Review plea filed by Reliance against SC's spectrum judgment
What's the story
Reliance Communications has filed a review petition against the Supreme Court's decision to exclude spectrum from the list of 'assets' for insolvency and liquidation. The telecom giant argues that the right to use spectrum is an 'intangible asset' and should be included under the Insolvency and Bankruptcy Code. The plea was filed by Anish Niranjan Nanavaty, Resolution Professional of Reliance Communications.
Financial implications
Excluding spectrum from insolvency framework may discourage bank financing
Nanavaty's plea contends that excluding spectrum from the insolvency framework would render it unworkable for telecom and other sectors relying on government-granted rights to use sovereign resources. This could discourage banks from financing any commercial project involving government-allocated natural resources, affecting sectors like mining, hydropower, and infrastructure. The plea further argues that if such a core operational asset is excluded from the insolvency estate, Reliance Communications may have to go for liquidation.
Legal challenge
If spectrum is a sovereign resource, liabilities should be transferred
The review petition also challenges the Supreme Court's definition of spectrum as a sovereign resource. It argues that if spectrum is indeed a sovereign resource, then the liabilities arising from its grant should also be transferred with it. However, the judgment permits the Department of Telecommunications (DoT) to reclaim spectrum as a sovereign resource and enforce the entire spectrum-related debt against Reliance Communications within CIRP.
Asymmetry concerns
Review petition highlights structural asymmetry in judgment
The review petition highlights a structural asymmetry in the judgment, giving de facto super-priority to DoT over other creditors. It argues that this goes against the statutory waterfall mechanism and equitable treatment of creditors under the Code. The plea also points out internal inconsistencies in the judgment regarding spectrum responsibilities, arguing that it disrupts the unified structure of the Code and makes insolvency framework unworkable for telecom and similar enterprises.