Future Retail breached terms of contract: Amazon lawyer tells court

A lawyer for e-commerce giant Amazon on Wednesday told the Delhi High Court that investors have protective rights. The lawyer argued that  FRL (Future Retail) was aware that Amazon's consent was needed in case of sale (retail assets) particularly to a restricted person.

The case deals with Future Retail's suit against Amazon in a matter related to the interim order passed by an Emergency Arbitrator in Singapore. The arguments from the legal counsels of the companies continued on the second day. The matter was heard by Justice Mukta Gupta. The court adjourned the hearing until Thursday after a day-long hearing, according to the information available on law platform Bar & Bench.

On Tuesday, the court had also sought a response from Amazon on Future Retail’s plea which alleged that the e-commerce firm was interfering in its deal with Reliance on the basis of an interim order by an Emergency Arbitrator in Singapore. 

Amazon, which was represented by senior advocate Gopal Subramanium on Wednesday argued that when it comes to ‘tort of interference’ in contracts, the contract itself has to be legal. The sanctity of contracts is to be preserved. He argued that primary recondition is that FRL (Future Retail Ltd)  must have an untainted lawful agreement with Reliance, but where is the agreement? He said it is a product of breach and bypasses an award.

Last year in August, Amazon bought a 49 per cent stake in Future Coupons for Rs 1,430 crore.

Subramanium said the award, states that the emergency Arbitrator held that prima facie FRL breached the terms of the contract. “Money has gone into the company from me.. how can he now say that there is an agreement with another company,” said Subramanium, according to Bar & Bench.

Last month Amazon won a favourable ruling for its plea in Singapore against Future Group striking a Rs 24,713-crore asset sale deal with Reliance Industries Ltd (RIL).

On Wednesday Subramanium argued that the moment one signs an agreement with SIAC (Singapore International Arbitration Centre) rules, one is bound by the stipulation that when there is an award by an Emergency Arbitrator and one is bound by it, according to Bar & Bench. 

“The arguments made by senior advocate Gopal Subramanium primarily revolved around ‘What is the cognizability of the award? And the general status of an emergency award under Indian law,” said Salman Waris, managing partner at technology law firm TechLegis Advocates and Solicitors, who analysed Wednesday’s court proceedings. “Under 1940 Act, an award is not a waste paper. It is final and binding under the first schedule,” said Waris.

In the court, Subramanium said the Arbitrator (in Singapore) has followed the spirit. After finding a prima facie case, he passed the directions.

Subramanium argued that there is no doubt that SIAC (Singapore International Arbitration Centre) rules govern the arbitration, they are the expression of party autonomy in this case. So an emergency Arbitrator is as good as an Arbitrator. All agreements (FRL SHA, FCPL SHA, and share subscription agreement) are on the plate together.

Earlier the legal counsel of Future Retail had said that Amazon, which came to invest in India had a limitation as, under Indian law, foreign direct investment (FDI) in the multi-retail brand is not allowed.

Subramanium on Wednesday argued that the plaintiff is the beneficiary of the monies invested by Amazon. “How can it now say that (there is) violation of FDI policy,” asked Subramanium. “This suit is very doubtful.. it is not maintainable at all. It seeks to stall an existing sacred arbitration agreement, a process which is already underway.”

Earlier lawyer of Future Retail had also said that Amazon is writing to the Competition Commission of India (CCI) and Securities and Exchange Board of India (SEBI) and pressed for an ad interim injunction against the e-commerce giant to stop it from writing to statutory bodies.

Subramanium on Wednesday argued that one cannot restrain a person from going to a court. “My friend says don't go to statutory authorities. I am going because there is an award in my favour. It is not a great sin,” said Subramanium, according to Bar & Bench.

Subramanium also referred to the Antrix case. “It was argued that the parties in the present matter agreed to ICC (International Chamber of Commerce) rules and the Supreme Court said that they could not change it,” said Waris of TechLegis.

Subramanium said the parties are bound by the directions of the emergency Tribunal. The Biyanis (Future promoters) are common in all this. They are parties to the arbitration agreement.

The day’s highlights:

Counsel representing Amazon told the Delhi High Court that the investors have protective rights.

It argued that  FRL (Future Retail) was aware that Amazon's consent was needed in case of sale (of retail assets).

The counsel alleged that FRL breached the terms of the contract with Amazon.

It said the plaintiff is the beneficiary of the monies invested by Amazon.

The counsel argued how can it now say that there is a violation of FDI policy?

The court adjourned the hearing until Thursday after a day-long hearing.