Supreme Court Sends RCom Bank Guarantee Case to High Court

The Supreme Court on Thursday refused to intervene in Reliance Communications’ (RCom) challenge against the Department of Telecommunications’ (DoT) decision to encash bank guarantees totaling approximately ₹801.91 crore. These guarantees are linked to RCom’s deferred spectrum dues, with the court directing the company to seek relief from the appropriate High Court.

A Bench of Justice P S Narasimha and Justice Alok Aradhe denied RCom’s plea for one-week interim protection, questioning the practice of invoking Article 32 jurisdiction before seeking High Court recourse. The court also clarified that its February 2026 ruling on spectrum under the Insolvency and Bankruptcy Code (IBC) does not automatically justify the invocation of these guarantees.

Key Invoked Guarantee Figures

• Total amount: ₹801.91 crore
• Yes Bank: ₹281.45 crore
• State Bank of India: ₹249.29 crore
• Punjab National Bank: ₹114.09 crore
• Canara Bank: ₹157.08 crore

RCom’s resolution professional, alongside applications from Yes Bank, State Bank of India, and Punjab National Bank, had filed the petition. They argued that the DoT had kept the guarantees untouched for nearly eight years, from 2018 to 2026, invoking them only after the Supreme Court’s February ruling in the insolvency case.

RCom contended that the funds recovered from these guarantees would otherwise form part of the insolvency estate, distributed among creditors under the IBC’s priority framework. Their encashment, the company argued, would unfairly grant the DoT priority over other creditors.

Understanding RCom’s Arguments

• DoT invoked guarantees after eight years, post-SC’s February ruling.
• The earlier Supreme Court judgment did not instruct DoT to invoke the guarantees.
• Encashment would give DoT priority over other creditors in the insolvency estate.
• A review petition against the February judgment remains pending, potentially undermining RCom’s challenge.

The February ruling established that telecom spectrum is a public resource and not an asset of a telecom service provider to be included in insolvency proceedings. RCom maintained that this judgment did not specifically address whether bank guarantees for spectrum dues could be invoked during ongoing insolvency proceedings.

The resolution professional further emphasized that RCom operates as a going concern, suggesting that any action affecting its spectrum could severely impact its continued operations. The Supreme Court’s decision to deny interim protection underscores the need for RCom to pursue its legal challenge through the High Court, as the merits of its case were not reviewed at this stage.