Debt resolution only after clearance of govt dues, says tribunal
Anil Ambani-promoted Reliance Communications (RCom), which is now bankrupt, will now undergo liquidation, unless the Supreme Court overturns the National Company Law Appellate Tribunal (NCLAT) order.
The order states that spectrum owned by the firm can be sold under the insolvency process after government dues are cleared.
A banking source said the committee of creditors (CoC) for RCom will file an appeal against the order. The NCLAT had passed the order in the ‘Aircel versus the Department of Telecommunications (DoT)’ legal fracas.
Following the NCLAT’s judgment, experts said the resolution plan of UV Asset Reconstruction Company (UVARCL) for Aircel, which was approved in June 2020, would be unworkable and the company would be heading for liquidation, thus resulting in zero recovery out of the Rs 18,000 crore owed to lenders.
“A similar fate awaits RCom, which was sent to the NCLT for debt resolution after it defaulted on Rs 46,000 crore of debt,” said a banker.
UVARCL is also the successful bidder for assets of RCom and Reliance Telecom (RTL), which primarily include spectrum and real estate.
The NCLAT, in its judgment last week, had held that spectrum could not be treated as ‘security interest’ by lenders. However, the tribunal held that the government was an operational creditor. In the matter of ‘Ghanashyam Mishra and Sons Private Ltd vs Edelweiss Asset Reconstruction Company Ltd’, the Supreme Court had held that operational creditors could not claim any amount over and above the resolution plan as approved by the CoC.
It is clear that the DoT, as an operational creditor, cannot recover any adjusted gross revenue (AGR) dues ahead of financial creditors. Aircel and RCom owe Rs 12,389 crore and Rs 26,000 crore, respectively, to the DoT in AGR dues.
The resolution plan of RCom and RTL was duly cleared by 100 per cent of lenders, and is awaiting approval of the NCLT, Mumbai, since March 2020.
Liquidation of RCom and RTL will result in a loss of Rs 40,000 crore to 38 lenders. Chinese banks led by China Development Bank will lose Rs 9,000 crore, while SBI stands to lose Rs 3,000 crore and Life Insurance Corporation of India stands to lose Rs 3,700 crore. The banks, which have not received a single penny from RCom since June 2017, are now looking at clarity from the apex court.
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