An arbitration court has “restrained” Reliance CommunicationsBSE 1.98 % (RCom) from selling or transferring assets without its permission, and set June 9 as the date for the next hearing, dealing a blow to the Anil Ambani-owned telco’s efforts to pare debt by March end under a plan driven by its lenders.
“We direct the Claimant (RCom)and its affiliates are restrained from transferring, alienating, encumbrance or disposing of any of its assets without specific permission/leave of the Arbitral Tribunal,” the court of arbitration said in an interim order dated March 5.
“The respondent (Ericsson) has made an arguable case and the tribunal is of the opinion that in the event it is denied any relief, it will suffer an irretrievable injury,” said Justice Swatanter Kumar, Justice VS Sirpurkar and Justice SB Sinha — all former Supreme Court judges — in their order, a copy of which has been reviewed by ET.
A spokesperson for RCom — which is trying to pare its Rs 45,000-crore debt — said the operator will soon move the high court against the order. “We are looking into the matter and will move the Hon’ble High Court to oppose this directive,” the spokesperson said. The order came in an arbitration battle being fought between Ericsson and RCom with the Swedish equipment maker trying to recover its dues worth Rs 1,012 crore.
The equipment maker had said that if RCom is allowed to sell or transfer its assets, it would be turned into a shell company and Ericsson wouldn’t be able to get its money back.
As things stand, the ruling stalls the company’s planned sale of most of its wireless assets including spectrum, tower, fibre and media convergence nodes Mukesh Ambani-owned Reliance Jio Infocomm for over Rs20,000 crore, which was scheduled to be completed by March end. Jio did not respond to am emailed query seeking comment.
The funds thus raised would be used to repay RCom’s 35 lenders. But in case RCom can’t repay by end of March, the lenders could take the company to the National Company Law Tribunal (NCLT) under the Insolvency & Bankruptcy Code, 2016, especially after the central bank scrapped all debt recast schemes.
China Development Bank, which accounted for 37% of RCom’s secured debt, had also previously moved NCLT to recover dues worth Rs 11,460 crore, but withdrew it following an understanding with the telco after the Jio deal. Its condition was it could review its position if the money wasn’t repaid.
“If RCom has been prevented to sell assets, then they will sure file and appeal in the court which means that the deal to sell assets to Reliance Jio could be delayed,” said a senior banker, asking not to be named.
Anil Kher, senior advocate representing Ericsson in this case, claimed the development was a huge victory for the company. “The tribunal has secured our (Ericsson’s) money by passing the order. We have also filed a separate claim for Rs 1,600 crore that RCom owes as of October 11, 2017 with arbitral tribunal,” said Kher. He added that the Rs 1,012 crore was due till March, 2017, which has grown to Rs1,600 crore now, necessitating a separate claim from Ericsson. Ericsson has also separately moved NCLT to recover its dues from RCom, the hearing for which is due on March 9.
RCom had late December just managed to avoid the possibility of ceding control to banks under a strategic debt restructuring programme, with the proposed sale of assets to Jio. After the sale to Jio, RCom exited the debt recast process. But the latest order puts a cloud on the sale process. The latest order said that substantial part of dues claimed by Ericsson have been “unequivocally admitted” to by RCom and transfer of assets, if allowed at this stage, would “render award passed by Tribunal in favour of respondent redundant”.
RCom, prior and even during proceedings, had intended to delay the process and the “respondents will not be able to enjoy the fruits of decree if passed in their favour,” the order copy added.
Source: Economic Times