Bankruptcy court admits Bank of India’s insolvency plea against Future Retail

The bankruptcy court on Wednesday admitted the Bank of India’s petition to admit Future Retail Ltd under the Corporate Insolvency Resolution Process (CIRP) and has also appointed Vijay Kumar Iyer as the interim resolution professional (IRP) of the company.

The Mumbai bench of the National Company Law Tribunal (NCLT), presided by Justice PN Deshmukh and Shyam Babu Gautam while admitting the Kishore Biyani promoted Future Retail, also rejected an application filed by Amazon.com NV Investment Holdings that sought dismissal of the lender’s plea to admit the company under insolvency resolution.

Earlier, On June 27, the tribunal had reserved its order after hearing arguments from lawyers of Bank of India, Future Retail and Amazon.com.

The state-owned lender Bank of India had initiated a resolution process against BSE-listed Future Retail (FRL) following the Rs 3,495 crore default on the one-time restructuring scheme between the bank and the company.

At the time of filing the petition to admit the company for resolution process, Senior Advocate Ravi Kadam, appearing for the bank informed that the consortium of lenders are supporting this petition and argued that to protect the assets of the company, it is necessary that the tribunal admits this petition.

Lenders have dues of over Rs 17500 crore, which includes Rs 3700 crore offshore bonds and Rs 13800 crore borrowing from local banks. The company’s assets include 620 stores, among them 30 Big Bazaar hypermarkets and 350 smaller-format outlets.

The Bank of India on April 14 had initiated insolvency against Future Retail for non-payment of dues that were due under the terms of the Framework Agreement entered into between the Future Group and the lender.

However, the e-commerce major Amazon.com had sought dismissal of this insolvency resolution plea with the arguments that the petition filed by the lender is an act of ‘malice and collusion’ with the company and its promoter Kishore Biyani. Amazon also pleaded with the tribunal to direct an investigation into the ‘fraudulent and malicious’ intentions and impose a penalty on both - banks and FRL.

“Soon after the admission of the petition by the tribunal, interim resolution professional will start the process of inviting the claims and after verifying the claim, will proceed to form the committee of creditors,” said Ashish Pyasi, Associate Partner at law firm Dhir & Dhir Associates. “Simultaneously, IRP will proceed to take over the assets and management of the company for conducting the resolution process and the powers of the existing board will stand suspended.”

In April, in its regulatory filing to the stock exchanges, FRL said 69% of lenders voted against the plan while 30% supported it. As much as 83% of the secured creditors of Future Lifestyle Fashion, the group’s second-largest listed entity, also rejected the proposed sell-off to Reliance.

In 2020, Future Group had decided to combine its two-dozen listed and unlisted companies and sell them on a slump sale basis to rival Reliance Retail for about Rs 25,000 crore as debt ballooned.

The Amazon-Future dispute stems from a 2019 investment by the US giant to acquire 49% in promoter firm Future Coupons Pvt Ltd (FCPL), which owned about 10% of FRL. The US e-commerce major has accused Future Group of breach of contract by agreeing to sell its assets to Reliance, which it said was not allowed under the 2019 investment agreements.

Reliance had taken possession of 835 stores as outstanding rentals had accumulated to about Rs 4,800 crore.

Amazon and the Future Group have filed petitions and counterpetitions over the deal in multiple legal forums. Amazon claims that the terms of its 2019 investment in a Future Retail promoter firm gave it the first right of refusal in any stake sale in the Indian retailer and barred it from selling a stake to Reliance entities.