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NCLT continues stay on sale of RCOM’s tower and fibre assets

March 13, 2018

The National Company Law Tribunal (NCLT) continued with its stay on the sale of Reliance Infratel’s assets to a third party till further orders, making it more difficult for its parent company Reliance Communications (RCOM), to sell its towers and fibre to Reliance Jio Infocomm Limited (RJIL) by end-March 2018 deadline set by lenders.

The company has stated that it would appeal the order immediately with the National Company Law Appellate Tribunal (NCLAT) for vacation of the stay, to protect the interests of its secured lenders. It is to be noted the stay granted by NCLT relates only to RCOM's tower and fibre assets, and does not apply to spectrum, media convergence nodes and real estate, among others.

The Mumbai bench of the NCLT passed the order after HSBC Daisy Investments (Mauritius), a minority shareholder in Reliance Infratel, argued that its consent was not sought for the asset sale and if allowed, it would be an oppression of a minority shareholder under section 397 and 398, as Reliance Infratel would become defunct. HSBC Daisy Investments, which invested Rs 11 billion in July 2007, owns about 5 per cent in the tower firm.

While rejecting Reliance Infratel’s petition which had in turn sought dismissal of HSBC Daisy Investments' plea, seeing a stay on Reliance Infratel’s asset sale, NCLT directed RCOM’s tower unit to file its response within three weeks and allowed HSBC Daisy Investments to file a rejoinder after that, thereby taking the case post the cut off deadline of end-March 2018.

However, RCOM stated that as legally advised, the claims of minority investors and / or unsecured vendors cannot under any circumstances rank in higher priority than the undisputed claims of secured domestic and international lenders, and any stay granted in this regard is not defensible in law and liable to be vacated.

ROM is in the process of selling its tower and optic fibre assets to RJIL for Rs 80 billion, of which Rs 50 billion would be for the towers and land alone. Along with the sale of spectrum and switching nodes to RJIL, the entire deal is worth nearly Rs 250 billion, which was to be used to repay 35 lenders and pare RCOM’s Rs 450 billion debt. If the deal isn’t completed by the prescribed deadline, the lenders could be forced to take the company to the NCLT under the Insolvency & Bankruptcy Code.

Meanwhile, an arbitration court separately has already restrained RCOM from selling any of its assets without the bench’s permission, in a separate case with gear maker Ericsson which is also seeking its dues. The operator has challenged that order in the Bombay High Court, which however didn’t grant any stay.

In the latest development, HSBC has also filed a contempt petition against Reliance Infratel for not providing details of its expected asset sale to RJIL, which the tribunal will hear on April 6, 2018.



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