In response to the Committee of Creditors’ rejection of the resolution plan from Space Mantra, a construction materials platform, Future Retail confirmed the insolvency professional’s move to initiate the liquidation process. The application for liquidation under Section 33 of the Insolvency and Bankruptcy Code, 2016, was filed with the National Company Law Tribunal (NCLT), Mumbai bench, on November 9, according to a TOI report.
The resolution plan presented by Space Mantra faced a setback when it garnered only 42% support in the vote held on September 30. The plan required a minimum of 66% approval from lenders to proceed. Following the regulatory guidelines of the Insolvency and Bankruptcy Board of India (IBBI), the insolvency professional is obligated to file for liquidation based on the voting outcomes.
Reliance Retail, which took over the tenancy of Future Retail’s key locations, holds total approved claims amounting to Rs 19,400 crore. In contrast, Space Mantra’s bid of Rs 550 crore was not endorsed by the lenders. Notably, other bidders who submitted binding offers were predominantly scrap dealers, indicating the challenging landscape faced by Future Retail in its quest for revival. As the curtains draw on this retail saga, the industry watches closely to witness the resolution of this insolvency drama.
Insolvency proceedings
The NCLT had granted four extensions to FRL for completion of CIRP and the last date was September 30, 2023, and after that there was no extension in the time frame.
The insolvency proceedings against FRL were started by the tribunal on July 20, 2022.The Insolvency & Bankruptcy Code (IBC) mandates the completion of CIRP within 330 days, which includes time taken during litigations.As per Section 12 (1) of the Code, the CIRP shall be completed within a period of 180 days from the date of initiation.
However, NCLT may grant a one-time extension of 90 days. The maximum time within which CIRP must be mandatorily completed, including any extension or litigation period, is 330 days.
Earlier, FRL had said it had received six bids from prospective buyers by May 15, which was the last date for submission of resolution plans.
The deadline for submission of resolution plans was May 15, 2023, for 48 companies, which were in the final list of ‘Eligible Prospective Resolution Applicants’.
This has happened despite FRL lenders coming with revised Expressions of Interest (EoIs) and inviting fresh bids after dividing its assets into clusters.
Future Retail has a debt of around Rs 30,000 crore and the company is going through CIRP.
On March 23, 2023, creditors of FRL invited new EoIs, whereby prospective buyers can bid for the debt-ridden firm “as a going concern or individual cluster or a combination of clusters of its assets”, as it failed to attract a resolution plan in more than four months.
FRL operated multiple retail formats in both the hypermarket supermarket and home segments under brands such as Big Bazaar, Easyday, and Foodhall. At its peak, FRL was operating more than 1,500 outlets in nearly 430 cities.
It was part of the 19 Future group companies operating in the retail, wholesale, logistic and warehousing segments, which were supposed to be transferred to Reliance Retail as part of a Rs 24,713-crore deal announced in August 2020.
However, lenders had rejected the takeover of the 19 Future group companies, including FRL, by Reliance amid a legal challenge by Amazon.
