National Company Law Appellate Tribunal orders Airtel to pay Rs 112 crore to Aircel

An appellate court has ordered asked Bharti Airtel to pay Rs 112 crore to Aircel, overturning an earlier tribunal order, giving a financial boost to the bankrupt telco which is about to exit insolvency proceedings.

"...we allow the present appeal and set aside the order dated 01.05.2019 passed by NCLT, Mumbai Bench and direct the Respondent No.1 & 2 to pay the amount whatever has been set off by them to the Aircel Entities. The Appeal is allowed with the above directions and, if any, interim orders were issued stands vacated," said the National Company Law Appellate Tribunal (NCLAT) in an order on Monday. Respondents 1 & 2 are Bharti Airtel and Bharti Hexacom, respectively.

According to people aware of the developments, NCLAT overturning National Company Law Tribunal's order will be a setback to Airtel , which may now take the matter to Supreme Court.

The three member NCLAT bench observed that "Accounting Conventions cannot supersede any express provisions of the laid down provisions of the specific law on the subject ", and set aside the tribunal's order.

The Insolvency and Bankruptcy Code -"I&B Code, 2016 provides the mechanism of Moratorium during the CIRP till the Resolution Plan is approved or Liquidation order is passed. The I&B Code has a provision to override other Company Appeal (AT) (Ins) No.530 & 700 of 2019 laws as enunciated above. Hence, even if there are some such provisions in any other law, the I&B Code 2016 will prevail over that," it added.

It all started when Airtel had given bank guarantees for Rs 453.7 crore and paid Rs 298 crore in cash to the Department of Telecommunications (DoT) on behalf of Aircel, after adjusting the amounts against its Rs 3,500-crore deal to buy the smaller telco’s 4G spectrum. DoT had demanded these to clear the deal.

The Supreme Court had upheld an earlier tribunal order and cancelled bank guarantees, which meant Airtel had to pay the amount to Aircel, and asked DoT to return Rs 298 crore cash to Aircel.

Airtel paid Rs 341.80 crore to Aircel and its unit in January 2019, and adjusted the remaining Rs 112 crore against what it claimed were inter-connection charges due from Aircel.

The complexity of the case arose on the grounds of whether a creditor - Airtel - can pay its corporate debtor - Aircel - after making deductions despite the fact that the debtor is undergoing insolvency and is under a payment moratorium, say experts