Bankruptcy Court To Decide Whether Reliance Communications Can Keep Its Spectrum License

The bankruptcy court has to decide on a Rs 10,000-crore question in the case of Reliance Communications Ltd. The decision will have a bearing on the single most important asset of the telecom service provider—its telecom licence.

RCom is under insolvency proceedings before the Mumbai bench of the National Company Law Tribunal and has been under moratorium since May 15, 2018. The company has spent over Rs 10,000 crore to acquire spectrum, Senior Advocate Ravi Kadam informed the tribunal.

The NCLT is set to decide whether spectrum dues payable by RCom to the Department of Telecommunications qualify as operational or current dues.

For now, the tribunal has granted interim relief making way for RCom to continue providing telecom services till Aug. 12.

The Controversy

In 2016, the licensing regime for telecom firms changed from unified access service license to a new unified licence regime. Irrespective of any spectrum in any part of the country, now a single license was required.

Following this, in October 2020, RCom applied to migrate telecom licenses in its name to the UL regime.

But on June 15 this year, the telecom department denied the migration of licence citing outstanding amounts, including spectrum auction instalments due between 2013-16.

In its order, the department also said these outstanding dues fell under the definition of the term "current dues" in the explanation to Section 14(1) of the IBC. This section prevents cancellation of regulatory licenses on grounds of insolvency as long as all "current dues" have been paid.

Since RCom was an existing defaulter, its request for license migration cannot be considered favourably till it pays all its current dues, the telecom department had said.

The NCLT And Delhi High Court Overlap

This prompted RCom to move the NCLT and seek certain reliefs for continuation of its licenses, particularly those which would expire on July 19.

On July 15, NCLT had adjourned the matter without granting any respite to the company, stating the reliefs sought by RCom in the nature of extension of license are outside the scope of the powers of the tribunal.

Taking a cue from the observations of the NCLT, the company moved the Delhi High Court on June 19 by way of a writ petition.

The high court however, observed the dispute differently. It said the issue between the parties essentially involved interpretation of the term "current dues" under IBC which is within NCLT's domain.

As an interim relief till July 30, the high court directed the telecom department to not take any coercive action against RComm. It also permitted the company to continue providing telecom services.

Telecom Department Has Already Filed Its Claims As Operational Dues, RCom Says

Before the NCLT today, the counsel for RCom argued that these payments cannot be categorised as “current dues”. This because the amounts became payable before the moratorium kicked off and had already been separately claimed by the telecom department before the resolution professional as operational dues.

These dues are past dues, and not "current dues" in any manner, under the explanation to Section 14(1) of the IBC, Kadam said.

The telecom department guidelines on unified licence, Kadam said, don't envisage payment of deferred spectrum dues or any other dues by a licencee, as a precondition for migration of existing licenses to the new regime.

The company has already approached Telecom Disputes Settlement and Appellate Tribunal on this issue, Kadam told the NCLT.

The NCLT will next hear the matter on Aug. 12.