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Future builds Rs 1,000-cr war chest in arbitration battle with Amazon

In order to factor in all present and future liabilities in its arbitration tussle with global e-commerce major Amazon, Kishore Biyani's Future Group is learnt to have set aside around Rs 1,000 crore in an escrow account as a safeguard measure.

Written by Aashish Aryan , Sandeep Singh | New Delhi | Updated: October 31, 2020 4:51:25 pm
Future builds Rs 1,000-cr war chest in arbitration battle with AmazonThe amount in the escrow account, which could later be raised to Rs 1,500 crore, is equal to the total investment made by Amazon in Future Coupons, the promoter group entity of Future Retail, the sources said.

In order to factor in all present and future liabilities in its arbitration tussle with global e-commerce major Amazon, Kishore Biyani’s Future Group is learnt to have set aside around Rs 1,000 crore in an escrow account as a safeguard measure, sources privy to the development told The Indian Express.

The amount in the escrow account, which could later be raised to Rs 1,500 crore, is equal to the total investment made by Amazon in Future Coupons, the promoter group entity of Future Retail, the sources said. The Future Group did not respond to a detailed questionnaire seeking its response on the development.

The company’s top management is also of the view that the deal with Reliance Retail Ventures, a unit of Mukesh Ambani-owned Reliance Industries, will go ahead as planned and will be completed as per schedule, one of the persons said.

“The understanding within the company is that even if Future Group loses the arbitration, it would have to pay a maximum of monetary damages. And we are ready for that. That is the idea behind keeping the money aside in the escrow account,” the person quoted above said.

Explained | What is next in Future-Reliance vs Amazon?

Legal sources, however, said that if Future decided to go ahead with the deal, it would leave Amazon with no option but to either approach an Indian court with a plea seeking a stay on the deal, or to approach the Singapore International Arbitration Centre (SIAC) for an early hearing in the matter.

“The interim order passed by the emergency Arbitrator of SIAC is not per se enforceable by Indian courts, although it holds persuasive value and parties are expected to abide by it. In order to enforce the interim order in India, Amazon can apply for interim reliefs under Section 9 of the Arbitration and Conciliation Act from Indian courts. In the event of breach of an interim order, there can be damages that can be claimed by them (Amazon),” Amit Jajoo, partner at IndusLaw, said.

Section 9 of the Arbitration and Conciliation Act provides the option to parties to ask the court to pass orders to preserve the condition of the goods or to take interim custody of the same until a final order is passed in the case.

On August 29, Future Retail had announced that it would “sell by way of a slump sale the retail and wholesale business” of its supermarket chain Big Bazaar, premium food supply unit Foodhall, and fashion and clothes supermart Brand Factory’s retail and wholesale units, to Reliance Retail.

The deal had run afoul of Amazon, that had bought a 49 per cent stake in Future Coupons, which translates to roughly 3.58 per cent in Future Retail. In its objections, Amazon had said that the deal, apart from being a violation of a non-compete clause and a right-of-first-refusal pact, was also denying it the “call” option, which was part of the agreement that it had with Future Coupons.

This provision, Amazon has claimed, enabled it to exercise the option of acquiring all or part of Future Retail’s shareholding in the company, within three to 10 years of the agreement. It said the deal also required Future Group to inform Amazon before entering into any sale agreement with third parties.

After the Future Retail-Reliance Retail deal, Amazon had taken Future Coupons, Future Retail, and other promoter group entities to the SIAC, from where it had, on October 25, obtained a favourable interim stay on the deal.

An emergency arbitrator of the SIAC had in his order asked Future Retail, Future Coupons, and the parent company Future Group “not to take any steps in furtherance to the Board Resolution of August 29”.

While the order was welcomed by Amazon India, Future Retail and Reliance Retail Ventures have so far maintained they intended to go ahead with the deal as planned.

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