NCLT greenlights Future Retail's liquidation: New chapter begins in Kishore Biyani's retail saga

The National Company Law Tribunal’s (NCLT) decision to allow the liquidation of the Kishore Biyani-promoted Future Retail Ltd (FRL) adds a fresh twist to a long tale. It comes because no resolution plan was approved by the lenders. In April 2022, the committee of creditors, led by Bank of India, filed an insolvency application against the company. In July of the same year, NCLT admitted Future Retail under insolvency.

The company has a debt of more than Rs 17,000 crore that needs to be repaid to its operational and financial creditors. What happens next and who will get how much are among the big questions. According to Avanti T. Chandele, Partner at Mind Legal, the Insolvency and Bankruptcy Code (IBC) mandates that costs associated with the insolvency resolution process and liquidation must be paid in full and given priority. That will be followed by the workmen’s dues for 24 months preceding the commencement date of liquidation. Next in line are the debts owed to a secured creditor. “The last part is the employees’ dues for 12 months, unsecured financial creditors, operational creditors, government and statutory dues and finally equity shareholders and partners, if any.”

There is another issue concerning Amazon’s investment in FRL. Amazon owns 49% in Future Coupons, giving it an indirect 4.81% stake in FRL. “The liquidation order is likely to have an impact on Amazon’s indirect holding in FRL. Additionally, it may also impact the ongoing arbitration proceedings, as the shareholder agreement between Amazon and FRL forms a subject matter of that proceeding,” says Arush Khanna, Partner at Numen Law Offices.

However, further recourse in the arbitration may only be available after the final award is passed. “In the intervening period, Amazon may, like any other stakeholder, look at challenging the liquidation order before the NCLAT,” says Khanna. Clearly, this story is far from done.

@krishnagopalan