# RELIANCE COMMUNICATION LIMITED & ORS v. STATE BANK OF INDIA & ORS

- **Citation:** [2019] 4 S.C.R. 64
- **Court:** Supreme Court of India
- **Decided:** 2019-02-20
- **Bench:** R. F. Nariman, Vineet Saran
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/reliance-communication-limited-ors-v-state-bank-of-india-ors-33516
- **Pages:** 32

## Headnote

Contempt of Courts Act, 1971 - s.12(4) - Agreement between
Ericsson and Reliance Communications (RCom) - Ericsson agreed
to provide managed services, i.e., operation, maintenance, and
management of RCom's network - It raised invoices, however on
receiving no payment, ultimately issued notices - Notices replied by
three Reliance Companies (RCom and its group companies, Reliance
Telecom Ltd. & Reliance Infratel Ltd. - Understanding reached for
making payment of the outstanding invoices - However, even this
understanding fell through - Ericsson terminated the agreement
calling upon the three Reliance Companies to pay the outstanding
amount in full - Ericsson filed three applications u/s.9, Insolvency
Code - National Company Law Tribunal (NCLT) appointed three
Interim Resolution Professionals to carry out the corporate
insolvency resolution process - In appeal, NCLAT by order dtd.
30.05.2018, stayed the orders - Statement of counsel appearing on
behalf of the Reliance Companies that the matter was agreed to be
settled for a sum of INR 550 crore, which would be paid within 120
days' time - Undertakings filed - Writ petition filed by the three
Reliance Companies before Supreme Court seeking quashing/closure
of the corporate insolvency resolution process in view of settlement
of disputes - By order dt. 03.08.2018, Supreme Court recorded that
the timeline of 120 days shall be strictly adhered to and payment of
INR 550 crore is to be made on or before 30.09.2018 - Pursuant to
the order, undertakings dt.09.08.2018 given by the Chairmen of
these Companies in Supreme Court, however, stating that the sum
of INR 550 crore will be paid "upon sale of assets of the company"-
First contempt petition filed by Ericsson- Reliance Companies
applied for extension of time for payment by 60 days - Supreme
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RELIANCE COMMUNICATION LIMITED v. STATE BANK OF
INDIA
Court inter alia ordered that as a last opportunity, the amount must
be paid on or before 15.12.2018 - Second application to extend
time - Dismissed, as withdrawn - Second contempt petition filed by
Ericsson for non-payment of INR 550 Crore on or before
15.12.2018- Third contempt petition filed by Ericsson - Held: Order
dt. 03.08.2018 clearly recorded that the payment of INR 550 crore
will be made on or before 30.09.2018, and an undertaking was to
be given by the Chairmen of the Reliance Companies to that effect
- Order separately noted that the sale of assets will continue, as
stated in the orders of the NCLT and the NCLAT- Undertakings
that were to be given by the Chairmen of the Reliance Companies
concerned were only that the payment of INR 550 crore was to be
made on or before 30.09.2018 - There was no linkage with any
sale of assets of these Companies - However, a perusal of these
undertakings would show that they are contrary to the undertakings
given by the authorized persons of these very Companies pursuant
to the NCLAT order dt.30.05.2018- Those undertakings were
unconditional, however, these undertakings are now conditional
upon sale of assets of the Companies - Statements made by RCom
and its group companies that they were "disabled" from paying the
amount of INR 550 crore plus interest; that they "were and are unable
to pay"; is belied by the letter dt. 21.01.2019 written by the
advocates of the Reliance Companies inter alia stating that the full
payment would be made by 31.01.19 if two conditions were met
namely, withdrawal of contempt petitions and withdrawal of
arbitration proceedings - The three Reliance Companies had no
intention, at the very least, of adhering to the time limit of 120 days
or to the extended time limit of 60 days plus, as given by way of
indulgence - Undertakings given on the footing that the amount of
INR 550 crore would be paid only out of the sale of assets was false
to the knowledge of the three Reliance Companies and was a
deliberate misstatement made with the purpose of circumventing the
orders of Supreme Court - This itself affects the

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[2019] 4 S.C.R. 64
64
RELIANCE COMMUNICATION LIMITED & ORS.
v.
STATE BANK OF INDIA & ORS.
(Writ Petition (Civil) No. 845 of 2018)
With
(Contempt Petition (C) No. 1838 of 2018, 55 of 2019 and 185 of 2019
in W.P.(C) No. 845 of 2018)
FEBRUARY 20, 2019
[R. F. NARIMAN AND VINEET SARAN, JJ.]
Contempt of Courts Act, 1971 - s.12(4) - Agreement between
Ericsson and Reliance Communications (RCom) - Ericsson agreed
to provide managed services, i.e., operation, maintenance, and
management of RCom's network - It raised invoices, however on
receiving no payment, ultimately issued notices - Notices replied by
three Reliance Companies (RCom and its group companies, Reliance
Telecom Ltd. & Reliance Infratel Ltd. - Understanding reached for
making payment of the outstanding invoices - However, even this
understanding fell through - Ericsson terminated the agreement
calling upon the three Reliance Companies to pay the outstanding
amount in full - Ericsson filed three applications u/s.9, Insolvency
Code - National Company Law Tribunal (NCLT) appointed three
Interim Resolution Professionals to carry out the corporate
insolvency resolution process - In appeal, NCLAT by order dtd.
