The Mumbai Bench of the National Company Law Tribunal (NCLT) has held that the security deposits refundable to post-paid subscribers and the unspent balances of pre-paid subscribers are considered money collected in excess of prescribed rates. These amounts, being outstanding liabilities in the Corporate Debtor’s books at the start of the CIRP, shall be admitted by the RP as Operational Debt and are liable to be paid into the Telecommunication Consumers Education and Protection Fund.
The liability towards these subscribers exists and must be included in the Information Memorandum, irrespective of whether individual claims were filed, added the Tribunal.
The NCLT also clarified that only liabilities that exist as of the insolvency commencement date are admissible in a CIRP. Regulatory penalties imposed after the commencement of CIRP are not admissible claims due to the moratorium under Section 14 of the Code. The financial disincentive imposed by TRAI is considered an Operational Debt, but only the portion levied before the CIRP began is admissible and must be dealt with in accordance with the Resolution Plan.
The Division Bench comprising Ashish Kalia (Judicial Member) and Sanjiv Dutt (Technical Member) observed that the Corporate Debtor held security deposits from post-paid subscribers and advance payments from pre-paid subscribers, which were due for refund prior to the commencement of the CIRP.
The Tribunal observed that the total claim of Rs. 2.53 Crores was mostly raised after the commencement of the CIRP. Only a demand for Rs. 17 Lakh was raised prior to the CIRP start date, while the remaining Rs. 2.36 Crores was demanded while the moratorium under Section 14 of the Code was in effect.
The Tribunal emphasized the wide scope of Section 14, which stays all proceedings against the Corporate Debtor, and the overriding effect of the Code over other laws like the TRAI Act, as established by Section 238 of the Code. It held that regulatory penalties imposed after the commencement of CIRP, even if they pertain to a prior period, do not constitute a valid claim for the purpose of the resolution process.
The Tribunal thus classified the financial disincentive as a penalty for non-compliance, which should be treated as an Operational Debt.
Briefly, the application was filed by the Telecom Regulatory Authority of India (TRAI) against the Resolution Professional (RP) of Dishnet Wireless Limited (the Corporate Debtor). The Corporate Debtor, a wholly-owned subsidiary of Aircel Limited, was admitted into the Corporate Insolvency Resolution Process (CIRP) in 2018, and the TRAI had imposed financial disincentives amounting to Rs. 2.53 Crores on the Corporate Debtor for failure to meet the Quality of Service (QoS) benchmarks.
In 2017, the Corporate Debtor issued a notice to surrender its licenses in six service areas, which forced many subscribers to either port their numbers or lose them, leaving behind unspent prepaid balances and post-paid security deposits. TRAI directed the Corporate Debtor, and subsequently the RP, to refund these amounts. Thus, TRAI’s application sought a direction to the RP to ascertain these subscriber dues and make provisions for them in the Resolution Plan, and to admit its own claim of Rs. 2.53 Crores as statutory dues.
The RP contended that ascertaining the subscriber dues was a complex task and that subscribers should have filed their claims as part of the CIRP. The RP also argued that TRAI had not filed a claim for the financial disincentives and that most of these penalties were imposed during the moratorium period under Section 14 of the Insolvency and Bankruptcy Code, 2016 (the Code), and were therefore not admissible.
Appearances:
Senior Advocate Chetan Kapadia with Dhir & Dhir Associates, for the Applicant
