22 March 2019: After initial celebrations on receipt of settlement amount from Reliance Communications (RCom), there could be fresh worries for Swedish telecom equipment supplier Ericsson in the form of potential demand for refunding from the Anil Ambani company.
The Supreme Court (SC) on February 20 had directed RCom to pay Rs 576 crore to Ericsson by March 19 or risk letting the Anil Ambani, the chairman of the Anil Dhirubhai Ambani Group, face a three-month jail term.
Subsequently, RCom had moved the National Company Law Appellate Tribunal (NCLAT) seeking to utilise income tax refunds of Rs 260 crore, lying with State Bank of India (SBI), for repaying Ericsson.
Over the course of the NCLAT hearing, on March 13, the chairman of the appellate tribunal, J Mukhopadhyay, had observed that even if RCom pays the settlement sum to Ericsson, if Insolvency and Bankruptcy Code (IBC) proceedings are allowed by NCLAT, the amount will have to be refunded by Ericsson to RCom.
The appellate tribunal had further observed that the settlement amount of Rs 576 crore would be subject to the IBC proceedings if triggered. The NCLAT had even suggested to Ericsson that they should consider moving SC for a clarification.
And that without the SC clarification, the appellate tribunal would direct Ericsson to return the settlement sum of Rs 576 crore, if it allowed Corporate Insolvency and Resolution Process (CIRP) against RCom.
These observations appear to stem from the NCLAT’s interim order of May 30, 2018. In the interim order, in para 11 of the interim order, the NCLAT states, “Payment of Rs 550 crore to ‘Operational Creditor’ (read Ericsson) shall be subject to the decision of these appeals.”
The order further reads, “If the appeals are dismissed, the ‘Operational Creditor’ (Read Ericsson) will pay back the amount to the ‘Corporate Debtors’ (Read RCom).”
Ericsson, however, seems unfazed by NCLAT’s observations are confident that any direction by the NCLAT for returning the Rs 576 crore settlement sum will be untenable.
Senior advocate, Anil Kher, who appeared on behalf of Ericsson in NCLAT said, “Settlement, as proposed by RCom and authorised by SC, has been complied with and payment has been received. Appellate Tribunal has no power to seek a refund after SC’s approval of payment of the settlement sum of 576 crore.”
Lenders are expected to watch these developments closely after Ericsson, which is at best an Operation Creditor, had trumped the financial creditors in securing Rs 576 crore of its dues even before the lenders.
On March 15, NCLAT had rejected the RCom plea seeking to use income tax refunds of Rs 260 crore, lying with SBI, for repaying Ericsson. On March 18, RCom decided against challenging the NCLAT order in SC. And by late evening, RCom issued a statement confirming that Rs 458.77 crore had been deposited with Ericsson.
Already, Rs 118 crore had already been paid to Ericsson, earlier. The SC prescribed deadline for payment of the settlement sum of Rs 576 crore was March 19. Failure to pay would have meant a three-month jail term for Anil Ambani.
In the same statement, confirming the payment to Ericsson, Anil Ambani also expressed his gratitude to Mukesh Ambani and Nita Ambani for “standing by” him in “these trying times” and for “extending this timely support”.
Meanwhile, in another statement on March 18, RCom has confirmed that they will be looking for a successful resolution through the CIRP under the IBC.