Anil Ambani now faces personal bankruptcy case
In a major development, the National Company Law Tribunal (NCLT) has paved the way for starting of individual insolvency proceedings against Anil Ambani for failing to make payments as personal guarantor against loans taken by Reliance Communication and Reliance Infratel.
The NCLT has recently ordered appointment of Jitendra Kothari as resolution professional for personal insolvency proceedings against Anil Ambani, who had given personal guarantee for loan worth Rs 1,200 crore to RCom and Reliance Infratel Ltd by State Bank of India.
Giving a go-ahead to appointment of a resolution professional, the Mumbai bench of the NCLT noted that there was no dispute on the fact that Anil Ambani had given personal guarantee on the said loans taken by RCom and RITL. It also found no merit on Anil Ambani side’s request that the NCLT should wait for the insolvency process against RCom and Reliance Infratel to end as law requires it to nominate a resolution professional for the insolvency resolution process when an application under section 95 of the Code is filed by the Creditor.
The case pertains to Rs 1200 crore loan extended by the State Bank of India (SBI) to Anil Ambani-owned Reliance Communication (Rs 565 crore) and Reliance Infratel Ltd (Rs 635 crore) for which Ambani had given personal guarantee.
Both Rcom and RITL had defaulted in January 2017, after which the bank identified the two accounts as NPA retrospectively from August 2016. The bank in January 2018 invoked the personal guarantee and issued notice to Anil Ambani, who failed to make any repayments despite several reminders by the bank.
In the meanwhile on an application by operational creditor Ericson India, NCLT started the insolvency proceedings against Anil Ambani’s firms – Rcom and RTIL.
This is when the State Bank of India thought it would not be able to recover the claim amount from the CIRP or from the borrowers RCOM & RITL, and decided to issue a demand notice on 20 February 2020 in Form-B to the NCLT demanding payment from Anil Ambani. The Notice was not responded to by Ambani, forcing the bank to file a petition under section 95 of IBC requesting initiation of personal insolvency against Anil Ambani.
The Anil Ambani side had argued that it was the understanding between the Financial Creditor and Personal Guarantor, at the time of execution of the Personal Guarantee, that the Corporate Guarantee provided by RITL, Reliance Communications Infrastructure Limited, RCOM and Reliance Telecom Limited would be invoked before invoking the Personal Guarantee.
The lawyers of Anil Ambani, in a letter dated 13 March 2019 had informed the bank that in view of the ongoing CIRP of RCOM and RITL, the liabilities under the resolution plan approved under the Code pursuant to which the Personal Guarantee will be rendered redundant, more so in view of the understanding that the Personal Guarantee would not be invoked until the other guarantees had been invoked.
On Anil Ambani’s plea that personal guarantee cannot be invoked as long as the CIRP process of Rcom and RITL is on-going, the NCLT countered by saying that a plain reading of the provision would indicate that while an Application for corporate insolvency resolution process or liquidation proceedings of corporate debtors are pending before this Authority, an application against the personal guarantor shall have to be filed.
“This itself indicates that the process of corporate insolvency resolution of the corporate debtors in an application relating to insolvency resolution etc. of a personal guarantor needs to be filed and can be prosecuted. The law doesn’t envisage that the insolvency resolution of the personal guarantor should follow only when the process of corporate insolvency resolution of the corporate debtor has come to an end,” it said.
