Bloomberg/ New Delhi
Bickering among Indian government ministries and a deferred top court decision on the sale of bankrupt telecom companies’ rights to use mobile phone spectrum has derailed the resolution of the industry’s biggest bankruptcies, leaving banks waiting for $5.7bn in payments.
India’s top court in a verdict on telecom dues earlier this month asked a lower court to first rule on the dispute raised by the federal telecommunications ministry against a group of government-owned banks led by State Bank of India over the legality of the sale of airwave licenses of collapsed mobile phone operators.
The case is yet another example of how government branches are delaying bankruptcy settlements in a country whose banks suffer the world’s worst bad debt ratios. Any uncertainty about lenders’ rights over the key assets of operators could also discourage lending or bank guarantees to Bharti Airtel Ltd and Vodafone Idea Ltd.
In an interim step, the Supreme Court decided on Friday that the bankruptcy appellate tribunal will decide whether banks can sell bankrupt telecom companies’ right to mobile phone spectrum in the insolvency proceedings. That’s a change from the previous order, which empowered the lower bankruptcy court. Friday’s ruling removes one layer of appeals, which could expedite a final decision on the issue.
Any ruling by a lower court, followed by possible appeals up to the top court, may take from six months to more than a year, Shally Bhasin, a partner at Delhi-based law firm Agarwal Law Associates, said before Friday’s hearing. “Neither the banks nor the telecom sector can afford such delays. It frustrates the spirit of the bankruptcy law that mandates a time-bound resolution of insolvencies,” she said.
The bankruptcy tribunal had approved a plan to sell the assets of Aircel Ltd group companies to help banks recover about 190bn rupees ($2.6bn) of debt. Another proposal to sell the assets of Reliance Communications Ltd to reclaim about 230bn rupees is pending.
The banks were seeking larger amounts. A group of mostly state-owned lenders claimed about 587bn rupees from Aircel firms – formerly controlled by Malaysian billionaire T Ananda Krishnan - and some 1.2tn from collapsed Reliance companies, which used to be controlled by tycoon Anil Ambani. The telecom department claimed another 120bn rupees from Aircel and 250bn from RCom in fees for airwave
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