Amazon is going to file a complaint with the Delhi High Court and the National Company Law Appellate Tribunal (NCLAT), contesting Future Retail Ltd (FRLlease) structure change and the participation of the company’s independent directors in it, according to two industry executives.
For alleged non-payments of rents to the Mumbai conglomerate, Reliance Industries has taken control of the sites of 300-odd large-format stores of the Future Group and has begun shuttering them in the previous few days. FRL’s hypermarket chain, Big Bazaar, used to run 200 of these locations. There are also 100 or so places where Future Lifestyle Fashions’ Central and Brand Factory fashion boutiques used to be.
According to two industry insiders, Amazon is likely to file new proceedings in the Delhi High Court and the NCLAT against FRL for consenting to amend the lease agreement reached 12-15 months ago, which allowed Reliance to become the lessee and sublease the location to FRL. Reliance can now take over these store sites due to a modification in the agreement, citing FRL’s failure to pay rent. They added that the petition is expected to call into question the role of FRL’s independent directors in permitting the lease structure change while the case was still in court.
Debt-laden In 2020, Future Group agreed to sell its retail assets to Reliance Retail, a subsidiary of Reliance Industries, for over 25,000 crores. Amazon has disputed the acquisition in several forums, claiming that it violates an investment agreement it signed with a promoter firm of FRL in 2019. The Future-Reliance deal has been halted until a final order is issued by a Singapore arbitration panel, and the matter is also being heard by Indian courts.
Reliance shut down hundreds of Future Group stores and removed their signage over the weekend, according to persons in the know, as a stock-taking procedure is ongoing to rename those locations as Reliance outlets in the coming days or weeks. According to them, the decision has impeded Big Bazaar‘s online delivery. Big Bazaar’s website displayed a banner saying, “We are revamping our website” on Sunday night.
The fashion formats, Central and Brand, have similar leasing agreements, allowing Reliance to acquire ownership of those sites as well. Being an early arrival into the market, The Future Group held some of the most prime retail locations.
According to the persons, most lenders have categorized FRLs debt of Rs 17,000 crore as non-performing assets, prompting Reliance’s current move. “Reliance said that because FRL is a nonperforming asset, any lender might use the IBC (Insolvency and Bankruptcy Code) to seize the assets,” a source familiar with the situation said, “It’s a preemptive measure on Reliance’s part to ensure that the (Future-Reliance) merger goes through and to prevent any lender from taking over.“
According to another official, the measure will help save about 30,000 jobs by allowing Reliance to hire Future Group personnel without regard for their background, performance, or interview.
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