The tussle between Future Group and Amazon Company over the former’s Rupees 24,713 crore deal with Reliance Industries Limited (RIL) is snowballing, with the two litigants adopting the dual strategy of pursuing this case in Indian courts as well as at the Singapore International Arbitration Centre (SIAC).
A lawyer for Future Retail Limited, on Thursday (which Thursday?) told the Delhi High Court that Amazon Company is interfering with its lawful business. The lawyer again argued that due to these problems thousands of people may lose jobs and Future Retail Limited may go bankrupt. The judicial authority i.e. Delhi High Court is to hear Future Retail's suit related to its deal which it signed previously with Reliance.
At first, it is very clear that Amazon has not filed any legal case in India against the Future Group to date. Apart from that, it has approached the Singapore International Arbitration Centre (SIAC) alleging that the Future Group breached the contract signed by Amazon and Future Group last year by selling a stake to Reliance.
It was recently passed by an Emergency Arbitrator of the Singapore International Arbitration Centre (SIAC) in the favour of Amazon. The arguments from the legal counsels of the companies continued on the third day. The whole matter was heard by Justice Mukta Gupta. The court adjourned its hearing till November 19, 2020, according to the information available on the law platform Bar & Bench.
What is Reliance Industries Limited-Future Group deal?
Significantly, Reliance Retail Venture Limited (RRVL), a subsidiary of Reliance Industries, has acquired the retail and wholesale business and logistics and warehousing business of Future Group. The deal has been finalized for a lump sum of Rs 24,713 crore. As part of this acquisition plan, Future Group is merging some of its companies with Future Enterprises Limited (FEL). The retail and wholesale business of Future Group will be transferred to Reliance Retail and Fashion Lifestyle Limited (RRFLL), a subsidiary of Reliance Retail Venture Limited. The deal will also acquire Future Lifestyle Fashions. However, Future Group's financial and insurance businesses are not part of the deal. After this deal, stores like Big Bazaar, FBB, Easyday of Future Group will be owned by Reliance Retail Company.
Kishore Biyani's strategy to sell assets
The Future Group was under pressure due to a lot of debt and its servicing issues. Future Group's net debt burden had piled up to around Rs 12,989 crore with the entire promoter of the company holding pledged with lenders. On August 24, the group managed to avert a default by making a payment of Rs 100 crore on its foreign bonds. In August, Future Group struck a Rupees 24,713 crore asset sale deal with Reliance Industries Ltd (RIL).
Amazon & Future Group agreement
There was a contract signed between Amazon and Future Group, According to this contract, the sale of the business to rivals (Reliance) is barred. Amazon, in its legal notice, also claimed that the Future Group violated the deal signed between Amazon and Future Group when it entered into an agreement with Reliance earlier this year.
According to Miss. Namita Matthews, who is a partner at Bengaluru based law firm Algo Legal, the arbitration proceedings could take up to one year to be completed. According to her words, “The Party that does not succeed would also have the right to appeal, as we all know that the ambit of arbitration appeals is very limited. Nonetheless, there would be time lost by both the sides to get the final decision”.
The dissatisfaction of Amazon over RIL & Future Group Deal
In August 2019, Amazon bought a 49 percent stake in Future Coupons that is one of Future's unlisted firms at around Rs 1,500 crore with the right to buy into flagship Future Retail after a period between 3 to 10 years. The latter Amazon owns a 7.3 percent stake in Future Retail that operates in more than 1,000 stores under Big Bazaar, Fbb, Foodhall, and Easyday Club brands across India.
In the last week, Amazon sent a legal notice to Future Group and also filed a complaint to the Singapore International Arbitration Centre (SIAC) the claim was that the Future Group had breached the contractual obligations and responsibilities by excluding the online retailer from its discussions about the transaction. The company again claimed it should have been given the right to make the first offer if Future Group was exiting retail. Amazon also said that its earlier arrangement with Future Group included "a restricted list" of companies with whom Future Group cannot make any deal.
Comments on Jio &Facebook deal
At the time when we heard comments on RIL & Future deal, the same time Jio&facebook deal was also in the news. This report related to Reliance Retail has come at this point in time. When this deal between the Reliance company's Jio platforms and Facebook is also under question. According to the news, a lot of questions were raised by the Competition Commission of India (CCI) regarding data sharing in the deal between Jio platforms and Facebook. The CCI again said that the data that these companies will get from each other will increase anti-competitive behavior in the market. However, Facebook has assured the CCI that there will be 'limited exchange' of data from Reliance.
As per the report given by the news wire agency Press Trust of India, Kishore Biyani led his Future group with the intention to settle this matter amicably, through arbitration or settlement. Amazon has already filed a complaint to the Singapore International Arbitration Centre (SIAC) to settle such a dispute. The Reliance Industries Limited & Future Group deal also needs approvals from the National Company Law Tribunal (NCLT), Competition Commission of India (CCI), and Securities and Exchange Board of India (SEBI) in addition to no-objection certificates (NOC) from creditors and minority shareholders.
In the above case of the Future group stake sale, Kishore Biyani had to rush the deal through due to mounting debt of over Rupees 12,500 crore. The deal with Amazon for stake sale could not be held until the completion of 3 years, which was rejected due to debt constraints.
Rajdeep Singh Chauhan
Intern, Aquilas Legal Solutio