2.01.1 Capital Work-in-Progress includes ? 8 crore (Previous year ? 8 crore) on account of materials at site.
2.01.2 Transfer of title of certain Land and Buildings received from Reliance Industries Limited pursuant to the Scheme of Arrangement and from Reliance Communications Infrastructure Limited ('RCIL) pursuant to scheme of demerger of the Network division are under process.
2.01.3 Refer Note 2.1 9 for Security in favour of the Lenders. Foreign Currency Loans of? 1,623 crore availed by Reliance Infratel Limited (' RITL’) (ceased w.e.f. December 22, 2022) and Foreign Currency Loans of? 1,341 crore availed by Reliance Telecom Limited ('RTL') are secured by f rst pari passu charge on movable PPE of the Borrower Group. Apart from this, Rupee Loan of ? 91 8 crore availed by RITL (ceased w.e.f December 22, 2022) have been secured by second pari passu charge and Rupee loan of ? 611 crore availed by RTL have been secured by first pari passu charge on movable Fixed Assets of the Borrower Group. Further non fund based outstanding of ? 1,361 crore availed by the Company, ? 246 crore availed by RTL and ? 4 crore by RCIL have been secured by second pari passu charge on movable Fixed Assets of the Borrower Group.
2.01.4 On finalisation and implementation of debt resolution process through Flon'ble NCLT, the Company will carry out a comprehensive impairment review of its tangible assets.
2.01.5 Plant and Machinery includes Gross Carring Value of ? 23 crore (Previous year ? 23 crore) and Net Carrying Value of ? 1 7 (Previous year ? 1 8 crore) as at March 31, 2023, pertaining to assets taken on lease.
2.01.6 Above notes to be read with Note 2.14 "Assets Field for Sale".
2.01.7 There is no Revaluation of Property, Plant and Equipments during the current and previous year.
2.02.1 During the earlier years, the Company had successfully Bid under auction conducted for spectrum by the Department of Telecommunications (DoT), Government of India (GoI) and won spectrum in 12 service areas as total cost of ' 1,934 crore. The Company has made upfront payment of ' 527 crore under deferred payment option and the balance was payable in 10 annual installments for Mumbai and Jammu and Kashmir circles and 16 annual installments for other Circles.
The Company has defaulted the payment of installment of ' 196 crore each, which was due on April 9, 2019, April 9, 2020, April 9, 2021 and April 9, 2022 with the delay of 1,453 days, 1,088 days, 722 days and 357 days respectively and ' 6 crore each, which was due on October 20, 2019, October 20, 2020, October 20, 21 and October 20, 2022 with the delay of 1,259 days, 893 days, 528 days and 163 days respectively. Further, an installment of ' 22 crore with respect to Mumbai circle which was due on March 03, 2019, March 3, 2020, March 03, 2021, March 03, 2022 and March 03, 2023 is defaulted by 1,490 days 1,124 days, 759 days, 394 days and 29 days respectively as at March 31, 2023. Apart from above, balance installments not due as at March 31, 2023 is aggregating to ' 2,251 crore including interest @10% per annum. An Installment of ' 196 crore, due on April 9, 2023 is yet to be paid.
During an earlier year, the Company acquired spectrum of ' 4,513 crore under Scheme of Demerger along with corresponding Deferred Payment Liability of ' 2,013 crore. (Refer Note No. 2.33.2). Above was payable in annual installments of ' 281 crore each.
The Company has defaulted the payment of installments of ' 281 crore each, which was due on March 26, 2019, March 26, 2020, March 26, 2021, March 26, 2022 and March 26, 2023 with the delay of 1,467 days, 1,102 days, 736 days, 371 days and 6 days respectively. Apart from the above, balance installments not due as at March 31, 2023 is aggregating to ' 2,253 crore including interest @ 10 % per annum.
Department of Telecommunications issued show cause notice to the Company for revocation/ termination of spectrum due to non-payment of 3rd installment due on March 03, 2019 for 0.6 MHz Spectrum acquired in 1800 MHz band in Mumbai, which was stayed by the Hon'ble NCLAT. The said order of stay of NCLAT stood merged with its final order dated 30.04.2019 as a result of which RCOM's CIRP got recommenced at NCLT Mumbai and order of Moratorium got restored. Further, in the matter of One Time Spectrum Charges, TDSATs order dated 04.02.2019 inter alia directing for the return of Bank Guarantee of ' 2,000 crore, has been stayed by Hon'ble Supreme court on 1 9.08.2019 in an appeal filed by Union of India.
* This investment has been considered as monetary item as per Ind AS 21 "The Effects of Changes in Foreign Exchange Rates" and hence, cost has been revalued at the year end foreign exchange rate.
** During the earlier year, impaired as per Ind AS 109, "Financial Instruments" (Refer note 2.39.1).
*** at fair value through Profit and Loss
# During an earlier year, since the Company and RITL are undergoing CIRP income in respect of Yield on Preference Shares amounting to ' 4 crore per year has not been recognised from FY 2019-20.
## Investment in Preference Shares of RCIL is due for Redemption on July 29, 2022. Since both RCIL and the Company are under IBC, the same could not be redeemed on the due date. Also, refer note 2.31.
Details of Shareholders holding more than 5% shares in the company
As on March 31, 2023, none of the shareholders are holding more than 5% shares in the company.
Terms/rights attached to equity shares
The Company has only one class of equity shares having a par value of ' 5 per share. Each holder of equity shares is entitled to one vote per share. In the event of liquidation of the Company, the holder of equity shares will be entitled to receive remaining assets of the Company. The distribution will be in proportion to the number of equity shares held by the shareholders.
Nature and Purpose of Reserve Capital Reserve
Capital Reserve includes Equity Share Capital of the Company, which was cancelled pursuant to the Scheme of Demerger of Undertaking from Reliance Industries Limited. During the year, Capital Reserve is created under scheme of demerger (Refer Note 2.33.2).
Debenture Redemption Reserve
Debenture Redemption Reserve is created out of profits of the respective year as required under the Act then applicable, which shall be utilised for the purpose of redemption of Debentures issued by the Company.
Securities Premium
Securities Premium represents the premium charged to the shareholders at the time of issuance of shares. It also includes ' 8,047 crore created pursuant to the Scheme of Amalgamation/ Arrangements of the earlier years. Securities Premium can be utilised based on the relevant requirements of the Act.
General Reserve I
General Reserve I of ' 5,538 crore (Previous year ' 5,538 crore) represents the unadjusted balance being the excess of assets over liabilities relatable to the Telecommunications Undertaking transferred and vested into the Company.
General Reserve II
General Reserve II comprises of '4,159 crore transferred to General Reserve from Statement of Profit and Loss.
Treasury Equity
Treasury Equity represents 2,1 2,79,000 nos. of Equity Shares held by the ESOS Trust.
2.19.1 Debentures, Senior Secured Notes and Term Loans
The Company, on March 2, 2009, allotted, 3,000, 1 1.20% Secured Redeemable, Non Convertible Debentures ("NCDs") of the face value of ' 1,00,00,000 each, aggregating to ' 3,000 crore to be redeemed at the end of 10th year from the date of allotment thereof i.e. March 1, 2019 and the same remains outstanding as at March 31, 2023. The Company on February 7, 2012, also allotted, 1,500, 1 1.25% Secured Redeemable Non Convertible Debentures ("NCDs") of the face value of ' 1,00,00,000 each aggregating to ' 1,500 crore redeemable in four annual equal installments starting at the end of 4th year from the date of allotment thereof, the outstanding against said NCDs is ' 750 crore as on March 31, 2023. The Company had, on May 6, 2015, issued Senior Secured Notes (SCNs) of USD 300 million, face value of USD 100 per bond, bearing 6.5% p.a. interest, with a maturity of 5 1/2 years.
The Company had been sanctioned Rupee Loans of ' 6,015 crore (outstanding as on March 31,2023 was ' 5,463 crore) (Term Loan Facility) under consortium banking arrangement on the terms and conditions as set out in common loan agreement.
