Anil Ambani Asked to Pay $ 100 million within 6 Weeks by UK HC in Loan Default Case Filed by 3 Chinese Lenders
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.
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    Vodafone Idea to pay AGR dues in next few days, informs exchange
    Vodafone Idea is currently assessing the AGR dues and will pay this in the next few days, the company has said in an exchange filing.
     
    "We wish to inform that post the hearing yesterday, the company has received letters from the Department of Telecommunications (DoT) directing immediate payment," Vodafone Idea said in a regulatory filing.
     
    "The company proposes to pay the amount so assessed in the next few days. As disclosed in the company's financial statements for the quarter ending December 31, 2019, the company's ability to continue as a going concern is essentially dependent on a positive outcome of the application for modification of the Supplementary Order", it said.
     
    The company is currently assessing the amount that it will be able to pay to DoT and it proposes to pay the amount so assessed in the next few days, Vodafone Idea said.
     
    Though the company said it will pay up but the fact that it has again mentioned the company's ability to continue as a going concern is essentially dependent on a positive outcome of the application for modification of the Supplementary Order, also raises doubts over its long term ability over sustaining on account of huge losses and paying such large amount of dues.
     
    The company did not disclose how it plans to raise the money and how much it would pay. This comes after the Supreme Court on Friday slammed mobile service operators and the department of telecommunications (DoT) for failing to comply with its verdict, which mandated telecom companies to pay the adjusted gross revenue (AGR) dues of over Rs 1 trillion to the DoT by January 23.
     
    This came as a fresh blow for Vodafone Idea and doubts were being raised over its continuation as a going concern. As per DoT calculations, Airtel has to pay Rs 35,500 crore, Tata Teleservices has to pay Rs 14,000 crore and Vodafone Idea's dues are Rs 53,000 crore.
     
    Airtel told DoT on Friday it will deposit Rs 10,000 crore by February 20 and for rest before the next hearing of March 17. But much of the focus is on Vodafone Idea as its extremely weak financial position with the latest Q3 losses over Rs 6,000 crore, Rs 1.20 lakh crore debt, declining customer base and revenues. Its chairman K.M. Birla has sounded out multiple times that if it doesn't get any relief from government it will have to look at shutting operations. One of the parents of VIL - UK-based Vodafone has already ruled out any equity infusion in VIL.
     
    Vodafone Idea owes DoT over Rs 53,000 crore.
     
    Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.
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    COMMENTS

    ramamanis

    2 months ago

    Mr KM Birla has "threatened to close down operations, if Supreme court does not relent.!. " These types of threats - do not hold water, any longer. As a London court had declared in the case of Anil Ambani - Mr KM Birla is not insolvent and IS ENJOYING A LAVISH LIFESTYLE... If he is not able to pay the AGR dues, Supreme Court can tap "other avenues" to recover the money to drive home the point that " It is no more possible to lay your hands into Tax Payer's money with the connivance of some Bank officials..!!.."

    DoT Asks Telcos to Clear AGR Dues by Friday Midnight: Report
    After facing ire from the Supreme Court, the department of telecom (DoT) has asked telecom companies like Bharti Airtel and Vodafone Idea among other to clear their dues by Friday midnight, says a report from the Mint.
     
    The order asked telcos to clear dues by 11.59pm Friday.
     
    The DoT's licensing finance wing (LFP), in a letter to the telcos, said: "This office letter from LFP of 23 January 2020 stands withdrawn with immediate effect. It is directed to take immediate necessary action in compliance with the judgement of 24 October 2019 of the Supreme Court."

    As per the DoT calculations, Airtel has to pay Rs35,500 crore, Vodafone Idea has to pay Rs53,000 crore and Tata Teleservices has to pay a little over Rs12,500 crore.

    Telcos owe Rs1.47 lakh crore to DoT on account of pending AGR.
     
    Following the rap from the apex court, the DoT has decided to withdraw its direction granting protection from coercive action to defaulting telecom companies. 
     
    Quoting sources, a report from IANS, says, "DoT would submit the entire chain of facts and discussions and record notings leading to a desk officer issuing the letter, which cannot be an individual action but took place with approval from the competent authority and his seniors in the Supreme Court on 17 March 2020 and would apprise Law and IT Minister Ravi Shankar Prasad on the issue."
     
    The sources told IANS that the DoT withdrew its order immediately after the Supreme Court directed the managing directors and directors of telcos and other firms to explain why contempt action be not taken against them for non-compliance of its order to pay AGR of Rs1.47 lakh crore to the DoT.
     
    The letter, written last month, by an officer in the licensing finance policy wing, under the DoT, said no coercive action to be taken against telecom companies if they fail to comply with the top court order until further orders.
     
    Reprimanding the government on the desk officer's conduct, the court said this officer has written a letter to the attorney general, the top law officer, and other constitutional authorities directing them not insist on payment of money by the telecom companies.
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