NEW DELHI • In a remarkable warning to India’s elite, the nation’s top court said it will put one of the country’s most prominent business executives behind bars unless his group pays its dues.
It’s the latest twist in a dispute that helped push billionaire Anil Ambani’s (picture) mobile-phone carrier into bankruptcy proceedings and cast an unflattering light on the Indian mogul, who’s the younger brother of Asia’s richest man.
India’s Supreme Court said yesterday that Ambani disobeyed its earlier order for one of his companies, Reliance Communications Ltd, to pay 5.5 billion rupees (RM313.39 million) to Ericsson AB’s Indian unit.
If payments aren’t made within four weeks, the 59-year-old tycoon will be jailed for three months, the Supreme Court said. Ambani’s group said it will comply.
The threat shows India is upping the ante when it comes to tackling a mountain of bad debt that’s among the worst in the world.
A US$190 billion (RM773.32 billion) pile of soured and stressed debt has put the future of some Indian lenders in doubt and curbed investment just as the country is preparing for general elections.
The court ruling “definitely sends a very strong message to defaulting companies and managements that contractual dues need to be paid”, said Manmeet Singh, a New Delhi-based partner at local law firm L&L.
“This will certainly give more confidence to foreign investors regarding enforcement of contracts in India.”
The dispute with Ericsson began when the Swedish telecommunications equipment maker sought to collect 16 billion rupees in dues from Reliance Communications.
The Indian company settled the dispute with Ericsson in May last year, but failed to meet the payment deadlines, prolonging the row.
Reliance Communications decided to enter bankruptcy proceedings earlier this year after struggling to repay about US$6.3 billion in debt.
Ironically for Ambani, his extraordinary reversal of fortune in the telecommunications industry came after his older brother stormed into the market with a new outfit called Reliance Jio Infocomm Ltd, igniting a price war by offering free calls.
Yesterday’s ruling, which included fines levied on three of Ambani’s companies, reverberated across his business empire. Shares of Reliance Communications fell 4.2% yesterday, Reliance Capital Ltd slipped 4.3% and Reliance Infrastructure Ltd slumped 2.2%. Reliance Power Ltd also declined.
The tycoon’s older brother is Mukesh Ambani, chairman of oil and telecom giant Reliance Industries Ltd. He overtook Chinese e-commerce titan Jack Ma as Asia’s richest man last year. — Bloomberg