Outstanding NCDs along with SCNs, Foreign Currency Loans and Rupee Loans of ' 25,424 crore ("the said Secured Loans") have been secured by first pari passu charge on the whole of the movable plant and machinery including capital work in progress (pertaining to the movable fixed assets), both present and future including all the rights, title, interests, benefits, claims and demands in respect of all insurance contracts relating thereto of the Borrower Group*; comprising of the Company and its subsidiary companies namely; RTL, RITL ( ceased to be a subsidiary w.e.f December 22, 2022 upon implementation of the approved resolution plan, Refer Note 2.39 (a)) and RCIL, ("the Borrower Group*"), in favour of the Security Trustee for the benefit of the NCD/ SCN Holders and the lenders of the said Secured Loans. The said loans also include ' 3,583 crore which are guaranteed by a Director. Apart from above Rupee Loan also includes ' 398 crore which is secured by first pari passu charge on Spectrum, acquired during the earlier year under the scheme of demerger, (Refer Note 2.33.2) is pending to be executed. Outstanding Rupee Loan of ' 487 crore availed by the Company and ' 485 crore availed by RITL are secured by second pari passu charge on the movable plant and machinery and capital work in progress of the Borrower Group* and is guranteed by a director of the Company. During the previous year, the said loan was guaranteed by tower receivables, pledge of equity shares of Globalcom IDC Limited ('GIDC'), ceased to be a subsidiary w.e.f December 1 2, 2022, held by RWSL (Refer Note 2.32). Further, Outstanding Rupee Loans of ' 1,872 crore is secured by second charge over movable Fixed Assets of the Borrower Group*, out of which, charge is pending to be created for ' 1,072 crore. The Company, for the benefit of the Lenders of SCNs of ' 1,955 crore, Foreign Currency Loans of ' 11,191 crore, 11.25% NCDs aggregating to ' 750 crore and Rupee Loans of ' 7,403 crore has, apart from the above, also assigned 20 Telecom Licenses for services under Unified Access Services (UAS), National Long Distance (NLD) and International Long Distance (ILD) (collectively referred as "Telecom Licenses") by execution of the Tripartite Agreements with DoT and the Security Trustee acting on behalf of the Lenders. Further, assignment of the Telecom Licences of the Company for rupee loans from banks of ' 1,000 crore and from others of ' 740 crore is pending to be executed.
The Company has, for the benefit of the Lenders of SCNs, Foreign Currency Loans and Rupee Loans aggregating to ' 19,102 crore, apart from the above security, pledged equity shares of RCIL held by the Company and of RTL held by the Company and Reliance Reality Limited ('RRL') by execution of the Share Pledge Agreement with the Share Pledge Security Trustee. Outstanding Rupee Loans of ' 5,463 crore is also secured by current assets, movable assets including intangible, both present and future of the Borrower Group*. During the previous year, the said loan was also secured by pledge of equity shares of RITL held by RCIL and during the year, the equity shares of RITL have been cancelled consequent to implementation of resolution plan of RITL on December 22, 2022 (Refer Note 2.39 (a)). During the earlier year, charge over the three immovable assets of the Borrower Group* was created. However charge over balance immovable assets of the Borrower Group* and RGBV security for Rupee Loans of ' 5,463 crore is pending to be executed. Further, outstanding Foreign Curreny Loan of ' 1,623 crore availed by RITL and ' 1,341 crore availed by RTL is guaranteed by the Company.
During the earlier year, lenders have invoked guarantees provided by borrower group for outstanding rupee loan of ' 5,950 crore availed by the Company, ' 611 crore availed by RTL and ' 485 crore availed by RITL
During the earlier year, the Company created first ranking exclusive charge (pari passu inter se the Lenders) over Designated Account with future rights, title and interest therein, including all of its rights in respect of any amount standing to the credit of the Designated Account and the debt represented by it, in favour of State Bank of India, the Convenor (for the benefit of the Lenders) as continuing security.
During the earlier year, the Company was, in the process of finalising and implementing its asset monetization and debt resolution plan, comprising the Company's restructuring of Debt including allotment of shares against debt from lenders.
"Foreign currency Loans have been stated at the exchange rate of March 31, 2018."
The Company has not taken any loan during the year.
* RITL has ceased to be a subsidiary of the Company w.e.f. December 22, 2022 upon implementation of the approved resolution plan.
2.19.3 Since the Company is under CIRP and claims have been filed by lenders, the overall obligations and liabilities including obligation for interest on loans shall be determined during the CIR Process. The total loan amount has been disclosed in delay/ default during the current year. However, corresponding amounts of the previous year's delay/ default are based on original terms of facility and from the date of recall, where loans have been recalled.
2.19.4 Apart from above outstanding of Interest, the Company has not provided Interest Expenses of ' 4,456 crore, ' 4,491 crore, ' 3,916 crore, ' 4,212 crore, ' 3,907 crore and ' 3,055 crore for the year ended March 31, 2023, March 31, 2022, March 31, 2021, March 31, 2020, March 31, 2019 and March 31,2018 respectively which includes interest on NCDs from LIC of ' 421 crore, ' 420 crore, ' 420 crore, ' 420 crore, ' 420 crore and ' 418 crore for the year ended March 31,2023, March 31,2022, March 31, 2021, March 31, 2020, March 31, 2019 and March 31, 2018 respectively. Therefore it has not been disclosed.
2.19.5 The Company had been sanctioned working capital limits from banks in earlier years on the basis of security of current assets. As there was no requirement to file quarterly returns, the Company has not filed the same with such banks.
Revenue for the period from sale of services as disclosed above pertains to revenue from contracts with customers over a period of time. The Company has not given any volume discounts, service level credits, etc during the year. There is no disaggregation of Revenue as it pertains to service revenue of India Operations.
The Company has applied the practical expedient in Ind AS 115. Accordingly, the Company has not disclosed the aggregate transaction price allocated to pending performance obligations which are subject to variability due to several factors such as terminations, changes in scope of contracts, periodic revalidations of the estimates, economic factors (changes in currency rates, tax laws etc). No consideration from contracts with customers is excluded from the amount mentioned above.
The Company classifies the right to consideration in exchange for deliverables as either a receivable or as unbilled revenue if revenues is accrued. Receivable and unbilled revenue are a right to consideration that is unconditional upon passage of time. Receivable is presented net of impairment in the Balance Sheet. Unbilled revenue as at April 1, 2022, was ' 13 crore and it was billed during the year. Unbilled Revenue as at March 31, 2023 is ' 13 crore.
Invoicing in excess of earnings are classified as unearned revenue. Unearned revenue as at April 1, 2022, was ' 136 crore and out of which ' 22 crore was recorded as revenue during the year. Unearned Revenue as at March 31, 2023 is ' 122 crore and out of which ' 40 crore, ' 28 crore and ' 54 crore shall be accounted as revenue within one year, between next two to five years and balance after five years respectively.
Going Concern
1. Pursuant to an application filed by Ericsson India Pvt. Ltd before the National Company Law Tribunal, Mumbai Bench ("NCLT") in terms of Section 9 of the Insolvency and Bankruptcy Code, 2016 read with the rules and regulations framed thereunder ("Code"), the NCLT had admitted the application and ordered the commencement of corporate insolvency resolution process ("CIRP") of Reliance Communications Limited ("Corporate Debtor", "the Company") vide its order dated May 15, 2018. The NCLT had appointed Mr. Pardeep Kumar Sethi as the interim resolution professional ("IRP") for the Corporate Debtor vide its order dated May 18, 2018. The Hon'ble National Company Law Appellate Tribunal ("NCLAT") by an order dated May 30, 2018 had stayed the order passed by the Hon'ble NCLT for initiating the CIRP of the Corporate Debtor and allowed the management of the Corporate Debtor to function. In accordance with the order of the Hon'ble NCLAT, Mr. Pardeep Kumar Sethi handed over the control and management of the Corporate Debtor back to the erstwhile management of the Corporate Debtor on May 30, 2018. Subsequently, by order dated April 30, 201 9, the Hon'ble NCLAT allowed stay on CIRP to be vacated. On the basis of the orders of the Hon'ble NCLAT, Mr. Pardeep Kumar Sethi, wrote to the management of the Corporate Debtor on May 02, 2019 requesting the charge, operations and management of the Corporate Debtor to be handed over back to IRP. Therefore, Mr. Pardeep Kumar Sethi had in his capacity as IRP taken control and custody of the management and operations of the Corporate Debtor from May 02, 2019. Subsequently, the committee of creditors ("CoC") of the Corporate Debtor pursuant to its meeting held on May 30, 201 9 resolved, with requisite voting share, to replace the existing interim resolution professional, i.e. Mr. Pardeep Kumar Sethi with Mr. Anish Niranjan Nanavaty as the resolution professional for the Corporate Debtor in accordance with Section 22(2) of the Code. Subsequently, upon application by the CoC in terms of Section 22(3) of the Code, the NCLT appointed Mr. Anish Niranjan Nanavaty as the resolution professional for the Corporate Debtor ("RP") vide its order dated June 21, 2019, which was published on June 28, 2019 on the website of the NCLT. Accordingly, the IRP handed over the matters pertaining to the affairs of the Corporate Debtor to the RP as on June 28, 2019 who assumed the powers of the board of directors of the Corporate Debtor and the responsibility of conducting the CIRP of the Corporate Debtor.
