Future Retail Limited (FRL) has dragged its lenders to the Supreme Court to prevent them from tagging it a defaulter. The Kishore Biyani-led company filed a plea in the top court after the banks sent a notice for missing payments of ₹3,494.56 crore.

The retail company said in its petition that the delay in payment was due to developments beyond its control, especially the ongoing legal battle with Amazon that prevents sale of assets to raise funds.

The petition on Tuesday requested the SC to issue a “direction restraining the lenders from declaring Future Retail as a non-performing asset”.

“It is submitted that not only are the acts of the Respondents (lenders) unreasonable, arbitrary and without any justification or reasoning but they would also compromise the Petitioner No.1’s ( FRL’s) very existence let alone severely hamper its right to carry on trade and business,” it added.

Once declared an NPA, it could be dragged to insolvency courts to recover the dues.

Future Retail has asked for the restraining order along with an order giving it more time for loan payment; it requested the Supreme Court to “extend the timeline stipulated under the framework agreement for monetisation of the small-format stores in line with the minutes of the meeting dated 01.01.2022”.

Hit hard by covid-19, Future Retail had applied for a one-time-debt-restructuring under the RBI circular of August 6, 2020, which was a scheme issued by the finance ministry for those businesses affected by covid-19. 

Under the scheme, Future Retail’s debt was restructured for approximately ₹3,500 crore. It was supposed to discharge “an aggregate amount of ₹3,494.56 crore” on or before December 31, 2021 for that.

Future Retail was also allowed a moratorium of 30 days which end on January 30. Hence, in its petition, Future Retail has also requested the court to pass a direction in their favor. 

Future and Reliance had announced a ₹24,500-crore deal in 2021 which has been blocked by Amazon citing a 2019 deal with Future Coupons which had prohibited it from dealing with restricted parties including Relaince. 

But according to legal experts Future may be on a weak wicket as far as preventing lenders from tagging it a defaulter. 

“There is nothing in the RBI Master Circular concerning ‘Classification of Assets as Non-Performing’ nor in the OTR concerning FRL that would prevent FRL from being tagged as an NPA citing “developments beyond its control”, Rahul Kamerkar, a lawyer the high court said. 

Prashanth Shivadass, Partner, Shivadass & Shivadass Law Chambers, said that a company can’t prevent being ‘tagged’ as an NPA - “that is the prerogative of the bank under the aegis of the SARFAESI Act.” However, “the proceedings can be challenged before the judicial forums - one of the grounds can be circumstances beyond its control given that there are various orders of high courts and SC, giving moratoriums and options to restructure loans owing to COVID,” he added. 

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