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National Company Law Tribunal admits Aircel bankruptcy plea

March 09, 2018

National Company Law Tribunal (NCLT) has accepted Aircel's bankruptcy petition and issued a directive that the directors, promoter and chairman and managing director of the company should not leave without permission till further offers. Further, it has been learnt that Vijay Iyer of consultancy firm  Deloitte Haskins & Sells has been nominated as insolvency resolution professional (IRP) from Aircel's side to start the resolution process.Once an IRP is appointed, the management will be dissolved and resolution professionals will lead the way ahead. It is learnt that Law firm J Sagar Associates along with senior counsel Janak Dwarkadas and Zal Andhyarujina are advising Aircel in the bankruptcy case.

Earlier, Aircel and its two units Dishnet Wireless and Aircel Cellular filed for bankruptcy in the NCLT Mumbai bench after over four months of attempts to settle the matter with lenders. Banks had finally accepted the company’s request to undertake strategic debt restructuring, when the Reserve Bank of India scrapped loan recast schemes and left Aircel with no option but to file for bankruptcy under the Insolvency & Bankruptcy Code, 2016. Aircel and its units under a debt of Rs 500 billion to financial and operational lenders and had asked for an IRP was needed urgently since it would resolve issues around continuation of services, repayment of loans, payment of salaries and reiterated that there was threat to staff since security personal too were unpaid. The operator's assets listed out include license fee and spectrum worth Rs 100 billion and fibre and towers worth Rs 220 billion. Aircel’s counsel argued that if petition is accepted then a resolution is possible otherwise the assets would be sold in a firesale and there would be no possibility of network continuation impacting customers at large. Further, Aircel stated it has requested its partners and vendors to continue to provide their services to enable the operator to serve its some 50-million active users.

Moreover, the tribunal rejected GTL Infrastructure's intervention application, stating that operational creditors cannot be party at this juncture.Earlier, operational creditor GTL infrastructure had appealed for a petition copy demanding that the tower firm be given couple of days to see if there are any parts of the petition which went against the Delhi High Court passed on January 29, 2018.The tower firm had filed a petition for recovery of Rs 8 billion. The court had ordered an interim injunction stating no assets of Aircel would be moved or sold without a petition for the same. Consortium of a bankers led by State Bank of India had then pointed that in case of a liquidation, they would need to recover via sale of assets. GTL stated that Aircel currently owns the firm Rs 10 billion. However, Aircel's senior counsel argued that the client's petition in NCLT was under Section 10 for urgent appointment of IRP and had no impact on Delhi High Court order.

Aircel hasn’t been able to service its debt due to falling revenues and dwindling cash flows after prices were slashed amid intense competition with the entry of Reliance Jio Infocomm Limited in September 2016. The operator’s woes were compounded after its parent company, under Malaysia-based Maxis Communications stopped funding it. Most of Aircel’s debt comes from loans raised to buy spectrum, including broadband wireless airwaves back in 2010. As of early 2017, dues Aircel owed to local banks including SBI, its leading lender, stood at Rs 126.27 billion, while foreign currency debt stood at about Rs 5.95 billion and debt from offering bank guarantees and letters of credit stood at Rs 32.32 billion.

All creditors of Aircel including other operators, tower companies and equipment suppliers, are now preparing to head to the NCLT to recover their dues from the debt-ridden operator. Idea Cellular and Vodafone India have stopped taking calls to their users from those of Aircel due to non-payment of interconnection fees. Further, the Department of Telecommunications (DoT), which has bank guarantees equaling the dues that Aircel owes to the government, is awaiting NCLT’s directions on the Aircel petition before it decides whether to en-cash them as a means to ensuring that the dues are paid.

 
 

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