• Friday, March 29, 2024
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India’s Anil Ambani found guilty of contempt in Ericsson case

India’s Anil Ambani found guilty of contempt in Ericsson case

High-profile tycoon Anil Ambani has been found guilty of contempt of court by India’s supreme court and told that he will face prison if his company does not complete a $77m payment to Sweden’s Ericsson within four weeks.

Ericsson has been pursuing Mr Ambani over unpaid dues for services to his Reliance Communications, which said this month it would pursue insolvency proceedings. The businessman had personally assured the court that RCom and two subsidiaries would pay Rs5.5bn ($77m) to Ericsson by September.

After they failed to make the payment — despite extending the deadline to December — Ericsson launched a new suit asking for Mr Ambani to be detained for contempt of court.

On Wednesday, the supreme court found Mr Ambani guilty of the offence, along with Satish Seth and Chhaya Virani, who chair RCom subsidiaries Reliance Telecom and Reliance Infratel.

The court declined to have them detained immediately but said they would face three months in prison if the outstanding amount was not paid within four weeks.

“The Reliance companies are able to pay this amount, but are wilfully refusing to do so,” the court said, criticising Mr Ambani’s “cavalier attitude . . . to the highest court of the land”.

In a brief statement, RCom said it respected the judgment and would comply with it. A spokesman for the company said that Mr Ambani, Mr Seth and Ms Virani had no further comment.

Ericsson said it welcomed the judgment and looked forward to RCom’s compliance.

The ruling comes as Mr Ambani faces growing challenges to maintain his hold on his heavily indebted group. He has controlling stakes in his major listed companies through wholly owned investment vehicles but most of those stakes are now pledged to lenders as collateral for loans.

After the group’s share prices fell following RCom’s insolvency announcement on February 1, two of Mr Ambani’s nine lenders started selling pledged stock. Shares in his infrastructure and power companies subsequently fell by more than 50 per cent.

Mr Ambani’s group has filed a number of lawsuits against financial group Edelweiss, whose mutual funds sold a large quantity of pledged shares, alleging that these actions were illegal. Edelweiss denies wrongdoing.

On Sunday, a statement issued by Mr Ambani’s office said he had reached an “in-principle standstill understanding” with most of his lenders. It said they would not sell any more pledged shares until October and Mr Ambani would liquidate his direct stake in his power business to repay loans.

However, three of the lenders subsequently told the Financial Times they had given no assurances to Mr Ambani regarding the pledged shares.

Spokespeople for Mr Ambani’s group did not respond to repeated requests for comment.