China Development Bank withdraws insolvency petition against Reliance Communications

MUMBAI: China Development Bank (CDB) on Friday withdrew its insolvency filing against Reliance Communications (RCom), but Swedish gear maker Ericsson continued its battle against the Anil Ambani-owned telecom operator to recover its dues. Ericsson, operational creditor or a vendor who is owed by a client, is aiming to recover Rs 1,150 crore from RCom, while CDB, a secured lender accounting for 37% of RCom’s total secured debt, has dues of Rs 11,460 crore.

Senior counsel Darius Khambatta, who represented both companies, said that since RCom’s plans to sell wireless and real estate assets, designed to generate funds to repay lenders, is up to March 2018, CDB is “accommodating” for the benefit of all creditors.

The Chinese lender, however, warned that it retained the right to file an application again if it does not recover its dues from the telco, which is in the midst of strategic debt restructuring (SDR). While Khambatta didn’t spell out the specifics of any out-of-court settlement with RCom, ET had earlier reported CDB and other Chinese lenders were in advanced talks to take up 70% in the development of Dhirubhai Ambani Knowledge City.


Arguing for Ericsson, Khambatta told the bench comprising Justices BSV Prakash Kumar and V Nallasenapathy that RCom “has miserably failed to make payments” and listed out the multiple exchanges between Ericsson with RCom and its affiliates on dues for its services according to the contractual agreements signed in May 2012.

The court will hear RCom’s arguments on January 18. ET on Friday reported CDB planned to withdraw its insolvency filing, while Ericsson planned to continue to fight it out. Shares of RCom surged 7% post CDB’s call, to finally close at Rs 34.05 a piece, up by 2.10% on the BSE on Friday. RCom, weighed down by Rs 45,000 crore of debt, had invoked the SDR programme in 2017.

Last month, it announced that through asset monetisation, it will repay its lenders and exit the SDR process. The sale of spectrum, tower, fibre and media convergence nodes (MCN) to Reliance Jio for under Rs 24,000 crore is part of this strategy. In a regulatory filing on Friday, RCom said it is working ‘expeditiously'to close asset monetisation programme and “expects to close the same in a phased manner during January-March,” subject to approvals.

“Asset sale proceeds shall be utilised to pay the company’s debt, including non-convertible debentures (NCDs) as may be decided by the joint lenders forum,” said the telco.

“The company shall not pay or fix any record date for payment of interest on NCDs till the completion of the restructuring process.”

CDB, which is RCom's largest lender and Ericsson, had moved the National Company Law Tribunal last November and September respectively, against the operator and its affiliates in a bid to recover its dues. According to the 2012 agreement, Ericsson was responsible for network management and maintenance and after initial few years, payments stopped coming in from 2016 onwards.

“Payments became a dribble and then stopped. There was no dispute on the quality of service,” said Khambatta, representing Ericsson. According to court proceedings, the Anil Ambani-owned telecom company had assured that the dues would be cleared, detailing out the turbulence in the industry.