Delhi HC stays Future on Reliance deal

In a major victory for U.S.-based e-commence giant Amazon, the Delhi High Court on Thursday ruled that Future Retail Limited (FRL) and its promoters including Kishore Biyani “deliberately and wilfully” violated the order of an emergency arbitrator (EA) restraining FRL from going ahead with its assets sale deal with Reliance Retail.

Noting that the intention of FRL and its promoters “do not appear to be honest”, the high court directed attachment of the assets of Future Coupons Private Limited (FCPL), FRL, Mr. Biyani and 10 other promoters.

Justice J.R. Midha also directed Mr. Biyani and the other promoters to be present before the court on the next date of hearing on April 28. It additionally issued show-cause notices to all the promoters “to show cause why they be not detained in civil prison for a term not exceeding three months” for violation of the emergency arbitrator’s order.

The high court also imposed a cost of ₹20 lakh on Future Group which will be deposited in the Prime Minister’s Relief Fund for providing COVID-19 vaccines to senior citizens of Below Poverty Line (BPL) category.

It directed Future Group not to take any further action in violation of the interim order passed by the emergency arbitrator at the Singapore International Arbitration Centre (SIAC) on October 25, 2020. The high court’s order came on a plea of Amazon, which has 49% stake in FCPL, seeking enforcement of the EA award.

Amazon had contended that it had invested ₹1,43l crore in FCPL with the clear understanding that FRL would be the sole vehicle for its retail business and its retail assets would not be alienated without its consent and never to a Restricted Person, including the Mukesh Dhirubhai Ambani (MDA) Group.

Amazon stated that FRL had taken various steps to transfer the retail assets to the restricted person, MDA Group, in violation of the EA order and that the firm was continuing with it.

‘Breached agreements’

“The respondents (Future Group) have breached the agreements. However, there is no remorse. The intention of the respondents does not appear to be honest,” the high court remarked.

FCPL, which holds 9.82% in FRL, has objected to the enforcement of the EA award on various ground including that the EA is not an Arbitrator or Arbitral Tribunal. The high court rejected this saying, “The interim order dated 25th October, 2020 is legal, valid and enforceable as an order of the Court”.

FRL had also argued that Reliance was acquiring the retail and wholesale business as also the logistics and warehousing business from the Future Group as going concerns on a slump sale basis for a lumpsum aggregate consideration of ₹24,713 crore. The high court, however, rejected FRL’s argument that if this scheme fell through, it was inevitable that FRL would go into liquidation.