The National Company Law Tribunal has admitted a plea by Bank of India to initiate insolvency proceedings against Future Retail. The bankruptcy court has also turned down the petition by U.S. retail behemoth Amazon challenging the Indian lender’s plea to this effect.
The Mumbai bench of NCLT, comprising Justice P.N. Deshmukh, member (judicial) of NCLT, and Shyam Babu Gautam, member (technical) of the company law court, has also appointed Vijaykumar V Iyer of Deloitte India Insolvency Professionals LLP as the interim resolution professional for the insolvency proceedings against Future Retail. The management of the company will be handled by Iyer during the corporate insolvency resolution process (CIRP) period.
The NCLT has directed Bank of India to deposit ₹5 lakh as the initial corporate insolvency resolution process (CIRP) cost immediately.
The court has also prohibited institution of any suits or continuation of pending suits against the Kishore Biyani-led company “including execution of any judgment, decree or order in any court of law, tribunal, arbitration panel or other authority, transferring, encumbering, alienating or disposing of by the corporate debtor any of its assets or any legal right or beneficial interest therein.”
The supply of essential goods and services to Future Retail shall not be hampered in any way during the moratorium period, which will last till the CIRP is completed or a resolution plan for liquidation of the company is approved by NCLT, the court clarified.
In April this year, Bank of India had taken Future Retail to NCLT 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.
Amazon had opposed the lender’s request in an intervention plea, calling it “malicious”. The online retailer had argued that the arbitration award granted by the Singapore International Arbitration Centre (SIAC) prohibits Future Retail from disposing of or creating encumbrance on its assets or issuing any securities to secure any funding from a “restricted party”.
In response, Bank of India argued before NCLT that the legal parameters to admit insolvency proceedings against Future Retail were satisfied.
The chain of events started with Future Retail announcing plans to consolidate its retail, wholesale, warehousing and logistics businesses and transferring them to Mukesh Ambani-led Reliance Retail Ventures under a ₹24,713 crore deal.
Amazon had challenged this Future-Reliance deal, citing its 49% indirect shareholding in Future Coupons, which in turn had a 7.3% stake in Future Retail. This led to a bitter and long-drawn legal battle between Amazon and Future, holding up the latter’s deal with Reliance.
In April 2022, Reliance announced that it was backing out of its deal with Future as the latter’s shareholders had voted against the scheme of arrangement.