Further, pursuant to the meeting of the CoC of the Corporate Debtor dated March 2, 2020, a resolution plan, submitted by a resolution applicant in respect of the Corporate Debtor, has been approved by the committee of creditors. The application under Section 31 of the Code filed by the RP for approval of resolution plan is currently pending adjudication before the NCLT.
During the quarter ended June 30, 2019, the CIRP in respect of the Corporate Debtor and its subsidiaries; RTL and RITL had been re-commenced, and interim resolution professionals had been appointed in respect of the aforesaid companies. Subsequently, appointment of Mr. Anish Niranjan Nanavaty as the Resolution Professional (RP) of the Corporate Debtor and its subsidiaries was confirmed by the NCLT vide its order dated June 21, 2019 which was published on June 28, 2019 on the NCLT's website.
Further, during the year ended March 31, 2020, RCIL, a wholly owned subsidiary of the Corporate Debtor, had also been admitted by NCLT for resolution process under the Code and Mr. Anish Niranjan Nanavaty was appointed as the Resolution Professional of RCIL vide its order dated September 25, 201 9. In the meeting held on August 05, 2021, the CoC with requisite majority approved the resolution plan submitted by Reliance Projects & Property Management Services Limited, and in accordance with the Sec 30(6) of the Insolvency and Bankruptcy Code, 2016, on August 31, 2021, the plan was submitted to Hon'ble NCLT for its due consideration and approval. The matter is currently sub-judice.
In the meantime, the NCLT, Mumbai Bench, vide order dated December 3, 2020, approved the resolution plan submitted by Reliance Projects and Property Management Services Limited ("RPPMSL"), in respect of RITL, a step-down subsidiary of the Corporate Debtor. Upon approval of the resolution plan of RITL, Mr. Anish Niranjan Nanavaty ceased to be the resolution professional of RITL, and RITL was placed under the supervision of a monitoring committee constituted under the provisions of the approved resolution plan comprising of two nominees/representatives of approving financial creditors, two nominees of the Resolution Applicant (RA) and Mr. Anish Niranjan Nanavaty (as the Insolvency Professional). An application bearing number 1 960 of 2019 had been filed by Doha Bank and other banks before the NCLT, Mumbai Bench challenging the constitution of the CoC of RITL basis certain corporate guarantees issued by RITL in respect of facilities availed by the Corporate Debtor, allegedly without consent of the applicant lenders. The NCLT vide order dated March 2, 2021 has partly allowed the appeal and directed "R2 to R7 are not recognised as Financial Creditors of the Corporate Debtor. R1 (RP) is directed to re-constitute the CoC..." An appeal was filed by certain lenders against the order of the NCLT before NCLAT in State Bank of India v. Doha Bank Q.P.S.C. & Ors, Company Appeal (AT)(Ins) No. 304 of 2021. On April 12, 2021, the NCLAT stayed the operation of the impugned order until next date. The Hon'ble NCLAT has vide its order dated October 14, 2022 dismissed the said appeal, and upheld the order passed by the NCLT, inter alia, stating as follows:
"17.For all the afore noted reasons, this Appeal fails and is accordingly dismissed. No Order as to costs."
Certain creditors (who are parties to IA No.1960 of 2019) filed an appeal bearing Civil Appeal No. 8527/2022 before the Hon'ble Supreme Court assailing the order dated October 14, 2022 ("SBI SC Appeal"). The SBI SC Appeal was listed last on November 30, 2022, where the Hon'ble Supreme Court was pleased to issue notice in the SBI SC Appeal. The matter was thereafter listed on March 27, 2023. During the hearing on March 27, 2023, the Bench expressed that the issue involved in the matter requires detailed consideration and accordingly, directed re-listing of the matter for final hearing and disposal on a non-miscellaneous day in the month of August 2023.
An application had also been filed by Doha Bank before the NCLT, Mumbai Bench bearing number IA 3055 of 2019 challenging the decision of the RP of RITL of admission of claims of certain indirect lenders in the CIRP of RITL, on the basis of a deed of hypothecation. The NCLT had, vide order dated March 2, 2021, dismissed the application. An appeal was filed by Doha Bank against the order of the NCLT before the NCLAT in Doha Bank and Ors. v. Anish Nanavaty & Ors., Company Appeal (AT) (Insolvency) No. 414 of 2021. On June 22, 2021, the NCLAT granted stay on distribution of proceeds under the plan among financial creditors as interim relief. The NCLAT vide its order dated September 9, 2022 set aside the order passed by the NCLT and derecognized the creditors of RITL whose claims were admitted basis the deed of hypothecation ("Derecognized DoH Creditors"), as financial creditors. Further, the NCLAT remanded the matter back to the NCLT to take all actions consequential to such derecognition. The relevant portion of the order passed by the Hon'ble NCLAT is as below:
"12. In view of the above stated position of law and fact we are not in a position to sustain the order of the Adjudicating Authority and we are constrained to set aside the impugned order of the Adjudicating Authority and remanding back to the Adjudicating Authority for taking all consequential actions resulting from de-recognizing R-2 to R-5 as 'Financial Creditors'. No order as to costs."
Pursuant to strategic transformation programme, as a part of asset monetization and resolution plan of the Corporate Debtor, the Corporate Debtor and its subsidiary companies; RTL and RITL, with the permission of and on the basis of suggestions of the lenders, had entered into definitive binding agreements with Reliance Jio Infocomm Limited (RJio) for monetization of certain specified assets on December 28, 2017 for sale of Wireless Spectrum, Towers, Fibre and Media Convergence Nodes (MCNs) (as described above, RITL's implementation of resolution plan has been completed and RITL has ceased to be a subsidiary w.e.f. December 22, 2022). During an earlier year, the said asset sale agreements were terminated by mutual consent on account of various factors and developments including inter alia non receipt of consents from lenders and permission/ approvals from Department of Telecommunication (DoT).
On completion of the corporate insolvency resolution process, the Corporate Debtor will carry out a comprehensive review of all the assets including investments, balances lying in Goods and Service Tax, liabilities and accordingly provide for impairment of assets and write back of liabilities, if any.
The Corporate Debtor had filed applications with the DoT for migration of various telecom licenses [Universal Access Service License (UASL), National Long Distance (NLD) and International Long Distance (ILD) licenses] to the Unified License regime (UL) on October 25, 2020 (17 of which were supposed to expire on July 19, 2021). On June 1 5, 2021, the DoT has issued a letter to the Corporate Debtor requiring payments of various categories of certain amounts such as 10% of the AGR dues, deferred spectrum installments falling due within the CIRP period, etc. against the telecom licenses, stating such dues to be in the nature of "current dues" and prescribing such payment as a pre-condition to the consideration/processing of the migration applications ("DoT Letter"). On June 25, 2021, the Corporate Debtor has issued a letter to DoT clarifying that the various categories of dues stipulated by the DoT are not in the nature of the "current dues" and are to be resolved within the framework of the Code (being dues that pertain to the period prior to May 7, 2019) and/ or are not payable at present, and requesting that making payments against the said dues should not be mandated as a pre-condition for further processing of the migration applications filed by the Corporate Debtor.
