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Reliance Communications’ resolution may hit a bump as banks mark its account as fraud


Mumbai: The bankruptcy resolution process for Reliance Communications (RCom) may hit another hurdle with State Bank of India, Union Bank of India and Indian Overseas Bank classifying the accounts of the telco and its units — Reliance Telecom and Reliance Infratel — as fraudulent last week, said people with the knowledge of the matter. The lenders are now looking to initiate a deeper probe, said one of the persons.

Resolution applicants Reliance Jio Infocomm and UV Asset Reconstruction Co. Ltd (UVARCL) may want to seek indemnity from any investigative proceedings into these companies, said the people cited above. Delays will further erode the prospects of recovery for lenders who were expecting ₹20,000-23,000 crore from the asset sale of RCom and its units. Financial creditors have said they are owed ₹57,382 crore.

‘May Delay Recovery Process’

“Lenders will have to make full provisions for their exposure in these accounts over the course of the next four quarters and a decision on whether they want to flag this off with the investigative agencies will also be taken soon,” said a bank executive aware of the development. “The concern among bankers is that if investigators come into the picture, that could delay the recovery process if they consider monies of these firms as proceeds of crime.”

The latest allegations come a year after a forensic audit unearthed questionable transactions worth ₹5,500 crore in the three Anil Ambani-led Reliance Group entities. The probe that looked at transactions between May 2017 and March 2018 found three large entries buried under hundreds of thousands of others that the SBI-led consortium suspects could conceal fund diversion, according to the people cited above.

The lenders, RCom, Jio and UVARCL did not respond to ET’s queries.

At the time of filing for bankruptcy, RCom had debt of ₹46,000 crore. As many as 53 financial creditors, including local and foreign banks, nonbanking finance companies and funds have claimed ₹57,382 crore, of which ₹49,224 crore has been accepted by the resolution professional.

The allegations of fraud come as the dedicated bankruptcy court approved of the plan by Reliance Industries subsidiary Reliance Digital Platform & Project Services to pick up the tower assets of Reliance Infratel for ₹4,975 crore. Meanwhile, UVARCL is awaiting approval by the National Company Law Tribunal (NCLT) for picking up assets of RCom and Reliance Telecom, which houses spectrum and fibre.

Not all agree that there will be further delays.

“The investigations, if initiated, will be against the previous management and has nothing to do with the future monetisation plans,” said one of those cited above.

RCom was forced to shut its wireless operations late 2017, hurt by mounting debt and widening losses amid intense competition in the telecom sector after Jio’s entry in September 2016. Delays arising from regulatory clashes have already led to an erosion in asset value by over 10%, according to some involved with the transactions.

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