Insolvency Law: Supreme Court Declines Airtel's Plea To Set Off Dues Payable To Aircel

The Supreme Court upheld an order of the National Company Law Appellate Tribunal on Wednesday, which held that a set-off from an amount that is due cannot be permitted during the subsistence of a moratorium under the Insolvency and Bankruptcy Code.

The court was dealing with a case pertaining to Bharti Airtel Ltd. and its spectrum trade agreements with Aircel Ltd. and its subsidiary, Dishnet Wireless Ltd.

In 2016, Airtel entered into eight STAs for the purchase of the right to use the spectrum allocated to Aircel in the 2,300 MHz band.

Thereafter, Aircel was admitted into insolvency in 2018. At the time, Airtel owed Aircel nearly Rs 454 crore. However, Airtel claimed a set-off of Rs 112.87 crore from the amount payable, claiming that this amount is due and payable by Aircel entities.

Airtel's claim, however, was rejected by the resolution professional. This prompted it to file an appeal before the NCLT.

The NCLT held that Airtel had a right to set off Rs 112.87 crore from the payment, which was due and payable to Aircel entities.

This led to another appeal being filed before the NCLAT. The appellate tribunal allowed the appeal and held that a set-off violates the basic principles and protection accorded under the insolvency law.

The tribunal further held that as a moratorium under the IBC applies till the date of completion of the insolvency resolution process, which is until the resolution plan is approved or the liquidation order is passed, it will be contrary to law if a set-off is permitted during this period.

Subsequently, a final appeal was filed before the top court.

The court explained that the relationship and the nature of identity of the corporate debtor undergo a change upon the commencement of the resolution process.

Declining to interfere with the NCLAT's decision, the court said that the past-due bills of the debtor cannot be offset against bills that are due after the resolution process has started, as this is against the law.