Reliance Communications can now finally proceed with insolvency, as the National Company Law Appellate Tribunal approved its application for lifting the moratorium on insolvency and bankruptcy.
After two years of wait, Reliance Communications can now finally proceed with insolvency, as the National Company Law Appellate Tribunal approved its application for lifting the moratorium on insolvency and bankruptcy proceedings on the Anil Ambani-led company, a person close to the development told Financial Express Online. However, the NCLAT has also directed that the moratorium for RCom’s assets is to be maintained.
RCom had moved the NCLAT on 4 February 2019 to withdraw its earlier appeal of stay on the proceedings for insolvency so that it can move ahead with the resolution plan through NCLT, the company had earlier announced. RCom’s operational creditor — Ericsson — who was the first creditor to move the court for RCom insolvency was also asked to file its reply to the court by 8 February 2019.
Meanwhile, RCom was directed that the company or its guarantors cannot invoke any guarantee, mortgage or other instruments without the permission of NCLAT or the Supreme Court. The company or third party were also forbidden to sell or transfer any assets of the company, RCom informed the media. RCom has debts over Rs 44,000 crore.
Ericsson- RCom issue
Ericsson was an operational creditor to RCom and had moved court and initiated insolvency proceedings on RCom back in 2017. RCom was not willing to go IBC proceedings at the time (May 2018). RCom promised Ericsson an upfront payment of Rs 550 crore with an agreement that Ericsson will withdraw its appeal for insolvency resolution of the Anil Ambani-firm. Ericsson received the payment in March 2019.
But, with speculation rife that RCom may decide to opt for insolvency proceedings, Ericsson was told by the NCLAT that it may have to return the amount if the insolvency proceedings on the company were to resume. Under IBC provisions, financial creditors or secured creditors get preference over operational creditors when a company goes for insolvency. Ericsson, afterwards, moved the Supreme Court against potentially having to pay back RCom the money. The Supreme Court is expected to hear Ericsson’s plea in July 2019.