Updated: December 21, 2020 5:23:31 pm
After Future’s deal with Reliance, Amazon said the deal was a violation of a non-compete clause and a preemptive right pact it had signed with Future Group.
On Monday, the Delhi High Court refused to grant Future Retail Ltd’s (FRL) request for an interim injunction preventing Amazon from writing to SEBI, CCI and other authorities about the arbitration order against the asset sale.
The LRF led by Kishore Biyani had in November accused Amazon of adopting a media strategy of “making every development reported and become a line of communication with the stock exchanges” in relation to Amazon’s arbitration proceedings. Future Coupons in Singapore.
The court also qualified the FRL resolution approving the transaction with Reliance Retail as valid.
What is the Future-Reliance Agreement?
In August this year, Biyani Future Group entered into an agreement with Reliance Retail, a subsidiary of the umbrella group Reliance Industries Limited (RIL), to sell its retail, wholesale, logistics and warehousing to the latter. As part of the deal, Future Retail will sell its Big Bazaar supermarket chain, Foodhall premium food supply unit, and Brand Factory’s fashion and apparel retail and 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 was seen as an offer by the group to reduce it. Before the August sale to Reliance, Biyani had been courting various business groups to sell shares in various Future Group companies in an attempt to reduce debt, but had not been very successful.
Following the national shutdown in March, to contain the spread of Covid-19, Future Group’s retail business had come under further stress. Sales in many of its premium food retail branches, Foodhall and Brand Factory, nearly came to a halt at the shutdown, which lasted more than two months.
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Why is Amazon opposed to the Future-Reliance deal?
Last year, Biyani Future Retail signed another deal with global e-commerce giant Amazon. As part of the deal, Amazon had acquired a 49 percent stake in Future Coupons, the developer of Future Retail in a deal worth nearly Rs 2 billion.
While Future Retail could place its products on Amazon’s online marketplace, the two also agreed that Future Retails products would also be part of Amazon’s new plan, which was intended to deliver products to select cities within two hours afterward. to a client. order them. Future Retails has more than 1,500 stores across India.
The deal had also given Amazon a ‘buy-in’ option, allowing it to exercise the option to acquire all or part of the promoter of Future Coupon, Future Retail’s equity stake in the company, within 3-10 years thereafter. to the agreement.
After Future’s deal with Reliance, Amazon said the deal was a violation of a non-compete clause and a preemptive right pact it had signed with Future Group. The agreement also required Future Group to inform Amazon before entering into any sales agreements with third parties.
For its part, Future Group has said that it had not sold any stake in the company and was simply selling its assets and therefore had not violated any terms of the contract.
In this regard, 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 agreement as there was an order of provisional suspension. in the same.
When asking agencies to take note of the stay order, it emerged that Amazon said that if the deal went through, it would show companies around the world that orders from reputable courts such as the International Arbitration Center for Singapore (SIAC) were not respected in India.
Why did FRL relocate the High Court from Delhi?
The company had filed a petition in Delhi High Court seeking proper redress against Amazon.com’s NV Investment Holdings to prevent the latter from interfering with its deal with Reliance Retail Ventures Limited (RRVL) of Reliance Industries Limited (RIL) . In its letter to the Corporate Services Department of the Bombay Stock Exchange (BSE), the listing department of the National Stock Exchange, as well as the Singapore Stock Exchange, Trading Limited, Future Retail said that the application had been filed in superior court to prevent Amazon from “misusing” the provisional order approved by SIAC.
What does the ruling of the Delhi High Court mean?
Although the order says that statutory authorities and regulators can have an opinion on the agreement in accordance with the law, it also considered valid the award made by the arbitrator. Therefore, since Future Retail did not prevent Amazon from presenting itself to the various government and regulatory bodies, the e-commerce giant will be able to present its case, mainly on the basis of the arbitration award. However, it is also noteworthy that the antitrust regulator, the 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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