Insolvency proceedings will now be initiated against Anil Ambani’s debt-ridden firm Reliance Communications in the Mumbai bench of the National Company Law Tribunal (NCLT) as the National Company Law Appellate Tribunal (NCLAT) on Tuesday vacated a stay on such proceedings it had granted in May 2018.
The Mumbai bench of the NCLT had last year on May 16 admitted an insolvency petition filed by Ericsson India against RCom and its two subsidiaries — Reliance Infratel and Reliance Telecom — for failing to pay its dues.
However, on RCom’s appeal, the appellate tribunal had on May 30, 2018, halted the insolvency proceedings. This was based after the financial creditors and RCom had said that a settlement with Reliance Jio was underway.
Since the settlement did not work out, RCom had to pay `550-crore dues, plus interest, totalling `576 crore to Ericsson following a direction by the Supreme Court.
The NCLAT while allowing RCom’s plea for initiation of insolvency proceedings said that further orders in the case will be passed by the NCLT. It also directed that the ongoing moratorium on RCom’s assets and dues be maintained till then.
“In light of the order passed by the Supreme Court, we allow the appellant (RCom) to withdraw the appeal. The interim order on stay of insolvency proceedings stands vacated,” said a two-judge bench led by NCLAT chairman SJ Mukhopadhaya.
The NCLT, Mumbai bench will now hear the matter on May 7 when it may consider appointing an interim resolution professional to run the company. As of now, all legal cases and other liabilities stand suspended. The NCLAT had earlier observed that if the stay order on insolvency of RCom were to be vacated, Ericsson would have to refund the payment of `576 crore as an operational creditor since under IBC provisions, financial creditors or secured creditors get preference over operational creditors.
This matter, however, did not come up before the appellate tribunal on Tuesday. In fact, Ericsson has already filed a petition before the Supreme Court objecting to any such refund and the matter will be heard by the apex court in July.
Source: Financial Express, May 1, 2019