NCLT asks telecom department not to terminate Aircel's license and spectrum

The tribunal accepted the government's argument that licence or spectrum is a state asset over which Aircel had no right of ownership.

In a relief to lenders of insolvent telecom company Aircel, the  National Company Law Tribunal’s (NCLT's) Mumbai Bench has directed the department of telecommunications (DoT) to not cancel its licence.

“Without the licence, no (debt) resolution applicant will show any interest in reviving the company,” said the Bench of M K Shrawat and Chandra Bhan Singh.

“The licence is an essential requirement for the business of the corporate debtor.”

The tribunal accepted the government’s argument that the telecom licence or spectrum was an asset of the state, over which the corporate debtor had no right of ownership.

However, it observed, the Resolution Professional (RP) appointed for this case had not demanded ‘ownership’ of the licence but was simply seeking uninterrupted use of it till the agreed-upon period.

Also, it noted sub-Section (2) of Section 14 of the Insolvency and Bankruptcy Code prescribed that the supply of essential goods or services to the corporate debtor must not be terminated or suspended or interrupted during the (payment) moratorium period.

Since the telecom licence was used for business purposes by the corporate debtor, this provision would apply.

“The usage of licence/spectrum is akin to ‘Essential Goods or Services’ (as defined in the law) because without usage, the company cannot run its telecom business. This prohibition shall, therefore, also apply on DoT.”

“This is a very pragmatic approach; without the licence, the company will not be a going concern,” said Ashish Pyasi, associate partner at legal firm Dhir and Dhir Associates.

In April 2018, the RP had petitioned NCLT on the apprehension that the licence could be terminated by DoT, since Aircel had defaulted in payment of annual instalments of the licence fee.

DoT contended that with this default, it had the authority to terminate the licence.

“Ownership and control over the spectrum at all times is the property of Union of India and never vested with the licensee.

"The licensor (under the rules) reserves the right to suspend the operation of the license in whole or in part at any time, if in the opinion of the licensor it is necessary or expedient to do so in public interest,” it had noted.

WThe tribunal observed that Aircel invested Rs 6,249 crore to get licences and spectrum.

Being in insolvency, the expectation is to get a reasonably good resolution plan.

A bidder would show interest in reviving the company if it held the licence.

Aircel declared itself insolvent in March 2018 under the IBC.

Its debt is about Rs 27,000 crore, of which Rs 19,889 crore is owed to operational creditors and Rs 7,378 crore to financial creditors.

The tribunal has also said DoT may approach the Telecom Regulatory Authority of India or Telecom Disputes Settlement and Appellate Tribunal (TDSAT) or other regulatory bodies to appeal against the order if aggrieved by it.

This order by the bankruptcy tribunal could have a bearing on the Reliance Communications case; the latter has made the same argument against DoT, asking the NCLT to directthat its licence not be cancelled.

“There will be a direct impact on that case, as NCLT has set a precedent on applicability of moratorium to telecom companies in relation to spectrum,” said Nirav Shah, partner at DSK Legal.

Photograph: PTI Photo