SC not to rule on IBC payout
The Supreme Court on Wednesday said it won’t go into the specific sharing of the dues of the financial creditors and operational creditors in a company under bankruptcy. It was more concerned with a bankrupt company’s claims on its ability to pay dues when under insolvency.
The court gave the opinion in the midst of an argument between the committee of creditors of Reliance Communications (R-Com) and the department of telecom (DoT) over who had the first right over the spectrum of the Anil Ambani-company, which is at present undergoing insolvency. R-Com owes a staggering Rs 25,000 crore in spectrum fees linked to adjusted gross revenues (AGR).
“We won’t go into apportionment of resolution plan funds between creditors,” the bench observed, meaning it was not concerned about the sharing of dues but rather the bona-fides of the insolvency claims of telecom players such as R-Com and Aircel.
The court made the remarks after senior advocate Harish Salve, appearing for the committee of creditors, said the licence agreement clearly mandated that spectrum was a fit case of security for banks.
The SBI-led committee of creditors (CoC) of R-Com on Wednesday told the Supreme Court that R-Com would go into liquidation if UVARC decided to withdraw from the acquisition proceedings if its right to the sale of spectrum was denied.
The submission was made by Salve, appearing for CoC, before a three-judge bench headed by Justice Arun Mishra which is examining whether bankrupt operators such as R-Com and Aircel can seek insolvency proceedings to apparently avoid compliance with the apex court’s October 2019 judgment, which mandated the various operators to refund a staggering Rs 1.47 lakh crore as dues in the form of AGR to the government.
UVARC had successfully bid for R-Com in the insolvency proceedings before the National Company Law Appellate Tribunal (NCLAT). The The UVARC plan, approved by the CoC in March, involves the right to use spectrum under the control of R-Com.
“R-Com will go into liquidation if spectrum sale is not permitted… Even UVARC may back out of its bid if the DoT decides against spectrum sale citing IBC (insolvency and bankruptcy code),” Salve told the bench also comprising Justices Abdul Nazeer and M.R.Shah.
He was referring to the DoT’s argument that spectrum was a national asset and no telecom player can sell it to another party.
The CoC, on the other hand, has argued that the financial creditors should be given the priority as mandated by the Insolvency and Bankruptcy Code, 2016 and not operational creditors such as the DoT, employees and other service providers of the company under insolvency law.
The court will take up the hearing on Thursday, with senior advocate Ranjit Kumar appearing for the CoC of Aircel.