RBI rejects plan to sell Aircel assets to UVARCL, says proposal does not conform to norms for ARCs

MUMBAI: The Reserve Bank of India (RBI) has rejected the insolvency tribunal approved plan of selling Aircel’s assets to UV Asset Reconstruction Company Ltd. (UVARCL), dealing a blow to the bankrupt telco’s lenders and leaving the carrier staring at possible liquidation.According to people aware of the development, RBI has refused to give permission to the resolution plan on the grounds that it does not conform with guidelines laid down for asset reconstruction companies (ARCs) and provisions of The Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002 (Sarfaesi Act). The Sarfaesi Act does not allow ARCs to submit resolution plans for ailing companies, but the Insolvency and Bankruptcy Code (IBC) allows them to do so. IBC was brought in 2016 while the SARFAESI Act has been in place since 2002.UVARCL had approached RBI for approval shortly after the resolution plan was cleared by the National Company Law Tribunal (NCLT) on June 18.UVARCL, Deloitte and RBI did not respond to ET's queries. Legal experts say the development may have an impact on a similar resolution plan for Reliance Communications (RCom) and its unit Reliance Telecom, with UVARCL again being the nominated buyer of the bankrupt telco’s key assets, including spectrum. The plan is awaiting NCLT nod. Deloitte is the resolution professional for both Aircel and RCom. RBI’s stance could also have a domino effect on bankruptcies across industries where ARCs are bidders of insolvent firms.Sources say that UVARCL and Deloitte are likely to approach the likes of the Ministry of Corporate Affairs and the Insolvency and Bankruptcy Board of India (IBBI) to try and find a way to resolve the situation.“IBC is complementary and not contradictory to the Sarfaesi Act and both are enacted to resolve the financial assets by restructuring to ensure restoration of economic value. IBC being a later legislation overrides other laws unless inconsistent with any other extant law,” said a lawyer familiar with the matter.ET has learnt that ARCs together may also approach RBI for more clarification on this, since several of them have bid for the assets of bankrupt companies under the IBC process. For example, JM Financial ARC, ARCIL and Phoenix have bid for Reliance Naval and Engineering, while Suraksha ARC has recently submitted interest to buy debt laden realtor HDIL. These transactions are not yet closed.77754074THE OPTIONS“There appears to be clashes between the IBC and the SARFAESI Act in certain parts…The options now are — contesting RBI decision in courts, looking at the second highest bidder, reapplication of bids and if neither works, then it is liquidation,” said Manoj Kumar, partner and head- M&A and Insolvency, Corporate Professionals.UVARCL had outbid Reliance Jio, Bharti Airtel and private equity firm Varde Partners to pick up assets of Aircel, which went bust under a debt of Rs 26,000 crore. It was all set to take over Aircel and its two units with a 74% stake with an aim to repay some Rs 6,630 crore to the bankrupt telco’s financial creditors within five years, failing which lenders would have got a 74% stake in the company as against 26% now. The amount translates into an 89% haircut for lenders, which had made claims worth Rs 58,760 crore for the telco's outstanding loan amount.Lenders to Aircel and its units Dishnet Wireless and Aircel Cellular include SBI, Bank of Baroda, Punjab National Bank, China Development Bank and Canara Bank.

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