State-owned lender, Bank of India, has initiated insolvency proceedings against Kishore Biyani-owned Future Retail in the backdrop of the retailer recently defaulting on its debt repayments.
“Bank of India has served an advance intimation of filing an Application under Section 7 of the Insolvency and Bankruptcy Code, 2016, against the company for default on non-payment of monies due in terms of the framework agreement entered into between the company and Bank of India,” Future Retail said on Thursday.
The company said it has received a copy of the petition and is in the process of taking legal advise.
Future Retail, which operates supermarket chain Big Bazaar, was hit hard by the Covid-19 pandemic. The deal it entered into with Reliance Industries, to sell its retail, wholesale and logistics business for Rs 24,713 crore in 2020 has also been stuck after e-commerce giant Amazon went to court against it.
Struggling to survive amid the pandemic, Future Retail had hoped the deal with Reliance would help it raise substantial amount of money to repay its debts. However, Amazon objected to the deal and got a stay on it from the Singapore International Arbitration Centre. Amazon had alleged that its earlier deal with promoter entity Future Coupons, in which it acquired 49 per cent stake, prohibited Future Retail from selling the business to anyone else.
The two sides have fought a bitter battle in the Delhi High Court and the Supreme Court since. After settlement talks between the two sides failed, the Supreme Court last month ordered the two sides to resume arbitration proceedings in Singapore.
On April 1, Future Retail had intimated that it had failed to make a payment of Rs 5,322.32 crore due to lenders on or before March 31, 2022. Last year, Future Retail had entered into a one time restructuring scheme with banks, under the then guidelines issued by RBI to deal with Covid-related stress. Future Retail blamed the ongoing litigation with Amazon and other related issues for being unable to raise the required funds and meet the repayment deadline.
Bank of India was the lead banker in the consortium of lenders to Future Retail. Banks were left fuming after it emerged that Reliance Retail had taken over hundreds of Future Retail stores in March this year after the later had failed to pay the leases.
Following this, bankers, through newspaper advertisements, had warned people from dealing with assets of Future Retail as they had the first charge over the assets.
Now all eyes will be on which way the Singapore Arbitration Centre rules in the case between Future and Amazon.
Meanwhile, Future Retail is due to hold meetings of shareholders and creditors later this month to seek their approval on the Reliance Retail deal. Amazon has already warned the company from going ahead with these meetings, stating they violate the Singapore tribunal’s injunction on the sale of Future Retail’s assets.
