The Supreme Court Thursday dismissed a plea by State Bank of India seeking resumption of insolvency proceedings against the then chairman of Reliance Communications (RCom), Anil Ambani, to recover Rs 1,200 crore loan granted to his two firms. The top court refused to vacate the stay granted by the Delhi High Court by its interim order on the personal insolvency proceedings against Ambani.
Ambani had given personal guarantees for the SBI loans of Rs 565 crore and Rs 635 crore to RCom and Reliance Infratel Ltd (RITL) in August 2016. A bench of Justices L N Rao, Hemant Gupta and S Ravindra Bhatt asked the high court to take up the matter on October 6 and without any adjournment decide the case in view of the importance of the issue. The bench said SBI is at liberty to seek modification of stay order before the high court.
Senior advocate Harish Salve, appearing for Ambani, contended that to declare a man bankrupt has serious consequences and opposed vacation of stay on insolvency process. On August 27, the high court had stayed the insolvency proceedings against Ambani in relation to recovery of Rs 1,200 crore loans given by SBI to his two firms.
It had also restrained Ambani from "transferring, alienating, encumbering or disposing of his assets or legal rights and interests therein till the next date of hearing". It had issued notice to the Centre, the Insolvency and Bankruptcy Board of India (IBBI) and SBI seeking their stand on the plea by October 6, the next date of hearing. The court had also said that the proceedings would continue in relation to the corporate debtor (the companies), and while dealing with those proceedings, the liability of the petitioner-personal guarantor (Ambani) may also be examined by the IRP. Ambani in his plea has challenged the constitutionality of the IBBI (Insolvency Resolution Process for Personal Guarantors to Corporate Debtors) Regulations, 2019.
The Centre and the IBBI had opposed the stay of the insolvency process saying it could lead to the guarantor "frittering" away his assets. SBI too had raised similar apprehensions during the hearing. It also urged the court to allow the resolution professional appointed by the NCLT to go on with his work and give a report, but the bench did not agree to it.
The National Company Law Tribunal (NCLT) on August 20 had directed initiation of insolvency proceedings against Ambani under the personal guarantee clause of the bankruptcy law. It had ordered the appointment of a resolution professional and asked SBI to take the necessary action. The NCLT had also said both RCom and RITL committed default in repayment 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.
According to the NCLT 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. 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.
In March this year the SBI board had approved a resolution plan for RCom 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.
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