Supreme Court Clears Reliance Communications’ Assets Sale To Reliance Jio
The Supreme Court today approved a settlement between Anil Ambani-led Reliance Communications Ltd. and the Indian unit of Ericsson AB, paving the way for the sale of the debt-ridden telecom operator’s assets to Mukesh Ambani’s Reliance Jio Infocomm Ltd.
A two-judge bench headed by Justice RF Nariman directed Reliance Communications to pay Rs 550 crore to Ericsson by Oct. 1, Bloomberg News reported. The court also directed Chairman Anil Ambani to give an undertaking to pay Ericsson the amount.
The top court will hear Reliance Communications’ plea to end the insolvency case on Oct. 1. The Swedish telecom equipment maker had moved the apex court on Aug. 2 objecting to the settlement terms suggested by the Indian firm.
The company’s shares rallied as much as 15.3 percent to Rs 17.1 apiece following the news and multiple block deals. This was the biggest intraday jump since May 31. Total 71 lakh shares of Reliance Communications changed hands in five blocks, according to Bloomberg. Buyers and sellers were not immediately known.
The company, after earnings announcement on July 18, said it was confident a suitable debt resolution plan would be formulated along with lenders according to the strategic transformation programme.
On May 30, the National Company Law Appellate Tribunal had ordered that the insolvency plea initiated by Ericsson India against Reliance Communications would be put on hold, in favour of a settlement plan being discussed between the two parties.
In its order, the appellate tribunal had ordered Reliance Communications to pay Rs 550 crore to Ericsson India against their claims, within a period of 120 days. In the meantime, the sale of telecom assets to Reliance Jio, led by Reliance Communications’ lenders, would continue as planned, the NCLAT had said.
The tribunal had also said if Reliance Communications is unable to pay Ericsson’s settlement dues within the specified time frame, the insolvency proceedings would resume and that the funds recovered through any asset sale would have to be given back to Reliance Communications.
The Anil Ambani-led company had approached the Supreme Court objecting to this clause in the NCLAT order, saying that the sale should not be reversible. Reliance Communications also wanted the insolvency proceedings to be stopped completely, rather than be put on hold, so that the lenders involved would not face any haircuts. It is not entirely clear whether the reversibility of the Reliance Jio deal has been addressed by the Supreme Court in its order on Friday.