Supreme Court stalls $3.4-billion RIL-Future deal, win for Amazon

The Supreme Court on Friday ruled in favour of Amazon in a case that pitched the American online major against India’s original retail king Kishore Biyani’s Future Group and Mukesh Ambani’s Reliance Retail, which is set to go big on e-commerce. The ruling puts the $3.4-billion merger deal between Future and Reliance on hold for now.    

The top court allowed the appeal filed by Amazon against a Delhi High Court order staying attachment of properties of Future Group companies and Biyani in relation to a Future-Reliance Retail merger deal worth Rs 24,713 crore ($3.4 billion). The Bench of Justices Rohinton Fali Nariman and BR Gavai held that the order of an emergency arbitrator is enforceable in India, under Section 17(2) of the Arbitration Act.

Reliance Industries stock closed at Rs 2,133.30, down 2 per cent from the previous close on BSE. During the trading hours, the stock fell as much as 2.6 per cent.  Future Retail shares price were down 9.94 per cent to close at Rs 52.55.

The case centres around Amazon challenging Future’s merger deal with Reliance Retail, alleging that the transaction breached an agreement with the American e-commerce firm. Amazon had cited its non-compete agreement with the Biyani-led chain. The deal specified any disputes would be arbitrated under the Singapore International Arbitration Centre rules.

According to legal experts, the Supreme Court’s decision on Friday means that last October’s Singapore arbitrator’s award– that had found merit in Amazon's objections and had restrained Future Retail from proceeding with the merger deal with Reliance Retail – is valid and enforceable in India.

The next phase of arbitration in Singapore is expected within weeks, after which the Future Group and Reliance could explore further legal action, sources said.

“It (SC verdict) puts all eyes on the arbitral tribunal,” said Faisal Sherwani, Partner, at law firm L&L Partners.  “For now, the $3.4-billion deal will remain on hold and subject to the order of the Emergency Arbitrator. Until the order is vacated or revisited by the tribunal, you can consider that Amazon has put a spanner in a valuable deal.” He added that the pronouncement appears to be fair and is a reminder that ‘’party autonomy reigns supreme’’ when it comes to arbitration. “

Reading out the judgment on Friday, Justice Nariman said, "We have framed two questions and answered them as Emergency Arbitrator's award holds good and can be enforced under Section 17(2). Appeal is allowed." A division bench of the Delhi High Court had stayed an order passed by the single judge. It had directed attachment of properties of Future Group companies and Biyani in relation to the deal.

The single judge order of the high court had upheld the award of an emergency arbitrator. It directed attachment of the properties and restrained Future Retail Limited from merging with Reliance Retail. This order was subsequently stayed by a division bench, prompting Amazon to appeal.

“We welcome the verdict of the Supreme Court upholding the Emergency Arbitrator’s award," said an Amazon spokesperson. “We hope that this will hasten a resolution of this dispute with the Future Group.” Future Retail said the judgment addresses two limited points related to the enforceability of the Emergency Arbitrator’s order and not the merits of the disputes. “FRL is advised that it has remedies available in law, which it will exercise,” said Future Retail. The company added that the decision of the Arbitral Tribunal is awaited. “FRL intends to pursue all available avenues to conclude the deal to protect the interests of its stakeholders and workforce.”

Salman Waris, managing partner at technology law firm TechLegis Advocates and Solicitors, said, “This decision sends a very positive signal to international players and foreign companies, reaffirming that their rights would be protected in India under Indian law and as such would have a long term impact on future investment deals and investors.” The decision comes after the case went back and forth across the Delhi High Court, NCLT (National Company Law Tribunal) and the Supreme Court, he noted.

Last November, a lawyer for Future Retail Limited (FRL) told Delhi High Court that Amazon is interfering with its lawful business and thousands may lose their jobs and FRL may go bankrupt. Senior advocate Harish Salve, who appeared for FRL, had likened Amazon to East India Company. Senior advocate Gopal Subramanium, who represented Amazon, argued that the Jeff Bezos-founded firm had invested $6.5 billion across India and created 900,000 jobs.

Simran Brar, Partner (Arbitration Practice), Karanjawala & Co Advocates, said the ruling of the Supreme Court is yet another step in the right direction to bring India’s arbitration regime in line with the international regime in arbitration-friendly countries. “The judgment while laying to rest the ambiguity with respect to Emergency Awards has also interpreted the EA Award to further the ‘full party autonomy’ objective of the Indian Arbitration Act of having disputes decided as per institutional rules,” said Brar.

Naresh Thacker, Senior Partner, Economic Laws Practice said the decision of the Supreme Court is forward looking and brings forth a growing global perspective on the role of emergency arbitrators. “It recognizes that the order of an ‘emergency arbitrator’ is akin to that of the tribunal once properly constituted.”

“This victory is a tremendous blow for Future and Reliance,” said Sonam Chandwani, Managing Partner at KS Legal & Associates. “It comes at a good time for Amazon, since it competes directly with Reliance in the online food retail and supermarket segment.” Chandwani said Future Group may petition the Supreme Court for a review.

“The decision has thrown open the gateway for parties to conduct emergency arbitrations in India and across the world,” said Vasanth Rajasekaran, Partner at law firm Phoenix Legal.  “Big corporations which are often involved in matters of high stakes with severe commercial implications such as in this case would breathe a sigh of relief with the judgment in place.’’

Timeline:

• Aug 2019: Amazon acquires a 49% stake in Future Coupons, the promoter entity of Future Retail, for about Rs 1,500 crore.

• Aug 2020: Future group strikes a $3.4-billion asset sale deal with RIL.

• Oct  2020: Amazon sends legal notice to Future, alleging breach of the agreement.

• Oct 2020: Amazon gets favourable ruling for its plea in Singapore International Arbitration Centre (SIAC) against the deal.

• Nov 2020: Future moves Delhi HC against Amazon, alleges interference by US firm in the deal with RIL.

• Dec 2020: Delhi High Court refuses to restrain Amazon from interfering in Future Retail’s deal with Reliance by writing to statutory authorities.

• Jan 2021: Arbitration tribunal formed at the SIAC to look into the dispute.

• Jan 2021: Delhi HC serves a notice on Future Retail (FRL), Reliance Retail, and the Biyanis, seeking their views on a plea by Amazon against some of the observations by a single judge Bench.

• Jan 2021: Amazon files a petition in the Delhi HC, asking for the detention of Future Group’s founder and his family members.

• Feb 2021: Delhi HC orders status quo on the deal.

• Feb 2021: Setback for Amazon as Delhi HC lifts status quo on the deal.

• Feb 2021: Amazon moves SC challenging Delhi HC order that lifted status quo on the deal.

• Feb 2021: SC allows for FRL to proceed with a plea for a nod before NCLT, restrains NCLT from finalizing orders sanctioning the deal.

• Mar 2021: Justice JR Midha led bench of Del HC,  upholds the Emergency Award passed against the $3.4-billion Future-Reliance deal.

• Mar 2021: Delhi HC stays the single judge’s order restraining Future Retail (FRL) from going ahead with its $3.4-billion deal with Reliance Retail and directing the attachment of Future Group firms’ and founder Kishore Biyani’s properties in relation with Amazon’s plea asking for the enforcement of the emergency award.

• Apr 2021: Amazon approaches SC against a Delhi HC order which stayed a single judge's order restraining Future Retail Ltd from going ahead with its Rs 24,713 crore deal with Reliance Retail to sell its business.

• Aug 2021: Supreme Court rules in favour of Amazon, holds Singapore Emergency Arbitrator award against Future -Reliance deal enforceable in India.