Banks start tagging Future Retail as NPA, urge apex court to allow bidding by Amazon and Reliance

Twenty seven lenders to Future urged the apex court to let the two “suitors” Amazon and Reliance bid for Future Retail to facilitate recovery rather than take a long-winding legal route to resolution even as the banks started classifying the group’s retail assets as NPAs.

Future failed to sell its retail assets to Reliance for $3.4 billion after business partner Amazon went for arbitration and moved court arguing that Future Retail had violated certain non-compete contractual terms. Future denied this.

Amazon wants to own a part of Future Retail as part of its plans to dominate Indian retail.

“There are two suitors for Future Retail and we (banks) have a stake in it and we are entitled to sell the assets,” senior advocate Rakesh Dwivedi arguing for the banks said. “Let the two suitors bid for it, why litigate for one year for an uncertain outcome about who will get it.”

Explaining further why bidding was a viable option, Dwivedi said that this was the only “sure shot” method of recovering the money owed to the banks.

Future Retail owes around Rs 17,000 crore to the banks and the overall debt of the entire Future group is larger. The top court was informed today that the lenders have already begun the process of classifying the accounts of Future Retail as NPAs.

If Amazon was to win the litigation, a sum of only Rs 7,000 crore would come in through a private fund to save Future Retail. If the deal with Reliance is allowed to go through, the group will receive Rs 25,000 crore. “There is an element of uncertainty about who will get it,” Dwivedi stressed.

Dwivedi said that the two “cash-rich suitors” can bid for the assets of Future Retail and this is the only way the banks can get the entirety of the money owed and the issue of who gets Future Retail will also be put to rest.

Future Retail agreed with the lenders on the aspect that the interests of public depositors ought to take precedence and stressed that if the Reliance deal fructifies, not only will the “banks be repaid in full” but the jobs of 25,000 employees will be saved.

While Amazon expressed its interest to discuss any possible arrangement with the banks, it highlighted that the injunction orders still remain in force.

Meanwhile, the Supreme Court also posed a question regarding continuation of NCLT (National Company Law Tribunal) proceedings without the forum passing a final order and proceeded to reserve its order on this issue.

The top court will hear the issue of NPA classification later this month and refused to grant any interim relief to Future Retail against such tagging.

Disclosure: Moneycontrol is a part of the Network18 group. Network18 is controlled by Independent Media Trust, of which Reliance Industries is the sole beneficiary.