The biggest question that the SC is looking the answer for is can an asset which the telco doesn’t own be sold under the IBC process? In the last hearing, Kapil Sibal said that if the SC rules that spectrum is not an asset of the company and therefore the telco can’t sell the right to use it under IBC, it would have a negative impact on the economy of the country since no bank would recognise spectrum as a security against the loan and thus would refrain from lending money to the telcos. Along with that, in the last hearing, SC had asked for Bharti Airtel to pay for the uncleared dues of the spectrum that it got from Videocon. Read ahead to find out all the updates from the hearing that took place today.
No Additional Dues Demand Raised By DoT Against Airtel and Jio
Justice Arun Mishra led bench started off by suggesting that the government should cancel the license in case the dues are being wiped out. The apex court questioned how can a party sell something which they don’t own. SC said that if the spectrum is traded, then the dues associated to it will be wiped out. This shouldn’t happen suggested the apex court.
Harish Salve for RCom COC said that the telcos have the authority to sell the right to use of spectrum as per the trading guidelines. According to the license agreement, a spectrum is recognised as a security which can be monetised if need be under IBC. He further said that the liability towards the government is being wiped out because DoT is an operational creditor and not because of the sale of spectrum in the first place. The IBC allows for the sale of the right to use spectrum.
Salve also mentioned that it has been verified by DoT that no spectrum trading took place before 2016. The only spectrum trading which took place was with Reliance Jio and it is a small part of the spectrum that RCom owns. Adding to that, no additional dues were demanded by DoT until now from Reliance Jio in respect to this.
To this SC observed that it is not fair. It is like selling something you have taken on rent under IBC. The new person to whom the asset is rented won’t have to pay anything. That is why, if the spectrum is cancelled, it has to be returned to DoT so that it can be auctioned for a higher amount of money.
Ranjit Kumar for Aircel COC said that even if the spectrum is returned to DoT, that won’t necessarily mean that any telco would be up for purchasing it. Since the spectrum won’t be recognised as a security against the loan, no bank would lend money to the telcos for purchasing the spectrum.
Kumar pointed out that the License agreement which has been certified by the President recognises spectrum as security. Telcos don’t have the cash reserves to purchase the spectrum in auctions if it were to take place.
Kapil Sibal for Airtel said that Videocon entered in the IBC process back in 2018 and the Supreme Court decision on AGR was announced in 2019, then why no demands have been raised for additional dues from DoT until now? Sibal said that Airtel has been paying all the dues for all the spectrum it acquired from Videocon since 2016 and DoT hasn’t raised any demand for the dues pertaining to the period before that. Even if the demands are raised by DoT, Airtel reserves the right to challenge the demand in TDSAT so this court should not decide on the matter at this stage said Sibal.
SC then asked DoT why hasn’t it raised demands for the additional dues? DoT said that once the SC crystallises its view on spectrum sharing and trading, it will take decisions on that basis. Harish Salve for Jio said that only dues which were unknown can be recovered from the buyer and pointed out that AGR dues were known to the telcos. Sibal further questioned that why has DoT waited so long to raise a demand? He said that it was the DoT’s responsibility to make everything clear at the time when the spectrum was traded. AGR dues weren’t hidden from the telcos and DoT had raised demands, so why wait so long.
To this DoT replied that the assessment of part dues of Jio and Airtel for RCom and Videocon are still in process. SC replied that it has been a year since it announced its decision on AGR dues, then why can’t DoT make a decision until now? SC has asked DoT to share all the details regarding the demand for additional liability against Jio and Airtel.
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