The resolution process of Future Retail, currently undergoing bankruptcy proceedings, continues to be in limbo with the resolution professional (RP) locked in a battle with the erstwhile management over non-cooperation and critical information about the operations of the company not being available.
Following up on an earlier plea filed in March where the RP had alleged that current and former directors of the company had caused losses close to ₹15,000 crore to its creditors due to lack of adequate information, another affidavit was filed a few days back with more details about alleged ‘fraudulent trading’ by directors that include Future Group promoters Kishore Biyani and Rakesh Biyani.
The RP has been trying to get the former management of the company to provide information about transactions undertaken by the company, financial details, inventories lying with it, and other relevant data.
Correspondence between the RP and the erstwhile management shows that critical information pertaining to the company was stored with third parties but in a format that cannot be extracted. In one email the RP has written, “...it is difficult to comprehend why would any company and its promoter directors store information with third parties without adequate back up in a manner that it cannot be accessed when required.”
In some cases where information was available it was found to be of other group companies while that related to Future Retail was allegedly deleted.
- Also read: Future Lifestyle Insolvency: RP receives claims of ₹2,155.53 crore from financial creditors
Lapses and failures
Among the many lapses detailed by the RP are failure of the management to protect, store data and information of the company; maintaining fixed assets register; maintain and provide the balance sheets of the company; failure to segregate the data of the company from that of its subsidiaries, associates for the period prior to 2018 and changing its registered office immediately prior to the commencement of bankruptcy proceedings.
The RP has also said in his various affidavits with the National Company Law Tribunal that the former management attempted to migrate the data without maintaining a functional system, while laptops belonging to former employees did not contain any information or data about the company. The directors had also failed to safeguard the data and information in possession with employees.
A particular sticking point with the RP has been that the erstwhile management have not shared details of all the inventory in the stores owned by the company. The appeals have been filed by the RP under Section 66(2) of the IBC which mandates that the director should have known that there was no ‘reasonable prospect’ of avoiding the initiation of the CIRP and did not exercise due diligence in minimising the loss.
“’Fraud is the daughter of greed’ whereby such applications require a meticulous and holistic adjudication,” said Akshat Khetan, Founder of AU Corporate Advisory and Legal Services, who has been keenly watching the case.
“Resolution professionals should ensure that the process of wholesome resolution is not vitiated under the premise of such applications as the ultimate aim of IBC is maximisation of asset value of the corporate debtor,” he added.
The date for completion of the insolvency of Future Retail has been extended to August 17. No major company has bid for Future Retail though the process has been extended three times. Lenders are claiming dues of over ₹21,500 crore from the company.