Amazon-Future case: After talks fail, lenders to FRL may approach NCLT, DRT

With Future Retail and Amazon failing to resolve disputes, lenders will begin legal action to secure their interest with an option to approach the National Company Law Tribunal (NCLT).
 

They would also examine any possibility of fraud at the borrowers’ end.
 

Senior bankers said with failure of Future-Amazon talks, banks have to think of legal action only.
 

There is no other way out. Future Retail did not come up with a restructuring proposal or plan, according to them.
 

Banks will have to decide on using Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act (SARFESAI), for which the legal forum would be Debt Recovery Tribunal (DRT) or invoke provisions of Insolvency and Bankruptcy Code (IBC), 2016 and regulations.
 

There is an advantage in using IBC and approaching the NCLT as the moratorium would come into effect immediately. The DRT process is time consuming. Banks would have to arrive at a consensus, bankers said.
 

Failure of talks and complications as a defaulter are likely to delay any deal and mar the prospects for recovery.
 

Now onwards, dealing would be as defaulter and a detailed study of books for any instances of fraud, said a public sector banker.
 

These lenders would also take charge of any inventories and spares, said senior public sector banker.
 

On March 14, 2022, Bank of India (BoI) issued a caution notice on behalf of lenders to secure their interest.
 

The company borrowed money and it is secured by charge over movable assets and current assets, including receivables, spares, inventories and cash flows. These are all subject to fixed charge for the benefit of senior lenders of FRL, BoI said in notice.
 

A senior banker said lenders have not taken kindly to possession of stock (by Reliance entities). This was clearly communicated to promoter (Biyani), and through him, to Reliance.  
 

Any person dealing with such assets will transact subject to the charge of lenders.
 

They can be enforced against such persons dealing with assets unless such dealing has occurred in the ordinary course of retail trading by FRL.
 

The dealing would also be subject to a claw-back available under law, including for preferential transactions, undervalued transactions and frauds, according to the notice.
 

No person should open any account, whether deposit account, current account or for safe deposit lockers for FRL except on account of applicable laws and when permitted by lenders.
 

In a filing with BSE in February, FRL said it was going through an acute financial crisis. The company has defaulted on its loan servicing and the account of the company has been classified as non-performing assets by banks. 

FRL director Rahul Garg resigns

Future Retail Ltd’s director Rahul Garg has resigned from the board, a regulatory filing by the debt-ridden company said on Tuesday. “Rahul Garg, Non-Executive Director, has resigned from the Board of Directors and other committees of the board with effect from 14th March, 2022,” the Future group firm said in a statement. The company appreciates his valuable contribution and support made during his tenure as director, it added. PTI