Future Retail on Tuesday moved the Supreme Court seeking protection from being declared a defaulter for failing to pay loan dues of Rs 3,494.56 crore to its 26 lenders. The matter will be mentioned for urgent hearing by the company’s lawyers on January 28.

The company, while making RBI and other 26 banks, including SBI, IndusInd, DBS, HDFC, Union Bank of India, as respondents in its petition, has told the apex court that despite being aware of the impact of Covid-19 pandemic on its business/stores and also the freeze on the sale of its small-format stores due to its ongoing dispute with Amazon, the lenders have sent default notices to it earlier this month.

FRL apprehends that apart from its account being declared as non-performing asset (NPA), the lenders would also publish its and its board of directors names as wilful defaulters, thereby reducing its credit rating and consequently, compromising its ability to raise any further finance. Pursuant to the declaration of NPA by any of its 26 lenders, its account would stand classified as NPA by other lenders as well and would also adversely affect its other group companies which have availed the one-time restructuring (OTR) facility, it told the apex court.

FRL had missed the due date for payment of Rs 3,494.56 crore to banks and lenders as it could not sell assets due to its ongoing litigation with Amazon, impacting its monetisation plans. The company had last year entered into a one-time restructuring scheme for Covid-19-hit companies with a consortium of banks and lenders and was to discharge “an aggregate amount of Rs 3,494.56 crore” on or before December 31, 2021.

The notices have been erroneously issued despite FRL having “undeniably established its bona fide intent to adhere to the timelines prescribed in the Framework Agreement” and also explained to its all the lenders about the restraint orders passed in arbitration and other related proceedings initiated by Amazon, it stated.

FRL said that the banks had extended the timeline for monetisation of the small format stores and had also waived their rights to declare it as defaulter, but later default notices were issued contrary to agreements arrived at on January 1. Such action of lenders being “unreasonable, arbitrary and without any justification or reasoning” would compromise its “very existence let alone severely hamper its right to carry on trade and business, given the following consequences that could ensure pursuant to the event of default notices”, FRL said.

“Despite having acknowledged the fact that FRL’s inability to monetise the small format stores was on account of events outside its reasonable control and despite having accordingly waived their right to declare FRL’s inability to do so as an “event of default”, the lenders have issued default notices dated January 5, January 11 and January 15, threatening initiation of insolvency proceedings and other remedies, including declaring FRL’s account as a non-performing asset, the petition stated.

It had availed loan facilities for its operations from different banks and these facilities were secured by way of a charge on FRL’s tangible movable fixed assets as well as its current assets. Besides, FRL’s promoters Kishore Biyani, Rakesh Biyani and Vivek Biyani had stood as personal guarantors for the loans, it added.

The Supreme Court, on January 11, had reserved its order on Future Retail’s plea seeking nod to go ahead with the regulatory approvals for its Rs 24,713-crore merger deal with Reliance Retail.

The spat between Future Group and Amazon has been on since October 25, 2020, when the Singapore’s EA passed an interim order restraining FRL from going ahead with its deal with Reliance Retail. The two sides have been embroiled in a legal battle over Future Retail’s move to sell its retail assets to Reliance Retail for Rs 24,500 crore. Amazon, which had acquired an indirect minority stake in Future Group in 2019 for Rs 1,400 crore, has alleged that Future’s sale of its retail, wholesale, logistics and warehousing businesses to Reliance Retail breached its pre-existing contract, which included a right of the first offer and a non-compete clause.

Amazon is opposing the Reliance Retail deal saying its investment in Future Coupons grants it a right to oppose sale of Future Retail assets to competitors.

The CCI had in December had suspended its approval of Amazon’s 2019 deal with Future, denting Amazon’s attempts to block the sale of Future’s Retail assets to Reliance Retail.