The NCLT has directed to initiate insolvency proceedings against Reliance Communications Chairman Anil Ambani to recover Rs 1,200 crore under the personal guarantee clause of the bankruptcy law.
Anil Ambani had given a personal guarantee to the loans given by State Bank of India (SBI) to Reliance Communications and Reliance Infratel in August 2016.
The National Company Law Tribunal (NCLT) Mumbai in its order on August 20 said both RCom and RITL committed default in repayment in and around January 2017.
The accounts were retrospectively declared as non-performing account (NPA) with effect from August 26, 2016, even before loan agreements had been entered into.
"Such retrospective declaration seems rather incongruous, akin to the adage 'putting the cart before the horse'. While debt and default have remained undisputed, the incongruity of the declaration of NPA, has not been raised and contested by the Respondent.
"Besides, reappraisal of the declaration of the NPA by this Authority would not fall within the ambit of the provisions of the Code, under which the instant Applications have been made," the order said.
The NCLT ordered the appointment of a resolution professional and asked SBI to take the necessary action.
Moreover, it maintained that it is wrong to assume that no action can be taken until a resolution plan is accepted.
"Sec 60(2) clearly provides for proceedings to be launched against personal guarantors, running parallel to CIRP (corporate insolvency resolution process). Fallacious to assume that no action can be taken against guarantors until the Resolution Plan is accepted," according to the order.
A spokesperson for Ambani said: "Mr Ambani is reviewing the order dated August 20, 2020, of the National Company Law Tribunal, Mumbai Bench (NCLT), and is taking advice on filing an appropriate appeal before the National Company Law Appellate Tribunal against the appointment of the resolution professional." The NCLT has declined SBI's request for a restriction on Ambani from dealing or appropriating his assets, to the prejudice of the interest of SBI, the spokesperson said.
"The NCLT order directing appointment of the resolution professional does not constitute an admission of SBI's insolvency application by the NCLT. The resolution professional will examine SBI's insolvency application against Mr Ambani and submit a report to the NCLT." The claim against Ambani, after verification and determination of maintainability, would be considered at a later date by the NCLT, the spokesperson said.
"The order of the NCLT will have no bearing on the operations of Reliance Infrastructure Ltd, Reliance Power Ltd and Reliance Capital Ltd," the spokesperson added.
According to the order, around 2015-16, RCom had sought credit facilities of Rs 565 crore for repayment of certain existing financial debts and for credit facilities of Rs 635 crore for its sister concern RITL, also for the repayment of existing financial debts.
SBI on August 29, 2016, provided the amount as loan to RCom and RITL, the order said, adding that Anil Ambani provided personal guarantee under a Personal Guarantee Deed in favour of the Financial Creditor in respect of the credit facilities.
RCom filed for bankruptcy last year, consequently, its secured debt was estimated at around Rs 33,000 crore, while lenders submitted claims of around Rs 49,000 crore in August 2019.
Recently, in March the SBI board had approved a resolution plan for Reliance Communications that envisaged lenders recovering around Rs 23,000 crore, entailing a haircut of nearly 50 per cent.
RCom owes nearly Rs 5,000 crore to SBI.
The lenders of Reliance Communications (RCom) and Reliance Infratel (RITL) have already approved the resolution plans with 100 per cent voting in March 2020 and have been placed for the approval for the NCLT Mumbai.