to the Supreme Court, as the court’s current stance contradicts one of its previous rulings on the matter. Last year, the court had rejected an appeal from the DoT seeking to overturn a decision from the Telecom Disputes Settlement and Appellate Tribunal (TDSAT) which had stated that the regulator would not be allowed to collect RCOM’s from Jio based on spectrum the latter had acquired from the former. The planned deal ultimately collapsed, however.