The Supreme Court on February 1 asked the lenders of Future Retail Ltd to file their response on the company’s plea to be spared the non-performing asset tag on its accounts.
A consortium of 27 banks, including some private and foreign banks, had lent money to Future Retail and issued “event of default” notices to the company after it missed its repayment deadline. The grace period after the deadline lapsed on January 29.
Chief Justice of India NV Ramana headed an apex court bench that heard the case and made an oral observation that the banks too have to take a realistic approach in the matter and consider the consequence of the action they might take against Future group. It gave the lenders till Thursday to file their response to the petition.
While the Kishore Biyani-led company told the top court that it seeks relief in terms of an extension to make the repayment, it said the ongoing legal dispute with Amazon has been the sole reason for the company to be unable to alienate its assets and clear its dues.
With the company being barred from disposing of or alienating any of its assets, Future Retail offered for the banks to take over the company’s small format stores and monetise them for loan repayment, the court was told.
The counsel representing Future Retail and the Biyanis outlined that once the accounts are allowed to be declared as NPA, the logical next step would be initiation of insolvency proceedings under the Insolvency and Bankruptcy Code. This would “kill the company” and “nothing will survive to fight for”. The banks too would have to take home massive haircuts if the IBC route is taken.
The advocate arguing for the banks, however, told the court that the lenders have nothing to do with either Amazon’s interests in Future Retail’s business, nor with the company's asset sale deal with Reliance. Moreover, Future Retail claims to be bankrupt and does not have the wherewithal to continue with its functions until March 2023, the bank told the apex court, citing one of the filings made by Future Retail.
On being asked about its position by the court, Amazon said that it is also interested in the survival of Future Retail’s business and would not welcome IBC proceedings against it.
The case will be heard once the parties have filed their replies.
Disclosure: 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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