In light of the urgency of the matter, the RP had filed an application before the NCLT praying that the DoT inter alia be restrained from taking any action which may interfere with the continued holding of the telecom spectrum of the Corporate Debtor. The NCLT had adjourned the matter following which the RP had thereafter filed a writ petition in the Delhi High Court seeking issuance of an appropriate writ, order or direction in the nature of mandamus directing the DoT to migrate the telecom licenses to UL without the insistence on the payment of the dues set out in DoT Letter. The High Court, on July 19, 2021, passed an interim order that "till the next date, the respondent is directed to not take any coercive action against the petitioner for withdrawal of the telecom spectrum granted to the petitioner in respect of 18 service areas, as also to permit the petitioner to continue providing telecom services in the 18 service areas which are subject matters of the present petition. "On July 20, 2021, the writ petition hearing concluded and order was passed by the High Court permitting the withdrawal of the writ petition with direction that the issue on "current dues" should be decided by the NCLT and extending the protection under the July 1 9, 2021 order by further 10 days.
In view of the aforesaid, the NCLT was apprised of the order of the High Court and the NCLT has, as an interim measure, extended the ad interim protection granted by the Delhi High Court until next date of hearing. Further, on August 12, 2021, the NCLT has directed that the interim orders shall continue until the next date of hearing. The issue under consideration by the NCLT relates to whether the dues being claimed by DoT in its letter of June 15, 2021 for the purposes of processing the license renewal/ migration applications of the Corporate Debtor are in the nature of "current dues" (within the meaning of the Explanation to Section 14(1) of the Code) and therefore, payable during the CIRP period. The matter before NCLT is next listed on June 28, 2023.
Simultaneously, a petition has been filed before the TDSAT seeking directions for migration of the telecom licenses, in view of the Guidelines for Grant of Unified License dated March 28, 201 6 issued by the DoT, not prescribing pre-condition for any payment to be made prior to the migration of the telecom licenses. The TDSAT, on September 23, 2021, has directed that "The interim arrangement shall be considered further after receipt of the order of NCLT. However, till then let the status quo be maintained in terms of initial order of Delhi High Court passed on 19.7.2021 which has continued thereafter by further order of the High Court followed by orders of NCLT." On March 1 5, 2022, the TDSAT granted time for filing rejoinder and continued the interim order dated September 23, 2021. The matter was last listed on April 28, 2023 and is next listed on August 28, 2023.
Similarly, in the case of RTL, in one of the circles where the UASL license was due to expire on September 26, 2021, an application had been filed with DoT on July 16, 2021 for migration of UASL to UL wherein the DoT has sought for payment of certain dues as "current dues" (being dues that pertain to the period prior to May 7, 2019 and are not payable at present) as a pre-condition for consideration of the application. The RP has filed an application in the NCLT and a petition before the TDSAT in this regard (which matters are heard together with the RCOM license migration matters). On September 23, 2021, the TDSAT has directed that "Since the matters are similar in nature, in the interest of justice and uniformity the interim order of status quo as operating in TP No. 31 of 2021 shall operate in this matter also till the next date. It will be in the interest of petitioner to expedite the proceeding pending before the NCLT and try its best to produce the orders passed by that Tribunal by the next date." On March 1 5, 2022, the DOT has been granted 6 weeks' time by TDSAT to file the reply, rejoinder is to be filed before the next date of hearing. The TDSAT further directed that the interim order passed by the TDSAT vide order dated September 23, 2021 shall stand continuing to be operative during the pendency of the petitions. The matter was last listed on April 28, 2023 and is next listed on August 28, 2023.
Considering these developments including, in particular, the RP having taken over the management and control of the Corporate Debtor and its two subsidiaries, i.e. RTL and RCIL (Group) ( as described above, with the completion of implementation of the resolution plan approved in relation to RITL, RITL is no longer a subsidiary of the Corporate Debtor) inter alia with the objective of running them as going concerns, the standalone financial statements continue to be prepared on going concern basis. Since the Company continues to incur loss, current liabilities exceed current assets and company has defaulted in repayment of borrowings, payment of regulatory and statutory dues and pending renewal of telecom licenses, these events indicate that material uncertainty exists that may cast significant doubt on Company's ability to continue as a going concern.
Note: 2.32
During the year, the Company received a notice from Axis Trustee Services Limited ("Axis Trustee" / "Security Trustee") on November 9, 2022 regarding invocation cum sale of pledged shares Globalcom IDC Limited ("GIDC"). Thereafter, the Company received a notice of invocation of pledge over such shares from Axis Trustee on December 14, 2022.
As a matter of background, it may be noted that RWSL is a wholly owned subsidiary of RCOM, holding 100% of equity shares in GIDC. Accordingly, GIDC was a wholly owned step-down subsidiary of RCOM. Vide facilities agreement dated August 29, 201 6, RCOM and RITL had availed a loan facility of ' 565 Crore and ' 635 Crore respectively from State Bank of India ("Lender"). Vide share pledge agreement dated September 23, 201 6, RWSL had pledged 100% of its shareholding in GIDC comprising 20,99,994 equity shares to Axis Trustee (in its capacity as a security trustee for the Lender) for above loan facility.
Owing to defaults in the repayment of the facilities availed by RCOM and RITL, Axis Trustee first proceeded to issue a notice for the invocation cum sale of pledged shares on November 9, 2022, and thereafter, invoked the pledge on December 12, 2022.
Schemes of Amalgamation and Arrangement of earlier years
1. Pertaining to earlier years,
The Company, during the earlier years, underwent various restructuring Schemes through Court including restructuring of ownership structure of telecom business so as to align the interest of the shareholders. Accordingly, pursuant to the Schemes of Amalgamation and Arrangement ("the Schemes") under Sections 391 to 394 of the Companies Act, 1 956 approved by the Hon'ble High Court of respective Judicature, the Company, during the respective years, recorded all necessary accounting effects, along with requisite disclosure in the notes to the accounts, in accordance with the provisions of the said Schemes. The cumulative effects of the Schemes in case of Equity Share Capital of the Company have been disclosed below the respective Notes to the Accounts. Reserves, pursuant to the said Schemes, include:
(i) ' 8,047 crore being Securities Premium Account, which was part of the Securities Premium of erstwhile Reliance Infocomm Limited (RIC), the transferor company.
(ii) General Reserve I of ' 5,538 (previous year ' 5,538 crore) representing the unadjusted balance being the excess of assets over liabilities relatable to Telecommunications Undertaking transferred and vested into the Company.
(iii) General Reserve III comprises of ' 4,159 crore transferred to General Reserve from Statement of Profit and Loss.
(iv) Additional depreciation of ' Nil (Previous year ' Nil) arising on fair value of the assets has been adjusted, consistent with the practice followed in earlier years, to General Reserve as permitted pursuant to the Scheme of Arrangement sanctioned vide an order dated July 3, 2009 by the Hon'ble High Court and as determined by the Board of Directors.
2. During the earlier year, Pursuant to the Scheme of Demerger ("the Scheme") sanctioned by the Hon'ble High Court of Judicature at Bombay and at Jaipur, the Company had acquired Wireless undertaking of Sistema Shyam Teleservices Limited (SSTL) with effect from October 31, 2017. Upon merger of Wireless undertaking of SSTL, ' 1,397 crore being excess of assets over liabilities taken over has been credited to Capital Reserve. The Company had also allotted 27,65,53,305 nos of Equity Shares of ' 5 each, on October 31, 2017, to Shareholders of SSTL.
(v) Spectrum Charges
Department of Telecommunication (DoT) had, during the earlier years, issued demand on the Company for ' 1,758 Crore towards levy of One Time Spectrum Charges, being the prospective charges for holding CDMA spectrum beyond 2.5 MHz for the period from 1st January, 2013 till the expiry of the initial terms of the respective Licenses. Based on a Petition filed by the Company (T.P. No. 219 of 2018), the Hon'ble TDSAT, vide its order dated 4th February 2019, set aside the impugned orders and demands for OTSC. The said TDSAT order dated 4th February 2019 has been subsequently stayed by Hon'ble Supreme court vide its order passed on 19th August 2019 in CA No. 6548-6549 of 2019. Currently the matter is subjudice before Hon'ble Supreme court.
