Future Retail’s resolution stuck in legal quagmire
MUMBAI: The fate of Future Retail Ltd lies entangled in a legal quagmire as banks are set to fight it out in the insolvency tribunal amid a pending arbitration in Singapore, a case in the Supreme Court and another pending in the debt recovery tribunal.
Given the circumstances, the sooner the case is admitted to the National Company Law Tribunal, the better it is for Future and its lenders, legal experts said. Since the Insolvency and Bankruptcy Code (IBC) is a special legislation, it will take precedence over other ongoing litigation. They believe that this would lead to a more focused resolution approach than the multi-pronged legal battle over the assets of the Kishore Biyaniled retailer.
“If the application for corporate insolvency resolution is admitted by the National Company Law Tribunal (NCLT) against Future Retail, as per Section 14 of the IBC, a moratorium will be imposed,” said Vedika Shah, an associate at Pioneer Legal. As a result of the moratorium, new cases or continuation of pending litigation against Future Retail, including proceedings before the debt recovery tribunal (DRT), the Supreme Court and arbitration proceedings before the Singapore International Arbitration Centre, will be stayed, Shah said.
On April 23, Reliance Industries said in a regulatory filing that its acquisition of Future Group’s retail, wholesale, logistics and warehousing businesses could not be implemented as lenders voted against the proposal. Mint reported on Friday that lenders accounting for most of the loans to Future Group rejected the proposal after the Reliance Industries Ltd arm cut the deal value.
Experts said banks must have exercised their “commercial wisdom” while choosing between the estimated recoveries from the revised offer proposed by Reliance and taking the defaulting borrower to NCLT.
Bank of India, the leader of the consortium of lenders, referred Future Retail to the Mumbai bench of the NCLT on April 14, although it is yet to be listed for admission.
It is still unclear whether Reliance would submit a resolution plan if and when the borrower gets admitted under the insolvency code. The odds are, however, stacked against Amazon at the insolvency tribunal. Two provisions—india’s restrictions on foreign investment in multibrand retail and the bar on related parties under IBC— restrict it from bidding for the asset.