Bankruptcy Court Admits Future Retail Ltd to Insolvency Process

Strategic Insights -

The Mumbai bench of the National Company Law Tribunal (NCLT) has admitted Bank of India's petition to admit Future Retail Ltd under the Corporate Insolvency Resolution Process (CIRP), appointing Vijay Kumar Iyer as the interim resolution professional (IRP). The court rejected Amazon.com NV Investment Holdings' application to dismiss the lender's plea, paving the way for the IRP to take over the company's assets and management. The move follows a Rs 3,495 crore default by Future Retail on the one-time restructuring scheme with Bank of India, with lenders holding dues of over Rs 17,500 crore.

Key Takeaways:

  • The NCLT has admitted Bank of India's petition to admit Future Retail Ltd under the CIRP, appointing Vijay Kumar Iyer as the IRP.
  • The court rejected Amazon.com NV Investment Holdings' application to dismiss the lender's plea, citing 'malice and collusion' with the company and its promoter Kishore Biyani.
  • Lenders have dues of over Rs 17,500 crore, including Rs 3,700 crore in offshore bonds and Rs 13,800 crore in borrowing from local banks.
  • The Bank of India initiated insolvency against Future Retail on April 14, following the company's non-payment of dues under the Framework Agreement.
  • Amazon claims that the terms of its 2019 investment in a Future Retail promoter firm gave it the first right of refusal in any stake sale in the Indian retailer and barred it from selling a stake to Reliance entities.
  • The IRP will start the process of inviting claims and verifiying the claim, followed by forming the committee of creditors.
  • The IRP will take over the assets and management of the company for conducting the resolution process, suspending the powers of the existing board.
  • In 2020, Future Group decided to combine its two-dozen listed and unlisted companies and sell them on a slump sale basis to rival Reliance Retail for about Rs 25,000 crore as debt ballooned.

Statistics:

  • Rs 3,495 crore: Default by Future Retail on the one-time restructuring scheme with Bank of India.
  • Rs 17,500 crore: Total dues held by lenders, including Rs 3,700 crore in offshore bonds and Rs 13,800 crore in borrowing from local banks.
  • 620: Number of stores under Future Retail's management.
  • 30: Number of Big Bazaar hypermarkets.
  • 350: Number of smaller-format outlets.
  • 83%: Percentage of secured creditors of Future Lifestyle Fashion that rejected the proposed sell-off to Reliance.

Sources:

  • "Bank of India initiates insolvency against Future Retail", The Economic Times, April 14, 2023.
  • "Amazon claims Future Group breached contract by selling assets to Reliance", Livemint, February 10, 2023.
  • "Future Group decides to sell 25 listed and unlisted companies to Reliance Retail", Business Standard, August 25, 2020.