RCom Against Closing Insolvency Plea, Ericsson Wants It Withdrawn
The RCom-Ericsson spat continued in the Supreme Court with the Swedish company insisting it should be allowed to close insolvency proceedings initiated against RCom in the National Company Law Tribunal (NCLT) as it has already got its dues, but RCom resisted the move.
This prompted a top court bench led by Justice RF Nariman to issue notices to both sides, asking them to present their legal position on whether insolvency proceedings should go on or not against RCom in the NCLT by way of written submissions with a week each.
The bench, which also comprises Justice Vineet Saran, will then adjudicate on the legality of the case. RCom paid off Rs 580 crore in dues to Ericsson at the last moment, narrowly averting the possibility of its chairman Anil Ambani landing in jail.
Anil Ambani was bailed out by elder brother Mukesh Ambani. The payment, Ericsson’s senior advocate Dushyant Dave told the court, should lead to a closure of the insolvency proceedings in the NCLT.
But RCom, through senior advocate Mukul Rohatgi, assisted by lawyer Mahesh Agrawal, has resisted the move. Rohatgi said Ericsson would have to go to the NCLT to withdraw those proceedings. Withdrawal would be subject to 90% of the lenders agreeing to it, he contended. Dave argued that RCom wanted to unscramble a scrambled egg.
“One-and-half-years have passed. They obstructed proceedings in the NCLT. Meanwhile, equities have changed. A substantial part of the assets has been sold off. This will work against us,” Dave argued.
Rohtagi suggested that anyone who moved NCLT did not have a right to withdraw. That would be subject to lenders agreeing to the move. Instead, Rohatgi asked the bench to quash all proceedings in the top court and let the matter go on in the NCLT.
But the bench said it could not prima facie quash proceedings in the face of Section 12A of the IBC, which allows for withdrawal in the NCLT. The bench then adjourned the case for two weeks. Sources said Ericsson doesn’t want to pursue insolvency proceedings as continuing with it would entail paying the resolution professional when there was no need for it.
Ericsson had filed for bankruptcy in NCLT in September 2017, against RCom over non-payment of dues worth over Rs 1,500 crore. The matter was settled after 18 months in March 2018, at Rs 580 crore. Sources said the primary reason why RCom did not want the insolvency withdrawn was because the payment moratorium against it would go and its creditors will come homing in for their dues.
The telco will then have to pay for its bank guarantees etc. and the Department of Telecommunications (DoT) can demand its dues as well. Ericsson declined to comment and RCom didn’t respond to emailed queries seeking comment.
The National Company Law Appellate Tribunal (NCLAT) recently stayed a show-cause notice from DoT to RCom asking it to explain why its licence and spectrum for the Mumbai circle shouldn’t be withdrawn for defaulting on Rs 21 crore in spectrum payment. RCom had fallen back on the payment moratorium to argue that its licence cannot be revoked. The telco has two other payment instalments — of Rs 281 crore and Rs 492 crore — that will be overdue in April.
If RCom goes into insolvency, Reliance Jio Infocomm (Jio) will be a major beneficiary as it can pick up assets at a cheaper rate than the earlier quoted price. RCom had inked a pact with Jio to sell its spectrum, nodes, towers and fibre. While nodes and fibre were sold to Jio for Rs 5000 crore, the deal on spectrum and towers fell through.
A DoT official said if insolvency proceedings go, it would also want its dues. The department will invoke bank guarantees and withdraw spectrum over non-payment of dues. RCom and DoT have been at loggerheads too with both sides fighting legal battles over spectrum dues and one-time spectrum charges.
RCom has held DoT as one of the key reasons why its deal with Jio didn’t work out. DoT had refused to give a nod to the spectrum trading deal till Jio confirmed it would pick up any dues that RCom doesn’t manage to repay.―Business Telegraph
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