RCom goes to NCLT to speed up Jio deal, hopes move will expedite DoT nod

Reliance Communications' (RCom's) shares crashed 50 per cent as soon as the markets opened on Monday, reacting to the company's Friday announcement that it would file for insolvency in the National Company Law Tribunal (NCLT). Sources said this move, however, boosted hopes of the debt-laden firm being able to sell its spectrum and fibre optics assets to Reliance Jio (RJio) soon.

"As the matter moves to the NCLT, the Department of Telecommunications (DoT) nod will come earlier. The DoT is also a creditor and until the deal (worth Rs 25,000 crore) goes through, no lender will get anything," said a source in the company who did not want to be named. He added the deal was unlikely to be annulled.

The company also got relief from the Telecom Disputes Settlement and Appellate Tribunal (TDSAT), which on Monday asked the DoT to return bank guarantees to the tune of Rs 2,000 crore to RCom. The tribunal also said the spectrum charge levied by the DoT was invalid. 

RCom had approached the TDSAT over the spectrum fee.

 
The company's stock ended the day at Rs 7.6 a piece, down 35 per cent from its previous close. In intra-day trade, it touched a low of Rs 5.6 per share before recovering. The stock has been eroded by 65 per cent since the debt-resolution process began in June 2017.

Insolvency move 

The move to the NCLT, the company had said, would help in a time-bound resolution of the debt — a goal it has not been able to achieve in the past 18 months.

In August last year, RCom sold its fibre assets and related infrastructure covering 178,000 km across the country to RJio for Rs 3,000 crore. It also reinstated bank guarantees worth Rs 774 crore with the DoT, ahead of the timeline set by the TDSAT. It asserted that its Rs 25,000-crore asset-sale plan was on track.

Then, in December last year, the Supreme Court asked RCom to furnish corporate guarantee of Rs 1,400 crore. After the company had complied with this, the DoT had to give its nod to RCom's deal with RJio in seven days.

But, the DoT changed its stance after RJio sought assurances from the government that it won't be held liable for RCom's past dues. RJio also extended the terms of the agreement by six months. 

Before this, in January last year, RJio (owned by Mukesh Ambani) and RCom (led by his younger brother Anil Ambani) locked horns in the Supreme Court over the payment of spectrum-usage charges. Both denied responsibility for it.

RCom provided the DoT guarantees worth Rs 1,400 crore issued by Reliance Realty, along with an undertaking that it would not create third-party rights over the land belonging to the realty firm. RJio, however, was not satisfied to go ahead with the deal.

Sources said the DoT was still waiting for the two parties to settle differences before providing the no-objection certificate. 

The Ericsson twist

On Monday, RCom also moved the National Company Law Appellate Tribunal (NCLAT) to withdraw its opposition to an insolvency petition filed by Ericsson India in the NCLT, Mumbai. 

Ericsson and RCom had reached a settlement agreement in the NCLAT. The tribunal had, however, said Ericsson could revive the insolvency petition if RCom failed to pay within the deadline.

Now, Ericsson is opposing RCom's move to go for insolvency as it fears that under the Insolvency and Bankruptcy Code proceedings, it will end up being only an operational creditor, and consequently, get less than Rs 550 crore it is now getting, said sources in the company.

A breather

The NCLAT on Monday also stayed the sale of RCom assets and invocation of bank guarantees against it till the next date of hearing, February 12.

"Until further orders, appellants, corporate debtors, respondents or any third parties will not sell or transfer or alienate any movable or immovable assets of the company or corporate debtor," a two-member Bench led by Justice S J Mukhopadhaya said in its order.

RCom had said on Sunday the challenges raised by unreasonable minority lenders can now be overcome through the NCLT's 66 per cent majority rule, against the 100 per cent approvals rule.

According to the statement, the company's board also expects "substantial unsustainable debt and liabilities" to stand extinguished under the NCLT process. 
With inputs from Megha Manchanda  


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