Supreme Court Refuses To Pass Interim Order Against Banks In Future Retail's Plea To Defer Loan Default Actions

The Supreme Court of India on Thursday refused to pass any interim order to restrain coercive steps by the consortium of banks against Future Retail Ltd(FRL) over loan defaults.A bench comprising Chief Justice of India NV Ramana, Justice AS Bopanna and Justice Hima Kohli adjourned the writ petition filed by FRL without passing any interim order against the banks.The writ petition under Article 32 has been filed by FRL seeking directions to set aside or alternatively withdraw the Event of Default Notices addressed by the lenders. On February 1, the Court had sought the banks' response, after FRL sought for deferral of the coercive steps by pointing out the difficulties created by the orders passed in the Arbitration case with Amazon.Today, Senior Advocate Rakesh Dwivedi, appearing for the banks' consortium, raised preliminary objections regarding the maintainability of the writ petition."These are purely contractual matters. Ordinarily, the Court will not interfere under Article 32 in matters of contract. Also, in the consortium, there are 10 private banks and 3 foreign banks and Fundamental Rights are not enforceable against them", Dwivedi submitted. He further submitted that the loans were granted between 2015 and the beginning of 2021, much before the Emergency Award was passed by the Singapore Tribunal in Amazon's case. The defaults had been committed in 2020 and the loans were restructured as per FRL's request. The loans have no linkage with the litigations between Future, Amazon and Reliance, the senior counsel added.Dwivedi further submitted :"Our contract involves depositors' interest. So this involves public interest. We have a loan of Rs 17,000 crores. If it is pushed back to later this year, as requested by Mr.Salve(for FRL), it will grow to Rs 25,000 crores. And ultimately they are not certain, whether Amazon or Reliance will get it. So we are looking at an uncertain litigation. If Amazon ultimately wins, Rs 7000 crores will come in. But our loan to FRL only is Rs 17,000 crores. If we take into account the loans to the entire Future group, it will be over Rs 35,000 crores. If Reliance wins, Future will get Rs 25,000 crores, but for the entire group. So in any case, the banks will have to invoke IBC".Dwivedi put forth a suggestion that the entire assets of FRL can be subjected to open bids by Amazon and Reliance, with a reserve price of Rs 17,000 crores. Sealed bids can be submitted before the Supreme Court. "Whoever bids high, let them take. This is a sure shot, we will get our money, and whoever bids high will get Future", he suggested.Senior Advocate Harish Salve, appearing for FRL, submitted that he is agreeable to Dwivdedi's suggestion. But he added that Amazon cannot deposit a single rupee here being a foreign multi-brand company.Senior Advocate Gopal Subramanium, appearing for Amazon, said that his clients have no hesitation in discussing the matter with lenders for a resolution.,The bench also heard along with the writ petition the civil appeals filed by Future Retail and Future Coupons against the enforcement orders passed by the Delhi High Court with respect to the Emergency Award of the Singapore Tribunal. Though the bench had set aside the High Court's orders on February 1, it had posted the appeals along with the writ petition today for considering interim reliefs. The bench heard elaborate arguments of Senior Advocates Salve and Mukul Rohatgi for Future Group, Subramanium, Aspi Chinoy and Ranjit Kumar (for Amazon) in the civil appeals and reserved orders.As far as the writ petition is concerned, the bench said that it is not passing any orders. When Dwivedi sought a clarification if banks can take coercive action, CJI said "We are not passing any interim order. We are adjourning the writ petition".Details of the petition: The plea has sought directions restraining the 27 respondent lenders from declaring FRL as a Non-Performing Asset and directing them to extend the timeline stipulated under the Framework Agreement for monetization of the Small Format Stores in line with the minutes of the meeting dated 01.01.2022.Further directions have been sought to the lenders to extend the "cure period" / "review period" of 30 days under the Framework Agreement.The plea has sought directions to the Reserve Bank of India to relax the "review period" (of 30days) contemplated under the August 6 Circular in the case of FRLAccording to FRL, the injunction orders passed in arbitration and related proceedings initiated by Amazon to which it was erroneously joined as non-signatory party has impeded the FRL's ability to adhere to the timelines of monetisation of Small Format Stores under the Framework Agreement.The petitioner has argued that despite having acknowledged the fact that the FRL's inability to monetize the Small Format Stores was on account of events outside the reasonable control of FRL and despite having accordingly waived their right to declare FRL's inability to do so as an "Event of...

Supreme Court Refuses To Pass Interim Order Against Banks In Future Retail's Plea To Defer Loan Default Actions

Srishti Ojha

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