Reliance Communications’ Bankruptcy Proceedings Begin at NCLAT

Moneylife Digital Team 10 May 2019

Economy & Nation

The National Company Law Tribunal (NCLT) has admitted Reliance Communications Ltd (RCom) for bankruptcy proceedings on Thursday and has posted the case for hearing on 30th May. The Anil Dhirubhai Ambani (ADA) group company owes Rs50,000 crore to 31 lenders led by State Bank of India (SBI) showing once again, how recklessly Indian public sector banks (PSBs) have been lending to the high profile names of corporate India.

Given that Anil Ambani needed a bailout from his older brother Mukesh, in order to pay a mere Rs480 crore to the Swedish telecom company Ericsson and stay out of jail in connection with a contempt proceeding, it is clear that lenders are unlikely to recover much from the bankruptcy proceeding. Had there been any chance of finding a buyer for his assets, Anil Ambani would have found a way to sell the company already.

It has been a huge fall for Reliance since the days when he aggressively fought a dirty war for his share of the business empire and went on an acquisition and expansion spree. Reliance Communications has discontinued operations nearly two years ago and also owes over a billion dollars to China Development Bank (CDB).

The insolvency proceeding has to be completed in a maximum of 270 days. It may be recalled that insolvency proceedings against the company launched in September 2017 had been stayed by the appellate tribunal in the insolvency proceedings filed by Ericsson. The Resolution Professional has sought a waiver of 13 months when the matter had been stayed by the courts.

In April this year, the Supreme Court had cleared the decks for RCom for the sale of its spectrum and optical fibre assets to Reliance Jio Infocomm while vacating a stay granted by the Bombay High Court. RCom's plea challenging the stay by the High Court was supported by the consortium of banks headed by SBI, who have contended that the sale of spectrum and optical fibre assets would get them Rs25,000 crore -- part of Rs45,000 crore that they are owed by RCom.

Earlier in March, RCom said by mutual agreement, it has decided to terminate sale of certain specified telecom assets to Reliance Jio. "The said transactions have become incapable of being consummated in accordance with the terms thereof, on account of various factors and developments since the execution of the said agreements nearly 15 months ago," the company said its filing.

RCom had claimed that over the past 15 months and after more than 45 meetings, it could not get consent from over 40 foreign and Indian lenders for its proposed transaction with RJio.

Comments

User

Sanjeev B

7 years ago

a. Bankers need to go to jail for lending the money in the first place.
b. The IBC needs to have resolution by 74% majority mechanism (based on exposure) to allow the unimpeded sale of assets for recovery.