IBC may strip Govt’s AGR dues, says Supreme Court

The Supreme Court on Thursday observed that the government may not be able to recover any of its adjusted gross revenue (AGR)-related dues from bankrupt telecom operators through the insolvency resolution process, adding pressure on the government to try harder.

A three-judge bench, headed by Justice Arun Mishra, said any successful resolution applicant for the bankrupt telcos—Reliance Communications Ltd, Aircel Ltd and Videocon Telecommunications Ltd—can deny paying the AGR dues after spectrum is transferred under the Insolvency and Bankruptcy Code (IBC). The observation came in response to Aircel’s submission that the right to use radio airwaves is an asset of a telecom operator undergoing insolvency proceedings and, thus, can be sold to a new buyer.

The court’s observation implies it wants to ensure the government, classified as an operational creditor under the bankruptcy code, redoubles its efforts to recover dues, legal experts said. Under IBC, operational creditors do not get preference on recovery proceeds, which means DoT may get little or nothing from the insolvency resolution.

“The Supreme Court’s intention appears to analyse the interplay of IBC vis-a-vis monetisation of state resources in the context of AGR dues of the government. This matter has the potential to certainly set a precedent for priority of recovery of government dues under the IBC,” said Suvigya Awasthy, associate partner at PSL Advocates and Solicitors.

Aircel’s insolvency resolution process concluded in June, with UV Asset Reconstruction Co. Ltd emerging as the highest bidder. Aircel owes DoT Rs12,389 crore in AGR dues.

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