Monday, June 21

‘Let RCom use trust fund to pay Ericsson’, NCLAT warns lenders of insolvency

New Delhi: An appellate tribunal has warned lenders to Reliance Communications (RCom) that their failure to release tax refunds to clear the telco’s dues may force court to send the telco back into insolvency proceedings.

“If you don’t pay we will vacate the order (staying insolvency proceedings) and ask for insolvency,” National Company Law Appellate Tribunal (NCLAT) said on Tuesday. “If the payment fails we will pass orders for insolvency,” said a two-member bench headed by Justice SJ Mukhopadhyay. The tribunal will hear the case on Wednesday.

RCom requested that Rs 260 crore of tax refunds held in a trust fund by lenders be released on behalf of the telco to pay Swedish telecom gear maker Ericsson.

Senior advocate Kapil Sibal, appearing for RCom, argued that the telco would be unable to pay if Insolvency and Bankruptcy Code proceedings start, which will “fly in the face of directions of the Supreme Court. Therefore, that must come later and this (payment to Ericsson) must come now.” SBI counsel Neeraj Kishan Kaul contended that the trust fund belonged to the lenders. “No other party has any right over it (retention and trust account) at all. The settlement (from sale of assets) did not fail because of the Joint Lenders’ Forum (a consortium of 37 banks and financial institutions, led by SBI, seeking to recover dues from RCom). It failed because Jio declined to pay RCom’s past debt.”

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