MCA considering easing moratorium rules in IBC for certain sectors

The moratorium clause of the Insolvency and Bankruptcy Code (IBC) may be getting diluted for certain sectors, with the corporate affairs ministry considering exemption from this provision for aircraft leases, two senior officials told Business Standard. Moratorium for idle spectrum in the telecom sector can also be done away with by bringing a provision in the telecom bill, government sources said. 

Section 14 of the IBC declares a moratorium on proceedings, transfer or disposal of any of the assets of the company from the date of commencement of its insolvency. 

Officials said that the corporate ministry has been asked to reconsider its position in the matter of the aviation sector - to do away with the moratorium on leased aircrafts, during interministerial discussions. The move would be in line with the Cape Town Convention bill which the civil aviation ministry had first introduced in 2018. 

The bill assures lessors that their assets such as aircrafts would not get stuck if a company becomes insolvent, as has happened in case of Go First - currently undergoing the insolvency proceedings. 

In Go First’s cases, lessors had applied to the Director General of Civil Aviation for the deregistration of 45 aircraft prior to its admission of insolvency. These applications were put on hold following the admission of insolvency and the commencement of moratorium 

The government had recently brought out the notification to exempt petroleum assets leased under the Oilfields-Regulation and Development Act, 1948 from moratorium under the IBC. The move was to ensure that national assets do not go to waste. 

The draft telecom bill released by the Department of Telecommunications (DoT) for public feedback in September 2022 sought to clear the air over the ambiguity of spectrum owned by a telecom service provider (TSP) undergoing insolvency.

The bill stipulates that spectrum ownership remains with the government and implies that the value of spectrum cannot be sold by creditors under the IBC. Section 20(3) of the draft Bill clearly states that if the insolvent TSP fails to comply with these conditions, the assigned spectrum shall automatically revert to the government's control.

While the corporate affairs ministry is not making any changes in the Code, it is on board with the changes sought in the bill in this respect, a government official indicated. 

"The draft bill is lenient towards any potential TSP facing insolvency. It allows a licensee to continue operating under existing terms if it continues to provide telecom services or operate the telecom network or utilise the assigned spectrum," a senior DoT official said.

The Indian telecom sector has consolidated to the point of having three private sector TSPs - Reliance Jio, Bharti Airtel and Vodafone Idea (Vi), and public sector BSNL. But the latter two had been steadily losing market share and facing increasingly strenuous financial crunch.

The moratorium clause in IBC itself says that any licence or permit shall not be suspended if there is no default in payment of current dues arising for the use or continuation of the licence, permit, registration, quota, concession, clearances or a similar grant or right during the moratorium period. 

IN THE WORKS

Corporate affairs ministry received suggestions for changes in IBC rules during interministerial discussions

The ministry asked to do away with moratorium on leased aircraft

Moratorium on idle spectrum in telecom sector may also be discontinued

(Inputs from Aneesh Phadnis)