It said in a letter to verified lenders that there are procedural lapses in the resolution process and the RP had failed in his duty to maximise value for financial creditors. ET has seen the letter.
Deloitte-backed RP Vijaykumar Iyer had invited lenders to start voting on Space Mantra’s ₹550 crore resolution plan for FRL from August 31, as reported by ET on Thursday.
HDFC Bank’s August 29 letter said the RP did not provide critical information to the committee of creditors (CoC) to allow them to make an informed commercial decision on the resolution.
The RP and HDFC Bank did not respond to ET’s queries.
FRL, once owned by Kishore Biyani, operated 1,308 retail stores under the Big Bazaar, Easyday and Foodhall names as per the FY21 annual report. When corporate insolvency commenced, only 302 stores formed part of FRL’s assets.
Of this, the RP did not have access to 228 stores. The RP was able to vacate only 16 stores and made no effort to retain stores from lessors or owners as assets of FRL on the commencement of corporate insolvency, according to the HDFC Bank letter.
The private lender alleged substantial inventory comprising electronic goods, home furnishing and garments were stored in Mumbai warehouses but despite the lapse of a year, the RP hadn’t updated lenders on the status of this.
HDFC Bank alleged that Reliance (Industries) provided the RP assets and inventory purportedly worth ₹197 crore kept in 787 stores that was shifted to 50 large stores and warehouses of FRL. However, the RP has not provided any details on this to lenders, it said.
An April 20 order by the National Company Law Tribunal (NCLT) directed the local administration to provide the RP with necessary support to gain access to the stores. The HDFC Bank letter stated “no effective steps were taken by the RP to enforce the order, gain access of the stores and ascertain the actual position of the stocks and the inventories.”
It further added that, as of date, the CoC is not aware of the individual status of the stores.
“The RP ought to have provided the CoC with store-wise update of such inventories for the CoC to have visibility on the operation and management of FRL,” it said. “The valuation report does not take into consideration the inventory stored in inaccessible stores and has therefore attributed nil valuation to such inventory. Even when the resolution applicant assesses an expected value to the stocks and inventories, attributing nil valuation to such assets is in no way practicable.”
