Telecom legal dispute is just get more and more complicated
After the final judgment in the AGR case got postponed a number of times, the Supreme Court has now promised to give its final verdict on the telecom AGR case on 24 August. Considering the level of uncertainty; even that looks highly unlikely. With too many new dimensions to the case, it looks like there will not be an early resolution to the AGR issue.
AGR dues; largely pending
Back in September 2019, the Supreme Court had issued an order saying that all the telecom companies will have to pay the Adjusted Gross Revenue (AGR) charges. It had then promised a virtual goldmine for the government. A year later; only part of the dues has been recovered. While Bharti Airtel has paid nearly one-third of the AGR dues, Idea has paid a little over one-tenth of the outstanding amount. Even Tata Tele has just paid a small part of the dues. The bigger question is about bankrupt telcos like RCOM, Videocon and Aircel. These three telecom companies owe the government nearly Rs.40,000 crore towards spectrum usage charges (SUC). The Supreme Court has raised a valid question about the statutory dues from these bankrupt telecom companies. Under the IBC, full powers are with the Committee of Creditors (COC), which has agreed upon a model wherein the creditors get most of the dues and the government gets nothing. Now the SC wants the government to first recover these dues before the IBC sale.
Will the IBC prevail in this case?
One argument that some lawyers have put forward is that IBC was constituted by statute of Parliament with the clear understanding that its decision would prevail. But that could be a very flimsy argument if the government is being denied its share of revenues. The SC is right in its observation that no IBC resolution must be permitted without the bankrupt company, or its acquirer, making good the dues to the nation. If it emanates that adherence to the IBC puts the government at a loss, there is no way the IBC can legally prevail. Airtel and Vodafone get more time to pay their dues till this is resolved. But the IBC process may get a new dimension.
It is all about revenues
When the full powers in the IBC were given to the COC, the macroeconomic situation was very different. Today the government is scrounging every small bit of potential revenue and it is unlikely to let go the salivating prospect of the bonanza of Rs.40,000 crore from the bankrupt telecom companies. The SC has a valid point and it also suits the current government context. One thing is clear at this juncture. If the Supreme Court view prevails and potential buyers are asked to pay the AGR dues it would make little sense to the acquirers or to the banks. IBC process may actually lose its importance but that would be least of the worries in these times!
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