Anil Ambani, chairman of Reliance Communications Ltd ("RCom"), has been asked by a UK High Court judge in London to pay within six weeks $100 million pending the trial of a debt claim brought by three Chinese banks against Mr Ambani personally. This is the largest sum ever required to be paid into court by conditional order against an individual in the UK High Court.
Three lenders Industrial and Commercial Bank of China Ltd (ICBC), China Development Bank and Exim Bank of China have filed the case against Mr Ambani under a personal guarantee for an outstanding principal sum of $550 million plus interest of loans that they provided to RCom under a facility agreement worth $925 million in February 2012. More about it later.
The last week order was passed by Judge David Waksman at a hearing following an interim judgment that he delivered on 16 December 2019. The judge said "Mr Ambani has, and continues to have, a very lavish lifestyle. He had at one time the use of a helicopter, but more recently has had the use of a Bombardier Legacy 650 private jet, the use of around 11 cars worth about $3 million, the use of a yacht and the occupation of two floors of a very large and extremely prestigious building in South Mumbai..."
"Indeed, on Mr Ambani’s case, his companies are all misusing their assets by supplying to them, effectively, free of charge or nearly so. That is, the yacht, the cars, the aircraft, and the two floors of the Seawind building. One is bound to ask forensically if he can arrange his affairs thus, why he cannot arrange his companies to sell those assets and provide him with the money to pay into Court. He cannot have it both ways. He cannot plead poverty personally and then disown, as it were, any other items of personal use on the basis that they are corporate assets and irrelevant," the Judge says.
Mr Ambani had claimed before the HC that his "net worth is zero" and that he is "unable to raise any finance from external sources" in order to make such a payment. He contended, "The value of my investments has collapsed […] The current value of my shareholdings is down to approximately $82.4 million and my net worth is zero after taking into account my liabilities. In summary, I do not hold any meaningful assets which can be liquidated for the purposes of these proceedings."
Mr Ambani also told the Court that he is "unable to raise any finance from external sources" - including family members. Reports that his brother Mukesh Ambani had personally paid $76 million on his behalf to Ericsson in connection with proceedings against RCom were incorrect and misleading, Mr Ambani claimed."
In March 2019, however, in a statement, Anil Ambani had expressed his "sincere and heartfelt thanks" for his brother's support. “My sincere and heartfelt thanks to my respected elder brother, Mukesh, and Nita, for standing by me during these trying times, and demonstrating the importance of staying true to our strong family values by extending this timely support,” he had said in the statement.
Justice Waksman, however, noted, "...Indeed, on the figures he presents, it is said he is massively insolvent and actually bankrupt, although he has not applied for any bankruptcy order in India...There appear to be differences between Indian federal and local law, but either way he has not applied for any form of bankruptcy order in India...bearing in mind he clearly has more assets and/or income than he is letting on, that the family members, who have all helped out before, can, and, in my view, will, if required, assist, and bearing in mind the scale of the sort of assets that the family members have, and what they are able to afford by way of lifestyle, I am going to order a figure of $100 million to be paid into Court."
"There is a very real and sound basis for concluding, as I do, that it is not possible to take at face value all that [Mr Ambani] says about the extent or otherwise of his own assets including the ones that he has through his beneficially owned companies. There is good reason to suppose that he is not being frank and he is likely to have more assets at his disposal than he has let on. […] This is not borne of some unreasonable request for corroboration after corroboration. It is through the demonstrable inadequacies of his now two attempts to explain his financial position. To put it another way on this point, he has not discharged the burden of proof of satisfying me that he does not have assets or the control of assets which he could use for payment in," Justice Waksman says in his order.
The Chinses lenders' claim for the total amount of outstanding loans will now proceed to full trial at a date to be determined when Mr Ambani will be called to give evidence in person.
In a joint statements, the lenders said, "We welcome the grant of this order against Mr Ambani as we have always said his defence is not credible and we find his latest claims to have no meaningful assets similarly implausible, inconsistent and misleading. This is a straightforward debt claim to recover outstanding loans made to RCom in good faith and secured by a binding personal guarantee given by Mr Ambani, which he has refused to honour. We remain very confident in our claim. We hope that Mr Ambani will comply with the Court's order and look forward to the swift resolution of the case at trial."
Coming back to the lending arrangements, in February 2012, RCom signed an agreement to borrow $925 million from these three lenders to meet its obligations under foreign currency convertible bonds that were due to mature in the March 2012. The outstanding principal plus interest as on 7 February 2020 was $708 million.
The dispute, however, was not about the loan, but about the personal guarantee provided by Anil Ambani. While he had denied that he is bound by the guarantee either as a matter of actual or apparent authority, the Banks contended that Mr Ambani did provide a personal guarantee as the guarantor of the loan to RCom, which was an explicit precondition of the facility agreement.
In a statement, these banks say they will continue to pursue all legal options available in legitimately protecting their rights to recover the outstanding loans owed to them.