30.05.2018, stayed the orders - Statement of counsel appearing on
behalf of the Reliance Companies that the matter was agreed to be
settled for a sum of INR 550 crore, which would be paid within 120
days' time - Undertakings filed - Writ petition filed by the three
Reliance Companies before Supreme Court seeking quashing/closure
of the corporate insolvency resolution process in view of settlement
of disputes - By order dt. 03.08.2018, Supreme Court recorded that
the timeline of 120 days shall be strictly adhered to and payment of
INR 550 crore is to be made on or before 30.09.2018 - Pursuant to
the order, undertakings dt.09.08.2018 given by the Chairmen of
these Companies in Supreme Court, however, stating that the sum
of INR 550 crore will be paid "upon sale of assets of the company"-
First contempt petition filed by Ericsson- Reliance Companies
applied for extension of time for payment by 60 days - Supreme
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RELIANCE COMMUNICATION LIMITED v. STATE BANK OF
INDIA
Court inter alia ordered that as a last opportunity, the amount must
be paid on or before 15.12.2018 - Second application to extend
time - Dismissed, as withdrawn - Second contempt petition filed by
Ericsson for non-payment of INR 550 Crore on or before
15.12.2018- Third contempt petition filed by Ericsson - Held: Order
dt. 03.08.2018 clearly recorded that the payment of INR 550 crore
will be made on or before 30.09.2018, and an undertaking was to
be given by the Chairmen of the Reliance Companies to that effect
- Order separately noted that the sale of assets will continue, as
stated in the orders of the NCLT and the NCLAT- Undertakings
that were to be given by the Chairmen of the Reliance Companies
concerned were only that the payment of INR 550 crore was to be
made on or before 30.09.2018 - There was no linkage with any
sale of assets of these Companies - However, a perusal of these
undertakings would show that they are contrary to the undertakings
given by the authorized persons of these very Companies pursuant
to the NCLAT order dt.30.05.2018- Those undertakings were
unconditional, however, these undertakings are now conditional
upon sale of assets of the Companies - Statements made by RCom
and its group companies that they were "disabled" from paying the
amount of INR 550 crore plus interest; that they "were and are unable
to pay"; is belied by the letter dt. 21.01.2019 written by the
advocates of the Reliance Companies inter alia stating that the full
payment would be made by 31.01.19 if two conditions were met
namely, withdrawal of contempt petitions and withdrawal of
arbitration proceedings - The three Reliance Companies had no
intention, at the very least, of adhering to the time limit of 120 days
or to the extended time limit of 60 days plus, as given by way of
indulgence - Undertakings given on the footing that the amount of
INR 550 crore would be paid only out of the sale of assets was false
to the knowledge of the three Reliance Companies and was a
deliberate misstatement made with the purpose of circumventing the
orders of Supreme Court - This itself affects the administration of
justice, and is therefore, contempt of court - In the facts of the
present case, wilful default is made out - However, contempt petition
against the Chairman of SBI would not lie inasmuch as the Ericsson
transaction and the sale of assets by the Joint Lenders' Forum are
completely independent of each other - The three Reliance
Companies are guilty of contempt of this Court - Contempt of this
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Court needs to be purged by payment of the sum of INR 550 crore
together with interest till date - As stated in the letter dt. 21.01.2019,
subject to any calculation error, INR 453 crore must be paid to
Ericsson in addition to the deposit of INR 118 crore made in the
Registry of Supreme Court - Registry to pay over the sum of INR
118 crore to Ericsson within one week from today - RCom group is
directed to purge the contempt of this Court by payment to Ericsson
of the sum of INR 453 crore within four weeks from today - In
default, the Chairmen who have given undertakings to Supreme
Court will suffer three months' imprisonment - In addition to the
aforesaid sum being paid, a fine amounting to INR 1 crore for each
Company must also be paid to the Registry within four weeks from
today, which sum will be paid to the Supreme Court Legal Services
Committee - In default, the Chairmen of these Companies will suffer
one month's imprisonment - Insolvency & Bankruptcy Code, 2016.
Disposing of the Contempt Petitions, the Court
HELD: 1.1 The undertaking makes it clear that the
understanding of the three Reliance Companies with regard to
the NCLAT order dated 30.05.2018 was that a sum of INR 550
crore will be paid by 30.09.2018 without there being any linkage
to sale of assets, as separately stated in the order. Even otherwise,
reading the order as a whole, it is clear that whereas INR 550
crore had to be paid within 120 days, sale of assets could take
place at any time in the future without any time limit being
mentioned. This being the case, it is futile to contend that this
order itself made it clear that the sum of INR 550 crore was to be
obtained only from sale of assets. Both the undertakings as well
as a plain reading of the NCLAT order, militate against any such
linkage. [Para 8][82-G-H; 83-A-B]
1.2 The order dated 03.08.2018 clearly recorded that the
payment of INR 550 crore will be made on or before 30.09.2018,
and an undertaking was to be given by the Chairmen of the
Reliance Companies to that effect. The order separately noted
that the sale of assets will continue, as has been stated in the
orders of the NCLT and the NCLAT. A reading of this order also
leaves no manner of doubt that the undertakings that were to be
given by the Chairmen of the Companies concerned were only
that the payment of INR 550 crore was to be made on or before
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30.09.2018. There is no doubt whatsoever that there was no
linkage with any sale of assets of these Companies. Despite the
aforesaid position being clear, on 09.08.2018, the affidavits of
undertaking, in pursuance of Supreme Court's order dated
03.08.2018, were given by the Chairmen of the Reliance
Companies. Similar undertakings were filed on behalf of the
Chairmen of the other two Reliance Companies. A perusal of these
undertakings would show that they are contrary to the
undertakings given by the authorized persons of these very
Companies pursuant to the NCLAT order dated 30.05.2018.
