India

Explained: Why is the Delhi HC order on Future Group-Amazon dispute important?

The Delhi High Court on Tuesday held that the order of the emergency arbitrator of Singapore International Arbitration Centre (SIAC) had rightly proceeded against Future Retail and Future Coupons by barring them from going ahead with their deal with Reliance Retail and Fashionstyle, a subsidiary of Reliance Industries Limited.

The high court also held that the order of the emergency arbitrator was not a nullity as claimed by Future Retail and Reliance Retail and that it was enforceable under Indian laws.

What did the Emergency Arbitrator of the SIAC say in his order?

On a plea moved by Amazon, the SIAC had appointed V K Rajah as the emergency arbitrator in the case on October 5 last year. Amazon’s plea had sought a stay on the deal between Future Retail and Reliance Retail alleging that it would violate the agreement it had with Future Retail.

The emergency arbitrator, before passing any orders, asked Future Retail if it was willing to maintain status quo on their deal with Reliance Retail until the SIAC reached a final conclusion on the matter. Future Retail, however, refused, following which the emergency arbitrator passed an order barring the company from going ahead with the Rs 24,713-crore deal signed in August to sell its retail, wholesale, logistics and warehousing units to Reliance Retail.

The emergency arbitrator also said that the order shall remain in force until any further orders from the SIAC itself.

Why is the HC order important?

The Delhi High Court’s order and observation that the emergency arbitrator’s decision to block the deal was not a nullity and that it was enforceable in India gives a leg up to Amazon’s stand on the issue.

In its plea in the SIAC as well as the high court, Amazon had repeatedly submitted that the deal between Future Retail and Reliance Retail was a violation of an earlier deal that Amazon had signed with the Future Group. In 2019, Future Retail had signed a Rs 2,000-crore deal for Amazon to acquire 49 per cent stake in Future Coupons, the promoter firm of Future Retail.

According to Amazon, the deal had also given it a “call” option, which enabled it to exercise the option of acquiring all or part of Future Retail’s shareholding in the company, within three to 10 years of the agreement. It said the deal also required Future Group to inform Amazon before entering into any sale agreement with third part.

Both Future Retail and Reliance Retail had maintained that the order of the emergency arbitrator was not recognised under Indian laws, and therefore both the parties would go ahead with the deal as planned.

However, the Delhi High Court, while reserving its order on the issue, Tuesday said a status quo should be maintained on the issue. Though Future Retail has appealed against the status quo order, since it wants to move ahead with the deal, Amazon can claim the high court single bench order as a victory in its favour.

The high court order, legal experts said, also gives more credence to Amazon’s stand in the SIAC as the final arbitration on the issue is likely to start soon. Earlier this January, both Amazon and the Future Group had agreed on a three-member arbitrator panel.

What is the future of the Amazon-Future tussle?

The Delhi High Court has for now asked both the parties to not take any further steps until it decides on the plea that it pending before it. Though a single judge bench has reserved the order, Future has already moved the division bench challenging the status quo order.

Future has also moved the National Company Law Tribunal (NCLT) seeking approval of its merger with Reliance Retail. Final arbitration proceedings at the SIAC are meanwhile yet to start.

Tags
Show More

Related Articles

Leave a Reply

Your email address will not be published. Required fields are marked *

Close