On Monday, March 18, Swedish company Ericsson confirmed that Anil Ambani has paid the company approximately Rs 550 crore worth of his pending debt. Ambani thanked his older brother and sister-in-law, Mukesh and Nita Ambani, for likely paying the massive sum on his behalf.
In February, the Supreme Court had told Anil that unless he and two Reliance Communications (RCom) directors pay Ericsson’s dues in four weeks’ time, they will be sentenced to three months in jail for being in contempt of court.
However, Mukesh bailed out his younger brother and saved him from the impending jail term, seemingly ending the long-drawn feud between them that began after their father’s death.
Details of the repayment
Chairman of Reliance Industries, Mukesh paid Ericsson Rs 550 crore on behalf of Anil’s debt-laden company RCom.
Anil has also been spared a three-month jail term, a punishment ordered by the Supreme Court if he failed to repay Ericsson.
Anil Ambani thanked his brother and sister-in-law for their support.
“My sincere and heartfelt thanks to my respected elder brother, Mukesh, and Nita, for standing by me during these trying times, and demonstrating the importance of staying true to their strong family values by extending this timely support. I and my family are grateful and deeply touched with their gesture”, he said.
RCom offered no details on how this payment was made. The company statement only said that Ericsson has been repaid Rs. 550 crore with interest as per the Supreme Court order.
However, Anil’s words allude to the fact that Mukesh likely contributed the funds and bailed him out.
Ericsson’s tussle with RCom
In 2013, RCom struck a business deal with Ericsson where the Swedish telecommunications company would oversee RCom’s operation, maintenance, and management.
In 2017, Ericsson initiated legal proceedings against RCom and two of its units, Reliance Telecom and Reliance Infratel, stating that it had not been paid for its services.
The following year, Ericsson settled the matter with RCom via a Rs 550 crore settlement to be paid by September.
To secure the settlement funds, Anil initially tried selling off some of RCom’s assets to Mukesh’s Reliance Jio Infocomm. But, when RCom’s lenders and government agencies failed to approve the deal, Anil defaulted on the settlement amount as well.
Ericsson then moved the Supreme Court against Anil and alleged that he was “not complying with its order to clear dues of ₹550 crore towards the completion of asset sale with Reliance Jio Infocomm Ltd”.
The company also demanded that Anil be thrown into “civil prison” until he pays the company back.
The Supreme Court found that Anil had “wilfully” defaulted on the payment and ordered that he pay the settlement within four weeks or face imprisonment.
Thanks to his brother Mukesh, Anil will avoid any jail time.
However, he is not in the clear yet.
Anil is now facing a potential suit from state-owned telecom company BSNL for defaulting on a Rs 700 crore debt.
BSNL Chairman and Managing Director Anupam Shrivastava is likely going to begin legal proceedings against RCom for recovery of dues.
Warring brothers no more?
Following the death of their father Dhirubhai Ambani, the two brothers have been warring over control over the Reliance Group.
In 2006, Mukesh and Anil privately decided to split the industries between themselves and go their separate ways.
Their family conflict began to be aired in public when Anil questioned the terms of a gas supply agreement he had with Mukesh. Mukesh then accused Anil of lobbying.
Things took a turn for the worst with Anil when RCom began suffering financially after facing heavy competition from Airtel, Vodafone, Idea, and his brother’s own Reliance Jio.
Ever since Jio launched in 2016, it has swept up a large market share. Jio’s meteoric success worked directly against RCom, which began losing subscribers.
Anil tried to orchestrate a three-way merger with Aircel and MTS to regain market share and alleviate his company’s growing debt. However, this deal fell through and Anil was left scrambling for funds.
The Ambani brothers’ relationship seemed to improve when Anil and Mukesh made a deal to sell some of RCom’s wireless assets to Jio on the condition that Jio will not be held liable for Anil’s past debt.
However, the Department of Telecommunications said it will only approve the Jio-RCom deal if Jio will repay RCom’s debts, as is the trading norm.
Both, Anil and Mukesh have mutually terminated this deal because of the delay in approval.
Anil and Mukesh reconciling is good news not just for their family, but it also bodes well for the economic climate of the country. The Ambani family has control of a large portion of the Indian key businesses, and is currently enjoying the international spotlight because of high-profile, lavish wedding ceremonies of Mukesh’s children. So what happens with the Ambanis is important for the perception of stability in the Indian economy.
Thanks to Mukesh’s generosity, Anil has not only escaped the label of economic fugitive that Vijay Mallya could not, but also RCom’s staff, employers, and shareholders have been rescued from financial peril.
The outcome of Ericsson’s repayment proceedings has also shown that Indian institutions can be relied upon to hold corporate giants accountable for their business decisions.
Rhea Arora is a Staff Writer at Qrius.