* Includes ' 0.41 crore in respect of a particular case based on the original disputed amount for which the case was filed by the complainant. The Company has not disclosed / recognized the revised contingent liability of ' 59.75 crore basis an amended suit served on the Company, which amendment was allowed vide the order of Ld. Court dated 19 April 2022 during the moratorium period which cannot be entertained or allowed, on account of the moratorium under Section 14 of the Code. Note: 2.37
2.37.1 Financial Instruments
The fair value of financial assets and liabilities are included at the amount at which the instrument could be exchanged in a current transaction between the willing parties, other than in a forced or liquidation sale.
The following methods and assumptions were used to estimate the fair values:
Fair value of cash and short-term deposits, trade and other short term receivables, trade payables, other current liabilities, short term loans from banks and other financial institutions approximate their carrying amounts largely due to the short term maturities of these instruments.
Financial Instruments with fixed and variable interest rates are evaluated by the Company based on parameters such as interest rate and individual credit worthiness of the counterparty. Based on this evaluation, allowances are taken to account for the expected losses of these receivables.
Fair value hierarchy
Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
Level 3 - Inputs for the assets or liabilities that are not based on observable market data (unobservable inputs).
2.37.2 Financial Risk Management Objectives and Policies
Activities of the Company expose it to a variety of financial risks: market risk, credit risk and liquidity risk.
The Company's financial liabilities comprise of borrowings, trade payable and other liabilities to manage its operation and the financial assets include trade receivables, deposits, cash and bank balances, other receivables etc. arising from its operation.
Corporate Insolvency Resolution Process ("CIR Process") had been initiated in case of the Company and four of its subsidiaries [RITL's implementation of resolution plan has been completed and RITL has ceased to be a subsidiary of the Company w.e.f 22nd December, 2022 (Refer Note 2.39 (a))] under the Provisions of the Insolvency and Bankruptcy Code, 2016 (the Code) and in case of one subsidiary, NCLT has ordered for initiation of liquidation proceedings (Refer Note 2.39 (c)). Pursuant to the order, the management of affairs of the Company and powers of board of directors of the Company and its two subsidiaries stand vested with the Resolution Professional ("RP") appointed by the NCLT. The framework and the strategies for effective management will be established post implementation of Resolution Plan. Presently, the financial management activities are restricted to management of current assets and liabilities of the Group and the day to day cash flow and its associated risks are as under:
Market risk
The Company also operates internationally and hence, a portion of the business is transacted in several currencies. Consequently, the Company is exposed to foreign exchange risk to the extent that there is mismatch between the currencies in which its sales and services, purchases from overseas suppliers and borrowings in various foreign currencies. Market Risk is the risk that changes in market prices such as foreign exchange rates, interest rates will affect income or value of its holding financial assets/ instruments. The exchange rate between rupee and foreign currencies has changed substantially in recent years and may fluctuate significantly in the future.
As a result operations of the Company are adversely affected as rupee appreciates/ depreciates against US Dollar. Since the Company is under CIR Process, it is not required to meet any loan or interest obligation till the resolution plan is implemented. As the overall obligation and liabilities shall be determined during CIR Process, foreign currency loans are stated at exchange rate as at March 31, 2018.
Sensitivity Analysis
Not relevant till the time resolution plan is finalised.
Interest Rate Risk
Interest rate risk can be either fair value interest rate risk or cash flow interest rate risk. Fair value interest rate risk is the risk of changes in fair values of fixed interest bearing investments because of fluctuations in the interest rates, in cases where the borrowings are measured at fair value through profit or loss. Cash flow interest rate risk is the risk that the future cash flows of floating interest bearing investments will fluctuate because of fluctuations in the interest rates. Since the Company is under CIR Process, it could not meet interest obligation during the year and shall be finalised when resolution plan is implemented.
Exposure to interest rate risk/ Sensitivity Analysis
Not relavant till the time resolution plan is finalised.
Derivative financial instruments
The Company does not hold derivative financial instruments
The Company offsets a financial asset and a financial liability when it currently has a legally enforceable right to set off the recognized amounts and the company intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.
Credit risk
Credit risk refers to the risk of default on its obligation by the customer/ counter party resulting in a financial loss. The maximum exposure to the credit risk at the reporting date is carrying value of respective financial assets.
Trade receivables and unbilled revenue are typically unsecured and are derived from revenue earned from the customers. Credit risk has always been managed by each business segment through credit approvals, establishing credit limits and continuously monitoring the credit worthiness of customers to which the Company grants credit terms in the normal course of business. On account of adoption of Ind AS 109, the Company uses expected credit loss (ECL) model to assess the impairment loss or gain. ECL methodology depends on whether there is any significant increase in credit risk. In case of significant increase in credit risk, life time ECL is used; otherwise twelve month ECL is used. The Company uses a provision matrix to compute the expected credit loss allowance for trade receivables and unbilled revenues. The provision matrix takes into account available external and internal credit risk factors such as default risk of industry, credit default swap quotes, credit ratings from international credit rating agencies and historical experience for the customers.
Credit risk on cash and cash equivalents is limited as the Company generally invests in deposits with banks and financial institutions with high credit ratings assigned by international and/or domestic credit rating agencies. Investments primarily include investment in quoted bonds issued by Government and certificates of deposit which are funds deposited at a bank for a specified time period.
Liquidity risk
The Company is under CIR Process. The Company depends upon timely receipt from sales and delay in sales realisation as well as vendor payments can severely impact the current level of operation. Liquidity crises had led to default in repayment of principal and interest to lenders. Since the Company is under CIR Process, it is not required to meet any loan or interest obligation till the resolution plan is implemented.
Liquidity risk is the financial risk that is encountered due to uncertainty resulting in difficulty in meeting its obligations. An entity is exposed to liquidity risk if markets on which it depends are subject to loss of liquidity for any reason; extraneous or intrinsic to its business operations, affecting its credit rating or unexpected cash outflows. A position can be hedged against market risk but still entail liquidity risk. Prudence requires liquidity risk to be managed in addition to market, credit and other risks as it has tendency to compound other risks. It entails management of asset, liabilities focused on a medium to long-term perspective and future net cash flows on a day-by-day basis in order to assess liquidity risk.
Liquidity Periodic budget and rolling forecasts shall be determined during CIR process.
Exceptional Items Relating to Discontinued Operations
(a) Basis the directions issued by the NCLAT, the erstwhile resolution professional of RITL had preferred an application bearing number IA 2820 of 2022 before the NCLT seeking directions for taking consequential actions pursuant to the order dated 9 September 2022.
Meanwhile, the Derecognized DoH Creditors have filed various appeals (including Civil Appeal No. 7407 of 2022, Civil Appeal No. 7298 of 2022, Civil Appeal No. 7615, and Civil Appeal No. 7328) against the order passed by the NCLAT before the Hon'ble Supreme Court of India ("Secured Creditors Appeals"). The Hon'ble Supreme Court of India has vide its order dated October 21, 2022 issued notice in such appeals (barring the appeal filed by Industrial and Commercial Bank of China which was taken up later by the Bench on December 14, 2022 owing to pending rectification of defects). Vide the order dated October 21, 2022, the Hon'ble Supreme Court has stayed the operation of the order passed by the NCLAT. The relevant portion for the order passed by the Hon'ble Supreme Court of India states as follows:
Issue notice. Until further orders, there shall be stay of the operation of the impugned Order(s).
Further, when the Hon'ble Supreme Court of India took up the appeal filed by Industrial and Commercial Bank of China on December 14, 2022, it was pleased to tag all the Secured Creditors Appeals together, and such appeals are now next listed in 18th July 2023 (tentatively).
Considering the pendency of inter-creditor disputes highlighted above, Reliance Projects and Property Management Services Limited had preferred an application before the NCLT, bearing I.A No. 3429 of 2022 seeking necessary directions to allow the implementation of the resolution plan approved in respect of RITL, by way of deposit of the plan amount in an escrow account, with the inter se distribution of the amounts among financial creditors being subject to the final outcome of the aforesaid legal proceedings concerning the status of financial creditors. The financial creditors of RITL did not have any objection to the aforesaid, provided that the distribution of these amounts amongst the financial creditors will be subject to the outcome of the SBI SC Appeal and Secured Creditors Civil Appeal (collectively referred to as the "Pending SC Appeals"). The Hon'ble NCLT vide order dated November 21, 2022 ("Nov 21 Order") permitted the Resolution Applicant to proceed with implementation of the resolution plan and depositing the total value of the resolution plan, in an escrow account to be opened with State Bank of India. The relevant excerpts of the Nov 21 Order are set out below:
Accordingly, this Bench is of the view that an Escrow Account should be permitted to be opened in the State Bank of India, and the total value of the Resolution Plan should be deposited in that account. Further, the distribution of the amount so deposited in the Escrow account shall be in terms of the order passed by the Hon'ble Apex Court and after obtaining permission/orders from this Bench.
