The National Company Law Tribunal (NCLT) in Mumbai has provided significant relief to Future Lifestyle Fashions Limited, a key player in the Kishore Biyani-led group currently undergoing corporate insolvency resolution. The tribunal dismissed a plea by Mohan Clothing Company Private Limited, a lessor seeking the return of over 11,696 unsold fashion items from Future Lifestyle’s stores.
The bench, comprising Judicial member Kuldip Kumar Kareer and Technical member Anil Raj Chellan, noted that while the goods were indeed supplied by Mohan Clothing, the ongoing insolvency process imposes a moratorium that prevents the recovery of property from the corporate debtor, Future Lifestyle.
Mohan Clothing, a long-time supplier of apparel to Future Group, had supplied merchandise under the “sale or return” model. However, Future Lifestyle, which operates popular retail chains like Central and Brand Factory, did not return the unsold inventory despite multiple legal notices. Mohan Clothing cited a Memorandum of Understanding (MoU) to support its claim, but the tribunal found that the lack of key signatures rendered the MoU invalid.
The tribunal emphasized that the primary goal of the moratorium under Section 14 of the Insolvency and Bankruptcy Code (IBC) is to maintain the corporate debtor as a going concern during the resolution process. The NCLT ruled that returning the goods would undermine this objective and upheld the protection of the goods under the moratorium.
Despite rejecting the plea for the return of the unsold merchandise, the tribunal instructed the resolution professional to expedite the verification of Mohan Clothing’s pending claim of over ₹8 crore. The tribunal also stated that Mohan Clothing could seek compensation for the sold goods after the insolvency commencement date and potentially reclaim the unsold items after the conclusion of the CIRP period, depending on legal outcomes.
This decision marks another critical juncture in the Future Group’s ongoing struggles, following similar insolvency proceedings for its other entities, including Future Retail and Future Enterprises.