Insolvency proceedings against Reliance Communications (RCom) are set to begin, following the debt-laden telco’s inability to carry through the ₹25,000-crore deal between the Ambani brothers. The National Company Law Appellate Tribunal (NCLAT), on Tuesday approved RCom’s application for lifting the moratorium on insolvency and bankruptcy, and directed that the moratorium on RCom’s assets be maintained.
RCom has moved insolvency proceedings in the Mumbai bench of the National Company Law Tribunal (NCLT), which will hear the case on May 7.
The IBC process will begin with the appointment of an Insolvency Resolution Professional, a source in the know of the development told The Hindu. RCom had moved the NCLAT on February 4, 2019 to withdraw its earlier appeal of stay on the proceedings for insolvency so that it could move ahead with the resolution plan through the NCLT process.
Reliance Jio is again tipped to be the sole bidder for RCom, a company that Mukesh Ambani nurtured, but had to part with, with the division of the Reliance empire in 2005. “Reliance Jio is running on RCom’s towers, fibers, using RCom’s spectrum, so it is a natural bidder for RCom. But, this time, Jio will have to submit a resolution plan for RCom and that will be much discounted compared to the deal agreed to between the Ambani brothers,” said another source in the know of the development.
‘Failed deal’
Reliance Jio had earlier agreed to buy assets comprising towers, optic fibers, media convergence nodes (MCNs) and spectrum assets for ₹25,000, but the transaction fell through as Reliance Jio refused take liabilities of past dues of Reliance Comnunications, a pre-condition to get the Department of Telecommunication’s approval.
“Earlier, we were buying only assets that we needed, now you need to submit a resolution plan for RCom. It’s a different ball game.
“Let’s wait and watch what comes out of it. Without RCom’s assets also, we are self-sufficient in terms of spectrum, towers and optic fibre,” a Reliance Jio senior official told The Hindu.
The NCLAT also directed that the company or its guarantors cannot invoke any guarantee, mortgage or other instruments without the permission of NCLAT or the Supreme Court. Under IBC provisions, financial creditors or secured creditors get preference over operational creditors when a company goes for insolvency.
“All legal cases and other liabilities now stand suspended with the company moving back to the NCLT process,” said a RCom official.