An Indian court has agreed to hear a petition by the nation's largest lender seeking to initiate personal bankruptcy against tycoon Anil Ambani after the former billionaire failed to repay debt.
A two-member panel of the National Company Law Tribunal (NCLT) in Mumbai has appointed a bankruptcy administrator to verify a claim by State Bank of India, or SBI, that Ambani offered about $160 million of personal guarantees while seeking loans in 2016 for his now insolvent Reliance Communications Ltd. and Reliance Infratel Ltd., according to an order on the court's website, reports Bloomberg.
The tribunal can admit Ambani into bankruptcy process or reject the case based on the report.
"The NCLT order directing appointment of the resolution professional does not constitute an admission of SBI's insolvency application," Ambani's spokesperson said in an emailed response.
The court also rejected "SBI's request for a restriction on Anil Ambani from dealing or appropriating his assets," the spokesperson said.
The ruling is the most high-profile insolvency case against a founder who pledged to pay loans on behalf of their companies, which have since been dragged into bankruptcy, and can set precedent for future law suits.
Still, the legal case puts a moratorium on attempts to recover dues from Ambani and may hurt a group of Chinese banks' ability to enforce a separate London court's order asking Ambani to pay $717 million.
Ambani is taking advice on challenging the verdict in an appellate court, his spokesperson said.
"The order of the NCLT will have no bearing on the operations of Reliance Infrastructure Ltd., Reliance Power Ltd. and Reliance Capital Ltd.," Ambani's spokesperson added, listing out the tycoon's other companies.
As per the rules, if the Mumbai court admits Ambani into the bankruptcy process, a list of all claims against him will be compiled and a repayment plan will be worked out.
Lenders can jointly agree on a plan that may include payouts from his businesses or monetizing his assets.
Handing a Victory
Anil Ambani had also offered a personal guarantee on the banks' loans to Reliance Communications in 2012, Judge Nigel Teare said in a ruling on May 22 in London handing a victory to three state-controlled Chinese banks including Industrial & Commercial Bank of China Ltd.
State Bank of India filed the latest petition on concerns that the Chinese banks will attempt to seize Anil Ambani's assets after the UK court's ruling.
"Such action would have an adverse effect on the recovery rights," SBI said, according to the verdict on Thursday.
The company court's ruling can be challenged in an appellate court and then the Indian Supreme Court.