Debt ridden telecom companies cannot treat spectrum as ‘security interest’ under insolvency proceedings: NCLAT

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The National Company Law Appellate Tribunal (NCLAT) on Tuesday ruled that debt-ridden telecom companies undergoing insolvency proceedings cannot claim rights to their spectrum, which is a natural resource unless requisite spectrum usage payments have been made to the government. A three-member bench of the tribunal also made it clear that spectrum “cannot be treated as a security interest by the lenders”. Though a telecom service provider has the right to use spectrum under the licence granted to them, the tribunal noted that however, they cannot be said to be the owners in possession but only in occupation of the right to use spectrum.

Acting Chairperson Justice B L Bhat said that the spectrum cannot be utilised without payment of requisite dues which cannot be wiped off by triggering CIRP under I&B Code. Corporate Insolvency Resolution Process (CIRP) is initiated under the Insolvency and Bankruptcy Code (IBC). A CIRP commences only after approval from the National Company Law Tribunal (NCLT) and in case of disputes, the matter is heard by NCLAT. According to the appellate tribunal, spectrum is a “natural resource” and the government is holding it as a “cestui que trust” (beneficiary) and it would not be available to use without payment of requisite dues.

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