Introduction:
This article illuminates the legal clash between the corporate goliaths Amazon and Reliance ventures over the acquisition of the Future Group in India. This clash between two of the world’s wealthiest men shows how high the stakes are for Mr Bezos and Mr Ambani in a market frequently depicted as the last development frontier. It is additional proof of how hard it is turning out to be for foreign players to conduct business in India. In the previous few months, JioMart had extended to gadgets and fashion too – among sections that drive deals for existing huge e-commerce marketplaces.
Reliance’s goal to push these key sections first for the greater e-commerce play ahead is self-evident. The corporate fight has involved organizations driven by two of the World’s wealthiest men. If the agreement is not called off, it would give Reliance Retail unparalleled access to over 1,800 stores spread across over 420 cities in India. By giving a statement, in a dispute, it is not a party to, Reliance Industries’ retail unit flexed its muscles and made it clear that it will just not watch the Amazon-Future Group dispute from the side-lines.[1]
The Issue
Ambani’s Reliance Industries concurred in August to purchase the indebted Future Group’s resources for Rs.24,713 crore, a year after Amazon had bought an indirect stake in Future Retail. Amazon has disagreed with the deal, asserting it violates Future Group’s investment agreement with it. Amazon bought 49% in an unlisted firm of the Future Group i.e., future Coupons Ltd, giving it an indirect stake in Future Retail. The agreement likewise gave Amazon the option to purchase a greater stake in the Future Group i.e., flagship company once India lifts limitations on foreign investments in physical retailers. Notwithstanding, Future Group ran into a serious liquidity emergency after the cross-Country lockdown was reported in March.
Amazon has been restricting the Future group’s agreement with Mukesh Ambani’s RIL that was endorsed in August a year ago. The arrangement involves an offer of Future Group’s retail, warehousing units, logistics and wholesale to Reliance Retail Ventures Ltd. Amazon hauled Future Group to arbitration at Singapore International Arbitration Centre contending that the company violated its agreement by contracting with a rival, Reliance.
Amazon, which holds a 49% stake in Future Coupons (a Future Group arm) has blamed Future Group for breaching the terms of a contract that expressed that it would require the assent of Amazon on the off chance that it intended to fund-raise or offer a stake to another organization. The agreement allegedly had a rundown of five to six organizations, including Reliance Industries, that Amazon had drawn.
Arbitration Proceedings
Before the SIAC, arbitration proceedings were initiated by amazon against Kishore Biyani, Future Retail and Future Coupons in October and got instant relief to impede the deal with Reliance Industries.
Future Retail disregarded Singapore’s award and stated it as legally unenforceable in India and petitioned the Delhi High Court to prevent Amazon from meddling in the deal. Notwithstanding the order of the arbitration Court, reliance stated it has planned to buy Future Retail’s assets immediately.
Single Bench Judgment
In a comfort to Amazon, the High Court of Delhi said that it is of the “reasonable view” that the crisis grant (emergency arbitration) by the SIAC is enforceable in India. The emergency arbitration had stayed the Future-RIL deal in October 2020. Amazon moved to the Delhi High Court as of late to implement the EA and prevent Future from finding a way to finalize the deal with RIL. Amazon had referenced in its petition that Future was intentionally and malignantly overlooking the SIAC request to finalize the RIL deal by getting clearances from the authorities.
The court said the immediate requests are needed to secure the rights of the petitioner (Amazon).” “All the concerned authorities are coordinated to maintain status quo with respect to all matters in violation of the order dated 25th October 2020 said the order by Justice JR Midha. On 02.02.2021, in a plea against Future Retail Ltd. and Reliance Industries’ retail stake deal which was worth Rs. 25,000 crores endorsed by a Board Resolution of FRL a year ago, a Single-Judge Bench headed by Justice JR Midha, Delhi High Court had allowed interim relief to Amazon directing all authorities and parties to maintain status quo on the deal until a detailed interim order on the case. The bench in its judgment also refused to prevent Amazon from writing to the SEBI (Securities and Exchange Board of India), CCI (Competition Commission of India) or other legal bodies against the FRL-Reliance Retail and Lifestyle Limited deal.
Amazon, then, moved to the Division Bench of the Delhi High Court against a judgment given by a single judge, challenging an observation that Future Retail had on two occasions been able to prove that there was “prima facie case of tortious interference by Amazon”.[2]
The single-judge bench had, in its judgment, also noted that Amazon’s assertion that Future Retail’s August 29, 2020 resolution was void and that it had control over Future Retail since it had a stake in Future Coupons would “fall foul of the freedom of FRL (Future Retail) and Reliance (Reliance Retail) to enter into the transaction thereby causing loss to both FRL and Reliance which would be a civil wrong actionable by both FRL and Reliance in case they suffer any loss.
