Delhi High Court: DoT can't Revoke RCom's Licenses till 31st July

On Wednesday, the Delhi High Court told the DoT not to revoke the telecom licences of RCom till 31st July. Further, the court has directed the bankrupt telco to approach the dedicated bankruptcy court for relief.

RCom's Fate Going Down to the Wire

The teleco department told the court that RCom is a "dead horse", and that there was no merit in renewing its telecom licences. A counsel representing the government said, "their horse has died by flux of time and they are seeking to revive it".

Justice Rekha Palli said, "I am of the view that the only remedy for the petitioner is to approach the NCLT...Accordingly, while permitting the withdrawal of the petition, the interim arrangement as directed on 19th July 2021 will continue for a period of 10 days".

This decision comes as a slight relief to RCom's resolution professional Deloitte. The telco has 20 licenses, all of which were due for expiration on 19th July. DoT, on its part, had refused to renew these licenses, citing RCom's dues. The bankrupt telco was hoping for an interim order from the court to stop DoT from canceling its licences. If the DoT had gone through with it, RCom would have to surrender its spectrum, which is its most prized asset right now. This move would also kill the resolution process under IBC.

The Resolution Process

In March, RCom's CoC had cleared a resolution plan under the IBC proceedings. Under this plan, asset reconstruction firm UVARCL would have picked up the telco’s spectrum for ₹12,760 crore, staggered over 12 years. This amount represents a significant share of the total expected amount from sale of RCom and its two units. Besides spectrum, the telco's assets on sale include towers, fibre, enterprise business, data centres, and land.

The telco's lenders claim over ₹57,000 crore under IBC from the telco. However, in any scenario, DoT stands to recover only a fraction of its claims, as it is an operational creditor.

What's Next for Deloitte and RCom?

Senior Advocate Mukul Rohatgi, representing RCom, said, "my license was expiring. I have got a mandatory right under the government guidelines to get a migration".

He pointed out to the court that the DoT was seeking operational dues which do not take priority over financial dues. "Operational dues are paid at time of resolution," he added. The telecom department demanded dues of at least ₹26,000 crore against RCom.

Now, Deloitte may head for NCLT for further relief. However, its case was there for the last two weeks, till it had to appeal to the Delhi HC. If these licenses are not renewed, lenders will face huge losses as the asset monetization plan will fall apart.

So far, the NCLT has not cleared the resolution plans for RCom and Reliance Telecom. However, the tribunal has cleared the sale of towers under Reliance Infratel to Reliance Jio, for around ₹5,000 crore. The sale has not gone through, yet.