RCom stares at insolvency as SC rejects plea for more time on Ericsson dues

Apex court had asked RCom to clear Ericsson dues by Dec 15, while RCom sought two more weeks

Anil Ambani-led Reliance Communications (RCom) could be staring at insolvency as the Supreme Court (SC) on Thursday declined to grant it two weeks extra time to clear the Rs 5.5 billion dues of Ericsson. The deadline for the said repayment ends December 15.

The refusal by the top court to grant more time to RCom revives fears of corporate insolvency proceedings against the company. The Rs 5.5-billion repayment agreement between RCom and Ericsson was reached in the National Company Law Appellate Tribunal (NCLAT).  While asking RCom to clear the dues, the NCLAT had said Ericsson could revive the insolvency petition against the company if it failed to pay within the stipulated deadline.

RCom had then approached the apex court seeking an extension of the deadline, which was initially September 30 and later moved to December 15. The top court, however, had then made it clear that there would be no extensions beyond that. It had also directed RCom to pay Ericsson interest at the rate of 12 per cent per annum for missing the September 30 deadline.

THE STORY SO FAR

2017 December 

RCom signs Rs 250-bn deal with Jio for spectrum, assets sale to avoid insolvency 2018

August 

• TDSAT asks RCom to furnish Rs 30-billion bank guarantee for clearing spectrum sale to Jio
   
• RCom moves TDSAT against DoT’s bank guarantee demand, terming it unfair October 
   
• TDSAT allows RCom to go ahead with the spectrum sale without bank guarantee, junks 
• DoT plea

November 
 

• DoT moves SC against TDSAT order, says can’t give NoC for sale without bank guarantee
   
• SC asks RCom to furnish Rs 14-billion corporate guarantee, clears decks for sale to Jio

December 

• DoT fails to give NoC within stipulated 7-day period, RCom moves contempt plea against DoT
   
• SC declines to give RCom more time to pay Ericsson dues

As part of debt reduction efforts, RCom had, in December 2017, signed a Rs 250-billion deal with elder brother Mukesh Ambani’s Reliance Jio Infocomm (Jio).  The deal included sale of assets mortgaged with different banks to avoid insolvency proceedings. The company expects to raise Rs 180 billion from sales of its wireless assets to Jio and real estate assets to Canada’s Brookfield, and pare some of its Rs 460-billion debt.

For RCom, a lot also depends on Friday’s hearing in the SC as the contempt plea the company has moved against the Department of Telecommunications (DoT) for not giving the company a no objection certificate (NoC) clearing its spectrum and asset sale to Jio is scheduled to be heard.

The delay by DoT in clearing RCom’s asset and spectrum sale to Jio was due to the government doing necessary due diligence of the ~14-billion corporate guarantee, the government told the court.

RCom had provided DoT a corporate guarantee of its arm, Reliance Realty.

The apex court had on November 30 asked RCom to furnish a corporate guarantee of Rs 14 billion within two days, following which DoT had to give it an NoC for the RCom-Jio spectrum sale deal within seven days. The seven-day period expired on December 10.

Following the end of the seven-day period, RCom had moved a contempt petition against DoT.

In its plea on Thursday, RCom told the court that the payment to Ericsson would be done as soon as DoT gave the required NoC for the sale to Jio. The apex court, however, refused to entertain its plea.