Whereas those undertakings were unconditional, these
undertakings are now conditional upon sale of assets of the
Companies. These undertakings have obviously not been given
in accordance with Supreme Court's order dated 03.08.2018. To
further compound this misdemeanor, an application to extend
time by 60 days was moved on 27.09.2018, in which the same
linkage was made to sale of assets before the sum of INR 550
crore could be paid. Ericsson immediately protested in the form
of a contempt petition, being the first contempt petition that was
filed on 01.10.2018, in which it was clearly pointed out that the
said undertaking would show contumacious behavior coupled with
the fact that the Reliance Companies were wriggling out of the
commitment made to Supreme Court. When the first contempt
petition and the first application for extension of time came up
for hearing before Supreme Court, vide order dated 23.10.2018,
it was made clear that as a matter of indulgence, a last opportunity
would be granted to pay the aforesaid sum on or before
15.12.2018, making it clear that this is conditional upon payment
of interest of 12% per annum for delayed payment beyond
30.09.2018. It was also made clear that no further extension would
be granted and that Ericsson may revive the petition for contempt
if payment is not so made. This order again leads to only one
conclusion - that the averment made in the application for
extension of time that the sum of INR 550 crore will be paid out
of sale of assets was not accepted by this Court, as sale of assets
could have taken place even beyond 15.12.2018. This further
becomes clear from the fact that the contempt petition would be
revived if this payment were not to be made, i.e., it would be
open for Ericsson to contend that the undertaking given to this
RELIANCE COMMUNICATION LTD. v. SBI
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Court was not as per this Court's order, and that there had been
wilful and contumacious default on part of the Reliance
Companies. [Paras 9,10][83-B-E; 84-F-H; 85-A-D]
1.3 When a further application for extension of time was
made on the selfsame ground, Supreme Court made it clear by
its order dated 13.12.2018 that in view of the order passed on
23.10.2018, no further extension of time could be granted, and
revival of the contempt petition would necessarily follow. As a
result of this, this I.A. was dismissed as withdrawn on the said
date. Meanwhile, in parallel proceedings, Supreme Court did its
utmost to lend a helping hand, so that, independently of these
orders, sale of assets could also be affected. The DoT was called
before this Court and was asked to give its NOC for sale of
spectrum. However, it was pointed out that this NOC could only
be given according to certain guidelines, one of which mandated
that the buyer of the spectrum would have to undertake that it
would be responsible for payment of the erstwhile debts of the
seller. The sale of spectrum to Reliance Jio, therefore, did not
fructify, not because the DoT wrongfully refused to give its NOC,
as has been alleged by the Reliance Companies in their pleadings
filed in this case. It fell through only because the prospective
buyer, Reliance Jio, refused to give the undertaking that if called
upon, it would pay the erstwhile debts of the seller of the spectrum.
[Paras 11, 12][85-E-H; 86-A]
1.4 Contempt Petition No.55 of 2019 dated 02.01.2019 was
filed in view of non-payment of the sum of INR 550 crore on or
before 15.12.2018. Contempt Petition No.185 of 2019 dated
05.02.2019 was filed pointing out two subsequent facts. First,
that by a letter dated 21.01.2019, the Reliance Companies were
willing to pay the entire sum of INR 550 crore with interest if two
conditions were met, namely, withdrawal of contempt petitions
and withdrawal of arbitration proceedings. Ericsson replied on
23.01.2019, stating that this could only be done by moving an
application before this Court as contempt proceedings were
pending. Secondly, this petition points out that, maliciously, instead
of moving such appropriate application, from 01.02.2019 onwards,
an about-turn was taken, and Ericsson was left in the lurch as a
decision was taken by the three Reliance Companies that the
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corporate insolvency resolution process could be revived.
