The State Bank of India -led Joint Lenders Forum on Tuesday told the National Company Law Appellate Tribunal (NCLAT) Reliance Communications (RCom) should pay Ericsson on its own without saddling its past liabilities on lenders. The lender refused to release the Rs 266 crore worth of income-tax returns that RCom wants to use to pay the Swedish telecom equipment maker. Senior counsel Neeraj Kishen Kaul, appearing for SBI, argued the money did not belong to RCom. RCom should pay Ericsson, but not at our cost, he said.
An errant firm is wanting public money from the Retention and Trust Account formed in 2017, that is prior to initiation of any IBC proceedings against it, to clear its debts. No encumbrances can be created on the tax refund of `260 crore received in this account on which only the lenders have a lien. You gave undertaking to the SC and NCLAT, Kaul told a NCLAT two-member bench led by justice SJ Mukhopadhyay.
Kaul also argued the Supreme Court has held the three Reliance firms guilty of contempt for wilfully and deliberately not paying `550 crore plus interest and also having breached the undertakings given to the apex court and also to the appellate tribunal. The SC has nowhere said that the money will come from the Retention and Trust account. You (Reliance firms) are conveniently trying to pass on your liability on us as you are being guilty and your chairmen will have to go to jail, he contended.
The NCLAT observed that the insolvency plea against RCom cannot commence until the settlement with Ericsson attains finality. Entire due amount has to be paid with full interest. We are aware that RCom wilfully defied undertakings and went against the SC orders, the bench said.
However, it wondered how SBI would be able to recover its money if RCom goes into insolvency. You will get nothing if insolvency process starts. Will banks stand on I-T refunds be valid if IBC proceedings against RCom start? Where will be the RBI guidelines and the Retention and Trust Account? IBC says you save the company from liquidation and have a resolution plan. Whether your arguments will lie before the insolvency court? Can these arguments be advanced before us? It s not a litigation or a money recovery suit. All these orders are under the IBC, the bench noted.
Justice Mukhopadhyay came down heavily on SBI saying the appellate tribunal had stayed the May 16 order of NCLT, Mumbai, for initiation of CIRP only after the SBI-led JLF made a statement that Reliance companies will sell assets to raise money. You made a joint statement that if you fail, we should start insolvency proceedings. You obtained stay order to recover the money. We allowed you. We must also see your conduct also. The bench had observed on Monday that SBI had given a false impression that the Rcom-R Jio deal would fetch about Rs 37,000 crore.
According to the lead bank, RCom is bound by the hypothecation deed which says no person, other than the lenders in the inter creditor bank, can be the beneficiary under the agreement to which the Anil Ambani company is a signatory. It further said the whole purpose of having a Retention and Trust Account, which is meant to comfort lenders, goes if such RCom s plea for release of income tax returns is allowed.
Refusing to take the blame for any failure on sale of assest of RCom and its two group companies to Reliance Jio Infocomm, SBI said the sale was independent of any settlement with Ericsson and the asset sale fell through as RCom wanted RJio to pay off its debts which the latter refused to do so. Even the SC also held that the contempt against SBI chairman would not lie as the sale of assest was independent of each other, the senior counsel said.
RCom told the NCLAT that it was RCom and the two companies which are liable to pay Ericsson and not their chairmen.
Senior counsel Kapil Sibal argued that the secured creditors can t be allowed to say that they will not release their money lying in the retention account. Money can be only paid from this account. Where else the money will come from, he said.
He further argued that the contract between the parties can t override the NCLAT order and the tribunal has the power to see how money can be paid. The release would help RCom to clear a part of its `550-crore dues to Ericsson.