Future Retail Argues Emergency Arbitrator’s Interim Order Is Unlawful
A shopper walks through an aisle displaying personal care goods at a Big Bazaar hypermarket, operated by Future Retail Ltd., in Mumbai, India. (Photographer: Dhiraj Singh/Bloomberg)

Future Retail Argues Emergency Arbitrator’s Interim Order Is Unlawful

Amazon’s assertion to statutory authorities that the Emergency Arbitrator’s interim order is binding is complete fabrication and amounts to unlawful interference, senior counsel Darius Khambata told the Delhi High Court.

Arguing for Future Retail, Khambata said the law provides that if an order is passed without jurisdiction, it is a nullity and non-est. And that it need not be set aside. He was responding to Amazon.com NV Investment Holdings’ argument that Future Retail must either abide by the Emergency Arbitrator’s interim order or take steps to set it aside; else it can’t proceed with regulatory approvals for its deal with Reliance Retail.

To recap, Kishore BIyani-led Future Retail Ltd. has approached the court to direct U.S. internet giant Amazon to refrain from interfering with the approval process for Rs 27,513-crore deal between Future Retail and Mukesh Ambani-led Reliance Retail Ventures Ltd. Amazon, which invested in Future Coupons, a promoter company of Future Retail, has won a temporary stay on the Future Group - Reliance Retail deal. The stay was granted by the Emergency Arbitrator constituted under the Singapore International Arbitration Centre’s Rules.

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.

Here are the key arguments made by senior counsels Harish Salve and Darius Khambata, both representing Future Retail before the high court on Thursday:

CCI Disclosures ‘Not Candor But Sleight Of Hand’

Amazon, as per its disclosures to the Competition Commission of India, had invested 49% in Future Coupons Pvt. with a view to strengthen and augment the latter’s business relating to marketing and distribution of corporate gifts cards, Salve pointed out. But now its (Amazon) stance is contrary to what it told the regulator, Khambata added.

  • At that time, Amazon didn’t say that all these agreements are part of chain through which it is acquiring control to a limited degree over FRL. Amazon’s interest is in Future Coupons’ business.
  • The law is well-settled in India that admission is the best evidence—it’s decisive unless it’s successfully withdrawn or proved to be erroneous.
  • If an entity has made a representation to a regulator, it will have a chance by leading evidence in a suit to say it’s admission was wrong. But this particular defendant (Amazon) isn’t saying that.
  • Amazon has told the regulator that the entire transaction is to get value and a foothold in FCPL, and in the same document recognised that FRL shareholders’ agreement is existent. This means Amazon is effectively telling the regulator that the FRL SHA is not part of this transaction; it’s separate.
Amazon said in candor we pointed out to the CCI that there was a FRL SHA. That was not candor; that was sleight of hand. 
Senior Counsel Darius Khambata
  • Now, Amazon can’t say conflate the two agreements - that’s contrary to your admission to the CCI.

Amazon Only Wants To Protect Its Commercial Interests

By saying that Future Retail needs its prior written consent before doing business with certain restricted persons, Amazon is only protecting its commercial interests, Salve said.

  • As per FRL-FCPL shareholders’ agreement, “restricted persons” are those which are communicated by FCPL.
  • As per FCPL-Amazon SHA, it’s such persons as is mutually agreed to by parties. But if Amazon is now saying it has all the rights as a result of tying up of all these agreements, and its prior consent is required- where is mutual consent here? The degree of control is enormous.
  • Amazon is only protecting its commercial interests. These are not investor protection rights.
  • The reason Amazon is writing to statutory authorities is because it knows it won’t have locus when the deal goes for approval before the National Company Law Tribunal.
  • Company law gives an entity locus with at least 10% shareholding. Below that, a shareholders has no say.
But what Amazon is asserting is I have complete say in the running of a listed company with a pro-rata shareholding of less than 10% via some agreements. Sorry; that can’t be done.
Senior Counsel Harish Salve

Entitled To Ignore Emergency Arbitrator’s Order

Future Retail reiterated its stance that Emergency Arbitration is “alien” to the Indian Arbitration Act.

  • An arbitrator under Part 1 of the arbitration law is someone who has a degree of permanence.
  • Parties, at will, cannot appoint different arbitrators for different periods of time.
  • Section 32 provides for when a mandate to an arbitrator comes to an end.
  • What parties can do is agree to the procedure. But institutional rules (SIAC) cannot circumvent the Indian Arbitration Act i.e. parties cannot appoint transient arbitrators.
  • SIAC Rules specifically recognise Emergency Arbitrator’s award.
  • It’s a different specie created in SIAC Rules because under Singapore arbitration law, you can have an Emergency Arbitrator.
  • Supreme Court has held that before the arbitral tribunal is constituted, only section 9 of the arbitration law is available for interim relief. There is no jurisdiction in anyone else besides a court to grant interim relief.
  • Amazon says parties have agreed to SIAC Rules- so Emergency Arbitration must apply.
But I ask myself—can I agree to something that’s not allowed under Indian law? Can I say that until arbitral tribunal is formed, Mr X will grant me relief? It’s not possible in Indian law.
Senior Counsel Darius Khambata
  • Amazon says party autonomy is so great that you can agree to anything. Parties can agree to anything but it should be consistent with the scheme of the (Arbitration) Act.

Amazon will respond to these arguments on Friday.

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