SC Orders Airtel to pay dues of over Rs 100 crore to defunct Aircel

New Delhi: The Supreme Court has directed Airtel to pay Rs 112 crore to the now defunct Aircel towards its Spectrum Trade Agreements (STA) and other dues.

In 2016, Airtel entered into eight spectrum trading agreements with Aircel Limited and its subsidiary Dishnet wireless for the purchase of the right to use spectrum allocated to the latter in the 2,300 MHz band. However, in 2018, Aircel was admitted to the Corporate Insolvency Resolution Process (CIRP) under the Insolvency and Bankruptcy Code (IBC), 2016.

On Aircel being admitted to insolvency, Airtel owed it Rs 453 crore towards STA and other dues. The Resolution Professional (RP) of Aircel called upon Airtel to make the payment in 2019. However, Airtel paid only Rs 341 crore and retained Rs 112 crore as Aircel owed it on account of other transactions.

The RP wrote to Airtel asking it to pay the remaining Rs 112 crore and further informed the company that he would take steps to recover the amount if it is not paid. According to the RP, Airtel could not have set-off the dues as the IBC does not permit the same. Airtel took the issue to the National Company Law Tribunal.At the NCLT, Aircel’s RP contended that setting off Rs 112 crore would grant Airtel a preferential payment over other creditors and it is also against the objective of the IBC. The NCLT however permitted Airtel to set off Rs 112 crore. Subsequently, in 2019, an appeal was filed against the NCLT’s order at the National Company Law Appellate Tribunal (NCLAT). The NCLAT held that set-off is violative of the basic principles and protection accorded under any insolvency law. Set-off is antithetical to the objective of the IBC and when moratorium is in place, set-off cannot be permitted till the date of completion of the Corporate Insolvency Resolution Process, or the liquidation order is passed.

The issue reached Supreme Court on Airtel’s appeal. On January 3, SC dismissed Airtel’s plea upholding the NCLAT order.