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NCLT reserves order on initiating insolvency proceedings against Future Retail

A consortium of lenders, led by Bank of India, filed the insolvency application on April 14, seeking claims of Rs 5,322.32 crore from Future Retail as of March 31

June 27, 2022 / 04:33 PM IST
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A company court on June 27 reserved its orders on admitting debt-laden Future Retail into the bankruptcy process.

In legal parlance, when a court reserves its orders it means that the judge has heard oral arguments from the two parties and, rather than reaching for an immediate decision, a decision would be given at a later date. Generally, the date is not specified.

At the hearing in the Mumbai bench of the National Company Law Tribunal (NCLT), the counsel for Amazon, Zal Andhyarujina, reiterated that Bank of India’s petition to initiate insolvency proceedings against Future Retail was "malicious." He alleged that lenders to Future Retail, including Bank of India, were colluding with Future Retail by initiating sale of the distressed company’s assets to Reliance Retail.

Bank of India, in previous hearings, had argued that the parameters under the law to admit insolvency proceedings against Future Retail were “fully and wholly” satisfied.

The background:

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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.
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first published: Jun 27, 2022 04:33 pm
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