Amazon is planning to approach the Delhi High Court and the National Company Law Appellate Tribunal (NCLAT), questioning the change in the lease structure of the stores of Future Retail Ltd (FRL) and the role of the company’s independent directors in it, two industry executives said.
Reliance Industries has seized control over the sites of 300-odd large-format stores of the Future Group and has been shuttering them in the last few days, for alleged non-payments of rents to Mumbai conglomerate. These include 200 sites where FRL’s hypermarket chain, Big Bazaar, used to operate. There are also 100-odd locations that housed the outlets of Central and Brand Factory, the fashion stores owned by Future Lifestyle Fashions.
Amazon is likely to file new applications in the Delhi High Court and the NCLAT against FRL for agreeing to change the lease agreement undertaken 12-15 months back, which allowed Reliance to become the lessee and sub-lease the location to FRL, the two industry executives said. The change in agreement now allows Reliance to take over these store locations, citing that FRL has defaulted on rent. They said the petition is also likely to question the role of the independent directors of FRL in allowing the change to the lease structure when the matter was already in court.
Debt-laden Future Group had in 2020 agreed to sell its retail assets to Reliance Retail, a unit of Reliance Industries, in an almost ₹25,000 crore deal. Amazon challenged it at various fora, alleging that the deal was in violation of an investment agreement it signed in 2019 with a promoter firm of FRL. A Singapore arbitration body has stayed the Future-Reliance deal until it gave a final order, and the dispute is also being heard by Indian courts.
Emails sent to Amazon, Reliance Industries and the Future Group remained unanswered at press time Sunday.
Over the weekend, Reliance shuttered hundreds of Future Group stores in several cities and removed their signage as a stock-taking process is underway to rebrand those stores as Reliance outlets in the coming days or weeks, people in the know said. The move has also hampered Big Bazaar online deliveries, they said. On Sunday night, Big Bazaar’s website displayed a message that said “We are upgrading our website”.
Similar kind of lease agreements were also there for the fashion formats, Central and Brand, allowing Reliance to take control of those locations as well. The Future Group had some of the most prime retail locations, being an early entrant into the market.
Most lenders have classified FRL’s debt of ₹17,000 crore as non-performing assets, and that has prompted Reliance’s latest move, the people said. “Reliance said since FRL is an NPA, any lender could invoke the IBC (Insolvency and Bankruptcy Code) and take possession of the assets,” said one of them familiar with the development. “So, it is a pre-emptive move on part of Reliance, and it is to ensure that the (Future-Reliance) deal goes through and to prevent a takeover by any lender.”
The move will also help save around 30,000 jobs, with Reliance offering employment to Future Group employees without any scrutiny of their background, performance and or interview, another executive said.
