The Supreme Court Tuesday observed that no party will benefit from consequential punitive actions against Future Retail Ltd (FRL) for defaults in loan repayment and asked a consortium of 27 banks to file the response to a plea by the firm.
FRL has sought a direction from the lending financial institutions (FIs) that no coercive action be taken against it for a certain time period for non-payment of debt.
A bench headed by Chief Justice N V Ramana took note of the vehement opposition of the consortium of lending banks, represented by senior advocate Rakesh Dwivedi, that no writ petition, which is filed for enforcement of fundamental rights, would lie against them in a matter governed by loan contracts. The bench also comprised Justices A S Bopanna and Justice Hima Kohli.
“Out of 27 banks, 10 are private and three are foreign banks. How can a writ petition is maintainable against us. There should not be any interim order... We have nothing to do with Amazon or their arbitration. We are not parties to the arbitration. Moreover, the default has already occurred one month ago,” Dwivedi said.
"You have to take a realistic approach otherwise no party will get any benefit out of this. If writ can be maintainable or not is a different story," the CJI orally observed, adding “If this is your stand, why don't you file the affidavit.”
The consortium of banks said that they will have to take a business call with regard to the default in repayment of loan.
The matter has been listed for further hearing on Thursday. At the outset, senior advocate Harish Salve, appearing for the Future group, referred to the financial problems faced by the company since the time when the first lockdown was imposed in 2020 due to the Covid-19 pandemic.
The company has been facing various injunctive court orders after the dispute with US-based e-commerce major Amazon started, he said.
“The reason why we came here is, under the RBI guideline, the next step is the declaration of Non Performing Assets. Once it is declared NPA, the next step is Section 7 of the IBC. If this company goes into liquidation, everything will become infructuous", Salve said.
He said FRL needed some time and if its merger deal with Reliance Retail goes through, all debts could be cleared.
The merger will require the sanction of NCLT and if things go uninterrupted, hopefully by August the merger scheme will be finalised, he said.
"If the banks could give time till September, hopefully by then the deal will be complete and everyone can be paid off. If the Arbitrator holds that we can culminate the deal with Reliance, it is a relief," the senior lawyer said on behalf of FRL.
The plea was opposed by the consortium of banks.
FRL has sought directions restraining the banks from declaring it as a non-performing asset (NPA) and extending the timeline stipulated under the Framework Agreement for monetization of the Small Format Stores in line with the minutes of the meeting it had with the banks.
Earlier during the day, the same bench delivered the verdict on a separate batch of pleas of FRL and set aside three Delhi High Court orders including the refusal to grant a stay on the final arbitral award which had restrained FRL from going ahead with its Rs 24,731 crore merger deal with Reliance Retail and ordered fresh adjudication.