Insolvency issues confuse Indian AGR proceedings

Insolvency issues confuse Indian AGR proceedings

The Indian Supreme Court has asked, in a recent hearing, a question that does not appear to have occurred to India’s Department of Telecommunications (DoT): how does it plan to recover adjusted gross revenue (AGR)-related dues from telecom companies facing insolvency?

In addition the court wants to ascertain the bona fides of the telecom companies that have initiated insolvency proceedings under the Insolvency and Bankruptcy Code (IBC) – that is, why some of these companies have done so and what their liabilities are.

The court also wants to ensure that the IBC is not being used to escape those liabilities; there have been moratoriums in place for companies like RCom and Videocon as insolvency proceedings against them have started.

And yet money will have to be collected somehow. RCom, for example, owes just over $4 billion, which as the court pointed out, is public money.

The Court also asked, in a recent hearing, whether spectrum given to these companies can be sold, to which the DoT apparently said that telecom companies facing insolvency proceedings cannot sell spectrum as it not their property.

This isn’t a view shared by all participants. Aircel, which, admittedly, is not going into liquidation, appears to believe the spectrum can be sold as it was mentioned in the terms and conditions that it is transferable and the company has made an upfront payment for it.

While AGR issues have been around for a long time, things went downhill for some companies owing AGR in October last year when the court supported a widened definition of AGR that included non-telecom revenues; it later dismissed calls for a reassessment.

Although this seems to have been what the DoT wanted, it has now backtracked somewhat, seeking staggered payments over 20 years. That has yet to be agreed by the Court.

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