In a win for e-commerce firm Amazon, the Delhi High Court on Thursday upheld the Emergency Award passed against the $3.4-billion Future-Reliance deal. The order, passed by a single-judge Bench of Justice J R Midha, will restrain Future Retail from going ahead with the deal. The court also imposed a penalty of Rs 20 lakh on Future and the money will go to the Prime Minister’s Relief Fund.
The court held that Future Retail, Future Coupons (the promoter entity of Future Retail), founder and owner Kishore Biyani and others violated the Emergency Award. Issuing a show-cause notice to Biyani and others, it asked why they should not be detained in civil prison, according law platform Bar & Bench. Directing the attachment of Biyani’s assets, the court ordered the filing of an affidavit describing his assets.
The court held that the Emergency Arbitrator had rightly invoked the ‘Group of Company’ doctrine in relation to the Future Group companies. Thus, Future Group has been directed to approach the authorities for recall of the approvals granted for the Future Retail-Reliance deal.
While Future Group has been asked to not take any further action in the advancement of the deal with Reliance, Biyani and others are required to appear before the High Court on the next date of hearing in April. It has also directed Future Group to place on record any action taken by it in relation to the Reliance deal after October 25, 2020.
“The verdict passed by Justice Midha is probably one of the most poignant ones and will have an empirical impact on the ease of doing business ranking for India and ensuring corporate governance standards,” said K Narasimhan, advocate, Madras High Court. “For me, this verdict will strengthen faith in our judicial system and let businesses know that contracts matter for a reason,” said Narasimhan.
Last month, the judge had ordered maintenance of status quo in the deal till the pronouncement of this order. The status quo direction was subsequently stayed by a division bench of the High Court. Amazon’s appeal against the stay order on status quo is presently pending before the Supreme Court.
Jeff Bezos-led Amazon is locked in legal disputes with Biyani-headed Future. It has alleged that the retail conglomerate violated an agreement with the American e-commerce firm by agreeing to sell its assets to Mukesh Ambani-owned Reliance Industries last year. Future has denied any wrongdoing.
When contacted on Thursday, Future Group declined to comment on the development. However, executives said the company would appeal against the order, possibly in Supreme Court.
Bharat Chugh, a Supreme Court advocate, said the order would send a very positive message to all foreign investors that India is a jurisdiction that upholds the sanctity of contracts or investments, and Indian courts respect foreign court or tribunal’s orders.
“It reaffirms that Indian courts would not be unduly swayed by emotive arguments and narratives such as the one sought to be painted here by one of the parties: that of a ‘big American company trying to scuttle the rescue of a domestic company because of its greed.’ The decision also reaffirms the fact that Indian çourts can, and do look at the contract obligations and facts of a case – dispassionately and objectively,” said Chugh.
Meanwhile, the Amazon plea before the Supreme Court, challenging the Delhi High Court order which had stayed the implementation of status quo direction of the High Court, will be heard in the final week of April. The matter was discussed on Thursday before Justice Rohinton Nariman by senior advocate Gopal Subramanium for an early date.
The Singapore International Arbitration Centre (SIAC) Emergency Arbitration interim order formed the basis for the Supreme Court verdict. Future Retail has reportedly moved the Singapore arbitration tribunal to lift the interim stay the emergency arbitrator had imposed earlier last year.
In August 2020, the Future group had struck a $3.4-billion asset sale deal with RIL. Amazon then sent a legal notice to Future, alleging that the deal breached an agreement with the e-commerce firm. In 2019, Amazon had acquired a 49 per cent stake in Future Coupons (FCPL), the promoter entity of FRL, for about Rs 1,500 crore. The deal specified any disputes would be arbitrated under the Singapore International Arbitration Centre (SIAC) rules. Business Standard