India’s National Company Law Tribunal (NCLT) accepted an Ericsson request for troubled operator Reliance Communications (RCom) to face bankruptcy proceedings over a debt of $150 million owed to the Sweden-based vendor.
RCom announced in December 2017 it would exit India’s mobile sector, as it looks to reduce a debt load of around $6.9 billion. The process was held up when Ericsson said the operator owed it fees for outsourced management services.
A new insolvency code, which came into force in 2016, states cases must be resolved within nine months otherwise the defaulting company will be liquidated, Financial Times (FT) reported.
The code is seen as part of a government strategy to ensure powerful business owners abide by the law and FT said RCom is the highest-profile company having to deal with the new process.
Meanwhile, last month India’s Supreme Court gave RCom permission to sell most of its wireless assets to Reliance Jio. RCom expected to raise $3.8 billion through the sale.
However, FT said the NCLT decision “throws into doubt” the “landmark deal”.
The strict rules of the new code could force Jio to submit a new bid for RCom’s assets, as rivals may now be interested in putting forward their own bids.
RCom said it will wait for more details before deciding on next steps.