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How the loan default case against Anil Ambani is unfolding

By Dev Chatterjee & Pavan Lall
Last updated on: May 25, 2020 14:46 IST
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The dispute between RCom and Chinese banks led by ICBC started after Anil Ambani led company defaulted on its loans to Indian as well as Chinese banks. A British court on May 22 asked Ambani to pay nearly $717 million to three Chinese banks within 21 days.

Anil Ambani, chairman of the ADA group, can challenge the order by the Commercial Division of the High Court of England and Wales, London, which said a personal guarantee disputed by Ambani is binding on him, say corporate lawyers.

At the same time, Chinese banks will have to move Indian courts to enforce the order in India, they said.

 

The British court on Friday asked Ambani to pay nearly $717 million to three Chinese banks within 21 days.

The banks are pursuing the recovery of funds as part of a loan agreement with Reliance Communications.

The ADA group has said Ambani is seeking legal advice and the UK court order will have no bearing on the operations of its other group companies: Reliance Infrastructure, Reliance Power, and Reliance Capital.

Corporate lawyers said Ambani could challenge the UK court order on grounds of “conclusiveness” under Section 13 of the Code of Civil Procedure, 1908.

“Before enforcing a foreign judgment or decree, the party enforcing it must ensure that the foreign judgment or decree passes the tests mentioned in the CPC.

"If the foreign judgment or decree fails any of these tests, it will not be regarded as conclusive and hence not enforceable in India,” said Rajiv Bansal, senior advocate.

Bansal said according to Section 44A of the CPC, a decree of any superior court of a reciprocating territory shall be executed in India as a decree passed by the Indian district court.

“A judgment from a court of a reciprocating territory can be directly enforced in India by filing an execution application.

"While filing the execution application, the original certified copy of the decree along with a certificate from the superior court stating the extent to which the decree has been satisfied or adjusted, has to be annexed to the application,” he said.

Other top lawyers said India and England are reciprocating countries which means that judgments will be enforced in India as if they were judgments of an Indian court.

“Therefore, the Indian court will not reconsider the arguments but only execute the judgment.

"At that stage Ambani has a very limited number of arguments such as fraud for instance and it is unlikely that these will be given much credence unless there is some substance to the arguments,” said a Mumbai based lawyer asking not to be quoted.

Besides, the lawyer said any court judgment has to be enforced as a decree.

It may be enforced against any of Ambani’s assets outside India or against assets in India.

In the latter case, an Indian court process has to be followed, he said.

The dispute between Reliance Communications (RCom) and Chinese banks led by ICBC started after RCom defaulted on its loans to Indian as well as Chinese banks.

Chinese banks claim that Ambani had given personal guarantee for a corporate loan availed by RCom in 2012 for global refinancing.

The ADA officials said Industrial and Commercial Bank of China (ICBC) and others made their claim based on an alleged guarantee that was never signed by Ambani and he has consistently denied having authorised anyone to execute any guarantee on his behalf.

The amount ordered to be paid based on the alleged guarantee will in any case reduce upon the resolution of RCom’s debt in accordance with the Insolvency and Bankruptcy Code, 2016.

The amount claimed under the alleged guarantee would reduce by up to 50 per cent according to the resolution plan of RCom’s debt, which has been approved its lenders and has already been filed in the National Company Law Tribunal on March 6.

As far as the judgment of the UK Court is concerned, the question of any enforcement in India does not arise in the near future, and Ambani is seeking legal advice on the future course of action.

According to the UK Court Order, the final amount owed under the alleged guarantee will be assessed based on the outcome of the RCom resolution plan filed before the National Company Law Tribunal, Mumbai, ADA officials said.

Photograph: Francis Mascarenhas/Reuters

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Dev Chatterjee & Pavan Lall in Mumbai
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