Anil Ambani files for bankruptcy protection

Anil Ambani’s Reliance Communications (RCom) will soon move Mumbai bench of the National Company Law Tribunal (NCLT) to file for bankruptcy protection as the company seeks to sell its assets to repay the lenders.

The Company board, in its stock exchange filing, clarified that the move was taken to reduce its growing debt of over ₹46,000 crore through the asset sale, Economic Times reported.

RCom frequently failed to clear its huge liability to over 40 creditors and pending payments to companies like Swedish network giant Ericsson. Ericsson had also approached the Supreme Court seeking arrest of Ambani over delayed payments of ₹550 crore and had accused him of engaging in “gross and wilful contempt” of the court.

Indian Express quoted RCom as saying that this “unfortunate outcome is attributable to the unresolved challenges, including lack of 100% approvals and consensus, as mandated by the RBI’s February 2018 circular, on all important issues among over 40 lenders despite the passage of 12 months and over 45 meetings”.

It also mentioned pendency of many legal matters in high courts, TDSAT and the Supreme Court.

Remarkably, under the bankruptcy procedure, the NCLT employs resolution professionals to supervise the bidding for the sale of the assets of a bankrupt company and resolve it within a definite time frame.

RCom initiated debt resolution plan following its board members’ decision over a debt resolution strategy in June 2017. They company however has failed to implement the same and even after 18 months the lenders haven’t received their money.

A key part of its restructuring plan involved the sale of assets, including the sale of switching nodes, fibre, telecom towers, worth about ₹25,000 crore, to pay the money it owes to banks like IDBI Bank, Standard Chartered Bank, Union Bank, Canara Bank, and HSBC and China Development Bank etc.

It also hoped to fulfill ₹975 crore from the spectrum sale to Mukesh Ambani-led Reliance Jio, and real estate to Canada's Brookfield. However, the Supreme Court had asked it to refund ₹550 crore of Ericsson. The company also assured to repay ₹230 crore to settle dues of minority shareholder in Reliance Infratel (including HSBC Daisy Investments) in December last year.

But, RCom did not succeed in meeting the time limit to repay dues owing it to a delay in the consent from the Department of Telecom (DoT), following which the Swedish company filed its second contempt plea in the SC against Anil Ambani and asked the apex court to stop him from leaving India.

RCom also filed a contempt plea against the DoT for intentionally delaying the RCom-Jio spectrum deal. The DoT, on the other hand, refused to give its permission owing to non-payment of spectrum-related dues worth ₹2,947 crore which RCom owes to government.

The Supreme Court even asked both Jio and RCom to resolve the payment issue of spectrum dues to the DoT, following which Reliance Jio refused to take oversea any past accountability of RCom for which the Department of Telecom might raise claim in future.