The National Company Law Appellate Tribunal (NCLAT) stayed the May 15 order of the National Company Law Tribunal (NCLT) in Mumbai, which had admitted Reliance Communications (RCom) and two of its subsidiaries for insolvency proceedings.
With the stay on bankruptcy proceedings, RCom can now continue with its asset monetisation scheme involving the sale of towers, optic fibre cable network, spectrum and media convergence nodes to brother Mukesh Ambani-controlled Reliance Jio Infocomm (Jio) for Rs 170 billion.
On Tuesday, NCLAT chairman Justice S J Mukhopadhaya asked the parties to settle the matter stating that the fate of operational creditors under the corporate resolution process was not ideal, especially if Ericsson wished to recover the majority of its dues.
Ericsson India, a subsidiary of the Swedish telecom equipment maker and service provider, had filed a case at NCLT, Mumbai last September seeking the liquidation of Reliance Communications (RCom), and its subsidiaries Reliance Infratel and Reliance Telecom, in order to recover Rs 11.5 billion.
The three companies were subsequently admitted under the Insolvency and Bankruptcy Code (IBC), and NCLT appointed a resolution professional (RP) to take over the management of each company. Ericsson had argued that it had entered into a seven-year agreement in 2014 with RCom and its subsidiaries for maintaining, upgrading and developing the latter's telecommunications infrastructure, which was not honoured.
RCom and its subsidiaries owed Ericsson around Rs 9.78 billion for their services which, Ericsson's counsel told the NCLT, had increased to around Rs 16 billion given that there were delays in the payment, despite several notices being issued to the Anil Ambani controlled companies.
RCom filed its appeal with the NCLAT, and was awarded with a stay on the order admitting the three firms under the IBC.
RCom and its subsidiaries now have the permission to go ahead with the debt restructuring plan that was prepared in December 2017. There were fears of the three Reliance group companies undergoing insolvency proceedings, which would have meant that the asset monetisation scheme under the plan would not be allowed.
The restructuring will reduce debt of Rs 460 billion to around Rs 60 billion, as per Anil Ambani’s plan stated in December 2017.
The NCLAT allowed the Anil Ambani-led companies to continue with their strategic debt restructuring plans, with the proceeds for the sale of assets to Jio going to the secured financial creditors.
In another case, minority shareholders of the company had filed petitions at the NCLT in Mumbai against the sale of assets to Jio. However, on Tuesday, the NCLAT dismissed the petitions as RCom informed the appellate tribunal and the National Stock Exchange that “an amicable settlement has been arrived at between it and minority investors holding 4.26 per cent equity in the company, and consent terms will be filed shortly”.
RCom shares closed at Rs 17.5 on Wednesday, almost 10 per cent higher than the previous close on the NSE.