With only 3 days left to clear debt, Future Retail asks SC for more time to avoid an NPA tag

Future Retail (FRL) on Tuesday filed a petition in the Supreme Court, seeking its intervention to get an extension on the deadline to repay a ₹3,500-crore debt instalment to its lenders scheduled for January 29.

The Kishore Biyani-promoted retailer pleaded to the top court to stop its lenders from classifying its debt as non-performing assets, arguing that such a move will not only be unreasonable but will also compromise FRL's existence and hamper its right to do business.

The retailer said it could not raise funds to service the debt because a myriad of litigations by Amazon prevented it from selling its smaller format stores despite FRL not being a signatory to Amazon's investment agreements that have caused the litigations.

In its plea, FRL claimed that its lenders have acknowledged that the retailer was unable to monetise its small format stores due to "events outside the reasonable control" of FRL. Yet, the lenders have issued "event of default" notices and have threatened the company of initiation of insolvency proceedings if it fails to pay up ₹3,500 crore by January 29, the petition said.

"It is submitted that not only are the acts of the respondents unreasonable, arbitrary and without any justification or reasoning, but they would also compromise the petitioner No 1's (FRL) very existence, let alone severely hamper its right to carry on trade and business, given the following consequences that could ensure pursuant to the event of default notices," it said. ET has reviewed a copy of the petition.

In the event of its inability to service the debt, about two dozen lenders including the State Bank of India, Bank of Baroda, Bank of India and HDFC Bank would be free to initiate proceedings against FRL "including insolvency proceedings under the Insolvency and Bankruptcy Code", it said.

Such a move could result in the lenders classifying FRL and its board of directors as wilful defaulters. That could thereby reduce FRL's credit rating and "consequently compromising its ability to raise any further finance", the petition said.

AMAZON OFFER REJECTED

Meanwhile, independent directors of FRL have rejected an Amazon offer to infuse funds because the US ecommerce major did not positively respond to their call last week for immediate funding of ₹3,500 crore to stave off debt default.

"FRL had sought your help in seeking out funds in sufficient quantity to stave off bankruptcy but you were not able to bring forth a concrete and viable offer that would address FRL's concerns," the 3-member independent directors wrote to Amazon on Tuesday.