The Mumbai bench of the National Company Law Tribunal allowed initiation of insolvency proceedings against Future Retail Ltd. Vijaykumar Iyer has been appointed as the interim resolution professional.
The NCLT had reserved its order last month.
The Kishore Biyani Group company has defaulted on payments to its lenders, prompting of insolvency proceedings by Bank of India.
Amazon.com NV Investment Holdings LLC had opposed the insolvency application. It said that on April 26, 2021, Future Retail had signed a framework agreement with its financial creditors. Under this, the creditors were supposed to set up an asset sale committee to monetise Future Retail’s small-format stores.
The banks signed this agreement even as they were aware of the emergency arbitrator’s October 2020 order, which had injuncted alienation of Future Retail’s assets, the counsel for the e-commerce major had argued. “Banks were colluding with the corporate debtor to effectuate a transaction which they know is illegal.”
Future Retail, too, had made arguments against admission to bankruptcy. The demand notices, on which the insolvency application is based, are being contested before the Supreme Court, the company had said.
Counsel for the creditors, however, maintained that the two basic requirements of an insolvency application under the IBC are the existence of debt and default—both parameters are undisputed in Future Retail’s case. And hence, there aren’t any grounds for objection.
If Future Retail goes into insolvency, any future claims Amazon might have as a result of arbitration proceedings will not survive, Senior Advocate Ravi Kadam told the court on behalf of the creditors. “A moratorium will apply and Amazon’s arbitration will get derailed.”
That’s the whole point, Kadam said, adding that all these issues- what happens to Amazon’s monetary claim, who will it be against, etc.—will be delved into as part of insolvency proceedings. But to suggest that public sector banks, well-regulated by the Reserve Bank of India have “colluded” and have acted “fraudulently” is “laughable”, he had argued.