NCLAT refuses to direct SBI to release RCom funds to Ericsson

The National Company Law Appellate Tribunal on Friday refused to direct State Bank of India-led joint lenders’ forum to release Rs 260 crore of income-tax refunds of Reliance Communications to Ericsson India.

The tax refunds of Rs 260 crore for 2015-16, lying in the ‘Trust and Retention Account’ with SBI, the lead Bank of JLF, was required by RCom and its two group firms — Reliance Telecom and Reliance Infratel — to clear off their balance Rs 453-crore dues payable to Ericsson India by March 19, failing which promoter Anil Ambani will face jail term of three months.

This is as per the Supreme Court’s February 20 judgment which held the three companies guilty of contempt of court for failing to comply with its orders and undertakings given to the apex court in this regard.

The RCom group had sought the tax refunds on the grounds that they had no money except this to pay Ericsson India.

A bench comprising NCLAT chairperson SJ Mukhopadhaya and justice Bansi Lal Bhat said that no direction can be given to lenders to perform certain duties to ensure settlement between Reliance firm and Ericsson. It also refrained from passing any direction to refund any amount to any one or other party, till some order is passed by the SC.

However, it said that since the SC is seized of the matter, it is not vacating the stay on insolvency proceedings initiated by the Mumbai bench of NCLT. While posting the matter for orders on April 8, the NCLAT has asked the parties to inform it about the development so as to consider whether for failure of compliance, the interim order passed on May 30, 2018, is to be vacated or not.

“However, this order will not come in the way of (Reliance Communications) to ask for relief…from the Supreme Court, which has the jurisdiction to pass appropriate order under Article 142 of the Constitution of India,” it added.

It also said that the SC has clarified that the payment of dues of Rs 550 crore to Ericsson India (operational creditor) by three Reliance companies was not linked with the assets of SBI or any other bank, who are third party to the settlement between the three Reliance companies and the Ericsson.

“…we are of the view that the parties should take steps to ensure that settlement in terms of the order dated May 30, 2018, is made in its letter and spirit to save three ‘Corporate Debtors’ from the ‘Corporate Insolvency Resolution Process’ enabling the ‘Financial Creditors’ ie SBI and other banks and Ericsson India, to recover maximum dues. Otherwise this appellate tribunal will have no option but to vacate the interim order of May 30, 2018.

RCom’s dues to Ericsson arise out of a settlement reached on May 30, when the beleaguered telecom company had agreed to repay dues of Rs 550 crore to the Swedish equipment supplier by September 30. However, RCom failed to pay the money, saying that its sale of spectrum to Reliance Jio Infocomm had not gone through. After RCom had failed to pay for its supplies procured from Ericsson in 2014, the latter initiated insolvency proceedings against it before NCLT to recover Rs 1,500 crore. Subsequently, the two parties arrived at a settlement on May 30 before NCLAT by which RCom was required to pay Rs 550 crore.

The NCLAT had also on May 30 halted insolvency proceedings against RCom after the case was admitted by the Mumbai bench of National Company Law Tribunal on May 16, 2018. This appellate tribunal had also then allowed the JLF with whom the assets of the Reliance companies are mortgaged, and also the three companies to sell the assets of the beleaguered companies and to deposit the sale proceeds with SBI.