HomeBusinessFuture Retail-Reliance deal: Big win for Amazon in SC. What’s next

Future Retail-Reliance deal: Big win for Amazon in SC. What’s next

NEW DELHI: In a big victory for e-commerce giant Amazon, the Supreme Court on Friday upheld Singapore’s Emergency Arbitrator (EA) award restraining a deal between Future Retail Ltd and Reliance Retail.
Amazon and Future Retail have been engaged in a bitter legal fight over the later’s Rs 24,713 crore asset sale deal with Reliance Retail.
The decision comes as a major blow to the Kishore Biyani-led Future Retail as questions remain regarding the future of the deal.
According to reports, the Singapore International Arbitration Centre (SIAC) — which pronounced the initial award in the case — has concluded the final hearing over Amazon’s plea and a final judgement in the matter is awaited.
What was the deal
In August last year, Reliance Retail Ventures Ltd (RRVL) had said it will acquire the retail and wholesale business, and the logistics and warehousing business of Future Group for Rs 24,713 crore.
The scheme of arrangement entails the consolidation of Future Group’s retail and wholesale assets into one entity Future Enterprises Ltd and then transferring it to Reliance Retail.
However, Amazon objected to the deal.
Why Amazon contested the deal
Amazon is an investor in Future Coupons, which in turn is a shareholder in Future Retail.
In August 2019, Amazon had agreed to purchase 49 per cent of one of Future’s unlisted firms, Future Coupons Ltd (which owns 7.3 per cent equity in BSE-listed Future Retail Ltd through convertible warrants), with the right to buy into the flagship Future Retail after a period of three to 10 years.
After Future Retail entered into agreement with Reliance, Amazon contended was that it has invested Rs 1,431 crore in FCPL on the clear understanding that FRL would be the sole vehicle for its retail business and its retail assets would not be alienated without consent and never to a ‘restricted person’.
Subsequently, Amazon took FRL into EA before the SIAC over alleged breach of contract by the Future group.
The SIAC passed an interim award in favour of the US-e-commerce major that barred Future Retail from taking any step to dispose of or encumber its assets or issuing any securities to secure any funding from a restricted party.
In India, it had first filed a plea before the high court (single judge) for enforcement of the October 25, 2020, EA award by SIAC restraining FRL from going ahead with the deal with Reliance Retail.
However, even though Amazon scored a win today, it faces another challenge from the Competition Commission of India (CCI) which recently accused it of concealing facts when it sought approval for the 2019 investment in the Future unit, according to a report by news agency Reuters.
What’s next
A legal expert told news agency PTI that Future Retail is expected to file a review petition against the order pronounced by the Supreme Court and an appeal under section 37 (20) of the Arbitration Act against the EA’s interim award before the Delhi high court to obtain appropriate relief to pursue its deal with Reliance.
According to him, the judgement does not deal with the merits of the dispute between FRL and Amazon. It has dealt with the questions of law which are academic in nature.
Future Retail has contended that the deal is very important to save its business as Reliance will not only take over its stores but also all its liabilities.
In a statement, the company said that it intends to pursue “all available avenues” to conclude the deal and protect the interests of its stakeholders and workforce.
The Future Group company noted that the Arbitral Tribunal at the SIAC has concluded hearings on the questions that whether the interim award of the EA should continue and whether FRL is at all a party in the arbitration proceedings.
It is still trying to convince the arbitration panel to revoke its interim order.
The deal’s failure is likely to push Future Retail towards liquidation and impact livelihoods of 50,000 employees and 6,000 small- and medium-sized vendors.
Future Retail and Amazon will have to fight it out in Singapore court.
(With inputs from agencies)

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