Indian banks are gearing up to take legal action against beleaguered retailer Future Retail in an effort to recover their debts following the unexpected acquisition of some of their stores by Reliance. Future Retail has been grappling with financial difficulties amid the pandemic and is already embroiled in a legal dispute with Amazon, which has resulted in the blocking of a $3.4 billion sale of its assets to Reliance. Amazon alleges that the deal violates certain contractual agreements.

Reliance Industries, on the other hand, has taken control of hundreds of Future Retail stores, claiming non-payment of rent, despite Future’s denial of any wrongdoing. In response, Bank of Baroda, a state-owned lender, is set to be the first to initiate debt recovery proceedings against Future by filing paperwork with the Debt Recovery Tribunal (DRT) this week, with other lenders expected to follow suit.

For the banks involved, resorting to the DRT is seen as a last-ditch effort to protect themselves in this legal battle and forestall any further unexpected actions by Reliance. Future Group, as a whole, is burdened with a massive debt of over $4 billion, with lenders already classifying the loans as non-performing assets.

After initiating action at the DRT, the lenders are likely to approach the National Company Law Tribunal (NCLT), which handles corporate insolvency cases, in order to address the legal complexities of the situation. This move will enable the banks to quickly attach, seize, and sell Future’s assets, rather than taking action against the entire company at the NCLT.

By approaching the DRT first, the banks are employing a strategic and tactical approach to safeguard their interests and expedite the recovery of the debts owed to them by Future Retail. Meanwhile, the legal battle between Future and Amazon continues to unfold at various levels, including at the Supreme Court of India.

Useful Links:
1. Business Standard: Future banks set to move DRT to seek dues recovery from Future Retail
2. Livemint: Trouble mounts for Future Group as banks gear up for recovery action