NCLT asks telecom department not to terminate Aircel's license and spectrum

The National Company Law Tribunal (NCLT) has ordered Aircel’s telecom licence not be cancelled, granting relief to the company that filed for bankruptcy in March 2018.

“Without the license no resolution applicant will show any interest in reviving the company,” said the Mumbai bench of tribunal in a direction to the Department of Telecommunication (DoT).

“Cancellation of license shall adversely affect the business of the company. Only on the basis of license the company is running the telecom business in the country. Therefore, license is an essential requirement for the business of the corporate debtor,” said a bench presided over by M K Shrawat and Chabndra Bhan Singh.

The tribunal accepted the government’s argument that licence or spectrum is a state asset over which Aircel had no right of ownership. It observed that Aircel’s resolution professional did not seek “ownership” for the licence but uninterrupted use till the agreed-upon period.

The tribunal said Insolvency and Bankruptcy Code rules say that the supply of essential goods or services to a corporate debtor shall not be terminated or suspended or interrupted during moratorium period. And, since a telecom licence is used for business purpose a corporate debtor, the provisions of moratorium will apply.

“The usage of license/spectrum is akin to "Essential Goods or Services" because without usage the company cannot run its telecom vusiness. This prohibition shall, therefore, also applicable on DoT”.

“While it is true that the spectrum is a state asset and only a license to use the same has been granted to Aircel against payment of fees. Only on the basis of license the Company is running the telecom business in the country. Therefore, license is an essential requirement for the business of the Corporate Debtor”, said Nirav Shah, Partner - DSK Legal.

Aircel’s resolution professional had moved the NCLT in April 2018, apprehending that the government may scrap its licence for defaulting in payment of annual installments of the license fees. The DoT on the other hand had argued that since Aircel had defaulted on paying the license fees, hence they had the authority to terminate the telecom license granted to the company.

“The ownership and the control over the spectrum at all times is the property of Union of India and never vested with the licensee. The licensor reserves the right to suspend the operation of the license in whole or in part at any time if in the opinion of the licensor it is necessary or expedient to do so in public interest,” the DoT had argued.

The tribunal observed that Aircel had made an investment of Rs 6,249 crore to get the licenses and spectrum. And since presently the company is in insolvency, the expectation is to get a reasonably good relution plan. Also, any bidder will show interest in reviving the company the corporate debtor holds the license.

Aircel declared itself insolvent in March 2018 under the IBC and has a debt of over Rs 27,000 crore out of which Rs 19,889 crore is owed to the operational creditors and Rs 7,378 crore is owed to the financial creditors.

The tribunal also said that the DoT may approach Telecom Regulatory Authority of India (TRAI), Telecom Disputes Settlement and Appellate Tribunal (TDSAT) or other regulatory bodies to appeal against its order. 

“This order will have a direct impact on Reliance communications as the NCLT has set a precedent in relation to the applicability of moratorium to telecom companies in relation to its spectrum”, said Nirav Shah, Partner - DSK Legal.