Bank of India has approached the National Company Law Tribunal (NCLT) to initiate insolvency proceedings against Future Retail over a loan default, the Kishore Biyani-led company said in a regulatory filing.
“Bank of India has served an advance intimation of filing an Application under Section 7 of the Insolvency and Bankruptcy Code, 2016 against the company for default on non-payment of monies due in terms of the framework agreement entered into between the company and Bank of India,” Future Retail told the exchanges today.
Bank of India has moved the bankruptcy court against Future Retail to recover ₹3,495 crore default on the one-time restructuring scheme between the bank and the company. Several Future group companies, including Future Retail, had entered into agreements with their creditors under the RBI circular dated August 6, 2020, that offered relief to the companies hit by Covid-19 disruptions.
The company has received a copy of the petition and is in the process of seeking legal advice, it further added.
Earlier this month, Future Retail had reported a default of ₹5,322.32 crore to its lenders due to the ongoing legal battle with Amazon and other related issues.
The lender’s move to seek insolvency proceedings against the embattled retailer is likely to affect its ₹24,713 crore deal with Reliance Industries. As per the deal’s terms, 19 Future Group companies, including Future Retail, operating in retail, wholesale, logistics and warehousing segments, are yet to be consolidated into one entity and then transferred to Reliance Retail Ventures. Amazon had contested the deal claiming first right of refusal by virtue of its stake in Future Coupons, which holds a stake in Future Retail.
If the NCLT admits Bank of India’s petition to initiate insolvency proceedings against Future Retail, it is likely to hold up the acquisition deal between Future group and Reliance Industries, and would allow other potential buyers, including Amazon, to bid for the company. The deal is currently on hold on account of the litigations betweens Future and Amazon.
Last month, Bank of India had issued a public notice through newspapers claiming its charge over Future Retail and warning the public against dealing with assets of the company.
Notably, the Bank of India petition before the NCLT comes a week ahead of creditors’ meeting, scheduled on April 21 to vote on the scheme of arrangement proposed by Reliance Industries and Future Group on the sale of latter’s retail assets.
Meanwhile, Amazon and Future are engaged in legal tussles at various forums, including the Supreme Court of India, Delhi High Court, and Singapore International Arbitration Centre (SIAC). Last month, Reliance took over and terminated leases of over 800 stores run by Future Retail. This had raised concerns over recovery by lenders to Future Retail.
The Singapore arbitration tribunal will soon resume hearing on the validity of the Future-Reliance deal, which will also determine the recovery lenders could make.