Reliance Jio Infocomm (Jio) has moved the bankruptcy court against Reliance Communications(Rcom) tower unit, Reliance Infratel, seeking disclosures of the forensic audit reports of the tower company whose accounts, along with its parent’s, were marked as “fraudulent” by some of its lenders.
“We want a copy of the forensic audit report disclosed to us so that we can make an assessment of how it will impact the resolution plan,” senior counsel Vikram Nankani, representing Jio, said at a virtual hearing Thursday.
The bench directed Jio to furnish application copies to all parties and asked them to file their replies and adjourned the hearing to June 10.
On December 3, the National Company Law Tribunal’s (NCLT) Mumbai bench had cleared Jio’s resolution plan to pick up the tower and fibre assets of RCom – housed under Reliance Infratel – for under Rs4,000 crore which would have gone to the lenders.
A few weeks later, State Bank of India (SBI), Union Bank of India and Indian Overseas Bank classified accounts of the bankrupt telco and its units – Reliance Telecom and Reliance Infratel – as fraudulent. The allegations came a year after a forensic audit unearthed questionable transactions worth Rs 5,500 crore in the three Anil Ambani-led Reliance Group entities. The probe that looked at transactions between May 2017 and March 2018 found three large entries buried under hundreds of thousands of others that the SBI-led lenders’ group suspects could conceal fund diversion.
On Thursday, Jio through its unit, Reliance Project and Property Management Services, sought the audit details from Reliance Infratel’s Committee of Creditors (CoC) including SBI, Union Bank and Indian Overseas Bank. Resolution profession for RCom and its two units is Deloitte which is also part of CoC.
In its application, India’s largest telco told NCLT that it wanted the audit reports to know as to why the three Indian banks had classified the accounts as fraudulent last October.
“As it appears that the forensic audit report was available with the banks on 15th of October 2020. So, on the day on which your lordships approved the plan which was the 3rd of December 2020, this report was available with the banks. They did not disclose it, they did not disclose this to your Lordships, in fairness, they should have done it,” Nankani said.
The latest development could well further delay the lenders’ bid to make any recovery from the bankrupt telecom infrastructure company, the only one among the three whose resolution plan had been finalised by the NCLT, say legal experts.
Infratel, which holds 43,000 towers and 1,72,000 km of fibre, and Reliance Telecom, which mainly houses fibre, are the two units of RCom that went bust along with their parent company. Infratel went to Jio and the other two, including RCom, to UVARCL.
Parent RCom’s insolvency process is stuck amidst separate legal tussles between asset reconstruction firm UVARCL and Reserve Bank of India, another one with the telecom department.
At the time of filing for bankruptcy, RCom had debt of Rs 46,000 crore, with 53 financial creditors — including local and foreign banks, non-banking financial companies and funds — laying claims.
RCom was forced to shut its wireless operations late 2017, hurt by mounting debt and widening losses amid intense competition in the telecom sector after Jio’s entry in September 2016.
Interestingly, Rcom tried to sell its wireless assets, such as spectrum and towers, to Jio, but failed due to a slew of legal cases. This forced the telco, and its units, to opt for insolvency proceedings, which was admitted under the IBC in May 2019.
