๐๐ป๐๐ผ๐น๐๐ฒ๐ป๐ฐ๐ ๐ฎ๐ป๐ฑ ๐ง๐ฒ๐น๐ฒ๐ฐ๐ผ๐บ: ๐ก๐๐๐๐ง ๐๐น๐ฎ๐ฟ๐ถ๐ณ๐ถ๐ฒ๐ ๐๐ต๐ฒ ๐๐ถ๐ฒ๐ฟ๐ฎ๐ฟ๐ฐ๐ต๐ ๐ผ๐ณ ๐๐ฎ๐๐
Abhay Shrotiya. - The National Company Law Appellate Tribunal (NCLAT) recently ruled that the Insolvency and Bankruptcy Code (IBC) will take precedence over the Telecom Regulatory Authority of India (TRAI) Act in a case involving Reliance Telecom. This decision came after TRAI contested the classification of security balances and unspent balances of subscribers as operational debt during the Corporate Insolvency Resolution Process (CIRP) of the now-defunct company.
๐๐ฒ๐ ๐๐ถ๐ด๐ต๐น๐ถ๐ด๐ต๐๐ ๐ณ๐ฟ๐ผ๐บ ๐๐ต๐ฒ NCLAT'๐ ๐๐ฒ๐ฐ๐ถ๐๐ถ๐ผ๐ป:
๐๐ถ๐๐บ๐ถ๐๐๐ฎ๐น ๐ผ๐ณ ๐ง๐ฅ๐๐'๐ ๐ฃ๐น๐ฒ๐ฎ: The NCLAT dismissed TRAI's argument that the security balances of postpaid subscribers and unspent balances of prepaid subscribers should be considered operational debt. The tribunal stated that these amounts are held under a "constructive trust" and cannot be classified as operational debts in the context of insolvency proceedings.
๐ข๐๐ฒ๐ฟ๐ฟ๐ถ๐ฑ๐ถ๐ป๐ด ๐๐ณ๐ณ๐ฒ๐ฐ๐ ๐ผ๐ณ ๐๐๐: The NCLAT emphasized that, according to Section 238 of the IBC, it has an overriding effect over any other law in case of conflict. This was supported by a previous ruling from the Supreme Court, affirming that the IBC prevails over the TRAI Act.
๐๐ถ๐ป๐ฎ๐ป๐ฐ๐ถ๐ฎ๐น ๐๐ถ๐๐ถ๐ป๐ฐ๐ฒ๐ป๐๐ถ๐๐ฒ๐: TRAI had imposed a financial disincentive exceeding โน85 lakh on Reliance Telecom for quality of service issues. The NCLAT held that this penalty could not be classified as operational debt and noted there was no statutory prohibition against the company utilizing subscriber funds for business activities.
๐ฆ๐๐ฎ๐๐๐๐ผ๐ฟ๐ ๐๐๐ฒ๐: The tribunal also clarified that statutory dues are categorized as government dues, which must be settled according to the resolution plan established during insolvency proceedings.
๐๐บ๐ฝ๐น๐ถ๐ฐ๐ฎ๐๐ถ๐ผ๐ป๐
This ruling underscore the legal precedence of the IBC in insolvency cases, particularly concerning financial obligations defined under different regulatory frameworks. It suggests that regulatory bodies like TRAI may have limited recourse when dealing with financial claims during a company's insolvency process.
IBC TRAI Telecom Reliance Legal News Insolvency SupremeCourt NCLAT
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