The National Company Law Tribunal (NCLT) will on Friday rule on whether to admit an insolvency plea filed by the Indian unit of Ericsson against Reliance Communications (Rcom) and its two subsidiaries for recovery of dues, a decision which would have a direct bearing on the Anil Ambani-owned telco’s move to sell wireless assets to Reliance Jio and repay its lenders.
The Swedish telecom equipment maker has alleged that the Anil Ambani-owned telco owes it Rs 1150 crore. Lawyers representing the operator and lenders, led by State Bank of India, Wednesday strongly argued that if the court admits Ericsson’s bankruptcy plea, it would derail Rcom’s sale of wireless assets to Reliance Jio Infocomm (Jio). They added that delays in concluding the sale to Jio would further reduce the value of the assets – spectrum, towers, fibre and switching nodes – which have been valued at some Rs18,000 crore.
Rcom’s representatives told the bench headed by B.S.V Prakash Kumar and Ravikumar Duraisamy that a case for recovery of dues was pending in the arbitrational tribunal for resolution and therefore a similar one should not be admitted in the bankruptcy courts.
“Debt does not trigger insolvency but default does,” said senior advocate U. K Chaudhary representing Rcom. Senior counsel, Gaurav Joshi represented Reliance Infratel.
The Anil Ambani-owned company under a debt of Rs 45,000 crore is racing against time to complete the merger of its towers, fibre, spectrum and switching nodes to Jio for about Rs 18000 crore. The asset monetization needs to be completed by August 26, failing which the telco goes into insolvency.
“Order of admission would mean the sale is negated and stultified,” said Fredun De Vitre representing the consortium of 28 banks.
It was revealed during the proceedings that of Rs 18,000 crore, about Rs 7300 crore will be paid for spectrum and Rs 8000 crore for the tower and fibre by Mukesh Ambani-owned Jio.
RCom and SBI’s lawyers argued that delays will further reduce the value of these assets. During its March end results, Jio had commented that because of the lawsuits, the sale has taken “bit longer” but till such time that there is clarity on legal front, they cannot go ahead and close the transaction.
Rcom’s subsidiary Reliance Infratel is also battling HSBC Daisy Investments and other minority shareholders who have opposed the sale of tower assets.
Ericsson represented by senior counsel Anil Kher and Pessy Modi argued that Ericsson has had 9000 employees working on Rcom and its subsidiaries. They alleged that despite many promises, renegotiations on payment schedules, there was no money that came in from the Ambani owned telco.
If the petition gets admitted, it will be second telco after Aircel to head for bankruptcy in the sector that has seen mergers and exits as operators succumbed to tariff wars.
The telco’s shared closed at Rs 15.05, down by 0.66% on the BSE on Wednesday.
Source: Economic Times