A counsel for Future Retail on June 21 told the company court that the debt-laden retailer was not a wilful defaulter and hence, resisted the insolvency petition by a consortium of lenders led by Bank of India.
“Bank of India was a part of the consortium of banks,” counsel Shyam Kapadia told the Mumbai-bench of the National Company Law Tribunal. “They (banks) agreed to allow us ‘Holding on Operations.’ But suddenly, they had a change of heart and decided not to allow it. We maintain that the corporate debtor’s (Future Retail) ability to pay has been compromised.”
Under Holding on Operations, banks allow companies to draw funds from the cash credit account at least to the extent of their deposit of sale proceeds during the period of such an operation.
Future Retail’s counsel also alleged that there was a refusal on part of banks to take control of assets, in order to reduce, if not extinguish, the debt that was owed.
The NCLT will hear Bank of India’s reply to Future Retail’s arguments 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 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.
Most banks have already declared their exposure to Future Retail as non-performing asset (NPA).Disclosure: Moneycontrol is a part of the Network18 group. Network18 is controlled by Independent Media Trust, of which Reliance Industries is the sole beneficiary.