Supreme Court Rejects Reliance Communications’ Plea
In a significant ruling, the Supreme Court of India on Thursday dismissed a petition by Reliance Communications Limited (RCom) challenging the Department of Telecommunications’ (DoT) move to invoke bank guarantees valued at approximately ₹801.91 crore. The Bench, composed of Justices PS Narasimha and Alok Aradhe, granted RCom the liberty to seek relief from the appropriate High Court, but denied the company’s request to maintain the status quo for a week to facilitate this move.
Background of the Case
The core issue stemmed from the DoT’s decision to invoke the bank guarantees related to RCom’s deferred spectrum-payment obligations. This action was taken following a Supreme Court judgment concerning the treatment of spectrum under the Insolvency and Bankruptcy Code (IBC). However, the Court clarified that its previous judgment did not mandate the Department to invoke these guarantees.
Arguments and Legal Standpoints
RCom’s legal representatives argued that the invocation of the bank guarantees would disrupt the equitable distribution of the insolvency estate among creditors, as dictated by the IBC’s priority mechanism. Additionally, the company highlighted that a review petition regarding the earlier spectrum judgment was still pending, and premature invocation could render the review ineffective.
In the February ruling, the Supreme Court had declared that spectrum is a public resource and cannot be considered an asset of telecom service providers in insolvency proceedings. RCom contended that this judgment did not address whether guarantees for spectrum dues could be invoked during the corporate insolvency resolution process.
Supreme Court’s Decision and Implications
Despite RCom’s plea, the Supreme Court maintained that the company should approach the High Court for further proceedings. The Bench criticized the practice of petitioners filing under Article 32 of the Constitution and subsequently seeking interim protection to approach a High Court, noting that this trend has become increasingly common.
More Read
The Bench refused to grant an interim status quo, emphasizing that RCom should have initiated proceedings in the High Court before seeking the Supreme Court’s intervention. This decision underscores the Court’s stance on procedural propriety in approaching judicial forums.
Financial Implications for RCom
The Department of Telecommunications recently invoked guarantees issued by several banks: ₹281.45 crore from Yes Bank, ₹249.29 crore from State Bank of India, ₹114.09 crore from Punjab National Bank, and ₹157.08 crore from Canara Bank. These guarantees were linked to spectrum acquired by RCom in auctions conducted between 2013 and 2016.
Representing RCom in court were Senior Advocates Abhishek Manu Singhvi, Gopal Jain, and Niranjan Reddy, who argued that the invocation of these guarantees would significantly hinder RCom’s operational capabilities as a going concern managed by its resolution professional.
