A counsel for Bank of India, on June 22, told the company court that the parameters under the law to admit insolvency proceedings against Future Retail are “fully and wholly” satisfied.
“If a default is committed, there is no option to withhold insolvency proceedings under law,” counsel Ravi Kadam told the Mumbai bench of the National Company Law Tribunal (NCLT). “A debt and default are admitted by Future Retail; there are specific disclosures made to the stock exchanges.”
Kadam added that Section 7 of the Insolvency and Bankruptcy Code requires the existence of debt and clear evidence of default, which exists in Future Retail’s case. Hence, the court should admit the insolvency petition, he said.
The council was responding to allegations from U.S. online retailer Amazon. Amazon, in earlier hearings, had argued that Bank of India’s petition to initiate insolvency proceedings against debt-laden Future Retail was ‘malicious.’ He had also accused banks of colluding with Future Retail, in terms of selling its assets.
“The debt is under a lending agreement that goes back to 2006,” said Kadam. “These are pre-existing debts.”
The court will continue to hear the case tomorrow.
Bank of India on April 14 filed insolvency proceedings against Future Retail for non-payment of dues. Future Retail owes banks Rs 5,322.32 crore as of March 31, according to the Bank of India’s petition in the NCLT. Lenders to the company include Union Bank of India, State Bank of India, Bank of Baroda, and IDBI Bank, among others.
In a stock exchange filing on April 23, Reliance Industries had said the $3.4 billion deal to take over the retail assets of Future Retail could not be implemented because the company's secured creditors had "voted against the scheme.”
While over 75 percent of Future Group's shareholders and unsecured creditors had voted in favour of the deal with Reliance, 69.29 percent of secured creditors rejected the deal and the remaining 30.71 percent voted in favour of it, Future Retail said in an exchange filing on April 22.
In 2019, Amazon invested $200 million in Future Coupons for a 49 percent stake, by virtue of which the US company got a 7.3 percent foothold in Future Retail. Amazon, an investor in Future Group's gift voucher unit Future Coupons, tried to block the deal by obtaining a freeze order from the Singapore arbitration court.
The dispute gradually snowballed into a slew of cases across multiple Indian courts.
Even as a final order in the case was pending, Reliance started taking over the assets of Future Retail. Future was unable to make lease payments for some of its outlets. Reliance bailed out Future Retail by transferring the leases of some stores to its name and subletting them to the group to operate.Disclaimer: Moneycontrol is a part of the Network18 group. Network18 is controlled by Independent Media Trust, of which Reliance Industries is the sole beneficiary.