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Future retail independent director conduct raises question on corp governance in India

E-commerce major Amazon has alleged that independent directors of Future Retail failed to exercise their statutory duties and their conduct and attitude raise substantial questions on accountability, transparency and fairness regime for corporate governance in India.

In a strongly worded letter to Future Retail’s independent director on July 4, Amazon has also raised objection to an alleged attempt of Future Group to transfer its logistics and warehousing business to Reliance in violation to binding legal orders.

In August 2020, Future Group had announced a Rs 24,713-crore deal to sell 19 companies operating in retail, wholesale, logistics and warehousing segments to Reliance Retail Ventures Ltd (RRVL).

However, the deal could not go ahead as secured creditors of the Future Group had voted against it after continuous scrutiny by judicial forums, including the Supreme Court, the Delhi High Court and the NCLT. Besides, Amazon had moved the Singapore International Arbitration Center against the deal.

In the latest letter to independent directors of Future Retail, Amazon said, “…you, the Independent Directors of FRL, have failed to exercise your statutory duties and functions independently in accordance with law. Moreover, you have failed to safeguard the interest of shareholders, and have in fact facilitated commission of fraud perpetuated by FRL and the MDA Group (Reliance).

“Your conduct and attitude, as the Independent Directors of FRL, raises substantial questions on accountability, transparency and fairness regime for corporate governance in India,” Amazon said.

An email query sent to FRL and Reliance did not elicit any reply on the matter while Amazon declined to comment.

The US based e-commerce major alleged that FRL’s independent directors’ letter dated May 28 has “admitted” that FRL entered an illegal arrangement with the MDA Group to continue running the retail stores even when no money was paid to MDA Group as rent for these premises.

FRL independent directors in their letter on May 28 had charged Amazon of spiking FRL- Reliance deal and rubbished Amazon allegation on them that they facilitated the so-called fraud to handover stores to Reliance.

Amazon, however, claimed that the independent directors’ letter vindicates its stand that the entire sequence of surrendering of stores by FRL, and termination by MDA Group of such leases was a stratagem.

The e-commerce major claimed that despite FRL admission that MDA group has forcefully taken over 55-65 per cent of its retail business, the retailer firm now intends to enter into a business transaction with the MDA Group for sale of its supply chain and logistics businesses.

Amazon said that the FRL and its promoters on one hand have sought termination of arbitration proceedings as their scheme of arrangement with MDA group has failed and on the other hand they are seeking to give effect to the transactions that were part of the scheme by circumventing the binding orders.

The e-commerce firm has asked independent directors to conduct thorough investigation into the alleged fraud committed by FRL, its promoters, directors and key managerial personnel and raise concern over proposed transactions between FRL and MDA Group. PTI

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