Delhi HC clears Future -Reliance deal but allows Amazon to oppose3 min read . Updated: 21 Dec 2020, 06:26 PM IST
- With this, fresh battle lines are expected to be drawn before Sebi and the MCA where Amazon is currently challenging the deal
- Amazon accused Future Group of misleading investors and engaging in insider trading
The Delhi High Court on Monday upheld the proposed merger of Future Retail Limited ( FRL) with Reliance Retail Ventures Limited ( RNRL) while allowing Amazon Inc to continue opposing the merger in appropriate legal forums. In its ruling the Delhi High Court said it can’t bar the e-commerce giant from writing to regulators objecting to the Future group’s plan to sell its assets to Ambani’s Reliance Industries Ltd but the board sanctioned merger was not in violation of any statutory legal provisions and both sides were free to seek approval for the deal from local regulators.
With this, fresh battle lines are expected to be drawn before Securities and Exchanges Board of India (Sebi) and the Ministry of Corporate Affairs ( MCA) where Amazon is currently challenging the deal. The Competition Commission of India (CCI) , the third regulator cleared the transaction in November. The ruling by a single-judge bench can be challenged before a higher court. On 12 August 2019, Amazon had acquired 49% in Future Coupons Pvt. Ltd., which then acquired a 9.82% stake in FRL. The promoters of FCPL are the majority shareholders of FRL. The FCPL agreement with Amazon states that no transfer of the retail assets of FRL could be affected by FCPL and the promoters to any company, including RIL, without the permission of Amazon.
Kishore Biyani led-Future Retail Ltd (FRL) had approached the Delhi High Court in November seeking relief against an arbitration order passed by the Singapore International Arbitration Centre (SIAC) with regard to ₹24,713-crore deal with Reliance Industries. The Future group firm has contended that Amazon is "misusing" the interim order passed by an emergency arbitrator of the Singapore International Arbitration Centre (SIAC) on October 25, 2020. The SIAC had passed an interim award in favour of Amazon barring FRL from taking "any step to dispose of or encumber its assets or issuing any securities" to secure any funding from a restricted party. Opposing the deal Amazon has written two letters so far to Sebi, urging the regulator not to approve the transaction. Amazon accused Future Group of misleading investors and engaging in insider trading, but also has complained to Sebi against the FRL board for passing a resolution in August to approve the deal with RIL, without its consent.
On Monday, the HC further said that the rights granted to Amazon in the two shareholders agreements (with FCPL and FRL) are prima facie disproportionate to the actual shareholding of Amazon and by “camouflaging of words", the extensive rights held by Amazon cannot be masked as mere protective rights so as to fall beyond the test of “control".
The court further added against Amazon that the Jeff Bezos-run retail giant has not only been safeguarding its investments by creating protective rights, but also creating pre-emptive rights in contemplation of any change in Indian law that would permit Amazon to hold substantial shareholding of FRL. The court, however, declined to grant FRL’s plea an interim injunction to stop Amazon from approaching regulators, stating that Amazon can approach any competent authorities such as Sebi and CCI if the company intends to halt the RIL-FRL deal.
Mint reported on November 4 that lenders to Future group have signed inter-creditor agreements (ICA), paving the way for a potential restructuring of the group’s stressed loans, two people aware of the development said. The move by the lenders, comprising a clutch of banks, is part of a contingency plan to cope with a possible collapse or inordinate delay of Reliance Industries Ltd’s (RIL’s) planned acquisition of Future group’s assets because of Amazon.com Inc.’s legal challenge.