DoT slams Axis Bank for failure to honour Aircel guarantee

Yet another bank has got snarled in a controversy with the Department of Telecommunications (DoT) directing that guarantees from Axis Bank should not be taken as it had failed to honour a guarantee.

“Axis Bank has failed to invoke a bank guarantee issued by them on behalf of Aircel Group of Companies,” said a statement by the DoT. “This action by Axis Bank is a serious breach of trust and contract with the Government of India.”

An office memorandum of the DoT notes that the bank had failed to honour a bank guarantee issued by it on behalf of Aircel group. In light of this, the department has directed telecom ministry officials, mobile operators, associations of telecom companies and internet service providers “not to accept any new bank guarantee from Axis Bank including renewals.”

Aircel is filing for bankruptcy because of growing financial trouble and a tough business environment. The company has a debt of about Rs15,500 crore, while it has seen a sharp fall in subscribers – from 80 million to just 56 million.

According to Axis Bank, it had issued bank guarantees to Bharti Airtel when it had acquired Aircel’s spectrum. It had not released them as it would be a violation of the orders of the Telecom Disputes Settlement and Appellate Tribunal.

“Once the order is vacated, the bank will be pleased to honour the said guarantees, as per the underlying terms,” said a bank spokesperson. “This matter has been communicated to DoT.”