NCLT dismisses RCom plea seeking ₹325-crore refund from Ericsson

The Mumbai bench of the National Company Law Tribunal (NCLT) on Wednesday rejected Reliance Communications Ltd’s (RCom’s) claim for refund of around $100,000. ₹325 crore from Swedish telecom equipment maker Ericsson India Pvt. part of Ltd. ₹550 crore that Reliance Group paid to set aside the Supreme Court’s contempt order in 2019.

The court held that the payment did not violate bankruptcy norms and was made solely to comply with the Supreme Court’s directions and not for any bankruptcy-related relief.

“We do not find any merit in the applicant’s contention that the money paid to Ericsson should be refunded pursuant to the NCLAT stay order… The petitions filed by the resolution professional of the corporate debtor against Ericsson India Private Limited (operational creditor) are dismissed and disposed of,” the judgment said.

Contempt decision

The case stems from a 2019 Supreme Court contempt order in which the court found RCom, Reliance Telecom Ltd and Reliance Infratel Ltd and their directors guilty of failing to comply with the agreement with Ericsson and repeatedly missing court-mandated payment deadlines. Reliance Group ultimately paid damages to quash the defamation verdict and prevent its senior officials from being jailed. ₹550 crore to Ericsson.

Later, resolution expert Anish Niranjan Nanavaty approached the NCLT seeking a partial refund, arguing that making full payment to Ericsson amounted to preferential treatment as the operational creditor had withdrawn its entire claim before the secured financial lenders.

However, the NCLT rejected the claim, stating that the funds paid to Ericsson came from other Reliance group entities and not from the assets of the bankrupt companies. Since the corporate insolvency resolution process (CIRP) legacy was never exhausted, the court concluded that the payment could not be considered a privileged transaction or a violation of the moratorium under the Insolvency and Bankruptcy Code (IBC).

RCom had only called ₹325 crore, not quite ₹550 crore as this portion was considered attributable to RCom and Reliance Telecom. The remaining amount belonged to Reliance Infratel or other group entities, which are not part of the present petition.

Ericsson argued that RP’s claim was “misunderstood” and emphasized that the payment was strictly due to the Supreme Court’s contempt order and not the 2018 NCLAT interim order providing for refunds in case appeals are rejected. He said any challenge to the payment would have to be taken up before the Supreme Court.

The dispute dates back to a network maintenance agreement signed by Ericsson in 2013. ₹1,500 crore as unpaid dues. Following repeated defaults, Ericsson initiated bankruptcy proceedings, which eventually led to contempt proceedings against RCom directors. RCom went into bankruptcy with debt overhang in 2019 ₹46,000 crore.