Anil Ambani’s Reliance Communications on Friday got a huge relief from the Supreme Court, which allowed it to furnish corporate guarantee worth Rs 1,400 crore via its sister firm Reliance Realty to the Department of Telecommunications (DoT). The DoT had asked RCom to provide a bank guarantee of Rs 2,950 crore towards outstanding spectrum charges for approving its spectrum sale to Reliance Jio. When RCom said it did not have money to provide bank guarantee but can offer land as security, and if the DoT did not accept the offer its spectrum trading deal with Jio will collapse, the apex court accepted its plea.
It said the corporate guarantee will be in addition to the land parcel, which the company has to provide as security, as per the order of the Telecom Disputes Settlement and Appellate Tribunal.
The move paves the way for the completion of RCom’s asset monetisation programme under which it will sell its assets like spectrum, telecom towers and optical fibre to Jio. This will bring down the company’s overall debt of Rs 45,000 crore by 25,000 crore. The apex court has given two days time to RCom to furnish the guarantee basis which the DoT will have to grant a final approval for the spectrum sale in one-week time.
The Rs 25,000 crore, which RCom will receive from Jio includes around Rs 18,000 crore in cash and another Rs 7,000 crore towards deferred spectrum liabilities, which will get transferred to Reliance Jio, as the new owner of the spectrum. Of the Rs 18,000 crore, RCom needs to pay Ericsson its dues worth Rs 550 crore by December 15. If RCom fails to pay the dues within the stipulated time, then insolvency proceedings against it will be restored.
Additional solicitor general PS Narasimha on Friday opposed the furnishing of land parcels, pointing out that these did not belong to RCom. “Please see if this security is enough. We can’t go from pillar to post to recover money… One has to look at titles and the deal,” he said.
The ASG said the October 2015 guidelines for trading of spectrum made it mandatory upon the government to secure outstanding dues only by bank guarantees and nothing else. “There is no precedent for Union of India accepting land/buildings as security towards the unpaid dues…the land provides no such securitisation and cannot be monetised on demand… Undertaking not to alienate property worth Rs 1,400 crore is not in compliance of trading guidelines,” the government said in its appeal.
Ericsson had signed a seven-year deal in 2014 to operate and manage RCom’s nationwide telecom network. After RCom failed to pay for its supplies procured from Ericsson, the latter initiated insolvency proceedings against it before NCLT to recover Rs 1,150 crore. Subsequently, the two parties made an out-of-court settlement by which RCom was required to pay `550 crore.