2020 (3) TMI 486 - Tri - Insolvency and Bankruptcy

CIRP Process - apprehension is that Telecom Licenses and grant of Spectrum may be terminated during the 'Moratorium' Period because the Debtor Company had defaulted in payment of annual installments - HELD THAT - As a fundamental principle, if a property is in possession of the Corporate Debtor the same cannot be demanded back by the Owner/Lessor/DoT of the property as long as the same is in use and in possession of the Corporate Debtor/ Licensee. To this extent there should not be any controversy that since the intangible asset is used for business purpose by the Corporate Debtor, the provisions of Moratorium must apply. The Licensor/DoT can be prohibited from taking any step which may be prejudicial to the interest of the Licensee/Aircel. An exception to this general rule is that if an asset is in possession of the Corporate Debtor under contractual arrangement the same can be demanded back by the owner of the asset, refer Section 18(1)(f) of the Code. As far as the apprehension of cancellation of license by DoT is concerned, on examination we have noticed that there is a clause of Force Majure which prescribes that in addition to any act of God even by an act of State or direction from Statutory Authority the licensor shall not be entitled to terminate the license. Since the signing parties have duly agreed upon the terms and conditions, therefore, it shall be unfair on the part of the DoT to suspend the license at this juncture. This Bench is of the view that, admittedly the License/Spectrum is an asset of State over which the Corporate Debtor has no right of ownership, therefore, up to this extent the argument of the Government is hereby accepted. The relief sought by the Corporate Debtor is that due to issuance of Demand Notice by DoT an apprehension is that the same may be suspended. We hereby direct that the clauses of Moratorium are squarely applicable on this Corporate Insolvency Resolution Process Proceedings, hence need not be interrupted or hampered by any authority - As far as the Insolvency Proceedings are concerned, we are governed by the object set out in the 'Preamble' of the Insolvency Code wherein it is prescribed to maximize the assets of the Company as well as to protect the value so as to get good Resolution Plan for the revival of the debtor company. Application disposed off.

Summary

Issues Involved:
1. Applicability of the moratorium under Section 14 of the Insolvency and Bankruptcy Code (I&B Code) to telecom licenses and spectrum.
2. Rights of the Department of Telecommunication (DoT) to terminate telecom licenses and spectrum allocation during the moratorium period.
3. The status of telecom licenses and spectrum as assets of the corporate debtor under insolvency proceedings.

Detailed Analysis:

Issue 1: Applicability of the Moratorium under Section 14 of the I&B Code to Telecom Licenses and Spectrum
The primary relief sought by the applicants was to declare that the moratorium under Section 14 of the I&B Code applies to all licenses, including telecom licenses and spectrum, held by the petitioner company. The moratorium was declared to prevent the DoT from suspending or terminating the telecom licenses and spectrum allocation during the insolvency resolution process. The tribunal recognized that the telecom licenses and spectrum are essential for the operation of the petitioner company as a going concern and are valuable assets.

Issue 2: Rights of the DoT to Terminate Telecom Licenses and Spectrum Allocation During the Moratorium Period
The DoT argued that it retains exclusive ownership rights over the spectrum and has the authority to terminate the licenses if the licensee fails to pay the fees. The DoT emphasized that the spectrum is a national asset and the licensee only has the "right to use" the spectrum, not ownership. The tribunal acknowledged that the DoT has the right to terminate the license in case of non-payment but noted that the moratorium under Section 14(1)(d) prohibits recovery of any property by an owner or lessor in possession of the corporate debtor during the insolvency period. The tribunal directed the DoT not to terminate the licenses during the moratorium, as it would severely affect the business and potential resolution of the debtor company.

Issue 3: The Status of Telecom Licenses and Spectrum as Assets of the Corporate Debtor Under Insolvency Proceedings
The tribunal found that telecom licenses and spectrum, while not owned by the corporate debtor, are in its possession and are essential for its business operations. The tribunal referred to the "Force Majeure" clause in the license agreement, which prevents the DoT from terminating the license due to insolvency proceedings. The tribunal also emphasized that the "right to use" the spectrum should remain with the corporate debtor during the agreed period, as it is akin to "essential goods or services" under Section 14(2) of the I&B Code. The tribunal concluded that the moratorium applies to the telecom licenses and spectrum, and the DoT should not take any action to cancel them during the insolvency resolution process.

Conclusion:
The tribunal directed that the moratorium under Section 14 of the I&B Code applies to the telecom licenses and spectrum held by the petitioner company. The DoT was instructed not to terminate or suspend the licenses and spectrum allocation during the moratorium period. The tribunal emphasized the importance of these assets for the ongoing business operations and potential resolution of the debtor company. The applications were disposed of accordingly.