SC grants clearance for RCom’s spectrum sale to Jio, Rcom to furnish Rs 1400 crore corporate guarantee

Department of Telecommunication was seeking bank guarantee from RCom, but the company said it is not in a position to do so as it is undergoing insolvency proceedings.

Clearing the path for sale of Reliance Communications Limited’s spectrum to Reliance Jio Infocomm Ltd, the Supreme Court on Friday asked Reliance Communications to furnish a corporate guarantee of ₹1,400 crore within two days to get the No Objection Certificate (NOC) from the government.

The corporate guarantee will be issued by Reliance Realty Limited, a wholly-owned subsidiary of RCom. Once the corporate guarantee is furnished by RCom, the government is bound to give its NOC for the spectrum sale within a week. The court also directed the government to issue the NOC after it receives the corporate guarantee.

The Department of Telecommunications (DoT) had challenged the Telecom Disputes and Settlement Appellate Tribunal’s (TDSAT) on October 1 for permission given by the later to debt-ridden RCom to sell its spectrum to Reliance Jio.

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The SC order came in wake of the petition submitted by DoT, challenging TDSAT’s decision. In its petition before the top court, the DoT on Monday reiterates its demand of ₹2,940 crore in bank guarantees from Reliance Communications Ltd (RCom) for its payment liabilities on the spectrum, before clearing the Anil Ambani-led telecom firm’s proposed asset sale to elder brother Mukesh Ambani’s Reliance Jio Infocomm Ltd.

As part of debt reductions efforts, RCom had signed a ₹250-billion deal with Reliance Jio in December 2017. The deal included the sale of assets mortgaged with different banks to avoid insolvency proceedings.

In response to the Centre’s plea, RCom’s counsel and Congress leader, Kapil Sibal said the company was not in a position to make the payment as it was undergoing insolvency proceedings. “I can’t give a bank guarantee. If this deal is not allowed to go through, a lot of entities will suffer. Banks who are secured creditors will be in jeopardy and the deal falls through.”

Before this, the apex court had granted Rcom some respite, by extending the repayment time of the dues Anil Ambani led Reliance Communication owes to Ericsson.

A Bench of Justices Rohinton Nariman and S Abdul Nazeer passed the order after hearing Senior Advocates Dushyant Dave who was representing Ericsson and Senior Congress leader Kapil Sibal who appeared for Reliance Communications. It is interesting to note that while Congress president Rahul Gandhi is attacking Anil Ambani and his Reliance group on a daily basis for last several months, senior Congress leader Kapil Sibal is representing the same Anil Ambani in court against the government.

On August 3, the Supreme Court had ordered Reliance to pay Rs. 550 crore to Ericsson to settle the 1,500 crores owed by Reliance. The court had directed Reliance to pay this amount by 30th September.

Ericsson had approached the Supreme Court after Reliance had failed to comply with the order. The Apex Court after hearing Ericsson and Reliance ordered that the amount due can be cleared by Reliance by 15th December. In case of default, a penalty at 12% will have to be paid, which will kick off from the original due date of September 30.

The besieged telecom operator, which had been struggling with a mountain of debt and a failed merger with Aircel, finally decided to wind up its wireless business in December 2017. Back then, it had said that Rcom will essentially become a business-to-business (B2B) entity instead of a business-to-consumer (B2C) company.

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