Amazon Vs Future Retail: Delhi High Court Refuses Future Retail Plea For Injunction Against Amazon
The Delhi High Court declined Future Retail Ltd.’s plea that Amazon.com Inc. must be stopped from writing to statutory authorities. The statutory authorities and regulators are directed to decide in accordance with the law, the high court said.
Kishore Biyani-led Future Retail had approached the court to direct the U.S. online retailer to refrain from interfering with the approval process for the Rs 27,513-crore deal between Future Retail and Mukesh Ambani-led Reliance Retail Ventures Ltd.
Amazon, that invested in Future Coupons Pvt. Ltd, a promoter company of Future Retail, had won a temporary stay in October on the Future Group-Reliance Retail deal. This was an interim order passed by the Emergency Arbitrator at the Singapore International Arbitration Centre.
Post this, Amazon had written to market regulator and the stock exchanges to consider the interim order while reviewing the scheme of arrangement and the deal with Reliance Retail.
The two Future Group companies then moved the Delhi High Court seeking to stop Amazon from writing to statutory authorities against granting approval to the transaction.
Amazon May Suffer An Irreparable Loss, Says Delhi High Court
The high court noted that Future Retail and Amazon have already made their representations and counter representations to the statutory authorities/regulators. And it’s now up to these authorities to take their decision.
In its order, the court said, trinity of principles- prima facie case, irreparable loss and balance of convenience - need to exist to grant the relief of an interim injunction. It declined Future Retail’s request for this relief for the following reasons:
In case Amazon is not permitted to represent its case before the statutory authorities/regulators, it will suffer an irreparable loss. This because Amazon claims to have created preemptive rights in its favour in contemplation of any change in Indian law that would permit it to hold substantial shareholding of FRL.
Future Retail may not suffer an irreparable loss to FRL because even if Amazon has made representations based on incorrect facts, it will be for the statutory authorities/regulators to apply their mind and come to the right conclusion.
‘No Claim Of Amazon Lies Against Future Retail’
Future Retail in this case was represented by Senior Advocate and former Solicitor General Harish Salve as well as Senior Advocate and former Attorney General Mukul Rohatgi who broadly argued on three major points;
Indian arbitration law does not recognise orders of an emergency arbitrator
Amazon cannot claim investor protection rights against Future Retail
No contract can stop Future Retail’s directors from discharging their fiduciary duties
Future Retail’s lawyers called the emergency arbitrator’s order, which put on hold the deal between Future Retail and Reliance, a piece of paper that had no recognition under the Indian law.
Senior Advocate Mukul Rohatgi told the court that the order was not tested in any judicial forum and was a complete nullity.
In any case, Future Retail argued that Amazon had invested in Future Coupons and Future Retail (the company doing the deal with Reliance) has no contractual obligation to Amazon as that would be a violation of India’s FDI policy.
Future Retail told the court that the agreement between these two parties (FCPL and Amazon) cannot dilute the fiduciary duties of the directors of Future Retail who took every measure -in this case a scheme of arrangement with Reliance Retail - to save the sinking company. The promoters of Future Retail, Salve argued, had the right to update the list of a restricted person with who the company could engage in transactions with and Amazon had no role in that.
The hearing also saw Amazon’s actions being compared to the East India Company which was trying to further its illegitimate interests.
’’Please don’t allow this American giant to kill Future Group only to further its illegitimate interest to make sure that Reliance does not get its hands in. That’s its game plan—if I can’t get it, let Reliance not get it too,’’ Harish Salve requested the court.
‘We Are No East India Company’: Amazon
The arguments for Amazon were presented by Senior Advocate and former Solicitor General Gopal Subramanian.
Subramanian defended the interim award by the emergency arbitrator and argued that the concept is well recognized in Indian law as rules of the Delhi, Mumbai and Madras arbitration centers too have provisions for emergency arbitrators.
In this case, both the parties had agreed to follow the Singapore International Arbitration Centre’s rules which make the emergency award final and binding, Subramanian argued.
Subramanian also argued that the Future Coupon shareholders’ agreement had specified that Future Coupons cannot transfer or encumber their securities in Future Retail Ltd without mutual written consent of Future Coupons and its existing shareholders.
Both shareholder agreements had identical restrictions to say retail assets shall not be transferred, encumbered, disposed of in favour of a restricted person. This list, as per the SHAs, can only be amended if prior written consent is given by Amazon. No such written consent has been given.Senior Advocate Gopal Subramanian.
Therefore, there was nothing wrong in Amazon writing to the authorities to bring the award to their attention, Amazon argued, adding that the interim order by the emergency arbitrator is equal to an order of the court by virtue of Section 17 of the Indian Arbitration law.