This position was also reiterated by the Hon'ble Supreme Court in its order dated November 30, 2022, when the SBI SC Appeals were listed before it and it inter alia directed that the amounts payable in terms of the resolution plan be deposited in an escrow account to be opened with State Bank of India (i.e., the account bank herein) in terms of the Nov 21 Order with no distributions from the said account till the next date of hearing. The relevant excerpts in relation to the order dated November 30, 2022, are set out below:
In the meanwhile, we direct that the proponent will deposit the amount/money payable in an escrow account to be opened in the State Bank of India in terms of the order dated 21.1 1.2022 passed by the National Company Law Appellate Tribunal Court-I, Mumbai Bench, Maharashtra.
Pursuant to the above, RPPMSL issued a closing action notice dated December 21, 2022 committing to implement the resolution plan on or before December 23, 2022.
Accordingly, in pursuance of the above and in compliance with the Nov 21 Order, the Escrow Agreement dated December 22, 2022 ("Escrow Agreement") has been executed between RITL, representative of financial creditors State Bank of India and China Development Bank, RPPMSL, Mr. Anish Nanavaty (as authorised signatory) and State Bank of India (as account bank) for purposes of recording the terms governing the escrow account set up in accordance with the Nov 21 Order.
RPPMSL has transferred an amount of INR 3,720 Crore (Rupees Three Thousand Seven Hundred and Twenty Crores Only) in the escrow account(s) opened in pursuance of the Escrow Agreement, in lieu of which 372,00,00,000 Zero Coupon Optionally Fully Convertible Debentures ("OFCD") have been allotted to RPPMSL. Further, as part of the implementation, RPPMSL has infused an amount of INR 5 Crore (Rupees Five Crores Only) in the share subscription account of the Company with State Bank of India, in lieu of which, 50,00,000 (Fifty Lakhs) equity shares of RITL have been allotted to RPPMSL (along with its nominees).
Simultaneously, the entire existing issued, subscribed and paid-up share capital of the Company, being (a) 2,79,31,41,868 equity shares of INR 10 each, aggregating to INR 27.93 Crore; and (b) 4,00,00,000 0.1% Redeemable, Non-Cumulative, Non-Convertible preference shares of INR 10 each, aggregating to INR 40 Crore (except the paid-up equity share capital to the extent of the upfront equity infusion amounting to INR 5 Crore (Rupees Five Crore Only) allotted to RPPMSL (along with its nominees) in terms of the resolution plan), has been cancelled/reduced.
The amounts deposited in the escrow account(s) in pursuance of the Escrow Agreement shall be distributed to the relevant creditors and other stakeholders basis further directions from the relevant judicial authorities.
With the completion of the aforesaid actions, the resolution plan for RITL stands implemented on December 22, 2022 in terms of the order of the NCLT dated December 03, 2020 read together with the order dated November 21, 2022 and the Monitoring Committee of RITL has stood dissolved and RPPMSL has acquired the ownership and control of RITL in terms of the approved resolution plan.
Accordingly, RITL has ceased to be a subsidiary of the Company with effect from December 22, 2022. During the year ended March 31, 2023, Loss on de-subsidiarisation is ' 4,208 Crore and is shown as Exceptional Items.
(b) The Hon'ble Supreme Court of India, vide its order dated October 24, 2019 had dismissed the petition filed by the telecom operators and agreed with the interpretation of the Department of Telecommunications (DoT) to the definition of Adjusted Gross Revenue (AGR) under the license.
On September 01, 2020, the Supreme Court pronounced the judgment in the AGR matter ("SC Judgement"). It has framed various questions in respect of companies under insolvency and in respect of such questions, the Court has held that the same should be decided first by the NCLT by a reasoned order within 2 months, and that it has not gone into the merits in this decision.
The RP of the Corporate Debtor and RTL had filed intervention applications before the NCLAT in the appeal filed by the Department of Telecommunications against the resolution plan approval orders of the Aircel companies (wherein the NCLAT was adjudicating on the questions framed by the Hon'ble Supreme Court in the SC Judgement). The RP had also filed written legal submissions in this regard with the NCLAT. The Hon'ble NCLAT has pronounced its judgement dated April 1 3, 2021 setting out its findings on the questions framed in the SC Judgment. The RP has filed appeals in respect of the Corporate Debtor and RTL against the judgement of the NCLAT before the Supreme Court. On August 2, 2021, the appeals were listed when the bench issued notice in the matter and tagged the same with Civil Appeal No 1810 of 2021 (being the appeal filed by the COC of Aircel companies) and also allowed the application seeking permission to file the civil appeal. On February 22, 2022, the Supreme Court granted a period of six weeks to the DoT to file counter affidavit. The matter was listed on May 2, 2022 wherein the SC directed the matter to be tentatively listed in the third week of July 2022. The matter was mentioned on August 5, 2022, for early listing for arguments, but the Supreme Court directed the matter to be listed after eight weeks. The matter was thereafter listed on October 1 1, 2022, on which date, the Supreme Court directed that the matter be listed after six weeks. Further, the Supreme Court stated that the parties were to file a common compilation post discussion with each other, and file brief written submissions within a period of six weeks. Next date of hearing in the matter is July 18, 2023 (tentative).
The appeals are currently sub judice.
Further, in the SC Judgement, reiterating that AGR dues as per original decision should be paid, the Hon'ble Supreme Court had directed that DoT should complete the assessment in cases where demand had not been raised and raise demand if it has not been raised, to examine the correctness of self-assessment and raise demand, if necessary, after due verification. In case demand notice has not been issued, DoT should raise the demand within six weeks from date of judgement. The Corporate Debtor has not received any such demand in this regard till date.
The DoT had during the pendency of the various proceedings simultaneously directed Special Audit in relation to the computation of License fee, Spectrum fee, applicable interest and penalties thereon, which is under progress for the financial year 2015-16 onwards. In this regard, the Corporate Debtor had provided for estimated liability aggregating to ' 36,956 crore up to the previous year ended March 31, 2022 and has provided additional charge of ' 5,647 crore during the year ended March 31, 2023 and shown as exceptional items relating to discontinued operations which may undergo revision based on demands from DoT and/ or any developments in this matter.
Considering various factors including admission of the Corporate Debtor and its subsidiary RTL to resolution process under the Code and the moratorium applicable under Code, discharge of the aforesaid liability will be dealt with in accordance with the Code (subject to orders in the relevant judicial proceedings).
(c) During earlier year ended March 31, 2021, Reliance Tech Services Limited ('RTSL'), a wholly owned subsidiary of the Corporate Debtor, had been admitted by NCLT on August 04, 2020 for corporate insolvency resolution process under the Code and Mr. Anjan Bhattacharya had been appointed as the Interim Resolution Professional (IRP) and subsequently as the Resolution Professional (RP) by the Hon'ble NCLT. During the previous year, the resolution professional of RTSL had filed an application with NCLT on May 04, 2021 for initiation of liquidation proceedings in respect of RTSL.
During the year, NCLT vide order dated March 03, 2023 has ordered the liquidation of RTSL and appointed Mr. Ashok Mittal as Liquidator. Further, since there are no fixed assets, ongoing operations, or any employees in RTSL, therefore RTSL may not be capable of being liquidated as a going concern in terms of the Code, and accordingly, during the year ended March 31, 2023, provision is made on Investment of ' 0.05 Crore is represented as Exceptional Items.
(d) Assets held for sale including Wireless Spectrum, Towers, Fibre and Media Convergence Nodes (MCNs) continue to be classified as held for sale at the value ascertained at the end of March 31, 2018, along with liabilities and disclosed separately as discontinued operations in line with Ind AS 105 "Non-current Assets Held for Sale and Discontinued Operations.
