The Supreme Court of India on Wednesday held industrialist Anil Ambani and two directors of his Reliance Group guilty of contempt of court, saying he will go to jail for three months if he does not pay 4.53 billion rupees (US$63.7 million) to Ericsson India within four weeks.
Ericsson, a leading Swedish manufacturer of telecoms equipment, had filed three contempt cases against Ambani in the Supreme Court for willfully not paying debts of 5.5 billion rupees, Indian news agency ANI reported. Ericsson India had signed a seven-year deal with Ambani’s Reliance Communications (RCom) in 2014 for managing and operating its network.
The Supreme Court also held that the trio was in breach of earlier undertakings to the court. In order to clear the contempt charges, the three must hand over 4.53 billion rupees to Ericsson within four weeks. The court also directed that 1.18 billion rupees already deposited by Reliance Group with the supreme court be disbursed to Ericsson within a week, the Press Trust of India reported.
“From undertakings given by Reliance Group’s top brass, it appears they have willfully not paid the amount to Ericsson despite orders and undertakings given,” it said. The court said that the unconditional apology given by Reliance will be rejected as they had “breached the undertaking and order”. It added that the conglomerate did not adhere to the 120-day deadline and the 60-day extension given by the court in October last year to pay Ericsson’s dues.
RCom’s shares fell 9% intraday on Wednesday after Anil Ambani was found guilty of contempt in the Ericsson case.
The two-judge bench comprising Justices RF Nariman and Vineet Saran criticized RCom chairman Ambani and the two Reliance Group directors—Reliance Telecom chairman Satish Seth and Reliance Infratel chairperson Chhaya Virani—for showing “cavalier attitude” to the supreme court. It imposed a fine of 10 million rupees to each to the guilty three, with failure to pay leading to one-month jail terms.
During the hearing on February 13 when the court reserved judgment, Ericsson had taken a dig at Ambani by referring to the controversial Rafale deal. It said that the Reliance Group had enough money to invest in the Rafale fighter-jet deal but failed to clear its debts. The charges were vehemently denied by the Reliance Group.
Anil Ambani’s Reliance Defence is one of the offset partners of Dassault, the French aviation major manufacturing Rafale jets. Prime Minister Narendra Modi signed a deal for 36 Rafale jets with France in 2016. Opposition parties, especially Congress party, have alleged that corruption and irregularities have taken place in the deal to benefit Anil Ambani. The allegations were strongly denied by the Modi government, Reliance, and Dassault. But former French President François Hollande revealed that Reliance Defence was not the choice of Dassault to be its “offset” partner in the deal with India, but that the Indian government told the aviation company to join hands with Reliance.
Following Ericsson’s argument, Anil Ambani told the court that due to the failure of an assets sale deal with older brother Mukesh Ambani’s Reliance Jio, his Reliance Group had begun insolvency proceedings which, he claimed, meant he was not in control of the necessary funds. The assets sale was stalled after the government refused to provide immunity to Mukesh Ambani’s firm from any past-payment liabilities. As of the end of September 2018, RCom had cash and bank balances of 8.24 billion rupees and debts of 327 billion rupees.
The Supreme Court sacked two court masters on February 13 for tampering with the top court’s orders in the Ericsson contempt plea against RCom and Anil Ambani, The Telegraph reported. In the said order, delivered on January 7, the court court had issued a notice to Ambani seeking his personal appearance. But when the said order was uploaded on the court’s website, it read: “personal appearance of the alleged contemnor(s) dispensed with”. This had been brought to the Court’s notice by the Ericsson counsel and after investigations, it was found that the omission of the crucial word “not” in the order was not accidental.