CHINESE BANKS FACE LEGAL HURDLE RECOVERING DUES FROM AMBANI
Chinese banks, which are planning to move Indian courts to enforce the $717-million payment ordered by the UK high court from Anil Ambani, face an additional legal hurdle. This comes after State Bank of India (SBI) moved the National Company Law Tribunal’s (NCLT’S) Delhi Bench to enforce personal guarantees of Ambani.
SBI’S move comes more than a year after Reliance Communications (Rcom) voluntarily decided to file for insolvency proceedings with the NCLT.
Corporate lawyers said the latest move by SBI will delay recovery of dues by the Chinese banks, which won the UK court order in May this year.
The Chinese banks had invoked personal guarantees given by Ambani to avail foreign loans by Rcom but Ambani had refused to pay the money, arguing he never gave any personal guarantees.
Both SBI and the Chinese banks will have a tough time recovering funds from Ambani considering he has already submitted to the British court that his net worth is zero. Most of the stake held by Ambani in his Indian companies is already pledged with banks.
“With the SBI now litigating on the personal guarantee issue of Ambani, there will be lots of litigation awaiting the Chinese banks and they will have to wait longer,” said a Mumbai-based lawyer.
Lawyers said according to provision Section 96 (a) of the Insolvency and Bankruptcy Code, 2016 (IBC), interim moratorium is imposed as soon as the application under Section 95 of the IBC is filed before the Adjudicating Authority till the admission of application under Section 100 of IBC.
“As it is a personal guarantee specific to the State Bank of India, therefore, SBI shall have exclusive rights to claim money under such specific personal guarantee. The Chinese banks hold no right to claim any amount under such an application filed by the SBI before the Adjudicating Authority,” said Rajiv Bansal, a senior advocate.
Once the personal guarantee is invoked, there will be a moratorium which will get triggered, and during this period of moratorium, no fresh claim can be made with respect to corporate entities in which the individuals who have given their personal guarantees are promoters.
“The Chinese banks will not be able to proceed against Anil Ambani to recover the amounts due to them under the foreign judgment because the moratorium kicks in,” said Bansal.
The United Kingdom court, while passing its judgment against Ambani, had ruled that the final amount owed by Ambani to the banks under the guarantee shall be assessed subject to the outcome of the Rcom insolvency action," he added.
SBI has close to ~15,000 crore of exposure in the three Reliance Communications group companies, and is not receiving any dues from the Ambani companies after it agreed to sign a “standstill” agreement in June 2017.
When contacted, a spokesperson of Anil Ambani said, “The matter relates to a corporate loan availed by Rcom and Reliance Infratel (RITL) and is not a personal loan of Ambani.”
Rcom and RITL resolution plans were approved by 100 per cent of their lenders in March this year and these plans are awaiting approval of the NCLT, Mumbai.
“Ambani will file suitable replies, and the NCLT has not given any relief to the petitioner,” said the spokesperson.
According to the UK court order, the final amount owed under the alleged guarantee will be assessed based on the outcome of the Rcom resolution plan filed before the NCLT, Mumbai, Anil Dhirubhai Ambani group officials had said earlier. This is when Chinese banks had won the order in May.
The company had to shut down its business operations as a result of high debt and a failed merger with Aircel. Rcom has been admitted to the NCLT.