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More trouble for Anil Ambani as lenders may not bail out RCom

February 23, 2019 11:59 IST

In a meeting on Thursday evening, the RCom management, led by CEO Punit Garg, requested the bank representatives to release Rs 260 crore it received as I-T refund so that it could repay the dues to Ericsson.

The lenders to Reliance Communications are unlikely to agree to the company’s request for the release of Rs 260 crore, which it received as income-tax refunds and is lying in its bank account, to pay Swedish equipment maker Ericsson, said sources.

The lenders will put the request before their respective boards, but do not expect them to approve it.

“For all practical purposes, the banks may not allow RCom’s request as they have first charge over the company’s assets and on the escrow account. The banks’ decision to refer it to their boards may just be a formality to reject the request,” said a source close to the development.

 

On Wednesday, the Supreme Court had ordered RCom to pay Rs 550 crore to Ericsson within four weeks in accordance with an earlier undertaking given by promoter Anil Ambani.

A spokesperson for RCom was unavailable for comment.

In a meeting held on Thursday evening, the RCom management, led by CEO Punit Garg, requested the bank representatives to release the amount so that it could repay the dues to Ericsson.

In a statement to the stock exchanges, an RCom spokesperson had said, “The RCom group has requested urgent approval from its lenders to release Rs 260 crore received from income tax refunds, lying in its bank account, directly to Ericsson.” It added that Rs 118 crore had already been deposited with the SC. 

“RCom is confident of raising the balance Rs 200 crore for payment to Ericsson, in order that the entire Rs 550 crore plus interest thereon stands paid to Ericsson.”

Bankers said as the company had already been referred to the National Company Law Tribunal (NCLT), it was the secured lenders who had the first right on the proceeds lying in the escrow account. The money is currently lying in the Trust and Retention Account of State Bank of India. 

The SC has already ordered that Reliance group Chairman Anil Ambani would face three-month jail if the money was not paid to Ericsson.

RCom referred itself to the NCLT after it failed to repay its dues earlier this month. The company told the SC that its asset sale deal worth Rs 18,000 crore with Reliance Jio fell through because of which it was unable to raise funds to repay Ericsson. But this argument was rejected by the SC.

In the meeting with bankers, RCom argued that as the money had to be paid to Ericsson as per the Supreme Court order, approval from its 40-odd bankers was not required.

“This argument was rejected,” said a banker, who attended the meeting. RCom has defaulted on its debt of Rs 47,234 crore (as of March 2018) and is not paying any dues since June 2017.

After an 18-month standstill with banks, which ended in December 2018, the firm was referred to the NCLT.

On Wednesday, delivering its judgment in a contempt petition moved by Ericsson against Ambani and his executives for failing to pay Rs 550 crore, a two-judge Bench of Justice Rohinton Fali Nariman and Justice Vineet Saran held that three Reliance group firms had “no intention, at the very least, of adhering to the time limit of 120 days or to the extended time limit of 60 days plus, as was given by way of indulgence”.

The court then 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. 

It also slapped a fine of Rs 1 crore each for their “cavalier attitude” towards the court’s orders. Soon after the judgment, RCom requested its lenders for urgent approval to release the money directly to Ericsson from the TRA account.

Photograph: Reuters.

Dev Chatterjee in Mumbai
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