[Para 13][86-B-D]
1.5 The undertakings given on 09.08.2018 by the three
Chairmen of the three Reliance Companies were neither as per
the Court's understanding of its order dated 03.08.2018, nor the
understanding of the three Companies themselves, as is clear
from the undertakings given by the three Directors pursuant to
the order dated 30.05.2018. In this view of the matter, it is clear
that the three Reliance Companies had no intention, at the very
least, of adhering to the time limit of 120 days or to the extended
time limit of 60 days plus, as was given by way of indulgence, by
the order dated 23.10.2018. The undertakings given on the
footing that the amount of INR 550 crore would be paid only out
of the sale of assets was false to the knowledge of the three
Reliance Companies. This itself affects the administration of
justice, and is therefore, contempt of court. Despite the Reliance
Companies' continuous protestations to the contrary, the letter
dated 21.01.2019 from the advocate for the three Reliance
Companies made it clear that the entire payment would be made
by 31.01.2019, albeit on fulfilment of two conditions. In their reply
to the Contempt Petition No.55 of 2019, RCom and its group
companies had stated that they were "disabled" from paying the
amount of INR 550 crore plus interest; that they "were and are
unable to pay". Obviously, the letter dated 21.01.2019 by the
advocates on behalf of the Reliance Companies would belie each
of the aforesaid statements made in the said reply affidavit. The
three Reliance Companies have wilfully not paid the sum of INR
550 crore plus interest and have thus breached the undertakings
given to this Court. [Paras 17, 18 and 19][87-G-H; 88-A-C;
89-H; 90-C]
1.6 Another disturbing feature of the reply affidavit filed in
this Court by the Chairman of RCom to Contempt Petition No.
55 of 2019 is the statement that RCom has not taken or received
any advantage on account of the undertaking submitted before
this Court. This, again, is a wholly incorrect statement, given the
fact that a writ petition was filed in this Court seeking quashing
of the corporate insolvency resolution process on settlement of
the matter with Ericsson, which could not be achieved without
such undertaking being given to this Court. Any unconditional
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apology given that there was no intention to make any wrongful
undertaking or that the undertaking was submitted bona fide must
be rejected. It is clear that this reply affidavit clearly demonstrates
the cavalier attitude of the deponent of this affidavit to the highest
court of the land. To say that the sum of INR 550 crore would be
paid only out of sale of assets of the three Reliance Companies is
a deliberate misstatement made in the undertakings as well as
the applications for extension of time filed before this Court, which
was done with the purpose of circumventing the orders of this
Court. In the facts of the present case, wilful default is made out.
INR 550 crore plus interest was to be paid without any linkage to
sale of assets within a fixed time limit. As is clear from the letter
dated 21.01.2019, the Reliance Companies are able to pay this
amount, but are wilfully refusing to do so. [Paras 20, 21][90-D-F;
91-D-E; 92-E-F]
1.7 The contempt petition against the Chairman of SBI
would not lie inasmuch as the Ericsson transaction and the sale
of assets by the Joint Lenders' Forum are completely
independent of each other. Also, the statement made in paragraph
18 of the Contempt Petition No. 185 of 2019 that, "all the
respondents in the contempt petition were bound to have handed
over the amount of INR 550 crore to the petitioner on or before
15.12.2018 ......" is patently incorrect inasmuch as respondent
no. 4 (SBI) has nothing to do with this amount of INR 550 crore
which had to be paid over to Ericsson only by the three Reliance
Companies. The contempt petition against the Chairman of SBI
is, therefore, dismissed. [Para 22][92-G-H; 93-A-B]
1.8 The contempt of this Court needs to be purged by
payment of the sum of INR 550 crore together with interest till
date. As stated by the letter dated 21.01.2019, subject to any
calculation error, an amount of INR 453 crore must be paid to
Ericsson in addition to the deposit of INR 118 crore made in the
Registry of Supreme Court. The Registry of this Court is directed
to pay over the sum of INR 118 crore to Ericsson within a period
of one week from today. The RCom group is directed to purge
the contempt of this Court by payment to Ericsson of the sum of
INR 453 crore within a period of four weeks from today. In default
of such payment, the Chairmen who have given undertakings to
this Court will suffer three months' imprisonment. In addition to
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the aforesaid sum being paid, a fine amounting to INR 1 crore for
each Company must also be paid to the Registry of this Court
within four weeks from today. This sum will be paid over to the
Supreme Court Legal Services Committee. In default of payment
of such fine, the Chairmen of these Companies will suffer one
month's imprisonment. [Para 24][95-C-F]
Lakshman Prasad Agarwal v. Syed Mohammad Kareem
2009 (6) SCALE 413; Rosnan Sam Boyce v. B.R. Cotton
Mills Ltd. (1990) 2 SCC 636 : [1990] 2 SCR 381 -
relied on.
Babu Ram Gupta v. Sudhir Bhasin (1980) 3 SCC 47 :
[1979] 3 SCR 685; Ashok Paper Kamgar Union v.
Dharam Godha (2003) 11 SCC 1; Dinesh Kumar Gupta
v. United India Insurance Co. Ltd. (2010) 12 SCC
770 : [2010] 13 SCR 599; Mohd. Iqbal Khanday v.
Abdul Majid Rather (1994) 4 SCC 34; Gyanichand v.
State of A.P. (2016) 15 SCC 164 - held inapplicable.
Attorney-General v. British Broadcasting Corporation
[1980] 3 All ER 161; Attorney-General v. Leveller
Magazine Ltd. and Ors. [1979] 1 All ER 745; Patel
Rajnikant Dhulabhai v. Patel Chandrakant Dhulabhai
(2008) 14 SCC 561 : [2008] 10 SCR 1169; Noorali
Babul Thanewala v. K.M.M. Shetty (1990) 1 SCC 259 :
[1989] 2 Suppl. SCR 561; Supreme Court Bar Assn.
v. Union of India (1998) 4 SCC 409 : [1998] 2 SCR
795 ; Chhaganbhai Norsinbhai v. Soni Chandubhai
Gordhanbhai (1976) 2 SCC 951 : [1976] 2 SCR 786 -
referred to.
