To 'protect interest', banks to move DRT's Mumbai bench against Future

Lenders to Kishore Biyani-controlled Future Retail (FRL) will move the Debt Recovery Tribunal’s (DRT’s) Mumbai bench to protect their interest and also avoid a repeat of instances like Reliance Industries taking over some of FRL’s stores.
 

The paper work for application to the DRT is nearing completion and they will move the tribunal next week, two bankers aware of the matter said. Bank of Baroda will be the first to take troubled retailer to DRT.
 

The lead bank of the consortium has to issue notice under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act (SARFAESI). However, as for approaching the DRT, any member of the consortium can file an application at any point of time. Other members can later join the bank that moves the application.
 

Banker said the prayer to the tribunal would include repayments of dues, sale of assets and impounding of passports of those who have provided guarantees. It is for the DRT to allow a particular prayer or not.
 

Asked if RIL would be included in the lenders’ actions, a senior private sector banker said the focus is only on Future Retail, which is the borrower. Hence, the consortium has no basis to make RIL party to this.
 

FRL was going through an acute financial crisis. The company has defaulted on its loan servicing obligations and the account has been classified as a non-performing asset by banks. They have already been making provisions for exposures to the firm since this was a restructured asset.
 

The ongoing litigation initiated by Amazon in October 2020 has stalled the implementation of the scheme of arrangement between FRL and RIL. This resulted in severe adverse impact on the working of the company, sources said.
 

On March 14, public sector lender Bank of India issued a caution notice on behalf of lenders to secure their interest. The company has 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.

As for moving to National Company Law Tribunal (NCLT), bankers said the process of getting consent of all consortium members is not complete and may take time.