Division Bench Judgment
The judgment given by the single judge was stayed by a Division Bench with Chief Justice DN Patel and Justice Jyoti Singh when an appeal was moved against the status quo order by FRL. It was noted by the division bench that there was no cause to seek a status quo before the learned Single Judge and that statutory authorities like CCI, SEBI ought not to be restrained from proceeding as per the law.
Amazon asserted a decision in October by an arbitrator a year ago in Singapore is enforceable under the Indian laws where he had put the deal between Future-Reliance on hold. The High Court, in any case, was of the view that Future Retail was not involved in the arbitration agreement with Amazon thus the “group of companies” doctrine was not applicable.
A “group of companies” doctrine refers to a situation an arbitration agreement entered into by a company, being one within a group of companies, can bind its non-signatory affiliates or sister or parent concerns if the circumstances demonstrate that the mutual intention of all the parties was to bind both the signatories and the non-signatory affiliates.[3]
The high court, then, allowed Future Retail to carry on with the sale of its assets to Reliance Industries yet left it to the regulators i.e., SEBI and CCI to decide the destiny of the deal. It, notwithstanding, declined to control Amazon from appealing appropriate forums to restrict the transaction. Both the parties in the dispute can approach a higher Court.
Before the Supreme Court
Amazon has moved the Supreme Court seeking an immediate stay on the February 8 order by a division bench of the Delhi High Court which had allowed the Rs. 27,513 crore Future Retail-Reliance Group deal. Future Group had earlier filed a caveat petition in the top court in this case, which implies that no orders can be passed without hearing Future Retail’s arguments.
The instant plea before the Supreme Court, filed by Advocate Mohit Singh on behalf of Amazon, submits that the High Court has “failed to appreciate that orders made under the Act [Arbitration and Conciliation Act, 1996] are appealable only if there exists a provision under the Act specifically providing for a right to appeal”. Therefore, as the 2nd February order was issued under Section 17(2) [4] of the act, it would stand that no appeal would lie as there are no provisions for appeal provided against an order issued under Section 17(2).
The plea also raises the issue that the High Court has failed to exercise its jurisdiction in accordance with the legal principles settled in a catena of judgments “which have unequivocally held that an appeal is a creature of the stature and the right to appeal inherits in no one”, and accordingly, Section 37 [5] consciously takes away the right of an appeal against orders not contemplated under the Section. It has further been contended that FRL could not have preferred the Appeal before the Division Bench under Order XLIII Rule 1(r) of the CPC read with Section 13(1) [6], thereby challenging an order issued under Section 17(2) of the Act.
The Supreme Court issued a notice in the plea by Amazon challenging Delhi High Court’s stay on the implementation of its own order passed by the Single Judge bench of Justice Midha, which had directed status quo order on the Future – Reliance retail stake sale deal of nearly Rs. 25000 crores.[7] The Supreme Court allowed the National Company Law Tribunal (NCLT) proceedings related to the approval of amalgamation of Future Retail and Reliance to go on but said that the NCLT proceedings should not culminate into any final order on the sanction of schemes.
Conclusion
In my opinion, Kishore Biyani may be having evidence to support non-co-operation by Amazon at later stages when FRL sustenance as a going concern is at stake. Moreover, Amazon’s investment can be very well argued as a backdoor entry violating FDI guidelines on Multi-brand retail, so the non-compete clauses in the FCL agreement with ‘unrelated parties’ can be put to test of law in which the bedrock contention of violation of FDI guidelines may be questioned by some extra parties implicated by FRL which could be some government departments on FDI or even the Supreme Court may rope in them for fit and proper adjudication of the matter which stands a fair possibility to the advantage of FRL. This is no policy matter of government to discourage ease of doing business etc, it is rather a legal challenge that can happen in any country and it will certainly be understood clearly by Foreign investors even if it turns out to be against Amazon. In this saga so far, there have been many twists and turns, and it only promises more. The battle is between Reliance and Amazon and the prize is the Future Group’s assets. The keenly observed case may set an important legal precedent for investors on whether emergency decisions by foreign arbitrators are valid in India.
References:
[1] https://economictimes.indiatimes.com/industry/services/retail/a-lot-at-stake-in-amazon-reliance-fight-over-future/articleshow/78879604.cms?from=mdr.
[2] https://indianexpress.com/article/business/companies/amazon-moves-hc-division-bench-against-observations-in-future-case-7142503.
[3] Chloro Controls India (P) Ltd. v. Severn Trent Water Purification Inc (2013) 1 SCC 641.
[4] Arbitration and Conciliation Act, 1996 § 17(2), No. 26, Acts of Parliament, 1996 (India).
[5] Arbitration and Conciliation Act, 1996 § 37, No. 26, Acts of Parliament, 1996 (India).
[6] Commercial Courts Act, 2015 § 13(1), No. 04, Acts of Parliament, 2015 (India).
[7] http://roundup.manupatra.in/asp/displayart.aspx?itemid=30852.
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