Lenders May Restart Resolution Process For RCom’s Telecom Business

In August 2019, the RBI had first written to UVARCL questioning its decision to participate in the bidding process for another bankrupt telecom company Aircel Ltd. The regulator had highlighted that ARCs are not permitted to buy equity in stressed firm, even though it can buy loans from other lenders.

Despite months of discussions with UVARCL, the broader ARC industry and banks, the regulator remains unconvinced about allowing such a transaction to go through.

For a rebid to be initiated, RCom’s financial creditors will have to pass a resolution allowing for their last approval to become null and void. At least 66% of the financial creditors must approve such a proposal.

A fresh bidding process will only be initiated after the Supreme Court decides on a matter related to resolution of bankrupt telecom companies, the people quoted above said. The apex court will decide whether a resolution applicant can sell or transfer spectrum assets of a telecom company, without clearing the Department of Telecommunication’s adjusted gross revenue claims.

While the Supreme Court is yet to decide on the matter, it had observed in August 2020 that bankrupt telecom companies not clearing AGR dues was concerning.

Without clearing this issue, a new bidding process for RCom may not fetch buyers.

According to the two people quoted above, the DoT has already declined to renew RCom’s telecom license till the AGR dues are repaid. The government has claims worth around Rs 26,000 crore in RCom’s case, they said. The Economic Times first reported on Tuesday that the DoT had declined a license renewal to RCom.

To speed up the process, lenders led by SBI have written to the Ministry of Corporate Affairs to intervene in the matter, the first of the two people quoted above said.

Under the IBC, government statutory dues are positioned below creditor payments when a company undergoes liquidation.

Siddharth Srivastava, partner at Khaitan & Co., said that the issue of statutory dues is already settled in law and is unlikely to come in the way of resolving a bankrupt telecom company.

“Why should anyone give more weightage to the claims made by the DoT, as opposed to say the income tax department? There are multiple judgments which state that the statutory dues are to be treated as operational creditor claims and should accordingly be dealt as per provisions of IBC,” Srivastava said.

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