New Delhi: The National Company Law Tribunal on Friday refused to direct State Bank of India (SBI) and other bank lenders to release Rs 260 crore in income tax refunds to Reliance Communications (RCom), in what is a major set-back to the Anil Ambani-led telecommunications firm.
RCom needs that money to help repay the Rs 550 crore it owes Swedish telecom equipment maker Ericsson by March 19.
If the company doesn’t make the March 19 deadline, Ambani risks facing a three-month jail term for contempt of the Supreme Court’s order last month that ordered repayment by next week.
According to media reports, the NCLAT bench that was hearing RCom’s petition noted that it could not give any direction to any party to “perform certain duties to ensure settlement between other parties”.
“As the Supreme Court (SC) is seized of the matter, we are not passing any direction to refund any amount to anyone or other parties till the court passes some orders,” the NCLAT bench said.
It appears likely that Ambani will now need to approach the Supreme Court to seek the release of the Rs 260 crore it needs to pay Ericsson.
An 18-month-long tussle with Ericsson over unpaid dues came to a conclusion last month when the Supreme Court held Ambani and two others guilty of contempt and ordered RCom to pay Rs 550 crore within a month or potentially face jail time.
As The Wire had reported at the time, the Swedish firm’s attempts at recovering unpaid dues from RCom – for providing managed services to support the telecom firm’s nationwide network for a period of seven years – had followed a winding process.
As of now, the company has already paid Rs 118 crore to Ericsson by depositing the money with the Supreme Court registry. During the apex court hearings last month, Ericsson’s counsel had indicated that RCom had two income tax refunds totalling approximately Rs 260 crore coming its way, which could be used to pay what was owed.
The problem for Anil Ambani, however, was that these income tax refunds were received in a trust and retention account (TRA), which is controlled by SBI and other bank lenders. Generally-speaking, during debt repayment process, all receivables of a company are deposited in a TRA account over which the bank lenders have control.
This is why RCom moved the NCLAT bench after the Supreme Court order last month.
During the hearings this week, SBI, through its senior lawyer N.K. Kaul, argued against RCom’s appeal, noting that it would lead to “public money” being used to settle the payment of a “private party”.
Kaul also contended that SBI and other lenders “refused to believe” that the telecom firm would let its chairman go to jail for contempt of court and that it would pay Ericsson by the March 19 deadline even without the income tax refunds.
“I refuse to believe that the chairman of this company will be allowed to go behind bars and they will not pay up the money,” said Kaul.