Raju Vernekar
Mumbai, Aug 24:
The National Company Law Tribunal (NCLT)’s Mumbai bench has allowed State Bank of India (SBI) to initiate insolvency proceedings against Anil Ambani, noted Indian businessman and Chairman of the Reliance ADA Group, after two companies promoted by him failed to pay dues of Rs 1,200 crore and has appointed “Resolution Professional” for initiation of insolvency resolution process.
Jitender Kothari will be the RP, to handle recovery proceedings, against Ambani, who is a personal guarantor for the loan obtained, under section 60(2) of the Insolvency and Bankruptcy Code, 2016, which provides for proceedings against personal guarantors, running parallel to CIRP (corporate insolvency resolution process).
The above order was passed by a two-member bench comprising-Member (Judicial) Janab Mohammed Ajmal and Member (Technical) Ravikumar Duraisam of NCLT..
The application was filed under Part III of the Insolvency & Bankruptcy Code by SBI, under Section 97(3), against Ambani, after two companies- Reliance Communications Limited (RCOM) and Reliance Infratel Limited (RITL) failed to repay the loan. Ambani as the personal guarantor, had taken credit facility to the tune of Rs. 565 crores and Rs 635 crores respectively, for these companies. These companies were never floated.
Pursuant to a loan facilities agreement, SBI had extended the loans to RCOM and RITL. The accounts were later declared as Non-Performing Account (NPA) with effect from August 26, 2016. Apprehending that it would not be able to recover the claim amount from the ongoing corporate insolvency resolution process (CIRP), in January 2018, the SBI invoked the personal guarantee agreement.
Given the fact that the Industrial and Commercial Bank of China Limited, China Development Bank and Exim Bank of China had already initiated recovery proceedings against Ambani in the United Kingdom qua other personal guarantee agreements, the SBI feared attempts to initiate enforcement or execution proceedings in India including attachment or restraint of Ambani’s assets in India and abroad, may not yield any results.
In response to the application, Ambani informed the NCLT that while UV Asset Reconstruction Company Limited had submitted the resolution plans for RCOM and RITL have already been submitted.
The NCLT opined that in view of resolution plans, it would be prudent not to proceed against the personal guarantor Ambani at this point. There was no urgency in the present case as the personal guarantee would stand discharged after the plans are accepted and implemented.
The NCLT perused the provisions of the IBC and observed that it was “fallacious” to assume that no action could be taken against Ambani. It stated that a plain reading of Section 60(2) read with Sections 95 and 97(3) IBC indicated that even while an application for CIRP or liquidation proceedings of corporate debtors is pending, an application against the personal guarantor is also allowed to be filed.
The NCLT opined that it had no other option than to issue the direction under Section Section 97(3). Accordingly, Kothari was appointed as the RP under section 97 (4) IBC read with Rule 8 of the I&B (Application to Adjudicating Authority for Insolvency Resolution Process for Personal Guarantors) Rules, 2019.
SBI was represented by the DSK Legal team comprising Nirav Shah (Partner) and Ryan D’souza (Associate), led by Senior Counsel Venkatesh Dhond. Anil Ambani was represented by Senior Advocates Harish Salve, J J Bhatt with Advocates DJ Kakalia, JP Mishra, Raghavi Sharma, instructed by M/s. Mulla & Mulla & Cragie Blunt & Caroe.
