A company court on July 20 allowed a consortium of lenders, led by Bank of India, to initiate insolvency proceedings against debt-laden Future Retail
The order was pronounced by the Mumbai bench of the National Company Law Tribunal (NCLT). The two-judge bench of Pradeep Narhari Deshmukh and Shyam Babu Gautam also said that Vijaykumar V Iyer of Deloitte will be appointed as the interim resolution professional of the company.
The NCLT's order goes against US online retailer Amazon, a shareholder in Future Coupons. Amazon had alleged that Bank of India’s petition to initiate insolvency proceedings against the Indian retailer was "malicious." It had also alleged that lenders to Future Retail, including Bank of India, were colluding with Future Retail by initiating the sale of the distressed company’s assets to Reliance Retail.
Bank of India had argued that the parameters under the law to admit insolvency proceedings against Future Retail were “fully and wholly” satisfied.
Accordingly, Amazon's petition is dismissed, the NCLT bench said.
The background
Future Group was locked in a long-drawn-out legal dispute with Amazon over the debt-ridden Indian company’s announcement in 2020 to sell its retail, wholesale, warehousing, and logistics businesses to billionaire Mukesh Ambani’s Reliance Industries in a deal worth $3.4 billion.
In 2019, Amazon had 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 Reliance 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.
Meanwhile, 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.
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