Note:2.40
Recovery of the Expenses
Expenses are net of recoveries for common cost from; RITL (ceased w.e.f. December 22, 2022), a subsidiary of RCIL includes ' 5 crore (previous year ' 7) for Network Expenses and ' 3 crore (Previous year ' 3 crore) for Sales and General and Administration Expenses; GIDC (ceased w.e.f. December 12, 2022), a Subsidiary of the Company includes ' 0.49 crore (Previous year ' 2 crore) for Sales and General and Administration Expenses.
Note:2.41
Corporate Social Responsibility
The Company is not required to spend towards Corporate Social Responsibility (CSR) as per Section 135 of the Companies Act, 2013, since there is no average profit in the last 3 years calculated as per the provisions of the Act.
Note 2.42 Employee Benefits
Gratuity: In accordance with the applicable Indian laws, the Company provides for the gratuity, a defined benefit retirement plan (Gratuity Plan) for all employees. The Gratuity Plan provides a lump sum payment to vested employees, at retirement or termination of employment, an amount based on respective employee's last drawn salary and for the years of employment with the Company.
The gratuity plan is governed by the Payment of Gratuity Act, 1972 (Gratuity Act). The Company is bound to pay the statutory minimum gratuity as prescribed under Gratuity Act. There are no minimum funding requirements for a gratuity plan in India. The Company's philosophy is to fund the benefits based on its own liquidity and tax position as well as level of underfunding of the plan vis-a-vis settlements. The management is responsible for the overall governance of the plan. The management has outsourced the investment management of the fund to insurance company which in turn manages these funds as per the mandate provided to them by the trustees and applicable insurance and other regulations.
The Company operates its gratuity and superannuation plans through separate trusts which is administered and managed by the Trustees. As on March 31, 2023 and March 31, 2022, the contributions towards superannuation plans have been invested in Insurer Managed Funds.
The plan is in the nature of a defined benefit plan which is sponsored by the Company and hence it underwrites all the risks pertaining to the plan. In particular, there is a risk for the Company that any significant change in salary growth or demographic experience or inadequate returns on underlying plan assets can result in an increase in cost of providing these benefits to employees in future.
The defined benefit plan exposes the Company to actuarial risks such as logentivity risks, interest risk and market (Investment) risk. The following table sets out the status of the Gratuity Plan as required under Ind AS 19 "Employee Benefits".
During the year the Company has paid ' 27 crore Loan to RRL. The said loan, duly approved by CoC, carries an interest rate of 10% and repayable on demand is secured by way of creation of an exclusive mortgage by RRL in favour of / for the benefit of the Company. Charge is yet to be created with Registrar of Companies (RoC).
Other than the above, the Company has not charged interest on Loans and Advances to subsidiaries, as the Company has not provided interest on Borrowings for the year ended March 31, 2023 and for the previous year ended March 31, 2022 (Refer Note 2.48)
Note 2.45
Employee Stock Option Schemes
The Company was operating Employee Stock Option Plans; ESOS Plan 2008 and ESOS Plan 2009, which covered eligible employees of the Company and its Subsidiaries. ESOS Plan 2008 was operational till March 31,2017 whereas ESOS Plan 2009 was operational till January 16, 2019. ESOS Plans were administered through an ESOS Trust. The Vesting of the Options was on the expiry of one year from the date of Grant as per Plan under the respective ESOS(s). In respect of Options granted, the accounting value of Options (based on market price of the share on the date of the grant of the Option) was accounted as deferred employee compensation, which was amortised on a straight line basis over the Vesting Period. Each Option entitles the holder thereof to apply for and be allotted/ transferred one Equity Share of the Company of ' 5 each upon payment of the Exercise Price during the Exercise Period. The maximum Exercise Period was 10 years from the date of Grant of Options.
The Company has established a Trust for the implementation and management of ESOS for the benefit of its present and future employees. Advance of ' 387 crore (Previous year ' 387 crore) has been granted to the Trust and the said amount has been utilized by the Trust for purchasing 2.13 crore (Previous year 2.13 crore) Equity Shares during the earlier years. The fall in the value of these underlying shares on account of market volatility and loss, if any, can be determined upon sale of shares by Trust.
Note 2.46
Post Reporting Events
No adjusting or significant non-adjusting events have occurred between the reporting date and the date of authorisation.
Note 2.48 Non Provision of Interest and foreign Exchange Variation on Borrowings
Considering various factors including admission of the Corporate Debtor and its subsidiaries; RTL and RCIL to CIRP under the Code (as described above, with the completion of implementation of the resolution plan approved in relation to RITL, RITL is no longer a subsidiary of the Corporate Debtor), there are various claims submitted by the operational creditors, the financial creditors, employees and other creditors. The overall obligations and liabilities including obligation for interest on loans and the principal rupee amount in respect of loans including foreign currency denominated loans shall be determined during the CIRP and accounting impact if any will be given on completion of CIRP
Further, prior to May 15, 2018, the Corporate Debtor and its said subsidiaries were under Strategic Debt Restructuring (SDR) and asset monetization and debt resolution plan were being worked out. The Corporate Debtor has not provided Interest of ' 4,456 crore calculated based on basic rate of interest as per terms of loan for the year ended March 31, 2023 and foreign exchange (gain) / loss aggregating to ' 1,286 crore for the year ended March 31, 2023. Had the Corporate Debtor provided Interest and foreign exchange variation, the Loss would have been higher by ' 5,742 crore for the year ended March 31, 2023. The Net Worth of the Company as on March 31, 2023 and March 31, 2022 would have been lower by ' 27,465 crore and ' 21,723 crore respectively. During the previous years, Interest of ' 19,581 crore and foreign exchange loss (net) aggregating to ' 2,142 crore were not provided.
Note 2.49 Related Parties
As per the Ind AS 24 "Related Party Disclosures" as referred to in Accounting Standard Rules, the disclosure of transactions with the related parties as defined therein are given below. All transactions entered into by the Company with related parties, were in ordinary course of business and on arm's length basis.
1. wherever the ratios are negative, the same is shown as Nil (-)
2. Reduction in Net profit margin and Opeating Margin Ratio in March 31, 2023 compared to previous year is due to lower operating cost in March 31, 2023
3. Higher Inventory Turnover ratio in March 31, 2023 compared to previous year is due to lower inventory and revenue in March 31, 2023
4. Reduction in Current ratio in March 31, 2023 compared to previous year is due to reduction in Investment. Refer Note 2.39 (a)
5. Reduction in Trade Receivable in March 31, 2023 compared to previous year is due to higher Average Trade receivable in the previous year
Formula used for computation of Ratios:
i Current Ratio = Total Current Assets less Assets held for Sale / Total Current Liabilities less Liabilities directly related to Assets held for Sale
ii Debt Equity Ratio = Debt / Equity
iii Debt Service Coverage Ratio (DSCR) = Earnings before depreciation, interest and tax/ (Interest Principal repayment)
iv Return on Equity = Net profit after tax / Shareholder's fund
v Inventory Turnover Ratio = Turnover / Average Inventory
vi Trade Receivable turnover = Average Trade receivables /(Value of Sales and Services / no of days for the year)
vii Trade Payable turnover = Net credit purchase /Average Trade Payables
viii Net Capital Turnover Ratios = Turnover / working Capital
ix Net Profit margin (%) (Continuing operations) = Profit /(Loss)after tax / Value of Sales and Service
x Return on capital employed = EBIT / Capital employed
xi Interest Service Coverage Ratio (ISCR) = Earnings before depreciation, interest and tax/ (Interest expense)
xii Operating margin (%) (Continuing operations) = EBIT - Other Income / Value of Sale and Services
9) Utilisation of Borrowed funds and share premium:
During the year, there is no fresh borrowings and Share premium
10) During the year, the Company has not received as well as given advances (excluding transactions in the normal course of business) or loans or invested funds or provided any guarantee, security or the like from/ to any other person(s) or entity(ies), directly or indirectly, including any foreign entity(ies).
11) During the year, the Company has not surrendered or disclosed any income, previously unrecorded in the books of account as income, in the tax assessments under the Income Tax Act, 1961.
Note 2.51
Segment Performance
Disclosure as per Ind AS 108 "Operating Segments" is reported in Consolidated Accounts of the Company. Therefore, the same has not been separately disclosed in line with the provision of Ind AS.
