Resolution professional has failed to safeguard assets of Future Retail, claims proxy advisory firm

Proxy advisory firm Ingovern Research Services has written a letter to Securities and Exchange Board of India (Sebi) bringing to its attention, what it says, the complete inaction by the Resolution Professional of Future Retail Ltd (FRL) to safeguard the company’s assets of FRL for the benefit of the creditors and public shareholders.

Ingovern Research, in its letter to the capital market regulator, has pointed out that Rs 17,000 crore that Future Retail owes to creditors is at the danger of being written off as the substantial assets of the company have been frittered away just at the anvil of the commencement of FRL’s bankruptcy process.

The bankruptcy process of Future Retail started began in July 2022.

“As you would appreciate, there is significant public money at stake here, in the form of public shareholders of several listed entities, and public sector creditors of these entities, and the Resolution Professional has completely abdicated his responsibility to various stakeholders,” Ingovern Research says in the letter addressed to Sebi chairperson Madhabi Puri Buch.

The proxy advisory firm has raised questions on the way Future Retail terminated its leases with existing landlords and enter into arrangements with the Reliance group for operating retail stores in 2021.

According to Ingovern Research, such arrangements were never disclosed to the stock exchanges and shareholders at the relevant times and that such arrangements were only entered with one counterparty — Reliance group. It also pointed out that the arrangement with Reliance Group directly contradicted the statement made by FRL in the annual report for the year ending March 2021, where it has said that the “Company does not face a significant liquidity risk with regards to its lease liabilities as the current assets are sufficient to meet obligations to lease liabilities as and when they fall due.”

“It is telling that soon after these arrangements were consummated with the alienation of 835 stores that the CIRP of FRL commenced. This means that the Reliance group, which could only have an unsecured claim against FRL for unpaid rental dues, gained an unfair and undue advantage against the entire class of creditors who had a prior and secured claim against FRL. This fact alone should have been the basis of an application by the Resolution Professional to set aside such transactions and claw back the retail assets of FRL,” says Ingovern.

The proxy advisory firm, therefore, says that the Resolution Professional of Future Retail is duty bound to protect and preserve the value of assets of the company and clawback value which has been removed unlawfully from FRL by suspicious transactions.

Also see: Reliance Retail among 13 bidders vying for Future Retail business