By Nupur Aand and Abhirup Roi

MUMBAI, (Reuters) – Lenders to India’s Future Group turned down a $3.4 Billion deal to acquire its retail assets from Reliance Industries. This is despite the fact that the company has struggled to repay its debts since the COVID-19 epidemic.

A senior executive from a state-owned lender stated that “all secured lenders have voted against Reliance’s scheme of arrangement.”

The source stated that although initially, we assumed there were other options to increase recoveries. However, the matter has become entangled in legal matters and is now uncertain of its value.

Lenders rejected Future amid an ongoing legal battle by Amazon.com Inc (NASDAQ) in the United States. Future was accused of violating contracts through dealing with Reliance. Reliance is run by Mukesh Ambani, India’s richest man.

Future denied that it was involved in any wrongdoing. Future also stated it would file for bankruptcy if this deal fell through. This case is under review at multiple legal forums, including an arbitration panel based in Singapore.

Reliance, which was in the dark about the dispute and took over hundreds of Future shops in February. They cited non-payment as the reason for taking control. Future had also assumed many of its leases.

Bankers were alarmed and some have started debt collection proceedings against the bank. Future Group has over $4 billion of debt. Therefore, lenders began to classify the loans as Non-Performing Assets (NPA) and have since been able to recover that money.

Banks that are secured creditors usually have the highest priority in debt resolution. Reliance on regulatory filings in this instance has guaranteed bondholders full recovery raising eyebrows among lenders.

Another banker stated that the bondholders were receiving preferential treatment, and this isn’t something the bankers like,” adding that it was yet another reason to reject the deal.

Sources say that lenders are preparing for long and difficult battles in bankruptcy court, which could take many years.

Future and Reliance have not responded to inquiries for comment. (The headline has been corrected to read “billion.”