Telcos can’t claim spectrum rights if dues unpaid: NCLAT

Both Videocon and Reliance Communications hold spectrum licences and are currently in different stages of the resolution process.
For representational purposes
For representational purposes

CHENNAI:  A three-member tribunal of the NCLAT on Tuesday delivered a key judgement on the status of the spectrum licenses of a bankrupt telecom company undergoing the corporate insolvency resolution process. In a ruling that will have wide-ranging implications for telecom insolvencies, and more immediately in the case of bankrupt Reliance Communications and Videocon, the tribunal ruled that bankrupt telcos cannot claim spectrum rights based on their licences unless they have made the requisite payments to the government.

Both Videocon and Reliance Communications hold spectrum licences and are currently in different stages of the resolution process. On September 25, 2020, the Supreme Court had asked NCLAT to decide whether lenders can sell spectrum of Aircel Group under the insolvency resolution process to recover dues.

On Tuesday, the NCLAT bench headed by Acting Chairperson Justice B L Bhat noted that while a telecom service provider has the right to use spectrum under the licence granted to them, they cannot be said to be the owners in possession but only in occupation of the right to use spectrum.

“The spectrum cannot be utilised without payment of requisite dues which cannot be wiped off by triggering CIRP under I&B Code,” Bhat said. The appellate tribunal’s 107-page judgement rules that spectrum is a “natural resource” and the government is holding it as a “cestui que trust” (beneficiary). Dues towards such spectrum licenses also cannot not be wiped off because a firm triggers the resolution process, it added, noting that such an action made, not for resolution, but “with malicious or fraudulent intention” would be impermissible”.

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