The Supreme Court of India had dealt a major boost to Ericsson when it ordered Reliance Communications chief Anil Ambani ordered him to pay the Swedish telecom equipment giant a sum of Rs. 5.5 billion within 4 weeks. In its verdict today, the Supreme Court found Anil Ambani to be guilty of contempt of court and repeatedly refusing to pay Ericsson to sum of money that was owed. If Ambani does not make the payment within the stipulated time, then he is going to be sent to prison for three months. This development comes as a major development for Ericsson, which has been embroiled in this case for some years.
Reliance Communications used to be one of India’s most valuable companies until a decade ago, but a range of upheavals in the mobile communications industry has bled the company dry. Eventually, RCOM found itself staring at a mountain of debt and before long, creditors had to move the court to recover their dues. Ericsson had been one of the biggest vendors. After the previous verdict, RCOM had deposited Rs. 1 billion but the residual Rs. 4.5 billion remains unpaid, and now Anil Ambani would need to cobble together that amount within 4 weeks.
However, the money owed to Ericsson is only a small portion of the RCOM debt mountain. The company had not released information regarding their debt for some years but eventually did so in March of 2017. It was then that the true picture emerged. It owes a whopping $7 billion to a range of banks, and in addition to that, money is owed to workers as well. Ericsson came into the picture in 2014, when it reached an agreement to manage RCOM’s network. It sued RCOM in 2018 over unpaid bills.
Following the verdict from the two-member bench of the Supreme Court, Ericsson stated that it welcomed the verdict and hoped that Ambani would make the payment on time. RCOM and Ambani also stated that they would comply with the orders of the court. Although RCOM has stated that they are going to comply with the verdict, analysts are not quite sure about Ambani’s ability to pay back the money. Target Investing founder Sameer Kalra said, “It will be very difficult for RCom to meet the ordered payment and group companies might be utilized to pay the dues through inter-corporate loans. This puts a risk on group companies as well and might result in the delay in the sale of stakes in other companies.”