NEW DELHI: The Supreme Court on Monday continued pulling at the strands of two crucial aspects of the AGR case — both of which revolve around the Rs 57,000 crore in dues owed by bankrupt telecom firms.The first pertains to whether companies sharing the spectrum assets of insolvent licensees should be liable to pay statutory taxes on revenue earned from the use of these assets. The second involves the nature of spectrum rights, with the court seeking information on whether a bankrupt telco can “sell” the spectrum granted under the license agreement.
How the court decides on both questions will have a massive impact on the resolution of Anil Ambani’s bankrupt Reliance Communications (RCom). It may even see Mukesh Ambani’s Reliance Jio (RJio) stuck with some portion of RCom’s Rs 31,000 crore AGR liabilities. RJio has had a spectrum sharing agreement with RCom since 2016.
On Monday, RJio told the SC that current guidelines do not stipulate sharing of liabilities under spectrum sharing arrangements, and that the DoT had raised no such demand. The telco also observed that
if the rules mandated a sharing of liability, it would “never” have entered such an agreement. RJio has already paid the DoT’s demand for Rs 193 crore in pending AGR dues.
The SC bench, however, directed the Centre to submit its view on why RJio should not be liable for paying taxes when it has been earning revenue from the shared spectrum.As for whether companies can sell spectrum rights, Solicitor General said that the DoT’s view was that spectrum could not be sold since the government held ownership and only contracted out its use. “(Spectrum licenses) do not transfer ownership… The government continues to hold it in trust on behalf of the people,” Mehta said. RCom’s counsel differed, however, stating that spectrum could be part of a resolution plan for a bankrupt telco, and the rights sold.
Depletion of RCom’s asset value a concern
According to RCom’s plan, which is yet to be approved, UV Asset Reconstruction Company has emerged as the highest bidder with an offer of over I15,000 crore. But the bench raised questions over a large depletion of RCom’s asset value under this plan, which is less than the I35,000 crore cited earlier in 2019.