NCLT Orders Liquidation Of Future Retail

The National Company Law Tribunal (NCLT) Mumbai bench ordered the liquidation of Future Retail Limited (FRL) marking the end of the company's long-standing presence in India's retail market. The decision was made by a bench comprising Judicial Member Kuldip Kumar Kareer and Technical Member Anil Raj Chellan who held that the corporate insolvency resolution process (CIRP) exceeded its maximum permissible period without any resolution plan being approved by the Committee of Creditors (CoC). The order was passed on an application for liquidation filed by Vijaykumar Iyer the resolution professional appointed in July 2022 when the CIRP for FRL commenced. Future Retail once the flagship firm of Kishore Biyani's Future Group and a pioneer in organized retail faced financial difficulties that led to its insolvency proceedings. The company's downfall was further exacerbated by the collapse of a significant acquisition deal with Reliance Retail worth ₹24,713 crores. The deal which was initially announced in August 2020 faced numerous legal challenges including opposition from secured creditors such as Amazon. The insolvency proceedings against Future Retail were initiated following the company's failure to honor a credit facility agreement with a consortium of lenders, including Bank of India, Axis Bank, and Andhra Bank. Consequently, the Bank of India filed a CIRP application under Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC). During the CIRP, only one resolution plan was considered by the CoC. However, this plan failed to secure the required approval when put to a vote. The NCLT's liquidation order included the appointment of Sanjay Gupta as the liquidator. The tribunal directed the liquidator to maximize the value of the corporate debtor by endeavoring to sell FRL as a going concern under Regulation 32A clause (e) of the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016. Regulation 32A provides a framework for the liquidator to sell the corporate debtor in a manner that aims to preserve its business operations and maximize value for creditors. The liquidation process follows a series of extensions granted by the NCLT to Future Retail for completing the CIRP. Despite these extensions, no viable resolution plan was approved. Initially, the NCLT admitted the CIRP application against FRL on July 20, 2022 and appointed Vijaykumar Iyer as the interim resolution professional. Subsequent public announcements invited claims from creditors and the first CoC meeting on August 18, 2022 confirmed Iyer as the resolution professional. Throughout the CIRP, several attempts were made to attract potential resolution applicants. A request for resolution plans was issued and multiple expressions of interest were received. Despite receiving 49 EOIs and 6 resolution plans, none were deemed satisfactory. The only resolution plan considered by the CoC proposed resolving the corporate debtor as a going concern but failed to secure the necessary votes. In response to the lack of approved resolution plans, the CoC decided to liquidate the company. The liquidation application filed in November 2023 was approved by the NCLT on July 29, 2024. The liquidation process includes various directives for the liquidator such as continuing to investigate the financial affairs of the corporate debtor, following up on pending applications, and initiating steps for the recovery of dues. The liquidation process will involve selling the company's assets to settle its debts exceeding ₹17,000 crores to lenders. Click Here To Read/Download Order or Judgment

NCLT Orders Liquidation Of Future Retail

Rajesh Kumar

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