New Delhi: Future Retail on Sunday said the emergency order passed by the Singapore International Arbitration Centre (SIAC) putting its Rs 24,713-crore deal with Mukesh Ambani-led RIL on hold is not “enforceable and binding”, and any move to enforce it would be “resisted” by the company.
The interim award passed by the Emergency Arbitrator (EA) of SIAC last week over the plea of Amazon.com NV Investment Holdings LLC are “void and coram non-judice”, said Future Retail Ltd (FRL) in a regulatory update.
According to FRL, the EA order was passed in arbitration proceedings initiated by Amazon by invoking an arbitration clause in a contract to which FRL is not a party, it added.
“FRL is advised that an Emergency Arbitrator has no legal status under Part I of the Indian Arbitration and Conciliation Act, 1996 and therefore, the proceedings before an Emergency Arbitrator are void and coram non-judice,” the Kishore Biyani-led company said.
The EA order having been passed by an authority without jurisdiction is a nullity under Indian law, it added.
Last Sunday, the SIAC passing an interim award in favour of Amazon had asked the Future group to put the deal on hold and said that the deal cannot go through until it finally decides the matter.
In the interim arbitration award, a single-judge bench of V K Rajah barred Future Retail from taking any step to dispose of or encumber its assets or issuing any securities to secure any funding from a restricted party.
“The EA order is not enforceable under the provisions of the Arbitration and Conciliation Act, 1996 and is not binding on FRL. Any attempt on the part of Amazon to enforce the EA order shall be resisted by FRL to the fullest extent available under Indian law. FRL is also in the process of taking appropriate legal action to protect its rights,” the Future group firm said.
It has also said “the bourses BSE and NSE ought not to take cognizance of Amazon’s letter or the EA order” as FRL has complied with all the requirements of obtaining the requisite approval from its step-down firm Future Coupons Private Ltd (FCPL) as was required in the shareholders agreement executed by FRL with its promoters.
“FRL is undergoing serious financial difficulties, particularly in light of the unprecedented impact of the COVID pandemic” and “the proposed scheme is the only way, it can come out of the situation”.
The scheme is in the best interest of all stakeholders that includes shareholders, financial institutions, vendors and suppliers, and its employees and delay in the implementation “will cause irreparable losses” to all, FRL said.
Earlier Amazon.com Inc complained to India’s market regulator SEBI that FRL misled shareholders by incorrectly saying it was complying with its contractual obligations to the US e-commerce giant.
Over the process, the Future group firm said that consent for scheme was accorded by the Board of Directors of FRL at a properly constituted meeting held on August 29, 2020.
“The said board resolution, as well as actions taken in pursuance of the same are consistent with the Articles of Association of FRL and remain valid and subsisting,” it said.
Online retail giant Amazon had last year acquired a 49 per cent stake in Future Coupons Private Ltd, the promoter entity which owns a 7.3 per cent interest in Future Retail, the operator of more than 1,500 stores in India including grocery chain Big Bazaar.
Amazon’s investment in Future Group came with contractual rights that include a right of first refusal and a non-compete-like pact. Also, the deal came with the right to buy into their flagship, Future Retail, after a period of between 3 and 10 years. On August 29, 2020, the Future group announced sale of its retail, wholesale and logistic etc to Reliance Retail Ventures Limited, the retail arm of the Reliance Industries (RIL).
Amazon, Reliance and Walmart Inc’s Flipkart are in a battle to gain market share in India, where millions of middle-class customers are newly adopting online purchases of food and groceries due to the COVID-19 pandemic.
The booming e-commerce market in the country will be worth USD 86 billion by 2024, according to research firm Forrester.
The stakes are particularly high for Amazon, which believes India is a big growth market after shutting its online store in China last year.
The oil-to-telecom conglomerate Reliance has since September 9 sold an 8.48 per cent stake in its retail unit to investors such as Silver Lake, KKR and Mubadala for Rs 37,710 crore to expand its so-called new commerce venture, which uses neighbourhood stores for online deliveries of groceries, apparel and electronics.
The firm, whose retail operations already runs close to 12,000 stores, is looking to dislodge Amazon and Flipkart, which together control about 70 per cent of the online market in India.