The Delhi High Court Monday declined to grant Future Retail Ltd’s (FRL) plea for an interim injunction restraining Amazon from writing to SEBI, CCI and other authorities about the arbitral order against its asset sale.
The Kishore Biyani-led FRL had in November accused Amazon of adopting a media strategy of “having every development reported and converted into a line of communication with stock exchanges” regarding the Amazon-Future Coupons’ arbitration proceedings in Singapore.
The court also termed FRL’s resolution approving the transaction with Reliance Retail as valid.
What is the Future-Reliance deal?
In August this year, Biyani’s Future Group entered into an agreement with Reliance Retail, a subsidiary of the umbrella Reliance Industries Limited (RIL) group, to sell its retail, wholesale, logistics and warehousing to the latter. As a part of the deal, Future Retail will sell its supermarket chain Big Bazaar, premium food supply unit Foodhall and fashion and clothes supermart Brand Factory’s retail as well as wholesale units to Reliance Retail.
Future Group was under immense pressure from its lenders, led by the State Bank of India, to manage its debt, and the deal in seen as a bid by the group to cut down on the same. Before the August sale to Reliance, Biyani had been wooing several business groups to sell shares in several companies of Future Group in an attempt to cut down on the debt, but had not seen much success.
Following the nationwide lockdown in March, to contain the spread of Covid-19, the retail business of Future Group had come under more stress. Sales in many of its premium food sales arm Foodhall and Brand Factory had come to a near halt in the lockdown, which lasted more than two months.
Why is Amazon objecting to the Future-Reliance deal?
Last year, Biyani’s Future Retail had signed another deal with global e-commerce giant Amazon. As part of the deal, Amazon had acquired 49 per cent stake in Future Coupons, the promoter firm of Future Retail in a deal worth nearly Rs 2,000 crore.
While Future Retail would be able to place its products on Amazon’s online market place, the two had also agreed that the Future Retails products would also be a part of Amazon’s new plan, which intended to deliver products in select cities within two hours of a customer ordering them. Future Retails has more than 1,500 stores pan India.
The deal had also given Amazon a ‘call’ option, which enabled it to exercise the option of acquiring all or part of Future Coupon’s promoter, Future Retail’s shareholding in the company, within 3-10 years of the agreement.
After Future’s agreement with Reliance, Amazon said the deal was a violation of a non-compete clause and a right-of-first-refusal pact it had signed with the Future Group. The deal also required Future Group to inform Amazon before entering into any sale agreement with third parties.
On its part, the Future Group has said that it had not sold any stake in the company, and was merely selling its assets and had therefore not violated any terms of the contract.
Along these lines, Amazon also sent a letter to the Securities and Exchange Board of India (SEBI), the Bombay Stock Exchange and the National Stock Exchange (NSE) asking them not to approve the Future-Reliance deal as there was an interim stay order on the same.
Asking the agencies to take note of the stay order, Amazon is learnt to have said that if the deal went ahead, it would show companies across the world that orders by reputed tribunals such as the Singapore International Arbitration Centre (SIAC) were not respected in India.
Why did FRL move the Delhi High Court?
The company had moved a plea in the Delhi High Court seeking appropriate relief against Amazon.com’s NV Investment Holdings to stop the latter from interfering in its deal with Reliance Industries Limited’s (RIL) Reliance Retail Ventures Limited (RRVL). In its letter to the Department of Corporate Services of the Bombay Stock Exchange (BSE), the listing department of the National Stock Exchange as well as the Singapore Exchange Securities Trading Limited, Future Retail said the application had been moved before the high court to prevent Amazon from “misusing” the interim order passed by the SIAC.
What does the Delhi High Court’s ruling mean?
While the order says the statutory authorities and regulators can take a view on the deal in accordance with the law, it also held the award given by the arbitrator as valid. Therefore, given that Future Retail failed to stop Amazon from presenting itself to the various government bodies and regulators, the e-commerce giant will be allowed to make its case, mainly on the basis of the arbitration award. However, it is also noteworthy that the anti-trust regulator, Competition Commission of India, approved the sale of Future Group’s wholesale, retail, warehousing and logistics business to Reliance Retail last month.
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