Setback for lenders: NCLAT rules govt dues to be cleared before spectrum sale

In an order which will have adverse consequences for lenders of bankrupt telecom operators, the National Company Law Appellate Tribunal on Tuesday ruled that spectrum can be transferred as part of insolvency resolution plan but only after clearing all government dues. Though NCLAT maintained that the DoT in this case is an operational creditor, still the clauses relating to spectrum trading guidelines and licence agreement stipulate that government dues need to be cleared in full before spectrum is transferred and can be further used.

“The defaulting licensees/telcos cannot be permitted to wriggle out of their liabilities by resorting to triggering of CIRP by seeking initiation of CIRP under Section 10 of I&B Code, not for purposes of resolution but fraudulently and with malicious intent of withholding the huge arrears payable to government, obtaining moratorium to abort the government’s move to suspend, revoke or terminate the licences and in the event of a resolution plan being approved, subjecting the Central government to be contended with the peanuts offered to it as ‘Operational Creditor’ within the ambit of distribution mechanism contemplated under Section 53 of IBC,” acting chairperson of NCLAT, Justice Bhat said in the 107-page order.