Case Law Reference
2009 (6) SCALE 413
relied on
Para 15
[1990] 2 SCR 381
relied on
Para 16
[1979] 3 SCR 685
held inapplicable
Para 21
(2003) 11 SCC 1
held inapplicable
Para 21
[2010] 13 SCR 599
held inapplicable
Para 21
(1994) 4 SCC 34
held inapplicable
Para 21
(2016) 15 SCC 164
held inapplicable
Para 21
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[1998] 2 SCR 795
referred to
Para 23
[1976] 2 SCR 786
referred to
Para 23
[2008] 10 SCR 1169
referred to
Para 23
[1989] 2 Suppl SCR 561
referred to
Para 23
CIVIL ORIGINAL JURISDICTION: Writ Petition (Civil) No.
845 of 2018.
Under Article 32 of the Constitution of India.
WITH
Contempt Petition (C) Nos. 1838 of 2018, 55 of 2019 and 185 of
2019 in W.P. (C) No. 845 of 2018.
Dushyant A. Dave, Anil K. Kher, Kapil Sibal, Mukul Rohatgi,
Neeraj Kishan Kaul, Sr. Advs., Bhargava V. Desai, Akshat Malpani,
Kunal Kher, Mahesh Agarwal, Ms. Shally Bhasin, Chaitanya Safaya,
Prateek Gupta, Ms. Madhavi Agrawal, E. C. Agrawala, Vaibhav Niti,
Sanjay Kapur, Sanyat Lodha, Chanan Parwani, Ramchandra Madan,
Ms. Divyya Kapur, Ms. Megha Karnwal, Bharath Gangadharan, Kauser
Husain, Ms. Pallavi Kumar, Divyam Agarwal, Sumit R. Sharma, Advs.
for the appearing parties.
The Judgment of the Court was delivered by
R. F. NARIMAN, J. 1. Three contempt petitions are before us,
having been filed by Ericsson India Pvt. Ltd. ["Ericsson"] against
Reliance Communications Ltd. ["RCom"], Reliance Telecom Ltd.
["RTL"], and Reliance Infratel Ltd. ["RITL"] [hereinafter, collectively
referred to as the "Reliance Companies" or "Companies"].
2. The brief facts necessary to appreciate these matters are as
follows:
On 25.01.2013, Ericsson and RCom entered into a Managed
Service Agreement whereby Ericsson agreed to provide RCom managed
services, i.e., operation, maintenance, and management of RCom's
network. Ericsson raised invoices from time to time in consideration of
services provided, and on receiving no payment, ultimately issued three
notices, each dated 07.05.2017, under the Insolvency and Bankruptcy
Code, 2016 ["Insolvency Code"] to the three Reliance Companies,
calling upon them to pay an amount of INR 9.78 crore. These notices
were replied to on 19.05.2017, whereby the three Reliance Companies
stated that the performance of Ericsson had been inconsistent. After
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this date, discussions took place between the parties, and an understanding
was reached for making payment of the outstanding invoices. However,
even this understanding fell through, and on 07.09.2017, Ericsson issued
a letter to the three Reliance Companies, terminating the agreement
between them, and calling upon them to pay the outstanding amount in
full. At this stage, on 08.09.2017, Ericsson filed three applications under
Section 9 of the Code as operational creditors. On 15.05.2018, the
National Company Law Tribunal ["NCLT"] admitted the aforesaid
petitions and appointed three Interim Resolution Professionals on
18.05.2018 to carry out the corporate insolvency resolution process. At
this stage, appeals were filed against the NCLT order. The National
Company Law Appellate Tribunal ["NCLAT"], by order dated
30.05.2018, stayed the orders dated 15.05.2018 and 18.05.2018 passed
by the NCLT, and recorded the statement of counsel appearing on behalf
of the Reliance Companies that the matter had been agreed to be settled
for a sum of INR 550 crore, which would be paid within 120 days' time.
The order recorded that both the Reliance Companies as well as Ericsson
were to file respective affidavits of undertaking in terms of the statements
made before the NCLT. These undertakings were so filed in June, 2018.
At this stage, the three Reliance Companies filed a writ petition in this
Court on 17.07.2018 in which they asked for quashing/closure of the
corporate insolvency resolution process in view of settlement of disputes
between them and Ericsson. In this writ petition, by an order dated
03.08.2018, this Court heard learned counsel who appeared on behalf of
RCom and its group companies, and recorded that the timeline of 120
days shall be strictly adhered to and payment of INR 550 crore is to be
made on or before 30.09.2018. Undertakings to this effect were to be
filed before this Court by Chairmen of the Companies concerned. The
undertakings that were given by the Chairmen of these Companies,
pursuant to this order, were dated 09.08.2018 and are a serious bone of
contention between the parties in that these undertakings stated that the
sum of INR 550 crore will be paid "upon sale of assets of the company".
