The New Delhi bench of National Company Law Appellate Tribunal (NCLAT ) held that the IBC being a special statute shall prevail over the TRAI Act therefore any penalty imposed by the TRAI on the corporate debtor would be recovered as per the scheme of the IBC.
Telecom Regulatory Authority of India (TRAI), the Appellant is a regulator constituted under Section 3 of the Telecom Regulatory Authority of India Act, 1997 ( “1997 Act”). The Appellant in exercise of jurisdiction under the 1997 Act has framed Regulations namely – Telecommunication Consumers Education and Protection Fund Regulations, 2007.
The Appellant directed all cellular mobile service providers, to submit their compliance report in respect of parameters specified in Regulation 5 of Quality of Service Regulations on quarterly basis in the specified format. After giving opportunities and issuing show cause notice, imposed financial disincentives totaling to Rs.85,10,000/-. The Respondent discontinued voice services to all existing subscribers w.e.f. 29.12.2017.
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The Appellant issued direction on 19.01.2018 seeking refund of the unspent balance of the prepaid mobile subscribers who ported their numbers through the recipient operators, to whose network the subscriber have ported and process the refund subscribers, who do not wish to port out their mobile numbers or are not able to port out by 31.01.2018. The financial disincentive of Rs.1,60,000/- was further imposed on 17.04.2018.
The Corporate Insolvency Resolution Process (“CIRP”) against the Corporate Debtor – Reliance Telecom Ltd. commenced on 15.05.2018 on an application filed by Ericsson India Pvt. Ltd. During the CIRP of the Corporate Debtor, the Appellant filed an IA with the NCLT, seeking a direction against the RP to ascertain the unspent balance and security deposit payable to the subscribers and make provisions for the same in the Resolution Plan and further direction against the RP to allow the payments of statutory dues amounting to Rs.85,10,000/- to the Appellant. The RP filed affidavit in reply to the IA, which IA was heard by the Adjudicating Authority and allowed by order dated 05.12.2023, which is under challenged in the Appeal.
The appellant submitted that Adjudicating Authority committed error in treating security balance of post-paid subscribers and unspent balances of pre-paid subscribers of the company and financial disincentive levied by the Appellant as ‘operational debt’, which decision is not in accordance with law.
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It was alleged that security deposit balance of postpaid subscribers and unspent balances of pre-paid subscribers of the Company are held by the telecom service provider, in which the beneficial interest therein continues to vest with the subscribers till the service is actually rendered. As per Explanation to Section 18(1)(f) of the IBC the above amount cannot be appropriated by the Respondent and used in the CIRP as the beneficial interest therein never came to be vested in the Respondent and that in order to maintain its telecom license, the Respondent undertook to refund these amounts before and after commencement of CIRP. The amounts, therefore, ought to be treated as CIRP costs in terms of Section 5(13)(c) of the IBC.
At the outset, the tribunal rejected the contention of the appellant that TRAI being a special statute must prevail over the IBC and referred to the Supreme Court judgment in A. Navinchandra Steels Pvt. Ltd. vs. SREI Equipment Finance Ltd. & ors. (2020) wherein it was held that IBC is a special statute, which must prevail in the event of conflict due to a non-obstante clause contained in Section 238.
The tribunal observed that the disincentive, which has been imposed by the TRAI on the Corporate Debtor were in nature of penalty for non-compliance of Regulations 5A and 9A of Quality of Service Regulations 2009.
It was viewed that the payment towards the disincentive as imposed by the Appellant was liability of the Corporate Debtor, which remained outstanding on the date of commencement of the CIRP. Hence, the said amount has to be paid as per the Resolution Plan, in accordance with the IBC process therefore the AA was right in treating this amount as an operational debt.
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The security deposit, which was given by post-paid subscribers, which remained unpaid is an outstanding liability of the Corporate Debtor. The Corporate Debtor, thus has accounted for liabilities, which includes security as well as statutory dues. It was held that there was no error in the order of the Adjudicating Authority, accepting the said outstanding dues as ‘operational debt’, to be paid as per the provisions of the Resolution Plan.
The Bench of Justices Ashok Bhushan (Chairperson), Barun Mitra and Arun Baroka observed that there is no material on record to accept the submission of the Appellant that the said amount of security deposit balances of post-paid subscribers and unspent balances of prepaid subscribers be accepted as CIRP cost.
The tribunal dismissed the appeal as no grounds have been made out to interfere with the impugned order in these Appeal(s).
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