Can’t allow govt’s AGR dues to vanish, says Supreme Court

New Delhi | Mumbai: The Supreme Court expressed concern over how statutory adjusted gross revenue (AGR) dues of bankrupt telecom companies would be recovered if their spectrum were transferred during the insolvency resolution process.

The court asked the telecom department on Thursday who would pay the AGR dues of ailing telcos Reliance Communications, Aircel and Videocon, which are resolution cases under the Insolvency and Bankruptcy Code.

A three-judge bench led by Justice Arun Mishra asked solicitor general Tushar Mehta to provide this information and submit details of the spectrum held by these companies since 1999.

“We are extremely worried that all AGR dues will be wiped out in the IBC process. After the spectrum sale, the new user will deny pending demands against the spectrum,” he observed. “Spectrum trading is different from spectrum sale under IBC. Nobody can use the spectrum without paying past dues. Without paying for the horse, telcos are taking it for a ride.”

The bench is examining claims that telcos facing insolvency proceedings were in no position to pay their AGR dues, estimated at over Rs 40,000 crore.

The bench asked the Department of Telecommunications if the AGR dues of Videocon (Rs 1,512 crore) and Aircel (Rs 12,389 crore) could be fixed on Bharti Airtel, which had traded spectrum with both.

Bharti Airtel, through senior advocate Kapil Sibal, insisted that Airtel had already paid most of its AGR dues (over Rs 18,000 crore) and was not party to any resolution process.

The ailing telcos have urged the court to treat them as a separate class because they were in no position to pay. The court heard RCom on the issue on Wednesday.

On Thursday, the bench heard Aircel, through the resolution professional and banks represented by senior advocates Ravi Kadam and Ranjit Kumar, respectively, and Videocon, through senior advocate Neeraj Kishan Kaul.

The court will hear Etisalat, also facing resolution, through Ritin Rai on Friday.

Aircel’s lenders, led by State Bank of India, argued that IBC does not allow for AGR dues to be paid before payments to secured financial creditors.

“If the proceeds are used to satisfy AGR dues, banks won’t get anything. Public money will be lost,” they said, adding that the government cannot backtrack on allowing spectrum to be used as security for bank loans after allowing it in the first instance in the IBC.

The IBC prevails over every other law, the advocate for the banks said, citing parliamentary intent behind the law. Aircel’s resolution plan is yet to be approved, he said.

UV Asset Reconstruction Company Ltd has successfully bid for Aircel and RCom’s key assets including spectrum. Spectrum can be transferred only with the DoT’s approval, Kumar said.

Kadam said Aircel had traded part of its spectrum and surrendered some to DoT. The rest was lying idle with it.