InvestorQ : What are the implications of Reliance taking over the stores of Future group and what would be the next steps?
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What are the implications of Reliance taking over the stores of Future group and what would be the next steps?

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Tisha Malhotra answered.
2 months ago
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For now, there are different noises coming in. For instance, Future group has filed with the exchange that they will get back the stores from Reliance. Obviously, nobody is believing that Future was so naïve and was unaware of the possibility. Regarding Amazon, they may now have limited legal options available in front of them since this is a takeover against operational dues. The question is about RIL getting precedence over banks and that is why now Amazon has written to RBI to instruct banks to declare Future group loans as NPAs.

This would most likely put pressure on banks as it looks like the banks may eventually get nothing out of the deal. RRVL has been playing the cards close to their chest so not much is known about the status of the merger deal and the loans by banks. It now looks like Amazon may have to give up on its dreams of taking a controlling stake in the Future group at a later date when FDI policy permitted. But there are some larger regulatory and legal questions.

Even if Reliance was justified in what they did, what about rights of banks? Why are the banks, RBI and the courts silent? More than anything, this raises serious questions about the enforcement of agreements in India and sanctity of legal contracts and court orders. FDI in India has been spasmodic due to loopholes in judicial system. Legal contracts can be loose and enforcement dubious. Indian policymakers, if they want big global investments in India, must ensure a solid law enforcement mechanism. That is still the major missing link.

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