Amazon may make RIL party to Future Retail lawsuit this week

Amazon.com Inc. is considering impleading Reliance Industries Ltd (RIL) in the legal battle with Future Group after RIL seized control of 950-odd Big Bazaar stores, a move the e-commerce giant claims will prevent it from keeping Future Retail Ltd afloat and lenders from recovering their dues, two people with knowledge of the development said.

Losing control of the stores has had a substantial negative impact on Future Retail, one of the two people said, adding that the Delhi high court, too, asked counsels of Amazon and Future last week: “why can’t RIL be made a party to the case?”

RIL is likely to be made a party to the case in the Delhi high court, which will hear the matter this week, the person said.

Big Bazaar is a supermarket chain and the primary source of income for the beleaguered Future Retail.

The 28 lenders to Future Group have the right to first charge on the stocks, inventory, fixtures, billing systems, and all other equipment in the Big Bazaar stores under RIL’s control.

Future Retail is unable to generate enough income to repay lenders after RIL took over the stores, the first person said.

Amazon’s basis for making RIL a party to the litigation is that the e-commerce giant is unable to facilitate sales of Big Bazaar products on its online platform, and Future Retail’s value has eroded to such an extent that it is difficult for Amazon to find a buyer to help keep Future Retail afloat and repay dues.

Amazon’s plea to the court is to restore the ownership of the 950-odd Big Bazaar stores so that Future Retail can carry on with its business, repay banks and find an appropriate buyer.

Amazon favours making RIL a party to the ongoing case in the Delhi high court, Singapore International Arbitration Centre (SIAC) and the Supreme Court of India, the first person said.

Emails sent to Amazon, Future, RIL and top banks of Future remained unanswered till press time.

In August 2020, RIL proposed to buy Future Retail’s assets for ₹24,713 crore on a slump sale basis. RIL agreed to pay Future’s lenders over ₹12,000 crore from the deal amount.

However, the deal was challenged by Amazon, first at SIAC and subsequently in the Supreme Court of India since Future Group is barred from entering into any retail business deal with 30-odd entities, including RIL, according to a contract signed between Amazon and Future Retail’s promoter Future Coupons Pvt. Ltd.

In an interim arbitration order, SIAC blocked the transfer of any assets from Future Retail to RIL, but a final verdict on the matter is yet to be announced by SIAC and the Supreme Court.

“RIL has lowered the offer value for Future Retail from $3.2 billion to around $2 billion. The creditors have been asked to take a massive haircut, and now they are asked to take around ₹7,000 crore instead of ₹12,500 crore under the earlier offer. This is the reason why the secured creditors have rejected the scheme of arrangement involved in the asset deal with RIL,” said the first person.

Recently, Future Retail’s lead lender, Bank of India, filed an application for initiating insolvency proceedings against Future Retail.

The people cited above said Future Retail’s case may not be admitted in a bankruptcy court as a large part of the assets of Future Retail (Big Bazaar stores) is under dispute, and there would be hardly any asset to auction and sell to any potential investor even if the case is admitted to a bankruptcy court.Amazon is also likely to challenge the admission of Future Retail under the corporate insolvency resolution process, the two people said.