This being the case, a contempt petition, being Contempt Petition No.
1838 of 2018 ["first contempt petition"], dated 01.10.2018, was moved
by Ericsson, in which it was expressly stated that the undertakings were
not in terms of this Court's order and that the Companies aforestated
have no intention of abiding by their commitment to pay the necessary
sum of money within the time stated. Meanwhile, on 27.09.2018, the
Reliance Companies applied for extension of time for payment by 60
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days, expressly stating that since sale of other spectrum had not reached
a stage of completion, in order to enable the Companies to make payments,
they would require this extension. Both the application for extension and
the contempt petition came up for hearing before this Court on 23.10.2018,
and it was made clear, as a last opportunity, that the aforesaid amount
must be paid on or before 15.12.2018, and that interest at the rate of
12% per annum would also have to be paid for delayed payment beyond
30.09.2018. It was also made clear that the petition for contempt may
be revived if payment is not so made by this date. A second application
to extend time was moved on 12.12.2018, citing the same excuse of
other spectrum not yet being saleable. This time, extension of time was
asked for making the payment within two weeks from the date on which
a No-Objection Certificate ["NOC"] is given by the Department of
Telecommunications ["DoT"] for sale of other spectrum. On 13.12.2018,
this Court made it clear that it was not inclined to grant any such extension,
as a result of which, the second application for extension of time was
dismissed as withdrawn. While matters stood thus, a letter dated
21.01.2019 was written by the advocates of the three Reliance
Companies, who stated that on 09.01.2019, INR 118 crore had already
been deposited with the Registry of this Court, and that the total
outstanding, as on date, together with interest, would be roughly INR
570 crore. This letter specifically states that the net figure of INR 453
crore would be paid by 31.01.2019, conditional upon withdrawal of the
two contempt petitions (a second contempt petition, being Contempt
Petition No. 55 of 2019, was also filed on 02.01.2019) and upon withdrawal
of pending arbitration proceedings. This was replied to by the advocates
of Ericsson, stating that an appropriate application may be moved in the
Supreme Court, as once notice of contempt is issued, the Court alone
can pass necessary orders to effectuate the settlement. However, on
01.02.2019, the RCom group wrote to various stock exchanges, making
it clear that they will now not resist the corporate insolvency resolution
process that had hitherto been stayed. This led to the filing of a third
contempt petition, namely, Contempt Petition No. 185 of 2019, in which,
various prayers were asked for, including issuance of a notice of contempt
against the Chairman of the State Bank of India ["SBI"], who headed
the Joint Lenders' Forum comprising of 46 financial creditors of the
RCom group.
3. Shri Dushyant Dave, learned Senior Advocate appearing on
behalf of Ericsson, painstakingly took us through the NCLAT order dated
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30.05.2018 as well as our orders. According to the learned Senior
Advocate, the administration of justice has been sought to be interfered
with by the Reliance Companies in two ways. First and foremost, the
payment of INR 550 crore to his client was not conditional upon sale of
spectrum as is clear from all the orders passed. In fact, this was the
understanding of the NCLAT order dated 30.05.2018 by the Reliance
Companies, as was clear from the undertakings that were filed by their
Directors pursuant to this order. However, mischievously, the undertakings
filed pursuant to this Court's order dated 03.08.2018 brought in this
condition for the first time, and was directly contrary to this Court's
order dated 03.08.2018. He argued that this was the occasion for moving
the first contempt petition on 01.10.2018 in which this was pointed out.
He also argued that the reply made to the contempt petition, together
with the correspondence between the parties, would show that no bona
fide efforts were made to pay this sum of INR 550 crore at any stage,
and that the plea that the Companies were unable to pay is clearly belied
by their own advocates' letter dated 21.01.2019, in which it was stated
that full payment would be made within a period of 10 days. He, therefore,
argued that both on account of furnishing false undertakings to this Court
as well as wilfully breaching the said undertakings and this Court's orders,
the administration of justice has been sought to be interfered with. He
cited judgments in order to buttress these contentions.
4. On the other hand, Shri Mukul Rohatgi and Shri Kapil Sibal,
learned Senior Advocates appearing on behalf of RCom, and RITL and
RTL, respectively, have argued that at best, if the settled amount of INR
550 crore, in the place of INR 1500 crore, was not paid to Ericsson, the
corporate insolvency resolution process, which was stalled, would begin
afresh, and Ericsson would then stand in line as an operational creditor
to claim the entire sum of INR 1500 crore. In any case, it is also obvious
from the NCLAT order dated 30.05.2018, which was referred to by the
orders of this Court, that the sum of INR 550 crore was to be paid from
the sale of assets of the corporate debtor, which is part and parcel of the
order dated 30.05.2018. The undertakings given by the Chairmen of the
three Reliance Companies, dated 09.08.2018, are therefore, in accordance
with the NCLAT order as well as the order of this Court dated 03.08.2018.
They further argued that, in any case, even if such undertakings were
not in accordance with these orders, no complaint was ever made by
Ericsson, which went along with the undertakings. They also argued
that, throughout, the three Reliance Companies did their best to pay INR
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550 crore, as is clear from the correspondence between the parties and
their conduct. Also, as recently as 07.01.2019, the moment they got
income tax refunds amounting to INR 118 crore, this sum was deposited
in the Registry of this Court, in compliance of this Court's orders.
