The Mumbai Bench of the NCLT admitted SBI’s application seeking personal insolvency proceedings against Reliance Group Chairman Anil Ambani. The Tribunal appointed a Resolution Professional and directed issuance of a public notice inviting creditor claims, marking a major development in the insolvency process.
The Mumbai Bench of the National Company Law Tribunal (NCLT) has admitted an application filed by State Bank of India (SBI) seeking initiation of personal insolvency proceedings against Reliance Group Chairman Anil Ambani. The order marks a significant development in one of the most closely watched insolvency matters involving a prominent corporate guarantor.
The decision was delivered on Thursday by a Bench comprising Judicial Member Sushil Mahadeorao Kochey and Technical Member Prabhat Kumar. Upon admitting the application, the tribunal commenced the personal insolvency resolution process against Ambani under the provisions of the Insolvency and Bankruptcy Code (IBC).
As a consequence of the admission order, the NCLT imposed a moratorium in respect of all debts owed by Ambani. The moratorium will remain in force for a period of 180 days or until the tribunal passes an order on a repayment plan, whichever occurs earlier.
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The tribunal also directed Resolution Professional (RP) Prashant Jain to issue a public notice within seven days on behalf of the NCLT. The notice will invite claims from all creditors, who have been granted 21 days to submit their claims in the insolvency proceedings.
According to SBI, outstanding dues of approximately Rs 1,200 crore remain payable by Ambani in his capacity as a personal guarantor.
Background of the Dispute
The proceedings have their origins in financial assistance extended by SBI to Reliance Communications Limited (RCom) and Reliance Infratel Limited, companies belonging to the Reliance Group headed by Anil Ambani.
In 2016, Reliance Communications approached SBI’s Project Finance Strategic Business Unit seeking financial assistance amounting to Rs 565 crore for the purpose of refinancing and repaying existing debt obligations. Around the same period, Reliance Infratel, an associate company within the group, sought credit facilities of Rs 635 crore.
SBI approved the requested facilities through Rupee Loan Facility Agreements executed on August 29, 2016. The arrangements were subsequently amended and restated on September 8, 2016. To secure the loans, Anil Ambani executed personal guarantee deeds in favour of SBI on September 23, 2016, undertaking personal liability for repayment obligations in the event of default by the borrowing companies.
However, both Reliance Communications and Reliance Infratel allegedly failed to service their repayment obligations from around January 2017. The loan accounts were subsequently classified as non-performing assets (NPAs), with the classification being retrospectively assigned from August 26, 2016 in accordance with applicable Reserve Bank of India guidelines.
The financial distress of the group deepened over the following years. In 2018, the NCLT admitted insolvency petitions filed by Ericsson India Private Limited against Reliance Communications and Reliance Infratel, resulting in the commencement of corporate insolvency proceedings against the companies.
Following the defaults, SBI invoked Anil Ambani’s personal guarantees on January 31, 2018. The bank subsequently issued a formal demand notice to him in February 2020, asserting that despite invocation of the guarantees, no payment had been made towards the outstanding dues.
Consequently, SBI approached the NCLT in March 2020 under Section 95 of the Insolvency and Bankruptcy Code seeking initiation of a personal insolvency resolution process against Ambani as a personal guarantor.
In August 2020, the tribunal appointed insolvency professional Jitender Kothari under Section 97 of the IBC to examine the application and submit a report regarding the initiation of insolvency proceedings.
Arguments Raised by Anil Ambani
One of the principal objections raised by Ambani before the tribunal concerned the validity of the personal guarantees themselves. He argued that the guarantees were unenforceable because they had been executed after the date from which the loan accounts were retrospectively classified as NPAs.
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According to Ambani, since the accounts were deemed non-performing from an earlier date, the guarantees executed subsequently could not create a valid and enforceable liability.
The tribunal, however, rejected this contention. It observed that the NPA classification was carried out subsequently under RBI norms and merely operated retrospectively for regulatory purposes. The Bench held that such retrospective classification could not invalidate personal guarantees that had been validly executed in favour of the lender.
Ambani also argued that SBI’s right to proceed against him had effectively come to an end following the approval of the resolution plan in the corporate insolvency proceedings concerning Reliance Communications.
Rejecting this submission as well, the NCLT noted that the approved resolution plans specifically preserved the rights of lenders to enforce personal guarantees and proceed against third-party securities. Therefore, the approval of the corporate resolution plan did not extinguish SBI’s independent remedies against Ambani as a personal guarantor.
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