Amazon Says It Had Arranged Rescue Deal For Future Group
Amazon.com Inc. signage is displayed in front of a warehouse in the Staten Island borough of New York, U.S. (Photographer: Michael Nagle/Bloomberg)

Amazon Says It Had Arranged Rescue Deal For Future Group

Amazon.com Inc. cannot be restrained from approaching statutory authorities against the deal between Kishore Biyani’s Future Group and Mukesh Ambani’s Reliance Industries Ltd., Senior Advocate Gopal Subramanium told the Delhi High Court on Tuesday.

Arguing for the American internet giant, Subramanium said Future Retail’s suit asking for an injunction isn’t maintainable. Future Retail Ltd. has approached the court to direct Amazon, an indirect investor in the company, to not interfere with the approval process for Rs 27,513-crore deal between Future Retail and Reliance Retail Ventures Ltd.

Subramanium said Amazon had introduced private equity firm Samara Capital to the Future Group, which had even given a term sheet for investment in it. At the time, he said, Amazon was told that the exclusive period with Reliance Retail was on.

“They said nothing is conclusive; please call Samara,” Subramanium said. “We call Samara, and suddenly we come to know the deal (with Reliance) is done. And we find them hobnobbing with a restricted person.”

Subramanium said, as per the 2019 agreements between Future Group entities and Amazon sale of retail assets—particularly to a restricted person—required prior written consent of both Future Coupons and Amazon. Future Retail, Subramanium said, couldn’t produce such consent from either during the emergency arbitration proceedings.

Amazon, which invested in Future Coupons Pvt. Ltd., a promoter company of Future Retail Ltd., has won a temporary stay on the Future Group-Reliance Retail deal. This was an interim order passed by the emergency arbitrator at the Singapore International Arbitration Centre. The two Future Group companies have moved Delhi High Court seeking to stop Amazon from blocking their deal with Reliance.

Here are the key arguments put forth by Amazon’s counsels before the high court in response to allegations by Future Retail and Reliance Retail.

Future Retail’s Suit Isnt Maintainable

Subramanium questioned the cause of action stated by Future Retail in its suit. A court is empowered to entertain a case if the cause of action arises in its jurisdiction.

Amazon’s counsels pointed out:

  • As per Future Retail, the cause of action arose on Oct. 3, 2020, when Amazon gave it notice of the arbitration proceedings. But, Subramanium said, the suit was filed well after the interim award was granted in Amazon’s favour on Oct. 25.
  • Future Retail has said cause of action arose when Amazon “unmeritedly” sought to include it as a party to the arbitration without there being any right to do so. And also when the application for emergency relief was filed by Amazon, when SIAC communicated the appointment of VK Rajah as the emergency arbitrator, when the arbitrator wrote to Future Retail for certain clarifications, when Amazon wrote to Securities and Exchange Board of India and stock exchanges.
I can’t believe this. I’ve not seen a suit like this. Can these be a cause of action when there’s an arbitration clause? The Emergency Arbitrator, out of maximum transparency, asked for papers and clarification. How can that be cause of action?
Senior Advocate Gopal Subramanium
  • Between the notice of arbitration and now, about five weeks have passed, Ameet Naik representing Amazon said.
  • “If they could wait for five weeks to come to court in a suit for injunction, surely they can wait further since the arbitral tribunal is on the cusp of formation,” Naik said.

Approaching Statutory Authorities Is No Great Sin

  • If something is an order of the court, there is a procedure to set it aside, Subramanium argued. Justice Chauhan has held that a man can’t unilaterally decide I’m so wise that I can say the order is non-est, nullity.
  • Justice Khehar has held that it’ll be dangerous if parties actually decide that orders of court can be assumed to be nullities without taking steps to get them set aside.
  • This is for orders of court, one could say, but even for arbitral awards Justice Lokur has held that by virtue of section 35 of Arbitration Act, an award is final and binding unless steps are taken to get it set aside.
  • If this is an interim order by an Emergency Arbitration, section 17 of the arbitration law equates with the order of the court.
  • The Specific Relief Act says you cannot restrain a person from going to court.
  • Amazon could’ve gone to statutory authorities even without an emergency award, but it wanted to go by the letter of the agreement which provides for SIAC Rules.

“Bringing an award that’s in my favour to the attention of statutory authorities is no great sin, no offence, no illegality. Even before the award, you (Future Group) said, go to the authorities and raise noise there,” Subramanium said. “Now that there’s an award, how am I worse off?”

Emergency Arbitrator Is Not A Pariah To Indian Arbitration Law

Future Retail has argued that the concept of Emergency Arbitrator is “alien” to Indian arbitration law. It pointed to the 246th Law Commission’s report which had proposed that this provision be included in the Arbitration Act, but the Parliament decided against it.

Subramanium said merely because the amendment wasn’t made doesn’t mean that an Emergency Arbitrator is “pariah” to the Indian arbitration law. He said:

  • The Supreme Court has held the mere fact that Parliament didn’t act as advised by the Law Commission is no answer to the position that a court will interpret the provisions clearly. The apex court had held “development of the (arbitration) law by this Court cannot be thwarted merely because a certain provision recommended in a Law Commission Report is not enacted by Parliament”.
  • Rules of Delhi, Mumbai and Madras Arbitration Centres, too, have provisions for emergency arbitrators. Thus, the concept is well-recognised by Indian law.
  • The institutional rules of SIAC agreed to by the parties contemplate Emergency Arbitration.

“Once you agree to the rules, which say you undertake to abide by interim orders as well, you then can’t argue the concept is alien to Indian law,” he said.

He also reiterated that Amazon has no control over either Future Coupons or Future Retail, and so, the allegations that its investment was in violation of FDI policy for multi-brand retail and market regulator’s Takeover Code, are untrue.

The court will hear the final arguments of Future Retail on Thursday, and has asked parties to submit their written statements in the next two days.

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