Future Retail(FRL) said its board decision to approve the merger of listed entities and sell retail assets toReliance Industriesis valid according to the recent judgement byDelhi High Courtand the entire legal basis of the interim award given by the Singapore International Arbitration Centre is vitiated.
In a statement to the BSE, Kishore Biyani’s retail firm said the arbitration agreement is between its promoter entity Future Coupons (FCPL) and Amazon and not with FRL and merging these agreements would violate foreign exchange rules, as per the court order. “The Hon’ble court held that it is of the prima facie opinion that the conflation of the three agreements – FRL shareholders’ agreement (SHA), FCPL SHA, and FCPL share subscription agreement would render the conflated agreement violative of the FEMA FDI rules,” it said.
On Monday, the Delhi High Court rejected Future Group’s plea to prohibit the American giant from interfering in its deal with Reliance Retail and said the statutory authorities are free to take their own decision as per law. The court also held that Amazon’s representation to statutory authorities is not wrong but making them based on incorrect assertions makes the act based on unlawful means. It said Future Retail’s resolution approving the transaction with Reliance Retail was valid.
“The subject matter of the suit and relief claimed was not related to the enforceability of the emergency Award given by SIAC. Therefore, it cannot be said that this judgment of the Delhi High Court has vitiated the basis of the arbitral award,” said Ashish K Singh, managing partner, Capstone Legal. “At best, for the appropriate court, this order will be of persuasive value.”
Reliance Retail Ventures, a unit of Reliance Industries, agreed to buy the retail assets of the Future Group on a slump sale basis for about Rs 25,000 crore, it was announced in August.
The Competition Commission of India (CCI) has already approved the deal which also requires clearance from the Securities and Exchange Board of India (Sebi) and the National Company Law Tribunal (NCLT) in addition to no objection certificates from creditors and minority shareholders.
“Amazon’s interference, on the basis of the incorrect representation set out above is a civil wrong committed against FRL and Reliance and therefore SEBI cannot take cognizance of this unlawful interference in the freedom of FRL to implement the scheme sanctioned by a valid board resolution in compliance with the statutory provisions and Articles of Association of FRL,” said the company in its statement.
Amazon, which owns 49% stake in FCPL, a Future Group holding company, objected to the deal and asked regulators to consider the interim order of the SIAC putting the transaction on hold. In its interim order last month, the SIAC had directed the Future Group to put on hold its proposal to sell the retail business to Reliance until it gave a final ruling on the plea filed by Amazon.
Future Retail approached the court with the argument that the company was not a party to the dispute between Future Coupons and Amazon. Hence, the direction was not binding on Future Retail, it had argued.