Future Retail’s Insolvency: NCLT Reserves Order


The Mumbai bench of the National Company Law Tribunal on Monday reserved its order on the insolvency application against Future Retail Ltd.

The Kishore Biyani Group company has defaulted on payments to its lenders, prompting of insolvency proceedings by Bank of India. NV Investment Holdings LLC has opposed the insolvency application. Future Retail, too, has made arguments against admission to bankruptcy.

Counsel for the creditors, however, has maintained that the two basic requirements of an insolvency application under 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.

Here are the key arguments that the parties made before the NCLT:

On April 26, 2021, Future Retail had 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, Senior Advocate Rajiv Nayar argued.

In November last year, Nayar said, Future Retail itself communicated to banks that the sale of small-format stores may not be possible due to the injunction order. The consortium of banks met on Dec. 15 to discuss with Future Retail how the sale of small-format stores can be effectuated.

This provision deals with fraudulent or malicious initiation of insolvency proceedings.

Nayar submitted that the lenders deliberately overlooked the binding injunctions to collude with Future Retail.

Further, Amazon stated in its submissions that Future Retail entered into a “fraudulent stratagem” to handover its retail assets to Mukesh Ambani’s Reliance Group in the teeth of binding injunctions. And that lenders became “willing collaborators” to alienate the substantial majority of Future Retail’s assets in favour of Reliance.

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. “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 said.

On Amazon’s arguments regarding takeover of Future Retail’s stores by Reliance Projects and Property Management Services Ltd., Kadam submitted that no assets have been sold.

The NCLT is likely to pronounce its order later this week.


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