Aircel, last week filed for bankruptcy at the NCLT (National Company Law Tribunal) Mumbai bench. The NCLT finally accepted the Aircel bankruptcy petition and had issued an order staging a hold on directors, promoters, managing directors and chairman which prohibits them from leaving their positions until further notice from the Tribunal. Vijay Iyer of consultancy firm Deloitte Haskins & Sells has been appointed as the Insolvency Resolution Professional (IRP) from Aircel’s side to speed up the process of resolution of the company, as reported by Economic Times.
Previously, after making attempts to settle things with lenders on the inside for continuous four months and after months of toil and tug of war, Aircel cellular and Dishnet Wireless, the two units of Aircel finally filed for bankruptcy.
Things would have been good for Aircel if their request to undertake strategic debt restructuring would have gone through unhindered which the banks had already accepted, but Reserve Bank’s moves of scrapping loan recast schemes drove Aircel to a dead end forcing their hands to file for a bankruptcy finally today under the Insolvency & Bankruptcy Code, 2016.
Law firm J Sagar Associates along with senior counsel Janak Dwarkadas and Zal Andhyarujina are advising counsel for Aircel in the bankruptcy case. They explained once the IRP is appointed they take matters into their hands by first resolving the management and continuing further with their duties.
The IRP had to be appointed to speed up the process since there were many matters at hand to handle on the management’s behalf like a continuation of services, repayment of loans, payment of salaries and they also added that there was a threat to staff since security personnel were also left unpaid. The total amount of debt that Aircel is under sums to Rs. 50,000 crores, which is the humongous amount. The Tribunal bench, headed by MK Shrawat also couldn’t stop themselves from asking the question. “Where has this money gone? This is a huge debt,”
Amidst all this, Operational creditor GTL infrastructure also appealed for a petition seeking a chance to check if there were parts of the petition which went against Delhi High Court passed on January 29.
Since the court had put a hold on all assets of Aircel, it refused the plea of GTL Infrastructures of recovery of Rs.800 crores from Aircel. A Consortium of bankers led by SBI had then said that the firm would have to recover their Rs. 1000 crores which Aircel owed to them during the liquidation of the company via the sale of assets.
This plea by GTL Infrastructures was countered by Aircel’s senior counsel represented by Janak Dwarkadas saying that his client’s petition in NCLT was under Section 10 for urgent appointment of IRP and had nothing to do with the Delhi High Court order, whatsoever.
The bench also raised serious questions about the unpaid salaries to which the company replied that their assets under open Trust and Retention account was frozen. It is notable that the total value of assets of Aircel soars to Rs. 22,000 crores which include the license fee and spectrum worth Rs 10,000 crore, fibre and towers worth Rs 22,000 crore.
The counsel presented their case saying that things would go smoothly through a resolution if the petition were accepted in the Tribunal. If not, the company will have to do a sale of their assets which might result in them losing their license. Also, if this move is made the network won’t be expected to continue thus making an impact on the large user base of the network.
Reports surfaced that Aircel was amid talks with vendors and partners trying to set up a deal involving intra-circle roaming plans which would allow them to keep serving their customer base of 50-million active users. This was proposed by the IRP since they are making hard attempts to save the company from outright coming to a dead end.
Ananda Krishnan, the Malaysian businessman who was the actual parent of the company, stopped funding Aircel after continuous losses in September 2016 after the advent of Reliance Jio in the market, resulting in scare cash flow and steeply falling revenue for them.
As of early 2017, Aircel owed Rs 12,627 crore to local banks including State Bank of India, its main lender, while foreign currency debt stood at Rs 595 crore. All these debts were the result of the expenses which Aircel incurred while buying spectrum, including broadband wireless airwaves (BWA) in the year 2010.
Aircel was in talks with Reliance Communication for a merger, but the plans couldn’t be furthered because of a court order which stopped Aircel from selling their spectrum. The lawyer told the bench that revenues of the company were taking a nose-dive with registering Rs 500 crores in 2016 to Rs 400 crore in 2017.
Aircel seems to be in a downfall, as all the creditors who had to lend their money to Aircel will now approach NCLT to recover their dues. Idea Cellular and Vodafone have also stopped taking calls from Aircel users because of non-payment of interconnection fee. Everyone now seems to be awaiting Tribunal’s decision on the matter especially the telecom department which has bank guarantees equalling the dues that Aircel owes to the government. Now any action will be taken only after the NCLT declares their stance on the issue.
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