$6 billion in telecom bankruptcies left unresolved in India, ministries say

Wrangling between Indian government departments and a delayed court ruling over the sale of bankrupt telecom companies’ rights to use mobile phone spectrum have derailed the resolution of the industry’s biggest bankruptcies, leaving banks expect $5.7 billion in payments.

India’s Supreme Court, in a verdict on telecom dues earlier this month, asked a lower court to rule first on the dispute brought by the telecom ministry against a group of state-owned banks led by the State Bank of India on the legality of the sale of radio wave licenses from collapsed mobile operators.

The case is another example of how branches of government are delaying bankruptcy settlements in a country whose banks suffer from the worst bad debt ratios in the world. Any uncertainty about lenders’ rights to the operators’ core assets could also discourage loans or bank guarantees to Bharti Airtel Ltd. and Vodafone Idea Ltd.

In an interim step, the Supreme Court ruled on Friday that the bankruptcy appeals court will decide whether banks can sell bankrupt telecom companies’ right to mobile phone spectrum as part of insolvency proceedings. This is a change from the previous order, which authorized the lower bankruptcy court. Friday’s ruling removes a layer of appeals, which could speed up a final decision on the matter.

Any decision by a lower court, followed by possible appeals to the higher court, can take anywhere from six months to more than a year, said Shally Bhasin, a partner at Delhi-based law firm Agarwal Law Associates, before the decision. hearing on Friday. “Neither the banks nor the telecom sector can afford such delays. This goes against the spirit of bankruptcy law which mandates resolution of insolvencies within a limited time frame,” she said.

bad loan mess

The bankruptcy court had approved a plan to sell the assets of the Aircel Ltd group companies. to help banks recover about 190 billion rupees ($2.6 billion) of debt. Another proposed sale of the assets of Reliance Communications Ltd. to recover about 230 billion rupees is underway.

The banks were looking for larger amounts. A group of mostly state-owned lenders have demanded around 587 billion rupees from Aircel companies – formerly controlled by Malaysian billionaire T. Ananda Krishnan – and some 1.2 trillion from collapsed Reliance companies, which were controlled by tycoon Anil Ambani. The Department of Telecommunications has demanded an additional Rs 120 billion from Aircel and RCom 250 billion in fees for the air permits.

The Telecoms Department disputed any sale before its rights were settled, a view opposed by the Department of General Affairs. The lenders challenged the telecommunications ministry’s petition in court, saying that without the sale of the airtime rights, the bankruptcy resolution would fail.

“Ministries of telecommunications and commercial affairs need to triage issues at their levels so that the sanctity of the bankruptcy process remains intact,” said Bhasin of Agarwal Law.

(With help from Bhuma Shrivastava.)

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