The agreement – which was widely seen as a lifeline for the younger Ambani’s beleaguered group – is known to have been in jeopardy for a while now, especially after RCom filed for insolvency on February 1 following its inability to repay about Rs 47,000 crore of debt. But the admission in an open courtroom marks its formal burial.
Ambani, who is facing contempt proceedings for his failure to comply with the SC’s order to pay Swedish telecom company Ericsson Rs 550 crore (plus interest), was personally present in the court and remained standing in the jam-packed room for two-and-a-half hours.
Ericsson has asked that he be detained in civil prison till he clears his dues, for which he has given a personal guarantee.
Although the Ambani brothers had agreed on the transaction, they differed on the question of who would be responsible for RCom’s past liabilities, including the spectrum usage charge payable to the Centre.
The deal with Jio was critical for Anil’s bail-out plans, but with Mukesh’s refusal to assume any previous liabilities that might arise, it was headed for the rocks – despite the SC asking them to sit together and resolve the issue which primarily revolved around a bank guarantee of about Rs 3,000 crore that the department of telecom (DoT) has been insisting on.
Senior advocates Mukul Rohatgi and Kapil Sibal, appearing for RCom, told a bench of Justices R F Nariman and Vineet Saran that the money to repay Ericsson could not be raised because of the company’s failure to sell its assets.
Senior advocate Dushyant Dave, appearing for Ericsson, however, contested RCom’s position saying, “It was never said by them that money would be paid out of the deal. They are taking everyone for a ride.”
Dave submitted that RCom had failed to comply with the SC’s orders of August 3 and October 23. He said RCom officials had assured that money would be paid if Ericsson dropped contempt proceedings, which showed that the company had the necessary financial resources at its disposal.
As the hearing remained inconclusive and adjourned, the court asked Ambani and other officials of RCom to be present in the court on Wednesday. The SC had in December asked the government to clear RCom’s airwaves sale to Jio within seven days, once group company Reliance Realty submitted a surety towards future financial commitments.
DoT has, however, stuck to its position that the deal cannot be cleared unless there is clarity on payment of dues and associated charges, particularly as Jio has refused to assume any payment liability of RCom to conclude the spectrum-trading deal between the two firms.
RCom had offered the telecom department a corporate guarantee of Rs 1,400 crore issued by Reliance Realty Limited (RRL) as part of a guarantee towards meeting any past liabilties that may arise post the Jio deal.
However, with the telecom department insisting that Jio would still need to pay in case this guarantee fails or is insufficient, Jio backed off, leading to the collapse of spectrum trading deal.