India’s Future Retail Ltd (FRL) will go into liquidation if its deal to sell assets to Reliance Industries fails, the group told a Singaporean arbitrator while arguing against Amazon.com Inc’s offer to spoil the deal, showed an order legal seen by Reuters.
Amazon won a court order from a Singaporean arbitrator Sunday to stop FRL’s deal to sell assets to Reliance. Amazon alleged that FRL had violated certain contractual provisions it entered into last year in a separate agreement with the US firm.
The dispute centers on FRL’s decision in August to sell its retail, wholesale, logistics and some other businesses to Reliance for $ 3.38 billion, including debt.
Amazon argues that a 2019 deal it had with a Future unit had clauses that said the Indian group could not sell its retail assets to anyone on a “restricted persons” list, including companies in Reliance boss Mukesh’s group. Ambani. The agreement specified that any dispute would be arbitrated under the rules of the Singapore International Arbitration Center.
Shares of Reliance and FRL fell on Monday. Both companies reacted to the referee’s decision saying they want to complete the deal “without delay,” setting the stage for a showdown between Reliance and Amazon, each led by one of the richest men in the world.
A 130-page order from the arbitrator reveals how Amazon, led by Jeff Bezos, argued that Future violated agreements that prevented him from selling retail assets to entities like Reliance, whose boss Ambani is the richest man in Asia. It also shows Future’s level of concern if the deal is broken.
Future’s retail unit, which has more than 1,500 points of sale, will have to pack if the transaction with Reliance does not go through, which will affect the livelihoods of thousands of employees and workers of its supplier companies, the Indian group argued before the arbitrator, according to the request that is not public.
Legal obligations
“If the disputed transaction fails, FRL will go into liquidation. That will mean that the livelihood of more than 29,000 FRL employees will be lost,” representatives of the Indian group told arbitrator VK Rajah, former Singapore attorney general.
The COVID-19 pandemic has affected many Indian companies, especially in the retail sector, and the FRL-Reliance agreement aimed to protect the interests of all stakeholders through a large infusion of funds and the acquisition of liabilities, argued Future in court.
But Rajah ruled that “financial difficulties alone are not a legal reason to ignore legal obligations.”
Amazon, FRL and Reliance did not respond to a request for comment.
Amazon welcomed the arbitrator’s decision in an earlier statement. FRL has said it will take appropriate steps to ensure its deal runs smoothly, while Reliance said it will complete the transaction.
Amazon, which sees India as a key growth market in which it has invested $ 6.5 billion, has already been bogged down by antitrust investigations and strict foreign investment rules.
The latest fight puts Amazon at odds with not just FRL but also Ambani and his Reliance group, which is rapidly expanding its e-commerce business and threatening Amazon’s and Walmart’s Flipkart dominance in that space.
Two sources familiar with the matter said that the court order could not be automatically enforced in India and that the order would have to be upheld by an Indian court.
Any subsequent legal order in India to halt the deal would allow Amazon to negotiate with Reliance, Future and the banks on the other side, said Murali Neelakantan, a corporate attorney at the Indian law firm Amicus, who is not involved in the case.
“If Amazon doesn’t get an injunction against the settlement proceeding in India, it will probably only get compensation even if it wins the final arbitration,” Neelakantan said.
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