Amazon.com Inc. has asked India’s markets regulator to wait for the final order of a Singapore court before clearing the merger of Future group companies, a move that is seen as a precursor to an eventual sale of its assets to Reliance Industries Ltd.
In a 21 December letter, Amazon told SEBI that the Singapore arbitration court’s ruling has been held valid under India’s arbitration Act by the Delhi high court and, hence, the Future group’s amalgamation must wait till the Singapore court gives a final judgement.
“The Delhi high court has also made it clear that no observations were passed with respect to the merits of the interim award. Consequently, all findings contained in the interim award, including the finding that FRL (Future Retail Ltd) is a necessary and proper party to the arbitration proceedings, continue to be valid,” the Amazon letter, a copy of which Mint has reviewed, said.
The high court on 21 December allowed Amazon to oppose Future group’s asset sale to Reliance but left it to regulators, including the Securities and Exchange Board of India (SEBI), to decide on the validity of the deal.
Amazon’s latest salvo to stall the Rs 24,713 crore acquisition of Future Group’s assets by Reliance Industries raises the possibility that the dispute may drag on for months, leading to a deterioration in Future Group’s retail assets. Future Group has been caught in the middle of a battle between Amazon and Reliance Industries for supremacy in India’s retail market.
Acquiring Future’s network of retail, wholesale, logistics and warehousing assets will provide Reliance Industries’ retail unit, which is already the biggest offline retailer in the country, with the firepower to take on Amazon and Flipkart in the online retail market, which has seen sales surge after the pandemic.
Future Retail had petitioned the Delhi high court for an interim injunction restraining Amazon from interfering in the RIL-Future deal. Future Retail had argued before the court that the Singapore arbitration court’s ruling is not legally enforceable in India.
“Following the Delhi high court order, Amazon is contemplating an option to approach either a divisional bench of the high court or NCLT to stop Future Group from the amalgamation if Sebi delays acting,” said a person directly familiar with the developments.
On 29 August, RIL signed an agreement with Kishore Biyani’s Future Group to buy out the retail, wholesale, logistics and warehousing businesses from Future Group companies. Following this, Future Group has approached stock exchanges and Sebi for approval on a draft scheme of arrangement entailing merger of six Future Group firms into its flagship Future Enterprises Ltd.
On 25 October, Singapore International Arbitration Centre’s (SIAC), through an interim order, prohibited Future Group from proceeding with the deal with RIL since Future Group did not make Amazon’s consent before signing the deal, which was required as per an agreement signed between Amazon and Future Group in August last year when Amazon acquired a 49% stake in Future Coupons Pvt. Ltd.
In another letter on 26 November, a copy of which was also reviewed by Mint, Amazon has told Sebi that following the in-principle approval of the Reliance-Future deal by India’s competition regulator, Future Group’s businesses, transactions and the management control is being taken over by Reliance, which is in a serious breach of India’s takeover code.
On 20 November, an application on the scheme by Reliance Industries was approved by the Competition Commission of India. Following this, RIL has got an exclusive right to provide funds and finance such assets to FRL; the right to appoint an observer on the Future Retail board or a committee to ‘oversee’ the operations of the company; and the right to conduct the operations of Future Retail.
Amazon has opposed this, stating that such a transfer of Future Group’s listed companies’ controls over management, transactions and businesses from to RIL, without making an open offer or court approval, stands in violation of India’s takeover code since the scheme of amalgamation and the Reliance-Future deal is yet to be approved by Sebi, NCLT, FRL’s shareholders and creditors.
Citing this breach, Amazon has urged Sebi in its 26 November letter to suspend the scheme of amalgamation. Amazon has written five letters to Sebi so far, urging the regulator to stall the RIL-Future deal.
In order to assist Sebi with the legal position on the validity of the SIAC’s interim award, Amazon has obtained legal opinions from Dipak Misra (former Chief Justice of India) and Ajit Prakash Shah (former Chief Justice, high court of Delhi and former Chairman, Law Commission of India).
“The order passed by the emergency arbitrator remains valid and enforceable…and its sanctity cannot be ignored by any stretch of imagination,” says Misra, as per the Amazon letter to Sebi. “The interim award is enforceable under Indian law,” says the letter, citing Misra and Shah.
Amazon told Sebi in its letter that despite the binding injunctions of the interim award, it is “alarmed and deeply concerned” with Future Retail’s moves in contravention of the SIAC ruling.
“Such brazen disregard for contractual commitments and law severely undermine India’s reputation as a country,” said Amazon, adding that Sebi and Indian bourses should not approve FRL’s application for approval on the deal.
Amazon told Sebi that “SIAC shall now proceed with the constitution of the tribunal in this matter” to pass its final verdict.
“The arbitration panel for SIAC is likely to be formed soon after SIAC’s notification expected in the first week of January,” said the person cited above.