A tribunal has ruled that Bharti AirtelNSE -1.06 %’ was entitled to Rs 112 crore that it had deducted as adjustments from rest of the payments it had made to Aircel, dealing a setback to the bankrupt Maxis-owned operator which has been trying to mobilise whatever funds it can to maintain assets and pay its staff.
“…the Bench is of the view that the applicant is legally entitled under the insolvency code to set off the amount of Rs 112 crore while making a payment of the amount retained out of the total consideration settled as per Spectrum Trading Agreement…this Application deserves to be allowed,” the National Company Law Tribunal (NCLT) said in a May 1 order. The applicant, in this case, was Bharti Airtel and its subsidiary Bharti Hexacom while the respondent is Aircel.
The order comes on the back of long dispute over settlements between the Sunil Mittal led telco and Aircel, which is in the midst of insolvency proceedings.
Aircel and its unit Dishnet Wireless reeling under a debt of about Rs 20,000 crore, has accused Airtel of not complying with the court’s earlier orders and unlawfully retaining Rs 112 crore from a payment of Rs 453.7 crore.
It all started when Airtel had given bank guarantees for Rs 453.7 crore and paid Rs 298 crore in cash to the Department of Telecommunications (DoT) on behalf of Aircel, after adjusting the amounts against its Rs 3,500-crore deal to buy the smaller telco’s 4G spectrum. DoT had demanded these to clear the deal. The Supreme Court recently upheld an earlier tribunal order and cancelled bank guarantees, which meant Airtel had to pay the amount to Aircel, and asked DoT to return Rs 298 crore cash to Aircel.
Airtel paid Rs 341.80 crore to Aircel and its unit on January 10, and adjusted the remaining Rs 112 crore against what it claimed were inter-connection charges due from Aircel. The debt-laden telco, which is close to exiting bankruptcy proceedings, has been petitioning for the set-off amount to be returned.
The complexity of the case was whether a creditor (Airtel) can pay its corporate debtor (Aircel) after making deductions despite the fact that the debtor is undergoing insolvency and is under a payment moratorium.
Aircel had argued that the set-off amount is only allowed at the time of liquidation and by letting an operational creditor — in this case Airtel and its entities — make certain deductions, the telco was being given preferential treatment.
However, lawyers of the Sunil Mittal-led telco defended their stance, saying that mutual set-offs are mandated in the Insolvency Code, and therefore, Airtel had rightly claimed its dues.
Aircel, which ran mobile services across India and was particularly strong in the South, shut its services in March 2018 and voluntarily filed for bankruptcy, after coming under pressure due to brutal price competition in the sector and the burden of debt it took to acquire airwaves and fund expansion.
The operator’s debt resolution professional — Deloitte — has shortlisted UV Asset Reconstruction Company Ltd. (UVARCL) to take over the telecom company. The proposal is awaiting approval from the lenders.
Source: Economic Times