"The company will explore all legal remedies and take appropriate steps to pursue the scheme of arrangement,” Future group said in a statement.(Mint)
"The company will explore all legal remedies and take appropriate steps to pursue the scheme of arrangement,” Future group said in a statement.(Mint)

Setback for Future Group as Delhi HC halts RIL deal

In an interim order, the court directed Future Retail to maintain status quo on the assets starting at 4.50 pm on Tuesday, until “the pronouncement of the reserved order”.
By Richa banka, New Delhi
PUBLISHED ON FEB 03, 2021 01:28 AM IST

The Delhi high court on Tuesday put the brakes on Future Retail Ltd’s $3.4 billion sale of its retail assets to Reliance Industries Ltd, acting on a petition by Amazon.com Inc, which has alleged that the deal was in violation of its own contract with Future.

In an interim order, the court directed Future Retail to maintain status quo on the assets starting at 4.50 pm on Tuesday, until “the pronouncement of the reserved order”. The court said it was of the prima facie view that a Singapore tribunal order, which asked the company owned by Kishore Biyani not to proceed with the deal, was enforceable in India.

On October 25, the Singapore International Arbitration Centre passed an interim order in favour of Amazon, barring Future Retail from taking any steps to dispose of or encumber its assets or issuing any securities to seek any funding against them.

“The respondents are directed to file an affidavit to place on record the actions taken by them after October 2020 and the present status of all those actions, within 10 days. All the concerned authorities are directed to maintain status quo with respect to matters of violation of the order dated October 25, 2020 and shall file the status report with respect to the present status within 10 days the receipt of this order,” ruled justice JR Midha. The judge said a detailed order specifying the reasons will follow soon.

In a statement, Amazon Inc. said, “We have utmost respect for the Indian legal system and appreciate the interim order of the Hon’ble Delhi High Court to uphold the enforceability of the Emergency Arbitrator’s order and maintain status quo.”

Also read: Will budget 2021-22 spur growth ?

While a RIL spokesperson declined to comment, Future Group in a statement said, “The company is legally advised that the basis of the interim award of the Emergency Arbitrator has been superseded by the judgement dated December 21, 2020 passed by the learned single judge, Justice Mukta Gupta. The company will explore all legal remedies and take appropriate steps to pursue the scheme of arrangement.”

At stake in the legal battle is control of India’s estimated $1 trillion retail market between Jeff Bezos’s Amazon and Reliance Industries, controlled by India’s richest man Mukesh Ambani. For Bezos, who has struggled to gain traction in China where local giants dominate the e-commerce sector, India with a population of 1.3 billion is the only other market of similar size that can boost his company’s growth. Blocking Reliance, which is already the country’s biggest brick-and-mortar retailer, is key. Acquiring Future’s assets will double Reliance’s retail footprint—an advantage Amazon is not willing to cede, Bloomberg reported.

The Delhi high court rejected Future Retail’s submission that Amazon’s petition was not maintainable because an Emergency Arbitrator—the Singapore tribunal—cannot be considered an arbitrator under the Arbitration and Conciliation Act.

“This court is of the prima facie view that the Emergency Arbitrator is an Arbitrator; the Emergency Arbitrator has rightly proceeded against FRL; the order dated October 25, 2020 is not a nullity; the order dated October 25, 2020 is an order under Section 17(1) of the Arbitration and Conciliation Act,” judge Midha said.

Citing the Emergency Arbitrator’s order, the HC said it was subject to appeal under Section 37 of the Arbitration and Conciliation Act as well because it was an “enforceable” order.

Amazon filed a petition in the HC seeking detention of Future Group founders, including chief executive officer Biyani, and seizure of their assets in its attempt to block Future Retail from selling its retail assets to RIL.

On Tuesday, the court, after hearing arguments from both sides, said that it was satisfied that an immediate order was necessary to protect the rights of Amazon until the delivery of a final order. Future Retail, represented by senior advocates Harish Salve and Darius Khambata, argued in court that the Emergency Arbitrator’s order of October cannot be enforced because it was not an Arbitrator or Arbitral Tribunal and its order was not enforceable under the Arbitration and Conciliation Actt.

Salve told the court that if Amazon was trying to demonstrate management rights over his client, it would be a violation of the Indian laws as it was not a listed company in India. He also said that Amazon was trying to “blow smoke in the eyes of Indian authorities”.

Countering these submissions, senior advocate Gopal Subramanium, appearing for Amazon, asserted that the Singapore tribunal’s order was indeed enforceable under Indian laws. He pointed out that Future Retail had chosen not to file any appeal against the Emergency Arbitrator for the past one-and-a-half years of proceedings in the tribunal even as it went forward with talks to sew up a deal with Reliance.

Justice Mukta Gupta, on December 21, 2020, upheld the validity of the arbitrary order and declined to grant Future Retail’s plea to restrain Amazon from writing to statutory authorities and regulators about the arbitral award.

SHARE THIS ARTICLE ON
Close
SHARE
Story Saved
OPEN APP