An Indian court agreed to send Future Retail Ltd. into bankruptcy, allowing the creditors to find a new owner for the beleaguered retailer that once operated the largest chain of department stores across the country and was the prized trophy for two retail sector giants.
The National Company Law Tribunal on Wednesday gave its verdict on a petition by Bank of India to start bankruptcy resolution process for the cash-strapped retailer. It dismissed allegations from the local unit of Amazon.com Inc. that Future Retail’s lenders were colluding with its founders to push the firm into insolvency.
The court also appointed an administrator to take over the management at Future Retail.
The court ruling gives Mukesh Ambani-led Reliance Industries Ltd. an edge over Jeff Bezos’s Amazon in the fight for Indian retailer’s assets, as the two billionaire-led firms tussle to dominate the market with almost 1.4 billion consumers.
Reliance can have another go at Future Retail under the court-overseen insolvency process, after its 2020 deal to buy these assets for $3.4 billion was thwarted by the
American e-commerce giant through legal challenges across courtrooms in India and Singapore in the past two years.
While Reliance group is the country’s biggest retailer, there is no certainty of who will win an insolvent firm through the court-led resolution process. Indian laws, however, curb foreign direct investment in retail companies, which rules out the possibility of Amazon becoming the future owner of Future Retail.
According to India’s bankruptcy law, a moratorium on all money recovery cases against Future Retail will now kick in. The ruling effectively stops Amazon from pursuing arbitration case in Singapore against Future Retail, though cases against Future Retail’s founder Kishore Biyani and his other companies can continue.
Facing a severe cash crunch during a hard lockdown in India 2020 amid the COVID-19 pandemic, Future Retail agreed to sell most of its assets to Reliance.
Amazon later said the deal flouted its earlier investment contract with another Future Group firm and sought legal intervention. Courts halted the takeover deal that was eventually scrapped in April this year.
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