Note 2.52
Note on Disqualification of Directors
During the earlier year, Shri Anil D Ambani, Smt. Manjari Kacker, Smt. Ryna Karani, Smt. Chhaya Virani and Shri Suresh Rangachar, Directors tendered their resignation as Directors of the Company, however the Committee of Creditors of the Company ("CoC"), in its meeting held on 20th November, 2019 refused to accept the resignations tendered by above mentioned directors and instructed the Resolution Professional to convey to the directors to continue with their duties and responsibilities as directors and provide all cooperation in the Corporate Insolvency Resolution Process, at least until the completion of the corporate insolvency resolution process of the Company. In light of the above, it was duly communicated to the aforesaid directors of the Company that their resignations have not been accepted and they were advised to continue to perform their duties and responsibilities as the directors of the Company and provide all cooperation to Resolution Professional in the corporate insolvency resolution process. Accordingly, Shri Anil D Ambani, Smt. Chhaya Virani, Smt. Manjari Kacker, Smt. Ryna Karani and Shri Suresh Rangachar continues to reflect in the composition of the board of directors and the respective committees of the Company. Due to above mentioned events, the Company has not received annual disclosures as required under section 164(2) and Section 184(1) of the Companies Act, 2013 from Shri Anil D Ambani, Smt. Manjari Kacker, Smt. Ryna Karani, Smt. Chhaya Virani and Shri Suresh Rangachar, Directors of the Company. As per legal opinion obtained by the Company, none of the Directors were disqualified under section 164(2) of the Companies Act 2013 for default in payment of interest and principal of debentures.
Note 2.53 Lease:
The assets of the Company are held for sale as per Ind AS 105 and accordingly lease agreements are considered to be short term in nature and Ind AS 116 has not been applied.
Note 2.54
The Corporate Debtor has been served with copies of writ petitions filed by Mr. Punit Garg and certain others, being directors of the Corporate Debtor and its subsidiaries before the Hon'ble High Court of Delhi, challenging the provisions of the RBI Master Directions on Frauds- Classification and Reporting by commercial banks and select FIs bearing No. RBI/ DBS/ 2016-17/ 28 DBS. CO. CFMC. BC. No. 1 / 23.04.001 / 201 6-17 dated July 1, 2016 ("Circular") and the declaration by certain banks classifying the loan accounts of the Company, RITL and RTL being fraudulent in terms of the Circular. RITL's implementation of resolution plan has been completed and RITL has ceased to be a subsidiary of the Company.
The Corporate Debtor, RITL and RTL have been represented through their advocates and accepted notice in the petitions. The respective respondent-banks have been directed, on various dates of hearing, to maintain status quo until the next date of hearing by the High Court. The said petitions have been listed on various dates where counsels of various parties have made arguments and are presently sub judice before the Hon'ble High Court of Delhi. On September 26, 2022, when the matter was listed, Mr. Ramesh Babu, the learned standing counsel of RBI apprised the Hon'ble High Court that the question of constitutional validity of the Master Direction on Frauds is pending consideration before the Hon'ble Supreme Court of India in SLP (C) No. 3931 of 2021 and connected matters. He further informed that the aforesaid SLPs arise out of the Telangana High Court's judgment dated 10 December 2020 in WP No. 19102 of 2019 and the orders passed by the Telangana High Court and other High Courts and that the hearing in the said appeals has commenced and are listed on September 27, 2022 before the Apex Court as continuing part-heard matters.
Noting the aforesaid circumstances, the Hon'ble High Court adjourned the matter and all the connected batch matters to November 21, 2022. On November 21, 2022, the Hon'ble High Court was apprised that the Supreme Court has reserved judgment in SLP (C) No. 3931 of 2021 and connected matters dealing with the question of constitutional validity of the 'Master Direction on Frauds' issued by the RBI. Noting the aforesaid circumstances, the Hon'ble High Court decided to wait for the said judgment and accordingly, the captioned matter and all the connected batch matters were adjourned to May 12, 2023.
On 12 May 2023, the Hon'ble Delhi High Court in light of the judgment dated 27 March 2023 in SBI vs. Rajesh Agarwal [2023 SCC On Line SC 342] has disposed of the said petitions filed by Punit Garg, setting aside the actions taken against the petitioners under the Master circular on Fraud. The Supreme Court has held that since the Master Directions on Frauds do not expressly provide
an opportunity of hearing to the borrowers before classifying their account as fraud, audi alteram partem has to be read into the provisions of the directions to save them from the vice of arbitrariness.
Following the SC judgment, these petitions are disposed off setting aside the actions taken against the petitioners in the Master Circular. It is made clear that if any FIR has been lodged, proceedings proceeded thereto will remain unaffected by this order. It will be open to concerned banks to proceed in accordance with law in light of the judgment of the Supreme Court. SBI has filed an application for clarification to the aforesaid judgment with the Supreme Court which was dismissed by an order passed on May 12, 2023 with clarification that Supreme Court has not indicated that a personal hearing is to be given.
Note 2.55
During the earlier year ended March 31, 2021,and during the previous year ended March 31, 2022, certain banks had issued show cause notices to the Corporate Debtor, certain subsidiaries and certain directors and further during the current year, a bank has sent show cause notice to a subsidiary of the Corporate Debtor seeking reasons as to why the Corporate Debtor and its subsidiaries should not be classified as willful defaulter. Also, during the previous year ended March 31, 2022, a bank has served notice seeking explanation as to why the account of the Corporate Debtor and a Subsidiary Company RTL should not be declared as fraud in terms of applicable RBI regulations. The Corporate Debtor and its subsidiaries have responded to the show cause notices. The Corporate Debtor in its response has highlighted that the proceedings and the classification of the Corporate Debtor as a willful defaulter is barred during the prevailing moratorium under section 14 of the Code, and protection is available in terms of section 32A of the Code, and asserting that accordingly, no action can be said to lie against the Corporate Debtor for classification as fraud and requested the banks to withdraw the notices. Further, certain banks had issued notices seeking personal hearing by the authorized representative of the Corporate Debtor and its subsidiaries in respect of the aforesaid matter. Hearings were attended to and necessary submissions were made in accordance with the submissions made earlier in the responses to the show cause notices. No further response has been received from the banks since then. Currently, there is no impact of such notices issued from banks, in the standalone financial statements.
Note 2.56
Company is engaged in the business of providing infrastructural facilities as per Section 186 (11) read with Schedule VI of the Act. Accordingly, Section 186 of the Act is not applicable to the Company.
Note 2.57
Authorisation of Financial Statements
The Directors of the Company have approved the financial statement at their meeting held on May 27, 2023 which was chaired by Mr. Anish Niranjan Nanavaty, Resolution Professional ('RP') of the Company and RP took the same on record, basis recommendation from the directors.
With respect to the standalone financial statements for the year ended March 31, 2023, the RP has signed the same solely for the purpose of ensuring compliance by the Corporate Debtor with applicable laws, and subject to the following disclaimers:
(i) The RP has furnished and signed the report in good faith and accordingly, no suit, prosecution or other legal proceeding shall lie against the RP in terms of Section 233 of the Code;
(ii) No statement, fact, information (whether current or historical) or opinion contained herein should be construed as a representation or warranty, express or implied, of the RP including, his authorized representatives and advisors;
(iii) The RP, in review of the standalone financial statements and while signing this standalone financial statements, has relied upon the assistance provided by the directors of the Corporate Debtor, and certifications, representations and statements made by the directors of the Corporate Debtor, in relation to these standalone financial statements. The standalone financial statements of the Corporate Debtor for the year ended March 31, 2023 have been taken on record by the RP solely on the basis of and relying on the aforesaid certifications, representations and statements of the aforesaid directors and the erstwhile management of the Corporate Debtor. For all such information and data, the RP has assumed that such information and data are in conformity with the Companies Act, 2013 and other applicable laws with respect to the preparation of the standalone financial statements and that they give true and fair view of the position of the Corporate Debtor as of the dates and period indicated therein. Accordingly, the RP is not making any representations regarding accuracy, veracity or completeness of the data or information in the standalone financial statements.
(iv) In terms of the provisions of the Code, the RP is required to undertake a review to determine avoidance transactions. Such review has been completed and the RP has filed the necessary applications with the adjudicating authority.
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