The National Company Law Appellate Tribunal has directed Bharti Airtel Ltd. and Bharti Hexacom Ltd. to pay Rs 112 crore to Aircel Ltd. and its subsidiary.
The resolution professional for Aircel had moved NCLAT against a Mumbai National Company Law Tribunal order that had allowed the Bharti group entities to set off their dues against the receivables from the insolvent telecom company.
The case emanates from an order of the Supreme Court last year, which had directed the Bharti entities to return Rs 453 crore to Aircel and its subsidiary as per a spectrum trade agreement. The Bharti group entities, however, only paid Rs 341 crore and retained the balance amount of Rs 112 crore as a set-off.
A three-member bench of the NCLAT observed that an accounting convention cannot supersede any provisions of the insolvency code, which is a specific law on the subject. As such, it allowed the appeal filed by Aircel's resolution professional and set aside the order passed by the NCLT.
Accounting Set-Off Not Permitted During Moratorium, NCLAT Says
Counsel for the bankrupt wireless company and State Bank of India, the lead bank in the creditor's committee, opposed the set-off citing that:
- The NCLT granted a preferential payment to Bharti group entities over other operational creditors by allowing the set-off. This goes against the intent of the insolvency code. Further, Bharti entities claimed the set-off against two separate and unrelated transactions.
- The set-off violates the moratorium and goes against the interests of secured creditors who have a first charge over the spectrum assets.
To this, counsel for Bharti group entities argued that:
- The set-off was carried out only to the extent of undisputed principal amounts and was based on mutual dealings between the parties.
- It is a well-known accounting concept which has been given legal recognition under Indian corporate laws.
The appellate tribunal relied on its past rulings where it held that any person, including a financial creditor, cannot recover amounts from corporate debtor during subsistence of moratorium. Observing that the insolvency code overrides the inconsistent provisions in other laws, the NCLAT granted relief to Aircel.
In June, the Mumbai bench of NCLT had approved a Rs 6,630-crore resolution plan, proposed by UV Asset Reconstruction Company Ltd., for Aircel.
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