India: New battle front emerges in UK for defaulters

  • In a bruising battle that began in 2019, a trio of Chinese banks are seeking to enforce an order made in May 20 by the High Court in London instructing Anil Ambani to repay USD717mn in loans made in 2012 to RCom, the centrepiece of a group that spanned telecoms, finance and entertainment.
  • But analysts say the pursuit of Mr Ambani is shaping up as a landmark challenge to an assumption long at the heart of corporate India: that the country’s business magnates will remain beyond the reach of creditors even when their failed companies leave unpaid debts.
  • At the heart of the dispute is the contention of creditors that Mr Ambani personally guaranteed the loans, claims he strenuously denies, though the High Court ruled in the banks’ favour in May 20.
  • Popular among India’s personality-driven conglomerates during India’s boom years a decade ago, personal guarantees offered entrepreneurs a route to easy credit but were seldom enforced.
  • State Bank of India, the country’s largest lender, earlier in 2020 initiated separate domestic proceedings against Mr Ambani under new rules set out last year for the country’s insolvency code.
  • The rules strengthened creditors’ rights by allowing them to pursue the founders of bankrupt companies. Mr Ambani is seeking to include the Chinese banks in his legal challenge to the SBI’s proceedings in India.
  • If reform of India’s bankruptcy laws has made the country’s domestic lenders more assertive, the outcome of the case brought by ICBC and China Development Bank and Export-Import Bank of China, will do much to determine whether the English legal system becomes a new front on which creditors can do battle with Indian business magnates.
  • The Chinese banks have said they will pursue “all available legal avenues” to protect their rights and recover what they claim Mr Ambani owes. The parallel SBI proceedings mean there is a moratorium on claims against him in India.
  • Whatever success ICBC has in recovering its loans, some believe the decision to pursue Mr Ambani in London — and the parallel action from the SBI in India — will reverberate across corporate India.
  • “We’ll continue to move in this direction where the promoters [controlling shareholders] themselves personally, their shareholdings of their businesses, are all up for grabs,” Mr Tandon said. “None of them are safe.”

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