Ericsson Seeks Anil Ambani’s Imprisonment

Swedish telecommunications equipment manufacturer, Ericsson, has filed its second contempt petition in the Supreme Court against Anil Ambani and his Reliance Communications (RCom) for failing to clear a debt of Rs 550 crore. Ericsson has also sought that the Rcom Chairman be barred from overseas travel and be held in a civil prison until the dues are paid.

Anil Ambani’s business ventures have not been doing well. Reliance Aerostructure Limited, despite being chosen as an Indian offset partner, has not been able to take flight due to the Rafale deal. His Reliance Defence and Engineering (now Reliance Naval and Engineering) had to go into insolvency proceedings after failing to deliver 14 Fast Patrol Vessels to the Indian Coast Guard for Rs 916 crore. His Reliance Infrastructure Limited flouted employment and labour norms prompting his employees to unionise. Unfortunately for the employees, they were arrested as a part of the Bhima Koregaon ‘urban naxal’ myth.

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According The Economic Times, the Supreme Court had initially set a deadline of September 30 for RCom to clear its dues to Ericsson. However, after the deadline was missed, Ericsson filed a contempt petition against the company and its chairman. On a personal guarantee from Anil Ambani, the Supreme Court extended the repayment deadline to December 15.

In the present petition, Ericsson has asked the Supreme Court to allow insolvency proceedings against RCom to commence. RCom had earlier been hauled before the National Company Law Tribunal (NCLT) in an insolvency proceeding. However, the company managed to hold its ground by submitting an asset monetisation plan to reduce its debt from Rs 46,000 crore to Rs 28,000 crore, around 39%.

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RCom is in court regarding another contempt proceeding as well. In this case, RCom instituted the proceedings against the Department of Telecommunications (DoT). In this petition, RCom alleges that the DoT has played a sinister role in blocking a deal between RCom and Mukesh Ambani’s Reliance Jio Infocomm. The deal essentially consists of RCom selling its assets to Jio.

According to reports the deal was meant to finance RCom’s settlement with Ericsson. However, the spanner in the works was that Jio wrote to the DoT stating that it should not be held liable for RCom’s spectrum dues which amount to Rs 10,900 crore. This, however, violates the government’s spectrum trading policy where the buyer assumes the seller’s liability at the time of scale. Hence, the DoT rejected and blocked the deal for spectrum.

The sale of spectrum to Jio was a part of RCom’s asset monetisation plan and the Supreme Court had directed the DoT to accept a Rs 14,000 crore corporate guarantee for repayment and a parcel of land from a RCom subsidiary. The DoT accepted this arrangement but wanted the liability to transfer to Jio in case on non-payment. Jio evidently did not want to stand guarantee for RCom.

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Both petitions in the court form a part of the same transaction, i.e. RCom clearing its dues. However, the question that ought to arise is which deal will be given precedence. Will a deviation from law be allowed for RCom to pay Ericsson? Or will the law be upheld and RCom be forced to raise the amount from another source?

Another question is whether the minority shareholders, who are owed Rs 232 crore, will ever get their money back, not to mention what may be owed to the company’s employees. Then there is also the fear of a familiar turn of events where Anil Ambani mysteriously disappears to resurface in another country. Would he be yet another addition to the growing list of ‘fugitive’ eminent citizens, like Vijay Mallya, Nirav Modi, Mehul Choksi and the Sandesara brothers, to name a few?