NCLT to decide on RCom’s ₹550 crore refund plea against Ericsson in June | Company Business News

The insolvency court said it will decide next month on bankrupt telco Reliance Communications Ltd’s plea seeking a ₹550 crore refund from Swedish telecom equipment maker Ericsson.

During a brief hearing at the Mumbai bench of the National Company Law Tribunal (NCLT) on Thursday, Ericsson’s counsel termed the plea “frivolous”. The tribunal has directed both parties to file their responses and listed the matter for hearing on 11 and 12 June.

RCom and its two subsidiaries—Reliance Telecom and Reliance Infratel—paid Ericsson ₹550 crore in 2019 following a Supreme Court order. 

The bankrupt company now argues that the payment amounted to preferential treatment, since Ericsson is an operational creditor and received full payment ahead of secured financial creditors.

In a court petition this week, RCom’s resolution professional, Anish Nanavaty of Deloitte, said the payment to Ericsson amounted to a “preference” as it had “the effect of putting the respondent in a beneficial position vis-a-vis the other creditors of the corporate debtor in the event of distribution being made under liquidation of the corporate debtor”. 

The respondent here refers to Ericsson while the corporate debtor is RCom.

Ericsson is in no mood to give in.

“The demand for refund is an abuse of process of law inasmuch as the settlement and undertaking was in an order passed by the Supreme Court under Article 142 of the Constitution of India,” Anil Kher, senior advocate representing Ericsson, earlier told Mint. Article 142 allows the apex court to pass any order to ensure justice.

RCom had approached NCLT in 2019 seeking a refund from Ericsson, which asked the tribunal to dismiss the petition “with exemplary costs”, calling it wholly misconceived. The Swedish company had called the petition “motivated at the instance of the members of the Committee of Creditors who are also the Financial Creditors”. Nanavaty’s petition this week was a rejoinder to this.

The RCom-Ericsson dispute: How it came to this

Once among India’s leading telecom operators, RCom could not survive a brutal tariff war that began in 2016, and filed for bankruptcy in 2019. 

Earlier in 2013, RCom and its subsidiaries had engaged Ericsson to maintain their telecom networks. By 2017, with unpaid dues mounting to over ₹1,500 crore, Ericsson initiated insolvency proceedings. 

The case escalated, and after payment deadlines were missed, Ericsson filed a petition in the Supreme Court against RCom’s former chair Anil Ambani and the company’s units. 

At the time, RCom was reeling under a debt load of over ₹46,000 crore, with major financial creditors including the State Bank of India and China Development Bank. Operational creditors included the telecom department, tower companies, and vendors.

In early 2019, RCom filed for bankruptcy, and Deloitte was appointed as the resolution professional. That same year, RCom cleared the dues to Ericsson—paying ₹458.77 crore in addition to an earlier deposit of ₹118 crore. 

Later in 2019, Deloitte filed a petition before the National Company Law Appellate Tribunal (NCLAT) seeking a refund from Ericsson on grounds of preferential payment. The appellate tribunal directed the parties to approach the NCLT’s Mumbai bench, which is now hearing the matter afresh.

In 2020, RCom’s committee of creditors selected UVARCL as the preferred bidder for RCom and Reliance Telecom, while Reliance Jio was chosen for Reliance Infratel’s assets. However, both transactions remain entangled in legal challenges.