Reliance Communications chief Anil Ambani. Photo: AFP
Reliance Communications chief Anil Ambani. Photo: AFP

In a new twist to the Reliance Communication (RCom) bankruptcy case, an Indian appellate tribunal has said that if insolvency proceedings are revived against the beleaguered telecommunications firm, then Ericsson will have to pay back a large settlement amount it received earlier.

This observation was made by a two-judge bench, headed by Justice S J Mukhopadhaya, of the National Company Law Appellate Tribunal (NCLAT).

In February, the Anil Ambani-owned telco approached the NCLAT to withdraw the appeal it filed last year for a stay on an insolvency petition against the company admitted by the National Company Law Tribunal (NCLT).

RCom had to shut down its mobile-phone operation in 2017 and has a debt of 460 billion rupees (US$6.61 billion). While it managed earlier to get a stay on insolvency proceedings, it was not able to sell its assets in accordance with terms of the agreement.

RCom was forced to scrap its wireless assets sale to Reliance Jio, owned by Anil’s elder brother Mukesh, after successive legal obstacles.

If NCLAT were to dismiss RCom’s appeal it would mean the telco would be pushed back into insolvency and debt resolution under an appointed resolution professional, as per the previous NCLT order.

In that case, financial creditors, banks and other lenders, would get preference on any funds from RCom, while an operational creditor like Ericsson would get pushed down the priority list. Thus Ericsson would have to pay back the settlement amount of 5.5 billion rupees ($79 million).

However, Ericsson pointed out that it had been paid by RCom in compliance with orders passed by the Indian Supreme Court in a contempt petition. It now wants to withdraw the insolvency petition against the telco and the case was being heard in the Supreme Court. NCLAT has asked Ericsson to place on record all those proceedings that have taken place in the Supreme Court by way of an affidavit.

The NCLAT has set the next hearing for April 30, when it will hear the Department of Telecommunications’ (DoT) reply to RCom’s plea challenging the department’s show-cause notice to the company. The DoT issued the notice seeking to know why RCom’s license should not be canceled and the bank guarantee it had submitted be invoked, as the company had failed to pay spectrum charges.

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