Reliance Communication Limited & Ors. v/s State Bank of India & Ors.
PETITIONER: Reliance Communications Limited & Ors.
RESPONDENT: State Bank of India & Ors.
COURT: Supreme Court of India.
DATE OF DECISION: 20.02.2019
PETITION NO.: Writ Petition (Civil) No. 845 of 2018
In this case, Ericsson Pvt. filed three pleas for contempt before the Supreme Court of India against the Reliance Company, i.e. Reliance Communications Ltd., Reliance Telecom Ltd. And that's Reliance Infratel Ltd.
Ericsson India Pvt. Ltd. [Ericsson] and Reliance Communication have engaged into an arrangement where Ericsson has decided to continue providing Reliance Communication with a managed service for its network. Ericsson has asked Reliance Communication for payment of the money in exchange for the provision of the service but has not been successful in obtaining the same and has given three notices to these companies under the Insolvency and Bankruptcy Code 2016 for payment of the due sum, i.e. Rs. 9.78 crore, man. Reliance Communications three companies responded to the notice given, claiming that the service rendered by Ericsson was not up to the standard. After much negotiation between the parties, the decision was reached on the reimbursement of the due sum.
On 7th September 2017, after the agreement on payment was reached, Ericsson also informed all three companies of the termination of the agreement between them and of the payment of the outstanding balance. To this on the 8th, Ericsson filed three applications under section 9 of the Insolvency and Bankruptcy Code. And on 15th May 2018, the appeal was approved by the National Co. Law Tribunal (NCLT). The NCLT named three temporary resolution practitioners to continue with the insolvency proceedings. Subsequently, complaints against the order of the NCLT were also lodged with the National Company Law Appeals Tribunal. The NCLAT remained under the order of NCLT and heard from the lawyer on behalf of the Reliance Firms that the settlement was made by offering to pay Rs.550 crore within 120 days. The Tribunal also noted that all parties had to file an affidavit of the resolution. The company then sends a written appeal to the Supreme Court to quash the corporate insolvency proceedings. The court observed the counsel on behalf of the Reliance Firms and claimed that the 120-day deadline for payment of the due sum had to be strictly adhered to. In this respect, the Companies must file an undertaking.
On 9th September 2018, the undertaking was issued before the companies and it was agreed to sell the properties for payment of the sum. Ericsson filed the first petition of contempt on the ground that the companies did not comply with the terms of the court and that the companies have no intention of paying the sum within the time limit agreed.
On 23th October 2018, the court examined both the contempt and the extension petition and offered the last opportunity for payment. Court confirmed that the payment had to be made on or before 15.12.2018, along with 12% interest, beginning from 30.09.2018. Another request for an extension of time was filed. Reliance Companies immediately filed an extension of 60 days on the basis that the sale had not yet been concluded in order to pay the sum, which was denied by the court on 13th December 2018.
Later on 2nd January 2019 the 2nd petition for contempt was filed. And then the lawyer wrote a letter on behalf of the three companies claiming that Rs. 110 Crore had already been charged to the Court Registry on 09.01.2019 and the remainder will have to be paid by 30.01.2019 on the condition that the second petition for contempt had been withdrawn.
Further, on 1st February 2019, the 3rd petition for contempt was filed as Reliance Communication had written to various stock exchanges and made it clear that they would not stay in the company insolvency proceedings that were remaining. It was also demanded to give a notice of contempt against the Chairman of the State Bank of India.
1. If the petitioners are entitled for contempt on the part of the Court?
2. Whether the petitioner hindered the judicial process by providing two separate undertakings before the NCLT and the Supreme Court?
• Section 9 of Insolvency and Bankruptcy Code 2016 which states that an application for corporate insolvency resolution process can be initiated by operational creditor.
The SC held that the petitioner was liable for the contempt of the court and delayed the administration of justice by making two separate undertakings to NCLT and SC. The Court ordered the payment of Rs 118 to Ericsson, which had previously been paid to the Court Registry within one week. The Court also ordered the Rely Contact to pay Rs. 453 to Ericsson within 4 weeks for the purge of contempt of the court. In default of payment of the outstanding sum, the Chairman shall be sentenced to three months' imprisonment by which the undertaking has been issued to the court.
The additional court ordered the payment of Rs. 1 Crore fine to the Registry of Court for each company within four weeks. And this amount was made to be billed to the Legal Service Committee of the Supreme Court.
Moreover, the court stated that the chairman of all three companies shall be sentenced to one month's imprisonment in default of payment of the fine.