Resolution professional seeks access to ‘inaccessible’ stores, warehouses of Future Retail
The resolution professional for the corporate insolvency resolution process (CIRP) of Future Retail — Vijay Kumar V Iyer – has filed an application before the NCLT, Mumbai, requesting access to the inaccessible stores and warehouses of FRL.
It is to be mentioned here that Reliance Retail Ventures, a Reliance Industries’ entity, has taken control over 835 stores of the Future Retail in 2022 after it failed to pay Rs 250 crore lease rentals to Reliance group. In 2021, Future Retail terminated its leases with existing landlords and enter into arrangements with the Reliance group for operating retail stores. Future Retail has over 1,200 stores across 391 cities in the country.
The said rental agreement with the Reliance Group invited a lot of criticism from many quarters including Amazon, which indirectly held stake in Future Retail, and proxy advisory firms.
Amazon in its plea to NCLT has said that Future Retail failed to give any material details as to when and why such purported lease/sub-lease arrangements were entered into between the Reliance Group and FRL were never disclosed and FRL has not taken any action against the Reliance objecting to such ‘forcible’ takeover of the retail stores.
According to proxy advisory firm 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 further said that 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,” noted Ingovern in one of its letters to Sebi.
The Mumbai bench of the National Company Law Tribunal (NCLT) on 20 June 2022 admitted Bank of India’s plea to initiate corporate insolvency resolution process (CIRP) against Future Retail for defaulting on a payment of Rs 856 crore. Recently as many as 49 companies have submitted EoIs to bid for the assets of Future Retail.
Also See: Scrap dealers, waste management firms among 49 vying for Future Retail
