Supreme Court order upsets Reliance communication lenders

Source – economictimes.indiatimes.com

MUMBAI: Banks are staring at an additional loan-loss provisioning of a few thousand crore rupees in the current quarter after the Supreme Court on Thursday ordered to maintain status quo on RCom’s sale of assets to Reliance Jio.

The court will hear the plea of RCom’s lenders on April 5 and if the matter goes to the National Company Law Tribunal (NCLT), then the asset sale may get delayed, dealing a further blow to the banks.

“Many banks have not declared the account as a non-performing asset. So there will be a clear delay in recovery from this (RCom) account as it is likely to be embroiled in a legal tangle,” said a banker aware of the development.

“Our big worry is that if the resolution will be determined under the NCLT, it could be entangled further and delayed,” said another person. “You are already seeing what is happening with cases already tried under NCLT so this could be headed the same way.”

State Bank of IndiaBSE -2.32 % had moved the Supreme Court on Wednesday, challenging a tribunal’s order allowing Ericsson to stake a claim on RCom’s consolidated assets. The Bombay High Court upheld the tribunal’s order in favour of the Swedish equipment maker, which is trying to recover dues from RCom.

RCom owes Indian lenders Rs. 42,000 crore.

SBI, which is owed over Rs.4,000 crore by RCom, had appealed against Ericsson, an unsecured creditor, getting priority over secured creditors. Apart from SBI, there are 24 lenders including Bank of Baroda, Bank of India, Canara Bank, Central Bank of India, Punjab National Bank, IDBI Bank, UCO Bank, Indian Overseas Bank, Dena Bank, Corporation Bank, Union Bank, United Bank, LIC and Barclays Bank.

State-run Union Bank of India had classified RCom as a nonperforming loan in the quarter ended December.

Bankers had cut a deal with Jio, which agreed to buy RCom’s spectrum, cell towers and other infrastructure, including 1.78 lakh km of fibre optics, from RCom for Rs. 17,300 crore.

After the deal was finalised, Ericsson moved an arbitration tribunal to restrain the sale of assets on the grounds that it had a claim of Rs. 1,150 crore.