Anil Ambani’s RCom debacle has reached a stage where he faces a jail term for non-payment of dues. Who is to blame?
DKODING NEWSLINE : Feb21,2019| New Delhi
- On the petition of Ericsson, the Supreme Court has held RCom Chairman Anil Ambani guilty of contempt.
- RCom owes Ericsson dues of around Rs 550 crore, for which the company had dragged it to NCLT in September 2017.
- RCom was hoping to repay the amount with the proceeds of the asset sale to Reliance Jio, which
- Now Anil Ambani has to repay Rs 453 crore in 4 weeks or face a 3-month prison term.
The problems just don’t seem to be ending for RCom Chairman Anil Ambani, who’s company is already in the middle of the bankruptcy resolution process.
Ericsson has filed a suit against RCom for not clearing its debts of Rs 550 crore. In this regard, the company had filed three contempt pleas in the Supreme Court. In the latest hearing on February 20, the SC has held Anil Ambani and two directors of Reliance guilty of contempt of court.
Ambani has been asked to return Rs 453 crore to Ericsson in four weeks apart from Rs 118 crore that has already been submitted in the court. If he fails to do so, he faces a 3-month jail term. Even the three RCom entities have been asked to deposit a fine of Rs 1 crore each in 4-weeks, or directors face a 1-month jail term each.
The SC took this decision despite the ‘unconditional apologies’ given by RCom and Anil Ambani. It stated:
“Unconditional apology by Reliance can’t be accepted given the attitude of the deponent to the highest court of the land. Three Reliance companies had no intention of payment of money, it amounts to contempt.”
Ericsson had requested the court to send Anil Ambani to prison and seize his personal assets to recover its dues. It had also alleged that Anil Ambani’s Reliance Group had money to invest in Rafale but not to
repay its debt.
A PROMISE UNKEPT:
Ericsson had signed a 7 year deal in 2014 with RCom to operate and manage its network for seven years, but was not paid its dues of over Rs 1,000 crore. It then moved bankruptcy court against RCom in September 2017. After prolonged litigation, RCom agreed to settle for Rs 550 crore and managed to prevent the bankruptcy process from kicking off.
The company also requested the Supreme Court to stop the insolvency process against it so that the asset sale to Reliance Jio for Rs 18,000 crore could move on without any complications.
But the asset sale failed miserably. The last nail in the coffin was the spanner thrown in by Department of Telecommunications (DoT), which wanted a guarantee on repaymentof spectrum dues from Reliance Jio where applicable.
DoT had claims of over Rs 2,947 crore against RCom. It was asked by SC to take a corporate guarantee from RCom along with a land parcel from its subsidiary. But DoT only accepted this on the condition that if the collaterals faced any issue, Reliance Jio would pay the amount. But Jio had no inclination to pick the tab.
This has taken the company to insolvency proceedings. RCom even told the SC that they had moved “heaven and earth” to ensure that Ericsson is repaid. Also, Anil Ambani could not be held personally liable for the company, according to his lawyer.
But now in response to the Supreme Court judgement, RCom says that it is willing to pay up the dues.
- Anil Ambani’s RCom debacle is a typical case study on the drawbacks of taking too much leverage.
- The issue is not just RCom specific. The entire Reliance Group under Anil Ambani had a debt of Rs 1.72 lakh crore as on September 2018.
- RCom actually delayed the inevitable when its bankruptcy resolution first came under the NCLT. Now it’s market value has declined significantly and hope for lenders to recoup their investments is very low.
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