The National Company Law Appellate Tribunal (NCLAT) on Tuesday allowed debt-ridden Reliance Communications (RCom) to withdraw its petition challenging the National Company Law Tribunal (NCLT) Mumbai’s decision to initiate insolvency against it.
RCom moved the application to withdraw its plea after the company board on February 1 decided that it would file for insolvency as all attempts to revive it had been unsuccessful.
The board noted that despite so much time being spent, the lenders had received no proceeds from the proposed asset monetisation.
With the NCLAT allowing the withdrawal, the insolvency proceedings against RCom will restart in NCLT Mumbai. Ericsson India had in September 2017 moved insolvency petitions against RCom, Reliance Telecom, and Reliance Infratel at the Mumbai Bench of the NCLT for failing to pay dues amounting to nearly Rs 1,500 crore. The plea was admitted on May 15, 2018.
On May 30, 2018, the NCLAT had, on an application moved by RCom, stayed insolvency proceedings against the company.
RCom had subsequently reached an agreement with Ericsson India in the NCLAT to pay Rs 550 crore within 120 days (by September 30, 2018).
The NCLAT had, in its order, noted that if RCom and its two subsidiaries failed to pay the amount within the timeline, Ericsson India would be at liberty to revive the insolvency application.
On September 27, 2018, three days before the deadline, RCom and its subsidiaries approached the Supreme Court, seeking a deadline extension to pay the amount. In its plea before the apex court, RCom had said it needed more time due to the delay in completion of spectrum sale and other assets. Hearing the matter in October, the apex court had granted RCom and its subsidiaries time till December 15, but made it clear that no further extension would be granted.
In February, the Supreme Court had, in its judgment, in the petition moved by Ericsson against Anil Ambani and two of his companies for non-payment, held that he was guilty of contempt of court. It had then directed Ambani, Reliance Telecom chairman Satish Seth, and Reliance Infratel chairperson Chhaya Virani to pay Rs 453 crore within four weeks or face a jail term of three months. While RCom paid the amount, its move to withdraw the challenge to the insolvency petition brought about by Ericsson India was termed “dishonest” by the latter.
The petition, Ericsson India had said, intended to frustrate the orders of the court.
The purpose of the application filed by RCom to take the company into “voluntary winding up” is to obtain a moratorium, which would prevent it from making payments to creditors, Ericsson India had said.
Ericsson is opposing RCom’s move to go for insolvency as it fears that as it is only an operational creditor under the Insolvency and Bankruptcy Code (IBC) proceedings, it (Ericsson) will end up losing the Rs 550 crore it got as per the Supreme Court orders. Fears of the company were later reaffirmed after the NCLAT had on April 9 observed that Ericsson India may have to refund the entire amount of Rs 550 crore it got from RCom if insolvency proceedings against the latter were allowed to restart.
“Why should one party get it and why should banks suffer? Why should the Indian economy suffer,” a two-judge bench, headed by Chairman Justice SJ Mukhopadhaya, had observed. The bench added that it would either quash RCom’s bankruptcy proceedings in the NCLT or allow bankruptcy case to proceed according to law.
RCom had urged the NCLAT that the insolvency petition against it should now be allowed to restart since it had purged the Supreme Court’s contempt by paying Rs 453 crore to Ericsson India Private Limited. Ericsson India, on the other hand, opposed this plea and said the entire insolvency application should be disposed of since it had already come to an agreement with RCom and received the money.
Source: Business Standards, April 30, 2019