In a significant ruling, the Supreme Court of India has barred Reliance Communications (RCom) from selling its telecom assets to Reliance Jio. The decision, delivered by Justices A K Goel and U U Lalit, upheld an appeal against a Bombay High Court order.

Background RCom, led by Anil Ambani, had agreed to sell its telecom assets—spectrum, fibre, and towers—to Reliance Jio for approximately Rs. 18,000 crore. The deal was vital for RCom, which is grappling with over Rs. 46,000 crore in debt and facing bankruptcy proceedings in the National Company Law Tribunal (NCLT). However, minority shareholders opposed the sale, arguing that the proceeds would solely settle debts, leaving no benefit for the company. They also claimed RCom was attempting to circumvent the Insolvency and Bankruptcy Code (IBC).

RCom defended the sale, stating it was essential for the company's survival and to repay creditors.

Supreme Court's Ruling The court emphasized that Section 238 of the IBC takes precedence over other laws. While acknowledging RCom's intent to "unlock asset value" to reduce creditor losses, the bench ruled that asset sales during insolvency require approval from the National Company Law Appellate Tribunal (NCLAT). The court dismissed RCom's claim that the sale would level the telecom industry's playing field and rejected the minority shareholders' allegations as "unfounded."

Implications This ruling sets a key precedent for insolvency cases under the IBC, affirming the code's supremacy over existing contracts. It mandates NCLAT approval for asset sales by insolvent companies, ensuring compliance with insolvency protocols. The decision also underscores the need to safeguard minority shareholders, who risk losing investments during such proceedings.

Conclusion
The Supreme Court's verdict strengthens India's insolvency framework by enforcing adherence to the IBC and protecting stakeholders' interests. It serves as a cautionary note for companies to secure necessary approvals before pursuing asset sales during insolvency, ensuring transparency and compliance with legal processes.


References:

• https://thelawcodes.com/news/supreme-court-rejects-reliance-communications-telecom-asset-sale-to-reliance-jio/
• https://thelawcodes.com/corporate-lawyers-in-chandigarh/
• https://thelawcodes.com/corporate-lawyers-in-gurgaon/
• https://thelawcodes.com/law-firm-in-chandigarh/
• https://thelawcodes.com/law-firm-in-gurgaon/
• https://thelawcodes.com/supreme-court/