Therefore, according to them, there was no breach of undertakings, nor
has there been any wilful default. Despite their best efforts, the DoT
insisted on adhering to certain guidelines, as a result of which, it did not
give its NOC for sale of spectrum, and therefore, it had now become
impossible for the three Reliance Companies to pay the aforesaid amount.
The very fact that they have now succumbed to the corporate insolvency
resolution process going forward would show their bona fides. In any
case, they stated that they are still ready and willing to pay whatever
they can, by way of income tax refunds. Another sum of INR 129 crore
has now come by way of income tax refunds, which can be further
adjusted. Also, an extremely recent refund order of INR 134 crore can
also be used in part payment of the sum of INR 550 crore. Thus, a total
sum of INR 391 crore, out of INR 550 crore, can, in fact, be paid as of
today. All this would show that they are doing their best to make this
payment, and therefore, cannot be characterized as wilful defaulters.
They also made a fervent prayer that the special leave petition and the
writ petition should be dismissed as withdrawn, as the inevitable has
now occurred, and the corporate insolvency resolution process has to
now go forward. They also cited various judgments to buttress their
submissions.
5. Shri Neeraj Kishan Kaul, learned Senior Advocate appearing
on behalf of the Chairman, SBI, has argued that the Joint Lenders' Forum,
being allowed to sell assets outside of the corporate insolvency resolution
process has nothing to do with the Ericsson transaction. According to
him, prayers (c) and (j) of the Contempt Petition No. 185 of 2019 are not
reliefs that can be given in a contempt petition. Also, it is wholly
unnecessary to file an affidavit stating the total amount received from
sale of assets of the corporate debtors post the settlement dated
30.05.2018. Equally, prayer (j), asking for a direction for SBI to bring in
amounts due and payable so as to purge itself of contempt does not lie
against the Joint Lenders' Forum in view of the fact that the Ericsson
transaction is wholly independent of sale of assets.
6. Since everything turns on the order of NCLAT dated 30.05.2018,
and the three orders of this Court, these orders are set out hereunder:
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The order of the NCLAT, dated 30.05.2018, states:
"These appeals have been preferred by the Appellants-Directors
and Shareholders of 'Reliance Infratel Ltd.'; 'Reliance Telecom
Ltd.' and 'Reliance Communications Ltd.' against the common
orders dated 15th May, 2018 and 18th May, 2018, passed by the
Adjudicating Authority (National Company Law Tribunal),
Mumbai Bench, Mumbai, whereby and whereunder, the
application(s) under Section 9 of the Insolvency and Bankruptcy
Code, 2016 (hereinafter referred to as "I&B Code") preferred
by the Respondent- 'Ericsson India Pvt. Ltd.'- ('Operational
Creditor') have been admitted, order of 'Moratorium' has been
passed and 'Insolvency Resolution Professional' has been
appointed.
Apart from the ground that an arbitration proceeding is pending
and the Hon'ble Supreme Court has passed an order, some other
grounds have also been taken to assail the impugned orders.
2. The 'Financial Creditors'- 'Joint Lenders Forum', some
other Banks and 'Ericsson India Pvt. Ltd.'- ('Operational
Creditor') have appeared. It is informed that interests of a number
of Banks are involved who are awaiting the decision of this
Appellate Tribunal as they intend to recover the amount.
3. Mr. Tushar Mehta, learned Senior Counsel for the 'Joint
Lenders Forum'- ('Financial Creditors') submitted that they have
reached an agreement with the 'Corporate Debtors' for sale of
assets of the 'Corporate Debtors', pursuant to which, the 'Financial
Creditors' can recover a sum of Rs. 18,100 crores approximately.
He further submits that on re-structuring and sale of assets, the
'Financial Creditors' can recover Rs. 37,000 Crores approximately.
4. According to them, in view of the impugned order, the
Bank is not in a position to recover the amount and there is
recurring loss of more than crores per day.
5. Mr. Rajeeve Mehra, learned Senior Counsel appearing
on behalf of the 'Standard Chartered Bank' has also taken similar
plea and supported the stand taken by the learned Senior Counsel
for the 'Joint Lenders Forum'.
6. Mr. Kapil Sibal, learned Senior Counsel appearing on
behalf of the Appellants submitted that if the impugned order is
stayed and/or set aside, the parties may settle the matter.
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7. The case was taken up yesterday (29th May, 2018) and
on the request of the parties, the case was adjourned to find out
whether the Appellants and the 'Operational Creditors' can settle
the matter.
8. Mr. Salman Khursid, Mr. Arun Kathpalia and Mr. Anil
Kher, learned Senior Counsel appear on behalf of the 'Operational
Creditors' in the respective cases. They submitted that the
Respondent- 'Ericsson India Pvt. Ltd.'- ('Operational Creditor')
has agreed to settle the matter if affront payment of Rs. 600
Crores (Rupees Six hundred Crores Only) is made by the
Appellants/'Corporate Debtors'.
