Amazon faces uphill battle with Future Retail insolvency, say legal experts

MUMBAI : Amazon’s efforts to oppose Bank of India’s move to initiate corporate insolvency resolution proceedings against debt-laden Future Retail Ltd will be an uphill task, experts said.

The National Company Law Tribunal (NCLT) has heard the intervention application by Amazon opposing the insolvency proceedings against the company, which owes around 15,000 crore to creditors led by Bank of India.

In its application, the American e-commerce major has argued that the 26 banks led by BoI have colluded with FRL to deny Amazon its rights, and has urged NCLT to not let the banks dispose of the remaining assets of FRL to recoup their investments.

Amazon’s attempts to intervene will delay the entire resolution process, and if the insolvency case gets admitted there will be a moratorium that will halt the arbitration proceedings currently underway in the Singapore International Arbitration Center, said experts.

“Amazon, as a shareholder will not have a say in the insolvency process. Only financial creditors can attend the committee of creditors’ meetings and if the operational creditor has a claim of more than 10% debt then he will be allowed to attend the meetings. Amazon is neither a financial creditor nor operational creditor, but just a shareholder having a big stake in the company. This does not entity it to become a member of the committee of creditors, “Ashish Pyasi, associate partner, Dhir and Dhir Associates, said.

“As the corporate debtor is run by a different management, Amazon does not have a say or authority to deal with the assets and it will not be able to do anything unless it takes control over the management. However, after the initiation of the insolvency proceedings, taking over the management will also not help, “he added.

In its plea before the NCLT, Amazon said the Future Group did not honor the Singapore Emergency Arbitrator’s award of 25 October, 2020. Amazon had moved the Emergency Arbitrator in Singapore for alleged breach of contract by Future Retail. The counsel for Amazon said the Delhi High court had also upheld the tribunal’s order. “Unless a competent authority sets aside the EA order, Future group is bound by the order,” Amazon said during the NCLT hearing.

In August 2021, the apex court, too, had upheld the EA’s award as valid and enforceable under the Indian law. However, Future did not enforce the award, which led to a protracted legal battle.

“The moment the corporate insolvency process is admitted before the NCLT, all proceedings in every court will have to be stayed,” said Ramesh Vaidyanathan, managing partner, Advaya Legal.

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