13 March 2019: State Bank of India, the main lender to debt laden Reliance Communications (RCom), told an appellate tribunal Wednesday that it “refused to believe” that the telco will let its chairman Anil Ambani go to jail contempt of court, and will ultimately pay Ericsson by the March 19 deadline, even without the income tax refunds.
Arguing for SBI in the National Company Law Appellate Tribunal (NCLAT), senior counsel NK Kaul reiterated that RCom had no right to have its dues paid by the Rs260 crore “public money” held in the trust and retention account and argued that the 118 crores for payments to Ericsson had already come from related companies and other sources.
RCom needs to pay Ericsson Rs 453 crore – out of its Rs 571 crore dues – by March 19, else its chairman Anil Ambani will go to jail for three months. RCom has already paid Rs 118 crore.
“I refuse to believe that the chairman of this company will be allowed to go behind bars and they will not pay up the money.” said Kaul.
When the two-member bench led by Justice SJ Mukhopadhaya quizzed Kapil Sibal, senior counsel for RCom, on how the telco would raise the remainder of the dues to Ericsson if the tax refund of Rs 260 crore was released, Sibal said, “We will see what we can borrow from the bank or something like that”.
RCom moved NCLAT, seeking directions to the 37 lenders, including lead lender SBI, to release Rs260 crore that has been refunded by the IT department directly to Ericsson. Lenders have refused to do so, saying public money can’t be used to settle payment to a private party. NCLAT has warned that it would order a revival of insolvency proceedings in the National Company Law Tribunal (NCLT) against RCom if Ericsson wasn’t paid on time.
“If the logical order is that (there be) a revival of insolvency proceedings, then so be it,” Kaul said. NCLAT Wednesday reserved its order.
Incidentally, RCom also wants to revive insolvency proceedings against itself, and has separately moved the NCLAT to vacate the stay on NCLT’s ruling admitting such proceedings against the telco. This, after its move to sell assets, including spectrum, to Reliance Jio was stymied by a slew of legal cases. RCom has said it had banked upon this deal to pare its over Rs40,000 crore debt.
“Let it go for insolvency. So far as banks are concerned. we can’t do anything for sale (to Jio). We don’t have a buyer available with us. The other telecom operators who had bid, there was difference of more than 70% between the bid of RJio and the other mobile telecom operators,” said a counsel for some RCom lenders, who did not wish to be named.
Justice Mukhopadhaya cautioned that if insolvency proceedings are resumed, then all payments made to Ericsson after the order of the NCLAT staying insolvency proceedings, and funds held in the trust and retention account for lenders would have to be refunded to the insolvency professional.
Sibal argued that lenders had earlier agreed to paying Ericsson’s dues from the sale of spectrum that was mortgaged to lenders.
“They are talking about public money being used for a private settlement and they themselves agreed to it with respect to the sale spectrum that is mortgaged to them” said Sibal