Experts say Amazon-Future legal row worsening as US giant flexes muscle

The legal battle between US e-commerce giant Amazon and Future Group to stop Kishore Biyani-led retailer’s $3.4 billion deal with Reliance Industries Limited (RIL) is deteriorating and Amazon appears to be flexing its muscle, according to legal experts.

Amazon has filed a petition in the Delhi High Court to stop Future Retail’s (FRL) $3.4 billion deal with Reliance Industries Limited (RIL).  Amazon has asked the court to issue an injunction (in terms of the directions passed by the Arbitral Tribunal) restraining respondents from taking any steps to complete the impugned transaction with entities that are a part of the MDA ( Mukesh Dhirubhai Ambani) Group. It has asked to issue an injunction for restraining the respondents from directly or indirectly taking any steps to transfer, dispose of, alienate or encumber FRL’s retail assets, including the large format or small format stores or the shares held in FRL of the respondents (from the Future Group) in any manner without the prior written consent of the petitioner (Amazon).

Amazon has also asked the court to issue “an injunction (in terms of the directions passed by the Arbitral Tribunal) restraining the respondents from issuing securities of FRL or obtaining or securing any financing, directly or indirectly from any restricted person, including MDA Group in any manner contrary to the FCPL SHA ( Future Coupons Pvt Ltd Shareholding Agreement) or FRL SHA,” said the petition and which has been seen by Business Standard.

“The situation is deteriorating, and the two titans engaged in such a fierce conflict present a dismal image,” said Sonam Chandwani, managing partner, at law firm KS Legal & Associates. Chandwani hinted that Amazon may be flexing its muscles and said that the US e-commerce giant has also warned about taking action against Reliance.

"Amazon seems willing to fight to the bitter end. It will be interesting to see how Amazon handles this issue,” Chandwani asserted.

The Supreme Court was told on Tuesday that talks between Amazon and the Future companies had failed. The court was told that Reliance was taking over the assets of Future. A Bench of Chief Justice of India NV Ramana and Justices AS Bopanna and Hima Kohli was hearing Amazon's challenge to the Delhi High Court order staying proceedings before a Singapore International Arbitration Centre (SIAC) tribunal in relation to Amazon’s 2019 deal with Future Coupons Pvt Ltd.Senior Advocate Gopal Subramanium, appearing for Amazon, revealed that there was no headway in the mediation between the two parties.

“We are broke, we have no money. Amazon is driving us to the knees. That is where we find ourselves. A large amount today is owed to Reliance. We had no money to give them. We can harp on glory and grandeur, but when we are broke, we are broke,” said Senior Advocate Harish Salve, appearing for Future Coupons, according to law platform Bar & Bench.

“Rents have not been paid for 2 years. Landlords terminated leases and we had no money to pay them. Reliance signed up with landlords. We were in no position to pay,” said  Salve explaining that nothing has been transferred.

Both Amazon and Future said they would like to resume arbitration proceedings in Singapore that had been put on hold by the New Delhi High court. The Supreme Court said it will hear arguments from Amazon on Wednesday and decide on the matter.

Earlier this month  Supreme Court had given both sides time until March 15 to explore a settlement. During a hearing this month the court told the three parties — Amazon.com, Future Retail (FRL), and its promoter Future Coupons Pvt Ltd (FCPL) —to find ways to reach a settlement. The judges said the two sides could take 10 days to reach a solution.

The issue between Amazon and Future goes back to August 2019, when Amazon acquired 49 per cent in FCPL (Future Coupons Pvt Ltd), the promoter entity of FRL, for around Rs 1,500 crore. One year later, in August 2020, Future Group struck a $3.4-billion asset-sale deal with RIL.

In October 2020, Amazon sent legal notice to Future for doing the deal. It alleged it breached Future’s agreement with Amazon. It cited its non-compete agreement with the Kishore Biyani-led chain. The deal specified any disputes would be arbitrated under the Singapore International Arbitration Centre (SIAC) rules. The same month, October 2020, Amazon got a favourable ruling for its plea at the SIAC.

Also, Amazon on Tuesday put out a public notice in a newspaper accusing Future Retail (FRL) and its promoters of committing fraud after Reliance Industries (RIL) took over some retail stores of FRL. Amazon has in a public notice reserved the right to civil and criminal legal recourse against FRL and its promoters for the transfer of its retail assets to RIL in a "clandestine" manner.

"FRL and its promoters have consistently acted in violation of the order passed by the emergency arbitrator and reaffirmed by the Arbitral Tribunal,” said the notice. “It has now come to light that FRL and its promoters have been attempting to remove the substratum of the dispute by purportedly transferring and alienating FRL's retail assets comprising the retail stores in favour of the MDA Group.” MDA refers to Mukesh Dhirubhai Ambani.

“Amazon’s public notice seems to be irregular and improper considering the parties are currently litigating before the courts and more so, as Amazon has made serious allegations of ‘playing a fraud on the Courts’ and ‘making false submissions before the Supreme Court’ against the Future Group,” said Sohil Shah, principal associate at law firm Pioneer Legal. “Amazon runs a risk of being sued for defamation. The legally correct way for Amazon is to approach the relevant court and sue the Future Group for contempt of court.”

Legal experts said that amidst a protracted battle between Amazon and Future Retail Limited, the public notice issued by Amazon comes at a stage where the parties were granted time to explore a settlement.

“While the alienation of FRL’s retail stores to RIL, who is a ‘restricted person’ under the definitive documents, is a contractual violation, what the public notice achieves for Amazon may be two-fold: primarily, it re-emphasizes Amazon’s intent to battle it out with FRL and its promoters, this time over fraud and possibly wilful misconduct and secondly, to show the violation of a court order thereby indicating contempt on the part of FRL,” said Pavana Padmakumar, an associate at law firm Pioneer Legal.