The National Company Law Appellate Tribunal (NCLAT) on Tuesday allowed debt-laden Reliance Communications (RCom) to withdraw its petition challenging the National Company Law Tribunal (NCLT) Mumbai’s decision to initiate insolvency against it. RCom had moved the application to withdraw its challenge to the insolvency order after the board of the company had on February 1 decided that it would file for insolvency as all attempts to revive the company had been unsuccessful.
The board of the company noted that despite the passage of so much time, the lenders had received zero proceeds from the proposed asset monetisation plans and the overall debt resolution process was yet to make any headway.
Following 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 NCLT for failing to pay their dues amounting to nearly Rs 1,500 crore, which 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 in NCLAT reached an agreement with Ericsson India to pay Rs 550 crore within 120 days which was September 30, 2018. The NCLAT had then in its order noted that if RCom and its two subsidiaries failed to pay the said 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 an extension to the deadline to pay the amount. In its plea before the top court, RCom had said it needed more time due to the delay in completion of sale of spectrum and other assets. Hearing the matter in October, the apex court had granted RCom and its subsidiaries time till December 15, and made it clear that no further extensions would be granted.
In February, the top 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 asked 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 said 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 any payments to all 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 proceedings, it will end up losing the Rs 550 crore it has gotten as per the Supreme Court's orders. The 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 S J Mukhopadhaya had observed, adding that it would either quash RCom’s bankruptcy proceedings in NCLT or allow bankruptcy case to proceed as per law.
RCom had urged 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 that the entire insolvency application should now be disposed off since it had already come to an agreement with RCom and received the said money.
The board of the company noted that despite the passage of so much time, the lenders had received zero proceeds from the proposed asset monetisation plans and the overall debt resolution process was yet to make any headway.
Following 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 NCLT for failing to pay their dues amounting to nearly Rs 1,500 crore, which 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 in NCLAT reached an agreement with Ericsson India to pay Rs 550 crore within 120 days which was September 30, 2018. The NCLAT had then in its order noted that if RCom and its two subsidiaries failed to pay the said 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 an extension to the deadline to pay the amount. In its plea before the top court, RCom had said it needed more time due to the delay in completion of sale of spectrum and other assets. Hearing the matter in October, the apex court had granted RCom and its subsidiaries time till December 15, and made it clear that no further extensions would be granted.
In February, the top 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 asked 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 said 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 any payments to all 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 proceedings, it will end up losing the Rs 550 crore it has gotten as per the Supreme Court's orders. The 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 S J Mukhopadhaya had observed, adding that it would either quash RCom’s bankruptcy proceedings in NCLT or allow bankruptcy case to proceed as per law.
RCom had urged 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 that the entire insolvency application should now be disposed off since it had already come to an agreement with RCom and received the said money.
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