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RCom-Ericsson Case

Bench: Justice R.F Nariman

Ericsson filed the second petition regarding contempt of court against Reliance Communication (RCom) company by Ericsson due to non-payment of the dues on time. On Tuesday, 8th of January 2019, Supreme court issued the contempt notice against RCom.

Ericsson had also sought that the Ambani be “detained in civil prison” until the payment is made.

Supreme Court had set deadlines for the company to pay the dues by 30th September 2018. However, the company failed to clear out the dues on given date after which the Ericsson Company filed the first petition of contempt of court against the RCom on 23rd October 2018. RCom was given more time to pay the debt of Rs.550 crore to the Ericsson Company by 15th December 2018, if failed to pay, it will attract an interest of 12% per annum. RCom requested extension for which the court rejected the plea on 13th December 2018

RCom was ready to sell their spectrum to Reliance Jio and decided to pay off the debts of Ericsson and other creditors. DoT (Department of Telecommunications) rejected the trading pact of RCom stating that it is against our spectrum trading guidelines therefore, RCom is not allowed to sell the spectrum to Reliance Jio.

RCom is already under threat of being declared insolvent as they have also not yet payed the dues of a Swedish telecom gear maker on time for which the insolvency proceedings are going on.

Besides the contempt petitions, RCom, weighed under a Rs 46,000 crore debt, faces the threat of revival of insolvency proceedings, which it had resisted earlier, citing a Rs 18,000 crore plan under which it planned to sell towers, fibre, switching nodes and spectrum to Reliance Jio, and some real estate to Canada’s Brookfield. Spectrum being the key component, fibre and switching nodes have been already sold for Rs 5,000 crore. But the National Company Law Appellate Tribunal (NCLAT) announced that “sale could be reversed if RCom is dragged into bankruptcy proceedings due to failure to pay Ericsson”.

On Wednesday at NCLAT, the RCom’s representative, senior counsel Kapil Sibal, told the bench that RCom was deadlocked because of DoT’s delay. However, Ericsson’s lawyers argued that the agreement to repay dues by RCom was made without any conditions.