Indian Banks are all set to initiate the debt recovery proceedings against Future Retail so as to safeguard their interests after its rival Reliance suddenly took over some of Future’s retail stores.
Future Retail was hit hard by the pandemic induced country wide lockdown and has been struggling to pay off its debt. At the same time, it is locked in a bitter legal battle with US retail giant Amazon.
Citing violation of certain contract terms, the battle has seen obstruction of sale of 3.4 billion dollars worth of its retail assets to India’s largest retailer Reliance.
Meanwhile, Future Retail has denied any malpractices. Last month, Reliance Industries out of the blue took control of hundreds of Future’s stores, citing non-payment of rent.
The Bank of Baroda, which is a lender to Future, will be the first bank to take Future Retail to the Debt Recovery Tribunal (DRT) and is expected to file the paperwork this week.
One of the banker said that the bank is taking the step as a measure of last resort as they are looking to protect themselves in the ongoing legal debacle. Going to Debt Recovery Tribunal will ensure that Reliance doesn’t make another such sudden move, he added.
It is believed that other lenders too will most likely follow the suit. The Future Group on the whole has over 4 billion dollars of debt and various lenders have already started classifying the loans as non-performing assets (NPA).
Subsequently, it is likely that the lenders will also file a case in the National Company Law Tribunal (NCLT) that handles corporate insolvency cases. Future and Amazon are fighting legal battles at multiple levels, including in the Supreme Court.
Given the legal complexities in this case, first going to the Debt Recovery Tribunal will most likely help the banks in attaching, seizing and selling Future’s assets swiftly, instead of going after the entire Future Group at National Company Law Tribunal, Ketan Mukhija, a partner at Link Legal said.
He termed the move by the banks as very strategic and tactical.
