NCLAT STAYS INSOLVENCY ORDER AGAINST RCOM
The National Company Law Appellate Tribunal (NCLAT) on Wednesday stayed the May 15 order of the National Company Law Tribunal in Mumbai, which had admitted Reliance Communications and two of its subsidiaries for insolvency proceedings. The NCLAT asked the Anil Ambani-led company to pay Ericsson ~5.5 billion by September. With the stay on bankruptcy proceedings, RCom can now continue with its asset monetisation scheme .
The National Company Law Appellate Tribunal (NCLAT) on Wednesday stayed the May 15 order of the National Company Law Tribunal (NCLT) in Mumbai, which had admitted Reliance Communications (RCom) and two of its subsidiaries for insolvency proceedings. The NCLAT asked the Anil Ambani-led company to pay Ericsson ~5.5 billion by September.
With the stay on bankruptcy proceedings, RCom can now continue with its asset monetisation scheme involving the sale of towers, optic fibre cable network, spectrum and media convergence nodes to the Mukesh Ambani-led Reliance Jio Infocomm for ~181 billion.
“RCOM expects to now complete the sale of its assets within the next few weeks, having removed legal hurdles of cases by minority investors of Reliance Infratel, and Ericsson, thereby achieving an overall debt reduction of approximately ~250 billion from the first phase of its asset monetization program,” said RCom’s spokesman.
NCLAT chairman Justice S J Mukhopadhaya asked the parties to settle the matter, saying the fate of operational creditors in the corporate resolution process was not ideal, especially if Ericsson wished to recover the majority of its dues. The appellate tribunal asked RCom and Ericsson to file an affidavit by June 7, stating the two firms would abide by the settlement.
Ericsson India, a subsidiary of the Swedish telecom equipment maker and service provider, had filed a case in the NCLT, Mumbai, last September, seeking liquidation of RCom and its subsidiaries, Reliance Infratel and Reliance Telecom, in order to recover ~11.5 billion.
The three companies were subsequently admitted for insolvency proceedings, and the NCLT appointed a resolution professional to take over the management of each company. Ericsson argued it had in 2014 entered into a seven-year agreement with RCom and its subsidiaries for maintaining, upgrading the latter’s telecommunications infrastructure, which was not honoured.
RCom and its subsidiaries owed Ericsson around ~9.78 billion for their services which, Ericsson's counsel told the NCLT, had increased to around ~16 billion, with delays in payment despite several notices being issued to the companies.
RCom filed its appeal with the NCLAT, and on Wednesday secured a stay on the order admitting the three firms under the Insolvency and Bankruptcy Code. RCom's spokesperson noted that through this order, the company's board of directors has been reinstated.
The restructuring will reduce the company's current debt of ~460 billion to around ~60 billion by the end of the restructuring plan, according to the plan put forward by the Anil Ambani group companies in December 2017.
The NCLAT allowed the firms to continue with their strategic debt restructuring plans, with proceeds from the sale of assets to Jio going to secured financial creditors.
In another case, minority shareholders of the company had filed petitions in the NCLT, Mumbai, against the sale of assets to Jio.