Amazon claims Future hid facts from investors

Amazon.com Inc., which is fighting to block Future Group from selling its assets to Reliance Industries Ltd, has accused the Kishore Biyani-led Future Retail Ltd (FRL) of hiding key facts from shareholders while pursuing the transaction.

In a letter addressed to markets regulator Securities and Exchange Board of India (Sebi), Amazon has alleged that Future Group has perpetuated “fraud” by misleading public shareholders. A copy of the letter has been reviewed by Mint.

“FRL’s disclosure presents a selective and misleading picture. Such disclosure is against the public interest, misleads public shareholders (which make up approximately 70% of FRL’s shareholding) as well as perpetuates a fraud for the benefit of the Biyanis alone,” Amazon wrote in the 3 October letter.

In the complaint to Sebi, Amazon has alleged “grave and material breach of fiduciary duties by the FRL board, and said it is prejudicial to FRL, its public shareholders, and entails various breaches of the Sebi Act and the regulator’s disclosure requirements”.

Amazon’s letter to Sebi alleges that FRL has no regard for its “solemn contractual commitments, as well as binding orders passed by an internationally recognized and reputed arbitral institution, viz. SIAC (Singapore International Arbitration Centre) despite presenting its case at length before the EA (emergency arbitrator),” reads the letter. “In the event FRL and the promoters (led by Biyanis) pursue the impugned transaction, including seeking approval from Sebi, their acts would be in direct contravention of the interim award passed by the EA, and Sebi should, therefore, not approve the impugned transaction,” said the Amazon letter.

“Such cavalier conduct by a public listed company severely undermines India’s image as a pro-arbitration jurisdiction and a country which respects the rule of law and contractual obligations,” the Amazon letter to Sebi said.

On 29 August, Future Group, whose subsidiary, Future Coupons Pvt. Ltd, has Amazon as a 49% stakeholder, announced a deal valued at ₹24,713 crore to sell its retail, wholesale and logistics business to RIL’s retail subsidiary. Through its stake in FCPL, Amazon indirectly owns around 5% in FRL. On 5 October, Amazon initiated arbitration proceedings before SIAC against the Future Group promoters—FCPL and FRL—and sought emergency relief with respect to the transaction with RIL. Amazon has alleged that by entering the deal with RIL, Future Group has violated the key non-compete clauses mentioned in the agreement signed in August 2019 between Amazon and Future Group as a part of the FCPL deal. On 25 October, SIAC passed an interim award in favour of Amazon and noted that FRL did not have the consent from FCPL and, consequently, from Amazon, and accordingly, the board of FRL could not have approved the transaction with RIL.

The SIAC order bars Future Group from taking any steps to further the deal with RIL or make any filing before any person, including regulatory bodies or agencies in India for approval of the deal.

SIAC has said if Amazon and Future Group fail to agree on any terms, they are to refer their differences to the SIAC for resolution. In the letter, Amazon said it is confident that Sebi will promote ease of doing business in India by holding listed companies accountable to their dealings, particularly those having a material impact on public shareholders.

While Future Group and its promoters are in a hurry to repay their $2.5 billion debt, Amazon told Sebi that Future Group’s decision to seal the RIL deal has caused irreparable damage to the American retailer. “If the scheme is implemented by completely disregarding the interim award, it will cause irreparable harm and injury to Amazon, as also noted by the EA, and the same will also be detrimental to unsuspecting public shareholders of FRL,” said Amazon.