Reliance Jio has offered to put ₹3,500 crore in an escrow account, in order to complete the acquisition of Reliance Communications Limited’s (RCOM) tower and fiber assets. It has been two years since the National Company Law Tribunal Mumbai (NCLT) approved the resolution plan for the tower and fiber assets of RCOM.
However, the inter-creditors dispute over the distribution of resolution of funds has delayed the debt resolution process. Consequently, Jio has moved a fresh application in the NCLT saying that the money kept in escrow can be distributed amongst the lenders once the inter creditors’ dispute over the distribution is settled.
Contractual arrangement
An escrow is a contractual arrangement in which a third party receives and disburses money or property for the primary transacting parties, with the disbursement dependent on conditions agreed to by the transacting parties. Jio has proposed to deposit the total resolution amount of ₹3,500 crore with the State Bank of India. Upon the deposit of the ₹3,500 crore in an SBI account, “the Resolution Plan will stand, and the Applicant (Jio) shall get the Corporate Debtor (Reliance Infratel-holding company for assets for RCOM) on a clean slate basis.” Jio noted in its recent NCLT petition.
Jio stated in the petition that it is committed and ready to implement the resolution plan and acquire RCOM assets, however, the inter-creditor disputes are creating further delays in implementation. “In turn, the value of the assets of the Corporate Debtor (Reliance Infratel), will deteriorate, if urgent action is not taken towards implementation,” said Jio in its NCLT note.
Legal battle
SBI and a few other banks, including Doha Bank, Standard Chartered Bank, and Emirates Bank are engaged in a legal battle over the distribution of funds from the resolution amount. The matter is pending before the Supreme Court.
Doha Bank had challenged the classification of claims from the indirect creditors of RITL, as the financial creditors, by the Resolution Professional.
The ₹3500 crore to be deposited by Jio in the escrow account will be distributed amongst lenders once the Supreme Court settles the matter.
