Future Retail lenders are concerned that the Deloitte-backed resolution professional, Vijaykumar Iyer, has yet not filed an application with the bankruptcy court to liquidate the company even after five weeks have elapsed since they voted against the sole revival plan.
Lenders have sought an explanation from Iyer for his failure to file an application but if it is not satisfactory, they may seek legal advice on the matter, said people involved in the resolution process.
The development comes within a fortnight of the lenders issuing a legal notice to Iyer for putting on the block inventories of Future Retail without seeking their approval. At a voting held on September 30, majority lenders rejected Space Mantra’s ‘550-crore plan for Kishore Biyani-promoted Future Retail. Despite five weeks having passed, Iyer has not filed an application for liquidation before the National Company Law Tribunal (NCLT).
For a plan to be approved, 66% of lenders should vote in favour. In the case of Future Retail, only 42% voted in favour.
As per the Insolvency and Bankruptcy Board of India’s (IBBI) regulations, the RP should immediately file an application with the NCLT based on the outcome of the voting.
Soon after the voting on Future Retail concluded, the RP had proposed to restart the sale process, but most lenders rejected this proposal, as reported by ET on October 1. Lenders are also in the process of identifying a liquidator. The IBBI rule stipulates an RP cannot be the liquidator for the same company.
The RP, who declined to comment to ET, has admitted ‘28,114 crore claims from trader creditors, lenders and employees.
Already, lenders were surprised that the RP did not consult them before putting on the block inventories of Future Retail, particularly after they rejected Space Mantra’s plan, the people cited above said.
On October 17, the RP invited offers for the inventories of FRL lying in certain identified stores and warehouses across various locations in India, the notice stated. Responding to this, on October 23, Saraf and Partners, the legal counsel of lenders, issued a notice to the RP asking him to withdraw the sale notice immediately.
“The assets of a company can be sold either under a resolution plan approved by lenders or under a liquidation process. There is no provision to sell assets after a plan is rejected but before the liquidation process is initiated,” said a legal expert.
Even before the lenders had begun voting on the resolution plan, HDFC Bank in a letter dated August 29 to member banks, had pointed out that the RP failed in his duty to maximise value for financial creditors and that Space Mantra’s plan ‘suffers from gross illegalities’. The letter stated that RP had not provided critical information to the committee of creditors to allow them to make an informed commercial decision on the resolution plan.
