A warning for Anil Ambani

The Supreme Court has dealt punctiliously with the issue of Reliance Communications and two associate companies not paying Swedish giant Ericsson, which operated the communications network for six years from 2013 for RCom, which has gone under.The court had earlier shown the way in the Sahara Group’s case by keeping its head honcho Subrata Roy in jail for an extended period until he met some of his obligations by the sale of real estate assets. The point is, however big an industry and the scale of its problems, even collapse in competitive market conditions, it must honour its contracts and business obligations, and not feel obliged to do so just because foreign partners or contractors are involved. India’s image as a business destination tends to get sullied by the reluctance of major industrialists when it comes to accountability.

The news of the ultimatum given to RCom’s chairman and two directors to pay up Rs 453 crores in four weeks or go to jail comes into the spotlight even as Anil Ambani is involved in the Rafale deal as an offset partner. In fact, Ericsson had been bitter about the fact that Mr Ambani had the resources to pursue the manufacture of fighter jet components while other companies in the group owed money to them. While technical aspects of the Ambani firm’s involvement in the Rafale deal shouldn’t be linked to his financial obligations in the telecom business, questions do arise over an industrialist who is severely stressed financially being associated with a fighter jet deal that has serious national security implications. It will be interesting to see how RCom responds to the challenge of paying Ericsson and salvaging its reputation despite its failure to cope with the telecom business.