Supreme Court blames Jio for RCom spectrum sale failure [20-02-2019]

The Supreme Court has held RelianceNSE -1.17 % Jio Infocomm (Jio) responsible for Reliance Communications NSE 2.36 % (RCom) spectrum sale going kaput. The apex court said that it was not the telecom department’s refusal to give its nod to the deal but Jio’s refusal to agree to pick up RCom’s past dues that was the undoing.

“The sale of spectrum to Reliance Jio, therefore, did not fructify, not because the DoT wrongfully refused to give its NOC, as has been alleged by the Reliance Companies in their pleadings filed in this case. It fell through only because the prospective buyer, Reliance Jio, refused to give the undertaking that if called upon, it would pay the erstwhile debts of the seller of the spectrum,” observed the apex court.

The SC was referring to the tussle between the Department of Telecommunications (DoT), RCom and Jio over spectrum related dues that ultimately led to the collapse of the asset sale between the two operators.

The SC had earlier directed DoT to approve RCom’s pact to sell spectrum to Jio after accepting a Rs 1,400 crore-corporate guarantee, instead of a bank guarantee, as well as a parcel of land from an RCom subsidiary to cover for the spectrum user charge (SUC) claim of Rs 2,947 crore, which the Anil Ambani-owned company was disputing.

However, Jio sent a letter to DoT seeking assurance from the government that it won’t be held liable for RCom’s past dues, prompting the department to can any plans of agreeing to the sale, on grounds that both buyer and seller have to agree to take care of previous dues of the seller.

Meetings between the three parties did not break the stalemate and RCom in many court hearings blamed DoT for creating barriers in its asset sale and thereby, preventing the telco from paying its lenders and creditors.

“Meanwhile, in parallel proceedings, this Court did its utmost to lend a helping hand, so that, independently of these orders, sale of assets could also be affected. The DoT was called before this Court and was asked to give its NOC for sale of spectrum. However, it was pointed out that this NOC could only be given according to certain guidelines, one of which mandated that the buyer of the spectrum would have to undertake that it would be responsible for payment of the erstwhile debts of the seller,” said the apex court in its Wednesday order.

The spectrum deal was the fulcrum on which RCom’s asset monetisation plan of Rs 18,100 crore was hinging on.


22 Feb 2019