SC asks Future Retail’s lenders to take ‘realistic approach’

A Bench led by Chef Justice NV Ramana while seeking response from the banks within two days asked them to take a “realistic approach”in the matter.

future group
The spat between Future Group and Amazon has been on since October 25

Asking the Future Retail’s 27 lenders to take a “realistic approach”” while reconsidering their decision, the Supreme Court on Tuesday asked them to explain in two days as to why they should not be restrained from declaring the Kishore Biyani firm as a defaulter for failing to pay their loan dues to the tune of Rs 3,494.56 crore, the deadline for which lapsed on December 31. It also sought response from the banks, including 10 private and three foreign banks, for granting more time to FRL to repay its loan.

A Bench led by Chef Justice NV Ramana while seeking response from the banks within two days asked them to take a “realistic approach”in the matter and consider the consequence of their action on the debt-laden Future group. It will hear the case next on Friday.

FRL had last week moved the apex court seeking protection from being declared a defaulter alleging that the lenders had sent default notices to it earlier this month despite being aware of the impact of Covid 19 pandemic on its business/stores and also the freeze on the sale of its small-format stores due to its ongoing dispute with Amazon.

The company apprehends that apart from its account being declared as non-performing asset (NPA), the lenders would also publish its and its board of directors names as wilful defaulters, thereby reducing its credit rating and consequently compromising its ability to raise any further finance.

FRL had missed the due date for payment of Rs 3,494.56 crore to banks and lenders as it could not sell assets due to its ongoing litigation with Amazon, impacting its monetisation plans.

Senior counsel Harish Salve told the SC that FRL being barred from disposing of any of its assets had offered the banks to take over its small format stores and monetise them for loan repayment.

He said that once FRL’s accounts are allowed to be declared as NPA, the retailer would go into insolvency which would not only “kill the company,” but nothing would survive to fight for. Besides, the banks too will have to take huge haircuts if the IBC route is taken.

While seeking permission to go ahead with the procedural formalities with regard to its Rs 24,713-crore deal with Reliance Retail, he gave a timeline to complete the process before seeking nod from the NCLT.

Senior counsel Rakesh Dwivedi, appearing for the lenders, raised objection to the maintainability of the FRL’s petition, saying the banks had nothing to do with either the Singapore arbitration or the FRL-Reliance Retail deal. He further said that FRL had claimed to be bankrupt and does not have money to continue its functions until March next year, therefore, there is no need to give any extension of time.

Meanwhile, the Biyani-led Future group got a big relief as the apex court on Tuesday set aside the Delhi High Court’s three interim orders that had restrained FRL from selling its retail assets to Reliance Retail till it decided the Singapore arbitration proceedings initiated by Amazon in 2020. The apex court remanded the matter back to the HC.

Justice JR Midha in his two February last year’s orders had held FRL, Future Coupons and the group promoters including Kishore Biyani guilty of violating the Emergency arbitrator’s and had directed Future group to approach the authorities to recall all approvals granted to the Future-Reliance deal.

The spat between Future Group and Amazon has been on since October 25, 2020, when Singapore’s EA passed an interim order restraining FRL from going ahead with its deal with Reliance Retail. The two sides have been embroiled in a legal battle over Future Retail’s move to sell its retail assets to Reliance Retail for Rs 24,500 crore.

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