In a huge win for e-commerce giant Amazon in the tussle against Future Retail, the Supreme Court on Friday held that Singapore's Emergency Arbitrator (EA) order is enforceable. The apex court pronounced the verdict on Amazon's pleas against the merger of Future Retail Ltd (FRL) with Reliance Retail and held the EA award, restraining the Rs 24,731 crore deal.
A Bench of Justices RF Nariman and BR Gavai had reserved the verdict on July 29 after hearing a battery of lawyers including senior advocates Harish Salve and Gopal Subramanium, appearing for FRL and Amazon respectively.
The judgement addressed the limited issue of enforceability of the Emergency Arbitrator’s order and it does not address not the merits of the disputes.
FRL is advised that it has remedies available in the law, which it will exercise. The Arbitral Tribunal has concluded hearings on the questions -- (i) whether the interim award of the EA should continue and (ii) whether FRL is at all a party in the Arbitration proceedings. The decision of Arbitral Tribunal is awaited. FRL intends to pursue all available avenues to conclude the deal to protect the interests of its stakeholders and workforce.
Amazon has released a statement saying, “We welcome the verdict of the Hon’ble Supreme Court of India upholding the Emergency Arbitrator’s award. We hope that this will hasten a resolution of this dispute with Future Group.”
The verdict comes nearly a year after Reliance Retail announced that it will be buying Future Group's retail, wholesale, logistics and warehousing business by way of a slump sale for Rs 24,713 crore in August 2020.
In August 2019, Amazon had picked up a 49 percent stake in Future Coupons for Rs 1,500 crore. Future Coupons held a 9.8 percent stake in FRL and Amazon has a 49 percent stake in Future Coupons. So this gave Amazon an indirect holding of 4.82 percent in FRL. The deal also gave Amazon a call option, allowing it to buy a partial or controlling stake in Future Retail, starting three years from the deal, up to 10 years, subject to prevalent FDI norms at the time.
Having an interest in Future Retail, Amazon took objection to the deal and approached the Singapore International Arbitration Center (SIAC) in October 2020. It won an interim award in its favour with the Emergency Arbitrator halting the Future Retail-Reliance Retail deal.
Following this, Future Retail moved the Delhi High Court alleging interference by Amazon in the deal.
Amazon had also argued that its deal with Future Coupons barred the company from entering into share sale agreements with 15 companies including Reliance, Walmart, Google, Paytm, Swiggy, Alibaba, SoftBank, Zomato among others.
At the SIAC, and through the Delhi HC hearings, FRL maintained that it was not a party to the deal with Future Coupons and Amazon. The legal tussle in the Delhi High Court continued with a single-judge bench refusing to stay the deal and the order was challenged by Amazon in the High Court. Thereafter, a single bench ordered a status quo but it was contested by Future Retail, with a division bench lifting the status quo.
Meanwhile, the deal received a nod from CCI, SEBI, and the stock exchanges.
Subsequently, Amazon moved the Supreme Court alleging Future Retail was in breach of contract by entering into a deal with Reliance Retail. Following this, a three-member panel at the SIAC, too, heard arguments from Future Retail and Amazon in July.
Meanwhile, the lenders of Future Group companies Future Retail, Future Enterprises, Future Lifestyle Retail implemented a restructuring plan in April 2021 for the loans of these companies under RBI’s August 6, 2020, circular on Resolution Framework for COVID-related Stress. The scheme has received KV Kamath Committee’s nod and while lenders, too, have finalized the restructuring plan. This is being looked like a backup plan since the deal is currently embroiled in a legal tussle.
Some legal experts have pointed out that the judgement has dealt with questions of law that are academic in nature, rather than with the points of contention between FRL and Amazon.
FRL is expected to file a special leave petition against the order of J Midha before the Supreme court and an appeal under section 37(2) of the Arbitration act against the EA’s interim award before the Delhi High Court and obtain appropriate reliefs to pursue the scheme.
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