NCLAT pulls up SBI-led lenders of RCom for giving a 'false impression'

SBI says lenders have first right over tax refund, RCom cannot saddle responsibility of paying Ericsson on banks

For the second day in a row, the National Company Law Appellate Tribunal (NCLAT) pulled up State Bank of India (SBI), among other lenders of Anil Ambani-led Reliance Communications (RCom), for giving ‘false impression’ that Rs 37,000 crore would be recovered by selling the assets of the telecom company to Reliance Jio Infocomm (Jio). The appellate tribunal will continue hearing the case on Wednesday.

The NCLAT had on Monday sought the banks’ reply as to why action should not be initiated against them for giving a “golden outlook” about how the money would be recovered by sale of assets and the creditors would be paid off.

It is hearing a plea moved by RCom against the banks. RCom had approached the NCLAT after nearly 40 banks had refused to let the company withdraw money from the retention-and-trust account in which its tax refunds had come.

The purpose of a retention-and-trust account is to ensure the company completes the activities required of it under the contract signed with the lender.

RCom wanted to use the tax refunds of nearly Rs 260 crore to pay off Ericsson India as a part of the total payment of Rs 550 crore that it has to make to the latter.

The payment by RCom to Ericsson has to be made as part of the Supreme Court’s (SC’s) orders in which it had held Ambani guilty of contempt of court.

On February 20, the apex court had held Ambani and two others guilty of contempt of court for wilfully violating its order by not paying Rs 550-crore dues to Ericsson.

Replying to the NCLAT’s query on Tuesday, the banks said that they had first rights over the retention-and-trust account in which the said tax refunds had come. The retention-and-trust account, the banks said, had been set up before the insolvency process against RCom had begun and thus, has to be kept out of the current proceedings.

“The retention-and-trust account has separate Reserve Bank of India guidelines which says that no third-party encumbrances can be created. RCom cannot saddle the responsibility of paying Ericsson on the banks,” senior advocate Neeraj Kishan Kaul, appearing for SBI, said.

The joint lenders forum led by SBI also said that they should not be blamed for failing to recover Rs 37,000 crore from the sale of assets of RCom.

“It failed because Jio declined to pay RCom’s past debts,” Kaul said, adding it was up to RCom to make provisions to pay Ericsson, whether the deal happened or not.

Earlier, on February 4, the appellate tribunal had said that until further orders of the NCLAT or the SC, no one can sell, alienate, or create third-party rights over RCom’s assets.