With the threat of insolvency proceedings hanging over its head, Monday will be a crucial day for Future Retail Ltd (FRL) as the Supreme Court hears a petition on whether to classify the company as a non-performing asset (NPA) or not.

FRL will be looking for a relief from the top court as banks can invoke bankruptcy proceedings since it has not been able to pay a sum of Rs 3,500 crore by the deadline of January 29.

Any such move may complicate the Kishore Biyani company's efforts to sell its retail & wholesale assets to Reliance Retail or the small format stores. FRL had to pay a total amount of Rs 3,494.56 crore according to a one-time resolution plan to a consortium of banks on or before December 31.

The compamy could not complete its asset monetisation plans because Amazon had challenged the sale to Reliance Retail on the ground of a prior arrangement between Future and Amazon. This period ended on January 29.

Prior to this deadline, banks had issued three event of default notices warning the company of the initiation of insolvency proceedings and the account being declared as a non-performing asset (NPA).

FRL was looking to sell its small format stores but could not do so because of the ongoing litigation with Amazon.

FRL approached the Supreme Court requesting it to set aside the event of default notices, restrain lenders from declaring it as NPA and direct the banks to extend the cure or review period of 30 days.

In its petition, FRL claimed that banks had waived their right to declare its inability to sell the small format stores as an event of default, but still went ahead with the three notices.

While lenders reportedly have an exposure of little over Rs 6,000 crore to FRL, they will have to set aside around 25 per cent of this amount in the event of a default. Though the account has technically become a bad loan, the ball now lies with the Supreme Court on whether it will provide any relief to FRL.

In April last year, the RBI panel under renowned banker K.V. Kamath had approved Future Retail's debt recast plan under the apex bank's resolution framework for Covid-19 related stress.

The FRL debt included short-term non-fund based bank facilities, long-term fund based bank facilities and long-term term loans.