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A channel allocation algorithm in a cellular network consists of two parts: a channel acquisition algorithm and a channel selection algorithm. Some of the previous works in this field focused on centralized approaches to allocating channels. But, centralized approaches are neither scalable nor reliable. Recently, distributed dynamic channel allocation algorithms have been proposed, and they have gained a lot of attention due to their high reliability and scalability. But, in most of the algorithms, the cell that wants to borrow a channel has to wait for replies from all its interference neighbors and, hence, is not fault-tolerant. In this paper, we propose a new algorithm that is fault-tolerant and makes full use of the available channels. It can tolerate the failure of mobile nodes as well as static nodes without any significant degradation in service.