Author: Zuba Parvez Bubere
Symbiosis Law School, Pune
The legal dispute between Amazon.com Inc and Future Group (also addressed as The Kishore Biyani Group) relates to the sale of retail assets of the latter to Reliance Retail, a subsidiary of Reliance Industries Ltd. The said deal between Future Group and Reliance Retail took place in the month of August 2020 for a transaction involving a voluminous Twenty-five Thousand Crores of Rupees. The deal comprises of the sale of supermarket chain Big Bazaar, premium food supply unit Food hall and fashion and clothes supermarket Brand Factory’s retail as well as wholesale units to Reliance Retail. According to the said deal, Amazon.com Inc raised legal notices against the promoters of Future Group contending breach/violation of the terms of their agreements as well as misleading shareholders. It was well settled between Amazon.com Inc. and Future Group that in case of any dispute being raised in the course of conduct of business, the same shall be referred to an arbitrator as appointed from The Singapore International Arbitration Centre for settlement of the same.
ISSUE IN DETAIL
The Future Group was burdened with a huge debt towards its lenders, led by The State Bank of India. In the pre-lockdown period, several attempts were made by the Kishore Biyani Group to sell many of its shares to repay the outstanding debt obligations through sale proceeds. However, the same failed. With Covid-19 hitting the economy and aggravating the scenario in the already existing economic crisis due to recession, the pressure started mounting on the giant business entity. Therefore, The Biyani Group in the year 2019, agreed with the leading e-commerce player, Amazon.com Inc under which Amazon.com Inc. acquired 49 per cent of the stake in Future Coupons, a deal worth nearly 1500 Crores of Rupees in exchange of the agreement for Future Group to place its products on the electronic platform held by Amazon and deliver products in cities within two hours of a customer ordering them; thereby extending participation in Amazon’s new plan. The deal also bestowed an option called “the call option”, which offered Amazon the option to acquire all or part of Future Retail’s shareholding within a span of 3-10 years. Thereafter, in August 2020, Future Group entered into a deal with Reliance Retail for the sale of retail assets as mentioned above which according to Amazon.com Inc. is in breach of a non-compete clause and a right-of-first-refusal pact that was signed between the two disputants.
As per a report laid down by Reuters, Amazon .com Inc filed a complained before The Securities and Exchange Board of India (SEBI) alleging that its local partner viz. The Future Group has misled its shareholders by wrongly stating that it has been complying with the obligations towards the giant e-commerce player. Therefore, the e-commerce entity called upon The Securities and Exchange Board of India (SEBI) to consider the complaint.
When the matter underwent arbitration, in the course of proceedings before the two, Amazon.com Inc won an injunction against the deal involving the sale of retail assets. However, Future Group held that it cannot be held back by any arbitration proceedings and stated that the award has no enforceability under the provisions of the Arbitration and Conciliation Act of 1999. In support of the same, the Group also said that they have been complying with all the relevant requirements.
Amazon.com Inc. addressed letters to The Securities and Exchange Board of India (SEBI), The Bombay Stock Exchange (BSE) and The National Stock Exchange (NSE) to look into the matter and initiate an investigation. Amazon has contended that if the interim Arbitral Award is disregarded/disrespected and The Future- Reliance deal, if approved will result in irreparable loss to the multinational company whereas, on the other hand, The Future Group stated that due to the economic turmoil brought about by Covid-19 faced by the world, its business has been severely hit and in order to protect the interests of its shareholders it had no other alternative than to adopt the recourse. Future Group has always been of the view that there is no violation on their part with respect to their commitment towards Amazon.com Inc. and that the allegation of misleading shareholders hold no good for Amazon is not even a shareholder in the company. It went ahead to state that its deal with Reliance Retail shall continue to be worked upon as per the pre-decided schedule.
The present status reveals that though Amazon.com Inc. has, through arbitration, won an injunction against the other party, the dispute is yet to be resolved. Future Retail plans to move to the Delhi High Court and obtain orders in its favour to continue with its deal with Reliance; stating that the interim order has no value under Indian laws. A caveat petition has been filed by Future Retail in this regard, both in the Delhi High Court as well as the Supreme Court. Though Amazon has not yet commented on this move, if such a step is adopted, then Amazon is likely to approach the Arbitration Centre to seek a final stay till the resolution of the dispute.
Given the knotty nature of the dispute, it would be difficult to comment on the truthfulness of the allegations and comments by both, Amazon.com Inc as well as Future Retail. It would also be interesting to observe the stance and contentions to be laid down by Reliance Retail in the matter; being directly in connection with the said dispute. Observations by The Securities and Exchange Board of India (SEBI) as well as The Bombay Stock Exchange (BSE) and The National Stock Exchange (NSE) will also be taken into account and considered.
It is indeed a huge controversy for many reasons. Be it due to the nature of the entities or the scale of operations, the volumes of investments or the after-effects of the dealings, the inference/settlement will have a learning effect on the other players in the economy. The end result, will undoubtedly, impact the functioning and growth of the E-Commerce business in India.
1. Aditya Kalra, Reuters, Amazon tells Sebi its partner Future is misleading public, Mint (31st October 2020, 02.46 p.m.), https://www.livemint.com/companies/news/amazon-tells-india-regulator-its-partner-future-retail-is-misleading-public-11604131115691.html
2. Aashish Aryan, Explained: What is the tussle between Future Group and Amazon and what happens next, The Indian Express ( 2nd November 2020, 7.05 p.m.), https://indianexpress.com/article/explained/explained-tussle-between-future-group-amazonwhat-happens-next-6913824/
3. Future Retail files caveat before Delhi High Court against any early move by Amazon, The Hindu (November 3,2020), https://www.thehindu.com/business/Industry/future-retail-files-caveat-before-delhi-high-court-against-any-early-move-by-amazon/article33012712.ece