Anil Ambani's RCom files for insolvency as deal with Jio crumbles

Anil Ambani’s debt-laden telecom venture 

Reliance Communications

 (

RCom

) decided to file for insolvency on Friday, saddled with a mounting debt of Rs 46,000 crore and unable to sell its spectrum assets to elder brother Mukesh’s Reliance 

Jio

.

The insolvency filing comes weeks after Swedish network giant 

Ericsson

petitioned the Supreme Court to arrest Anil over the recurring delays in payment of its dues worth Rs 550 crore, and accused the embattled businessman of engaging in “gross and wilful contempt” of the apex court. Also, it follows the failure of a spectrum trading deal between RCom and Jio.

With the filing of the insolvency proceedings in the Mumbai bench of the National company law tribunal (NCLT), the debt resolution will now have to be worked out in the prescribed period of 270 days.

“… the Board decided that the company will seek fast track resolution through NCLT, Mumbai. The Board believes this course of action will be in the best interests of all stakeholders, ensuring comprehensive debt resolution in a final, transparent and time bound manner within the prescribed 270 days,” RCom said in a statement.

The company’s board had met to review the progress of its debt resolution plans since the invocation of strategic debt restructuring on June 2, 2017. “The Board noted that, despite the passage of over 18 months, lenders have received zero proceeds from the proposed asset monetization plans, and the overall debt resolution process is yet to make any headway,” the statement further added.

RCom said that 100% approval of all 40 lenders had been “impossible to achieve” on any matter for over 12 months and despite 45 meetings. Other factors that prompted it to opt for insolvency was – as the company described it -“recurring legal challenges by Department of Telecom for spectrum monetization” and the continuing litigation by other parties.

“Resolution through NCLT is in the best interests of all stakeholders, ensuring finality, certainty and transparency through a time-bound 270-day court- approved process,” its statement said

While RCom had been unable to get its spectrum trading deal with Jio pass through DoT norms, Ericsson was also at its throat for non-payment of dues that the Swedish company had already marked down from Rs 1,600 crore to Rs 550 crore as part of a court-monitored settlement. But the company had still not been paid by September 30 last year, despite RCom’s commitment.

Ericsson had demanded the arrest of Anil in its most recent petition in the top court. “The respondents have abused the process of law to the hilt and caused grave damage to the interest of justice… having committed and guilty of contempt of court, be directed to be detained in civil prison unless… (they) purge themselves by making payment of Rs 550 crore along with interest,” the network company had petitioned.

RCom’s sale plan to Jio has also been in the doldrums after Mukesh’s telecom venture sought protection from any liability post the deal. Jio had petitioned the DoT to insulate it from any dues arising towards RCom for the period prior to the clearance of the deal.

DoT, however, had refused to play ball. “There is no question of giving any kind of immunity to the new buyer. It is public money, and we will take it from whoever owns it in case the corporate guarantee that RCom is providing us does not prove to be sufficient,” a senior official at the telecom department had said, a stand which has seen the collapse of the deal.

Ericsson and the DoT are now reviewing the future course of action after the insolvency filing by RCom.