9. Mr. Kapil Sibal, learned Senior Counsel for the Appellants
informed that the Appellants have agreed to pay a sum of Rs. 550
Crores (Rupees five hundred fifty Crores only) (jointly) in favor
of 'Ericsson India Pvt. Ltd.'- ('Operational Creditor') and sought
for 120 days' time to pay the total amount.
10. Learned Senior Counsel appearing on behalf of 'Ericsson
India Private Limited'- ('Operational Creditor'), on instructions
from the Respondent, informed that the 1st Respondent has agreed
to receive a sum of Rs. 550 Crores (Rupees Five hundred fifty
Crores only), if the total amount is paid within 120 days as proposed
by the learned Senior Counsel for the Appellants.
11. Taking into consideration the stand taken by the parties
and the fact that if the 'Corporate Insolvency Resolution Process'
is allowed to continue, all the 'Financial Creditors' as also the
'Operational Creditors' may suffer more loss and the Appellants
have made out a prima facie case, as agreed and suggested by
learned Senior Counsel for the Appellants and learned Senior
Counsel for the 'Joint Lenders Forum' and the learned Senior
Counsel for the 'Operational Creditor'- 'Ericsson India Pvt. Ltd.',
we pass the following orders:
i. Until further orders, the impugned orders dated 15th May,
2018 and 18th May, 2018, passed by the Adjudicating Authority,
Mumbai Bench in C.P. (IB) 1385, 1386 & 1387 (MB)/2017,
shall remain stayed. The 'Resolution Professional' will allow
the managements of the 'Corporate Debtors' to function. He
may attend the office of the 'Corporate Debtors' till further
order is passed by this Appellate Tribunal. Thereby, the
'Corporate Insolvency Resolution Process' initiated against the
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'Corporate Debtors' namely- 'Reliance Infratel Ltd.';
'Reliance Telecom Ltd.' and 'Reliance Communications Ltd.'
shall remain stayed, until further orders.
ii. The 'Financial Creditors'/'Joint Lenders Forum' with whom
the assets of the 'Corporate Debtors' have been mortgaged
as also the 'Corporate Debtors' are given liberty to sell the
assets of the 'Corporate Debtors' and to deposit the total amount
in the account of the lead Bank of Joint Lenders Forum which
shall be subject to the decision of these appeals. If the appeals
are rejected, in such case, the 'Financial Creditors'/'Joint
Lenders Forum' and other Banks with whom the amount is
deposited, will have to return the total amount in the respective
accounts of the 'Corporate Debtors'.
iii. The Chairman, Managing Directors, Directors and other
members of the 'Corporate Debtors' namely- 'Reliance
Infratel Ltd.'; 'Reliance Telecom Ltd.' and 'Reliance
Communications Ltd.' are directed to pay a sum of Rs. 550
Crores (Rupees Five Hundred Fifty Crores Only) (jointly) in
favour of 'Ericsson India Pvt. Ltd.' within 120 days i.e. by
30th September, 2018. In case of non-payment of the amount
and part of the same, the concerned appeal(s) may be dismissed
and this Appellate Tribunal may direct to complete the
'Corporate Insolvency Resolution Process' and may pass
appropriate order. The payment of Rs. 550 Crores (Rupees
Five Hundred Fifty Crores Only) in favour of the 'Operational
Creditor' shall be subject to the decision of these appeals. If
the appeals are dismissed, the 'Operational Creditor' will pay
back the amount to the 'Corporate Debtors'.
12. The Appellants and the 'Operational Creditors' are directed
to file their respective affidavits of undertaking in terms of their
statement as made and recorded above within 10 days.
Let the appeals be listed 'for admission' on 3rd October, 2018.
13. In the meantime, it will be open to the parties to file
Interlocutory Application if orders and directions given above are
not complied. Interlocutory Application Nos. 701-702, 709-710
and 712-713 of 2018 stand disposed of with aforesaid observations
and directions.
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The order of the Supreme Court, dated 03.08.2018, states:
"Applications seeking exemption from filing certified copy of the
impugned orders are allowed.
Permission to file Appeals is granted.
Applications for impleadment are allowed.
Reading the interim Order dated 30.05.2018 of the National
Company Law Appellate Tribunal, it is clear that Ericsson India
Pvt. Ltd., who is an Operational Creditor, is willing to settle its
debt of over Rs. 1500 Crores for a sum of Rs. 550 Crores (Rupees
Five Hundred Fifty Crores only) which is to be paid within 120
days from the date of that order i.e. by 30th September, 2018.
Having heard Mr. P. Chidambaram, learned Senior Counsel for
Neptune Steel Strips Ltd. and Mahima Mercantile Credits Ltd.,
Mr. Kapil Sibal, learned Senior Counsel for Reliance
Communications Limited & Ors. and Mr. Tushar Mehta, learned
ASG for Joint Lenders Forum/SBI, we are of the view that this
time-line shall be strictly adhered to and payment of Rs. 550 Crores
(Rupees Five Hundred Fifty Crores only) be made on or before
30th September, 2018.
In the meanwhile, the undertaking that is to be given by the
Chairman of the Company concerned shall be given within a period
of one week from today.
Mr. Tushar Mehta, learned ASG appearing for the Joint Lenders
Forum agrees to this. Mr.