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Future Retail | Reliance: In a fight with Amazon, Future Retail sees liquidation if Reliance deal fails

NEW DELHI – India’s Future Retail Ltd (FRL) will go into liquidation if its deal to sell assets toReliance Industriesfails, the group told a Singapore arbitrator while arguing Inc’s bid to scupper the deal, a legal order seen by Reuters showed.

Amazon on Sunday won an injunction from a Singapore arbitrator to halt FRL’s deal to sell assets to Reliance. Amazon alleged FRL had breached certain contract provisions it entered into last year in a separate deal with the U.S. firm.

The dispute centres around FRL’s decision in August to sell its retail, wholesale, logistics and some other businesses to Reliance for $3.38 billion, including debt.

Amazon argues that a 2019 deal it had with a Future unit had clauses saying the Indian group couldn’t sell its retail assets to anyone on a “restricted persons” list including any firms from Reliance chief Mukesh Ambani‘s group. The deal specified any disputes would be arbitrated under Singapore International Arbitration Centre rules.

Shares in Reliance and FRL fell on Monday. Both companies reacted to the arbitrator’s decision by saying they want to complete the deal “without any delay”, setting the stage for a showdown between Reliance and Amazon – each led by one of the world’s richest men.

A 130-page order by the arbitrator reveals how Jeff Bezos-led Amazon argued that Future breached agreements which barred it from selling retail assets to entities including Reliance, whose boss Ambani is Asia’s richest man. It also shows the level of concern at Future if the deal breaks.

Future’s retail unit – which has more than 1,500 outlets – will need to pack up if the transaction with Reliance doesn’t go through, hitting the livelihoods of thousands of employees and workers at its vendor firms, the Indian group argued before the arbitrator, according to the order which is not public.

“If the disputed transaction falls through, FRL will go into liquidation. That will mean that the livelihoods of more than 29,000 employees of FRL will be lost,” the Indian group’s representatives told the arbitrator V.K. Rajah, a former attorney general of Singapore.

The COVID-19 pandemic has hit many Indian businesses, especially in the retail sector, and the FRL-Reliance deal was aimed at protecting the interests of all stakeholders through a large infusion of funds and the acquisition of liabilities, Future argued at the tribunal.

But Rajah ruled that “economic hardship alone is not a legal ground for disregarding legal obligations”.

Amazon, FRL and Reliance didn’t respond to a request for comment.

Amazon welcomed the arbitrator’s decision in a previous statement. FRL has said it would take appropriate steps to ensure its deal proceeds unhindered, while Reliance said it will complete the transaction.

Amazon, which counts India as a key growth market where it has invested $6.5 billion, has already been bogged down by antitrust probes and strict foreign investment rules.

The latest tussle puts Amazon at odds not just with FRL but also Ambani and his Reliance group which is fast expanding its e-commerce business, and threatening the dominance of Amazon and Walmart‘s Flipkart in that space.

Two sources familiar with the matter said the injunction was not automatically enforceable in India and that the order would have to be ratified by an Indian court.

Any subsequent legal order in India to halt the deal would allow Amazon to negotiate with Reliance, Future and banks on the other side, said Murali Neelakantan, a corporate lawyer at Indian law firm Amicus which is not involved in the case.

“If Amazon doesn’t get an injunction against the deal proceeding in India, they will probably just get damages even if they win the final arbitration,” Neelakantan said.

Long-drawn war

Overseas arbitration court

On expected lines

Dragging the battle to India

Being tested

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Maheshwari Clinics32 days ago

I am sure, the clever Gujju
that Mukesh Ambani is, has already started planning his action in case the Future – Reliance deal gets delayed. He can tolerate a few speed breakers, not any stops. Hats off to him.

Tushar Doke36 days ago

If the deal fails today…..
Reliance is of such tendancy that it will one day even takeover Amazon….
So American’s mess with anyone but not Reliance

P K Sharma36 days ago

Looks logical in the beginning, but, the details could be different legally. Reliance must have studied the pros and cons of earlier legal matter and could have taken precautions. Hence, wait for final hearing. ð ð

According to a report by IANS, as Reliance Industries Ltd (RIL) stepped into the e-commerce space with JioMart, speculations ran rife over two of world’s richest individuals up for a confrontation in the market. But RIL’s proposed acquisition of Future Group’s retail business has pitched both behemoths, Jeff Bezos’ Amazon and Mukesh Ambani’s RIL, against each other in a legal battle, which now seems to be heading towards a long-drawn war.

After a Singapore arbitration court ordered a temporary halt in the acquisition process, Future Retail has hinted at challenging the interim order. Indicating that the matter should not have been dealt with by an overseas arbitration court, Future Retail said that all the relevant agreements are governed by Indian law and provisions of the Indian Arbitration Act for all intents and purposes and “this matter raises several fundamental jurisdictional issues which go to the root of the matter”.

According to Future, the order will have to be tested under the provisions of Indian Arbitration Act in an “appropriate” forum. Sources close to Amazon, however, said that the eventuality of moving to Singapore International Arbitration Centre (SIAC) in case of an issue in the deal was part of the agreement done between Future and Amazon, in which Amazon acquired a 49 per cent stake in Future Coupons, a Future group entity.

As the final order in the matter is yet to come from the arbitration court, Future Retail’s statement that the need to test the order under the Indian Arbitration Act in an “appropriate” forum shows that another front might be opened up for the battle, this time in an Indian court.

The battle is as much important for Mukesh Ambani-led RIL, as it is for Kishore Biyani-led Future, as this deal would have made Reliance Retail a retail behemoth. As per several analysts, Reliance Retail would become the third largest retailer in the world. Showing its resolve to complete the proposed acquisition, Reliance Retail Ventures Ltd on Sunday said that it intends to enforce its rights and complete the transaction in terms of the scheme and agreement with Future group without any delay.


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