Few tycoons appear in London to declare poverty, but last month Anil Ambani did.
Once one of the world’s richest men with a fortune estimated at more than $40bn by Forbes, the Indian businessman is being pursued through the UK courts by creditors, led by Industrial and Commercial Bank of China, after last year’s collapse of his telecoms company Reliance Communications.
In a bruising battle that began in 2019, a trio of Chinese banks are seeking to enforce an order made in May by the High Court in London instructing Mr Ambani to repay $717m in loans made in 2012 to RCom, the centrepiece of a group that spanned telecoms, finance and entertainment.
The legal spectacle has been overshadowed by the business empire Anil’s brother Mukesh, now Asia’s wealthiest person, is building.
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.
“It’s a test case” for creditors, said Amit Tandon, head of Institutional Investor Advisory Services in Mumbai. “This is one of the earliest high-profile cases.”
As the scion of one of India’s leading business dynasties, Mr Ambani has been a figure of envy, living a seemingly gilded life of soirées with Bollywood stars and helicopter trips.
But on the last Friday in September, Mr Ambani, appearing from an office in Mumbai at the High Court hearing held by video link, painted a very different picture.
“I lead a very disciplined life. I am a marathon runner, and a believer in God and family and I live with my mother,” he told the court, adding that he did not drink, smoke or gamble. “My needs are not vast.”
The 61-year-old was cross-examined for a day by lawyers for the Chinese banks who were given permission by the judge to question Mr Ambani as they decide how to enforce the court’s order.
He sought to downplay his lifestyle as he was cross-examined about art, jewellery, loans, a helicopter, fast cars and credit card spending that his creditors argue undermine his claims of penury. Earlier this year, Mr Ambani told the court that his net worth had fallen to zero.
When Bankim Thanki, a barrister representing the trio of Chinese banks, suggested that a yacht was yet another adornment of the Indian businessman’s still lavish lifestyle, Mr Ambani shot back.
Not only is the yacht the property of a corporate entity and not a personal possession, he had only been on it once because he suffers from seasickness.
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. 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.
“Personal guarantees as a convention were always given as additional support. It was never meant to be a hard measure,” said Abizer Diwanji, head of financial services for EY India. “The leap between getting a court order and getting the money is huge.”
While Anil and Mukesh split their father’s empire after falling out in 2005, Anil’s investments in sectors such as power and infrastructure suffered as India’s heady economic growth slowed. RCom imploded after a price war sparked by the launch of Mukesh’s own mobile operator Jio in 2016.
State Bank of India, the country’s largest lender, earlier this year 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.
London’s courts are already a well-established centre for disputes between banks and wealthy oligarchs over loans or guarantees struck using English law, often involving litigants from Russia or the former Soviet Union.
But in recent years there has been a modest uptick in cases involving leading Indian business figures. Vijay Mallya, who is fighting extradition from London over money laundering and fraud allegations, is facing civil action in the High Court from Indian state banks seeking to enforce a £720m foreign judgment debt made in India. He denies any wrongdoing.
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.
In practice, any action is therefore likely to mean tracking down assets outside India or obtaining freezing orders against Mr Ambani. The English courts can impose further measures on defendants who fail to disclose assets, including jail terms for contempt of court.
Mukhtar Ablyazov, the former chairman of Kazakhstan’s BTA Bank, was given a 22-month jail term in 2012 after the lender alleged he breached a court order freezing his assets and failed to disclose assets in connection with fraud allegations.
And any enforcement of the UK order against Mr Ambani is likely to be a complex and fraught undertaking. Mr Ambani told the court last month that “the suggestion of a lavish lifestyle past, present and future, is completely speculative, a creation of the media”.
The entrepreneur added that he had sold all his jewellery to pay legal bills, owned just one piece of art, that it was his mother who had racked up shopping expenses in luxury shops such as Dolce & Gabbana, Harrods and Harvey Nichols and that he had no beneficial interests in any trusts.
A spokesperson for Mr Ambani declined to elaborate on last month’s cross-examination and had no further comment on the case.
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.”