’Amazon’s contention on RIL deal is misconceived’: Future Retail tells BSE, NSE

New Delhi: Stock exchanges must not take into cognisance order of a Singapore arbitration court, brought to the exchanges' attention by Amazon.com NV Investment Holdings, which bars Future Retail from selling company's assets to Reliance Industries, said Future Retail in a regulatory filing.

Future Retail Ltd (FRL) said on Sunday that a Singapore arbitrator's order in its dispute with Amazon.com Inc is not enforceable under Indian law and not binding on the company.

Amazon 'entirely misconceived' the agreement between Amazon and Kishore Biyani (CEO of Future Group) same as between Future Retail and its promoters, said Future Retail.

"The Emergency Arbitrator order accepts Amazon’s contention that two separate shareholder agreement(s), one between Amazon and Future Retail Limited's (FRL’s) promoters (to which FRL is not a party) and another between FRL and its promoter (to which Amazon is not a party) constitute one single integrated transaction and that by such a composite transaction Amazon has an interest in and rights against FRL.

"This contention raised by Amazon is entirely misconceived. In fact, if the two separate agreements were treated as a single integrated transaction by which Amazon obtained an interest in and rights against FRL, then in 2019, when the agreements were executed there would have been a change in control of FRL in favour of Amazon, requiring it to make an open offer to FRL’s public shareholders in terms of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011," said Future Retail in a stock exchange filing.

Calling the proceedings before the so-called "emergency arbitrator" void, FRL told Indian exchanges that any attempt on the part of Amazon to enforce the order will be resisted.

"Any attempt on the part of Amazon to enforce the EA Order shall be resisted by FRL to the fullest extent available under Indian law. FRL is also in the process of taking appropriate legal action to protect its rights," the company added.

"In its letter, Amazon has painted a picture that public shareholders of FRL are being misled. It is a bit rich for such an argument to be made from someone who is not even a shareholder in FRL. Evidently, Amazon’s letter is motivated by other considerations," said Future Retail.

Future Retail also told exchanges that Amazon has sought damages of ₹1,431 crore along with interest.

"Amazon has sought for damages amounting to INR 14,310,000,000 (Indian Rupees Fourteen Billion Three Hundred and Ten Million) alongwith interest being the amount invested by Amazon into Future Coupons Pvt. Ltd," said the company.

In its Sunday filing, FRL said it had complied with all regulatory requirements and urged the market regulator and the Indian stock exchanges to continue to review its deal with Reliance for approval. Any delay in the implementation of the deal will cause irreparable losses to all stakeholders, the company told exchanges.

"It is humbly submitted that BSE and NSE ought not to take cognizance of Amazon’s letter or the EA Order, since: (i) FRL has complied with all the requirements of obtaining the requisite approval from Future Coupons Private Limited, as was required in the Shareholders Agreement executed by FRL with its Promoters; (ii) FRL is undergoing serious financial difficulties, particularly in light of the unprecedented impact of the COVID pandemic; (iii) the proposed scheme is the only way, it can come out of the situation; (iv) scheme is in the best interest of all stakeholders, that includes shareholders, financial institutions, vendors and suppliers, and more importantly employees, etc.; (v) any delay in the implementation of scheme will cause irreparable losses to all stakeholders," Future Retail further said.

"At best, Amazon’s claims are a contractual dispute between Amazon and the promoters of FRL, and Amazon has already initiated arbitration for the same. It is submitted that SEBI and the stock exchanges should consider the Scheme independently on its merits, and as per SEBI regulations," the company said.

Earlier Amazon.com Inc complained to India's market regulator SEBI that FRL misled shareholders by incorrectly saying it was complying with its contractual obligations to the US e-commerce giant.

Over the process, the Future group firm said that consent for scheme was accorded by the Board of Directors of FRL at a properly constituted meeting held on August 29, 2020.

"The said board resolution, as well as actions taken in pursuance of the same are consistent with the Articles of Association of FRL and remain valid and subsisting," it said.

Last month, the Singapore arbitrator's interim judgement has put on hold the ₹24,713-crore deal between Future group and Mukesh Ambani's Reliance Industries Ltd.

The arbitrator's order has called for an arbitration process to be followed by Future and Amazon, and that the Future-RIL transaction be stayed.

Amazon had agreed to purchase 49 per cent of one of Future's unlisted firms -- Future Coupons Ltd -- last year with the right to buy into flagship Future Retail Ltd after a period of three to ten years. Future Coupons holds 7.3 per cent equity in BSE-listed Future Retail Ltd -- that operates popular supermarket and hypermarket chains such as Big Bazaar -- through convertible warrants.

The e-commerce giant had dragged Future to arbitration at Singapore International Arbitration Centre (SIAC) after the indebted Kishore Biyani group firm signed a pact to sell retail, wholesale, logistics and warehousing units to billionaire Mukesh Ambani's Reliance in August this year.

Amazon's argument is that Future violated the contract by entering into the deal with rival Reliance.

The tussle between Future and Amazon comes at a time when Reliance has been bolstering its position in the country's retail segment.

Reliance Retail Ventures Ltd (RRVL) -- run by India's richest man Mukesh Ambani -- has been on a fund raising spree and since September, it has raised ₹37,710 crore crore by selling stake in its retail arm.

RRVL operates India's largest, fastest-growing and most profitable retail business spanning supermarkets, consumer electronics chain stores, cash and carry wholesale business, fast-fashion outlets and online grocery store JioMart.