The National Company Law Tribunal on Thursday allowed Reliance Communications Ltd. to exclude the 357 days spent in litigation and admitted it for bankruptcy proceedings. With this, RCom has become the first Anil Ambani group firm to be officially declared bankrupt. It has debt of over Rs 50,000 crore to banks.
On Thursday, NCLT superseded the RCom board and appointed a new resolution professional to run its operations. The bankruptcy court allow a consortium of 31 banks, led by State Bank of India, to form a committee of creditors.
At its last hearing, RCom, through the existing resolution professional, had sought 357 days exclusion in the insolvency process, citing the stays it had on the process by the appellate tribunal and the Supreme Court.
The resolution professional sought the exclusion from May 30, 2018 to April 30, 2019 as the initial insolvency proceedings was stayed by the National Company Law Appellate Tribunal and later by the apex court.
An NCLT bench, comprising V.P. Singh and R. Duraisamy, said the RCom bankruptcy proceedings should proceed in a manner of law. NCLT also granted the exclusion of time for Reliance Infratel Ltd. and Reliance Telecom Ltd., along with RCom.
RCom was in trouble for years, forcing it to discontinue operations two years ago. Its efforts to stave off bankruptcy by striking an asset sale deal with Reliance Jio Infocomm Ltd. was scuttled due to delays in legal and government approvals. But it could not meet any of the several publicly made promises to pay back lenders by monetizing real estate and spectrum assets.
In April, RCom chairman Anil Ambani managed to avoid a possible jail term—due to contempt of court—after a last-minute bailout by elder brother Mukesh Ambani, chairman of Reliance Industries Ltd. He gave RCom over Rs 480 crore to pay back Ericsson S.A., the first operational creditor to drag RCom to the bankruptcy courts.
Ericsson took RCom to NCLT in September 2017 for non-payment of more than Rs 1,500 crore dues. They eventually agreed on a Rs 550 crore settlement.
Earlier, China Development Bank, from which RCom had borrowed more than $1 billion, had dragged it to NCLT. This case was settled after RCom a a portion of its headquarters in Dhirubhai Ambani Knowledge City, Navi Mumbai.
On May 3, SBI held a meeting to shortlist a resolution professional after issuing a request for proposal in April for a new RP. RCom’s committee of creditors will have to approve a new RP with a 66 percent vote after the NCLT starts the insolvency process.
On May 7, NCLT Mumbai directed the existing RP to file a progress report by May 30 when it will next hear the matter.
On Thursday, RCom shares gained 4.65% to Rs 2.25 apiece while the benchmark Sensex shed 0.61% to end the day at 37,558.91 points.―Bloomberg Quint