On Wednesday, Supreme Court of India has found Reliance Communications (RCom) chairman Anil Ambani guilty of contempt for willfully failing to clear the due of Rs. 550 crores ($77.29 million) to Ericsson.
The top court has ordered the billionaire and two RCom directors to pay off Rs. 450 crores to telecom equipment maker Ericsson within a month or risk 3-months imprisonment, as per the ruling from a two-members justice-bench, headed by Justice Rohinton Fali Nariman.
In a statement, RCom said that it respected the ruling and “shall comply with the same.”
A spokesperson of Ericsson said that the firm has welcomed the ruling and looking forward to RCom’s compliance.
In 2014, Ericsson has signed a deal to manage and operate a network of RCom and last year has approached the top court over the unpaid dues.
Supreme Court has asked RCom to repay off the dues by December 15, the company has missed the deadline.
However, RCom has struggled for cash as a result of price war, which triggered by the market entrance of Reliance Jio Infocomm, operated by Asia’s richest man Mukesh Ambani, brother of Anil Ambani.
In January 2019, RCom told the Supreme Court that a deal to sell tower assets and fibre to Reliance Jio has miserably failed, prompted the company to turn bankruptcy courts for debt resolution and was not in the condition to pay off the dues.
Reliance Communications owed banks $7 billion as on March 2017, when last it has made its debt level public. The company also owes money to Ericsson.
Equity Research Analyst and Target Investing founder, Sameer Kalra said that “it will be very difficult for RCom to meet the ordered payment and group companies might be utilized to pay the dues through inter-corporate loans.”
“This puts risk on group companies as well and might result in the delay in the sale of stakes in other companies,” added Mr. Kalra.
After the ruling, shares sharply fell in Anil Ambani-controlled companies, such as- Reliance Capital, Reliance Power, Reliance Infrastructure, Reliance Naval and Engineering, Reliance Nippon Life Asset Management, and Reliance Home Finance.