SC Adjourns the AGR Dues Case Hearing

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On 17th August, the Supreme Court heard the case of AGR dues. The Bench comprised of Hon’ble Justice Arun Mishra, Hon’ble Justice S. Abdul Nazeer and Hon’ble Justice M.R. Shah.

Facts of the Case 

The current hearing is concerning the question of whether selling of Spectrum as a part of bankruptcy proceedings allowed under IBC and if Jio is liable to clear RCom’s AGR dues. On Friday, 14th August 2020, the court asked for spectrum sharing agreements and related details. In today’s hearing, the Court asked Jio, why it should not be liable to pay AGR dues of RCom.

Government’s Submissions

The Solicitor General, Tushar Mehta argued that spectrum can never be a subject matter of IBC as people of the country are owners of the spectrum. Further, the contract allows the use of spectrum but its ownership is nontransferable. Additionally, IBC does not define spectrum as an asset and the government still holds it, in trust. Therefore, the assets owned by a third party helped by a company under insolvency, in trust, cannot be up for sale. 

The SC has suggested that the company which shares AGR dues has to discharge them. Relying on the same, the Solicitor General declared that spectrum sharing is different from spectrum trading.

He further pointed out that the opinion of MCA (Ministry of Corporate Affairs) and DoT (Department of Telecommunications) differ in this regard as MCA sought to allow the sale of spectrum for maximization of value whereas the DoT holds the view that spectrum can never be the subject matter of IBC. However, the government will support any decision of the apex court in this matter. 

RCom’s Submissions

The fair value of RCom is 10,200 crore. The ARC (Asset Reconstruction Company) will issue zero-coupon bonds of Rs 15,140 crore to banks which shall be redeemable in 5 years. Further, approval for the plan for the sale of the spectrum was already given and UVARC was the successful resolution applicant. However, the sale was not materialized and the initiation of insolvency proceedings took place. 

He further contended that spectrum is an asset of the company which can be the subject matter of IBC and thus, bought or sold. 

Jio’s Submissions

He argued that there was no legal basis for transferring the AGR dues of RCom to Jio as the two even though the two aforementioned companies are in a spectrum-sharing agreement, they do not share liabilities. He further stated that Jio would have not agreed with RCom if the agreement included the sharing of liabilities. Moreover, this agreement entered into on 5th September 2016 was only for 4G services and no provision of the 2G or 3G services was under the same. As the AGR dues pertain to the 2G and 3G services, Jio is not liable to pay these dues. 

The advocate also stated that Jio does not intend to buy RCom or any of its assets and it has not submitted any resolution plan for the same. 

Court’s Observations

The Court questioned the parties on certain matters such as: 

  • Why the assets of RCom have depreciated significantly?
  •  Is Jio liable to clear AGR dues of RCom?
  • Is buying and selling of Spectrum under IBC allowed?
  • What is the year-wise demand of RCom and who was the successful resolution applicant?

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