Home Legal News SC to SG Mehta : Whether spectrum can be sold by telecom companies that are undergoing proceedings under the Insolvency and Bankruptcy Code (IBC)?

SC to SG Mehta : Whether spectrum can be sold by telecom companies that are undergoing proceedings under the Insolvency and Bankruptcy Code (IBC)?

by Shreya
AGR Dues

The Supreme Court on Monday observed that the government may be unable to recover adjusted gross revenue (AGR)-related dues from bankrupt telecom companies undergoing proceedings under Insolvency and Bankruptcy code, including Reliance Communications, Aircel and Videocon Communications.

The apex court adjourned hearing in the matter to 14 August, directing the government to prepare a plan to recover dues from telcos undergoing insolvency proceedings.

The Supreme Court has put forth to SG Tushar Mehta representing the Department of Telecommunications (DoT), Whether spectrum can be sold by telecom companies that are undergoing proceedings under the Insolvency and Bankruptcy Code (IBC)?

In its last hearing on 20 July, the apex court had directed the department of telecommunications (DoT) to submit details of insolvency proceedings of bankrupt telcos that, according to the department’s estimates, together owe ?38,964.27 crore in AGR dues.

Also Read: Delhi HC Issues Notice In Plea Challenging IBC Ordinance Whereby The Operation of Section 10 Has Been Suspended

The apex court has reiterated that there was “no room for self-assessment” and telcos have to treat the AGR dues calculated by the DoT as final. The government wants the telcos be granted a timeline for payment of dues to avoid insolvency.

Justice M R Shah
Justice M R Shah
Justice Arun Mishra
Justice Arun Mishra
 Insolvency and bankruptcy code
S Abdul Nazdeer
Justice SAbdul Nazdeer

The court has expressed doubt over Vodafone Idea’s capacity to clear the dues in Insolvency and Bankruptcy code proceedings, asking how it be relied upon to make payments over a period given its financial position.

SG Mehta told the Court that the Centre is in the process of filing an affidavit. He informed the Court that all the Insolvency and Bankruptcy Code cases as regards various telecom companies were at different stages.

Mehta gave the Court a summary of the amounts recoverable from companies under Insolvency and Bankruptcy code like Reliance Communications and Aircel. He pointed out that as opposed to submissions made by Aircel before the National Company Law Tribunal (NCLT), spectrum cannot be included as company’s assets, since it is national property and cannot be sold off by the company.

The Court then asked how the proceedings under Section 7 of the Insolvency and Bankruptcy Code against Reliance Communications were revived by the NCLAT even after the Supreme Court’s order of August 2019 had directed for a settlement payment between Reliance and Ericsson.

“Our order is binding for all courts and tribunals. How can NCLAT revive insolvency proceedings despite payment to Ericsson?”

After the Supreme Court, in October 2019, delivered its judgment on the interpretation of the term “Adjusted Gross Revenue”, it granted the telecom companies a period of 90 days to clear the dues that would accrue.

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