Fri. Mar 29th, 2024
Anil Ambani. || source: https://timesofindia.indiatimes.com/Anil Ambani. || source: https://timesofindia.indiatimes.com/

The State Bank of India had filed a case against the chairman of Reliance Communications Anil Ambani. The case was launched over a 1200 crore loan default to the lender by the company. Based on the case, the National Company Law Tribunal ( NCLT ) has decided to appoint an interim resolution professional.

While taking the credit from the public lender, Anil Ambani had put up his personal guarantee along with other collaterals. NCLT was contacted by the bank after the company could not pay up its dues even after the bank invoked the personal guarantee.

The bank pleaded for the NCLT’s intervention under section 97 (3) of IBC. The insolvency of the board would be to appoint an IRP who would assess and submit a report on the assets owned by Anil Ambani.

To appoint an IRP for assessment of an individual’s wealth, the lender needs to approach the NCLT board according to the rules stated by IBC. Thereafter NCLT would seek suggestions of names for the IRP from Insolvency & Bankruptcy Board of India (IBBI) and choose one from them. When a case is filed in the tribunal, NCLT directs the board and within seven days of such application, a resolution professional has to be nominated for the insolvency resolution process.

The State Bank of India had given credit facilities to Reliance Communications and Reliance Infrastructure Limited under the Reliance ADAG group. The group has Anil Ambani at its head. The credit was provided in August 2016. State Bank of India provided Reliance Communications and RTIL with loans worth Rs. 565 and Rs 635 crore respectively then. A month later the chairperson Anil Ambani, to avail the loans provided a personal guarantee.

The following year, R.Comm and RITL accounts were held to be in default since August 2016. In 2018 January, the public lender invoked the personal guarantee provided to avail the credits. After that in February 2020, the bank issued a demand notice to Anil Ambani, where they demanded recovery of the dues. The bank got no response from the company.

RCom had filed bankruptcy last year, after which secured debt of Rs. 33,000 crore was estimated. The lenders claimed Rs. 49,000 crore in August 2019.

According to a spokesperson of Anil Ambani, as reported by moneycontrol.com, the company is reviewing the NCLT order. They have also added that they are taking advice on filling appropriate appeal against the tribunal’s decision if the appointment of RP.

The admission of SBI’s application is not constituted by the admission of the resolution professional. The resolution professional would only examine the insolvency application of the public lender against the chairperson of Reliance Communications and submit a report to the NCLT.

This order will also not have any effect on the operations of other companies under the Reliance group like Reliance Infrastructure Limited, Reliance Power Limited, and Reliance Capital Limited.

NCLT had observed the payment defaults of Reliance Communications and Reliance Telecom Infrastructure Limited in and around January 2017. After that, the accounts were labeled as Non-performing Account (NPA) by the bank. This declaration came into effect from 26.8.2016, before the loan agreements had been entered.

The order also says, “Such retrospective declaration seems rather incongruous, akin to the adage ‘putting the cart before the horse’. While debt and default have remained undisputed, the incongruity of the declaration of NPA has not been raised and contested by the Respondent. Besides, a reappraisal of the declaration of the NPA by this Authority would not fall within the ambit of the provisions of the Code, under which the instant Applications have been made.”

The order adds that section 60 (2) provides for proceedings to be launched against personal guarantors, in parallel to the CIRP. They also said that it is “fallacious to assume that no action can be taken against guarantors until Resolution Plan is accepted.”

A few months back Chinese Banks secured the recovery of Rs. 5447 crore loans were provided to Reliance Communications after an order from British Courts. After the non-payment of the amount to the Chinese Banks, SBI fears that they will likely invoke similar personal guarantees issued by Anil Ambani to them. The invocation of personal guarantee by the Chinese is presumed to affect recovery proceedings under IBC.

In March, SBI had approved a resolution plan for Reliance Communication that forecasted recovery of Rs 23000 crore of their money by the lenders. It is estimated that R.Comm owes nearly Rs. 5000 crores to SBI.

Lenders of Reliance Communications and Reliance Infratel had already approved the resolution plan with 100 percent votes in March. This has been put up in the Mumbai NCLT for approval.

 

 

By Swastik Bhattacharjee

A student from Kolkata. Currently content creator at The Indian Wire.

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