Amazon.com Inc. has sent a legal notice to Future Group led by Kishore Biyani regarding its ₹Sale of assets of 24,700 crore to Reliance Retail Ventures Ltd, calling it a breach of a 2019 agreement between Amazon and Future.
In a notice sent Monday, the multinational online retailer said the sale violated the non-compete agreement and several related clauses mentioned in an August 2019 contract through which it had purchased a 49% stake in Future Coupons, a subsidiary of Future Group.
Three people familiar with the development confirmed the development, adding that Amazon has also kept both the stock market regulator and the stock exchanges informed.
“Yes, we have initiated procedures to enforce our contractual rights. It will not be appropriate for us to provide further details related to the matter, as the matter is sub judice, “said a spokesman for Amazon Inc.
An email inquiry sent to Future Group went unanswered.
“Future Group was supposed to take formal approval from Amazon before entering into any kind of agreement with any entity directly or indirectly associated with the control / management of any kind of retail business,” said the first person, who knows the position of Amazon.
“A clause between Future Group and Amazon clearly stated that Future Group could not sell any assets within 10 years of the agreement with Amazon. The right of first refusal (RoFR) was in Biyani’s own shares, “added this person.
“Future Group had formally approached Amazon first, asking it to buy Future Group’s retail business. But, technically, it is not possible. Amazon was well informed about the negotiation process with Reliance Retail Ventures, a second person said.
“Only after extensive discussions with Amazon was an agreement reached with Reliance Retail Ventures,” the person added.
“Furthermore, the agreement with Amazon clearly establishes that the right of first refusal can be exercised only after three years and before the 10 years of the agreement with Amazon. So technically, there may not be much force in Amazon’s legal argument. Future Group is in constant dialogue with Amazon and the issue should be resolved within the next week, “the person added.
In August, Reliance Retail Ventures said it will acquire the retail, wholesale and logistics business of the indebted Future Group.
Amazon acquired a 49% stake in Future Coupons in August of last year.
As part of the investment, it obtained the rights to acquire Biyani’s promoter group’s stake in Future Retail at a future date.
“As part of the agreement, Amazon has been granted a purchase option,” read a Future Retail trade presentation.
“This purchase option allows Amazon to acquire all or part of the promoters’ equity interest in Future Retail Ltd, and can be exercised between the third and the tenth year, in certain circumstances, subject to applicable law,” added the Future Retail exchange presentation. .
With the acquisition of the Future Group retail business, Reliance Retail has become one of the biggest competitors to Flipkart, owned by Amazon and Walmart Inc. in India.
As part of the agreement between Future Group and Amazon last year, the promoters agreed to certain transfer restrictions on their shares in Future Retail, including restrictions not to transfer shares to specific individuals, a right of first refusal in favor of Amazon, etc. in.
Madhurima Nandy and Suneera Tandon contributed to the story.
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