Adverse SC ruling sends Future back to the drawing boards

The Supreme Court has implications beyond Future Group’s future. (File photo of Future Group founder Kishore Biyani)
The Supreme Court has implications beyond Future Group’s future. (File photo of Future Group founder Kishore Biyani)


  • It also signals India’s acceptance of international arbitration norms

The Supreme Court’s upholding of the Singapore arbitration court’s decision to place on hold a deal that would have allowed Kishore Biyani to sell Future Group’s retail, wholesale, logistics and warehousing business to Reliance Industries Ltd for 24,713 crore brings closure to the recent uncertainty around India’s position on such rulings. The objection to the deal had come from Amazon, which cited pre-existing contracts with Future Group to block its sale to parent Reliance Industries. The acquisition would have given the Indian company an advantage in the three-way battle for supremacy in India’s rapidly growing retail market.

While Reliance was not involved directly in the case proceedings, all eyes will be on the company following the SC ruling. But, will Mukesh Ambani still want to pursue a deal that appears to be fraught with legal hurdles? Two years ago, he had called off another deal to buy Reliance Communication’s spectrum after being asked to bear a guarantee for Anil Ambani’s past debts. While the sale offered a lifeline to the embattled RCom, and might also have made some sense for an expanding Jio looking for spectrum, the senior Ambani clearly did not like the idea of wading into troubled waters. In this case, too, it is possible that with the long stop date for the closure of the sale approaching on 30 September, he may choose to let it go.

That would have serious consequences for Biyani, whose lenders had agreed to a debt restructuring plan in April. In January, the group’s counsel told a Delhi high court during hearings on the case that it would collapse if the deal with Reliance didn’t go through. Given its upcoming repayments and desperate need for working capital, his hope now might be to go back to the negotiating table with his original partner Amazon. Given how doggedly the latter has pursued the case through multiple courts, it will draw a hard bargain were that to happen. Either way, Biyani’s future that looked somewhat secure a year ago when he first agreed to sell the assets to Reliance, now looks extremely suspect.

The SC ruling, though, has implications beyond Future Group’s future and the emerging contours of the retail sector in India. By stating unequivocally that the interim order of the Singapore arbitral tribunal was valid in India, the SC has sent out a clear signal that such awards need to be respected. Harish Salve, who appeared for FRL, had argued that there was no notion of Emergency Arbitrator (EA) under the Indian law on arbitration and conciliation. The SC judgment puts the seal on that, holding the EA’s award valid and enforceable in India.

Coming within a day of the finance ministry’s move to close the festering nine-year-old issue of retrospective taxation, the court ruling will certainly restore international investors’ faith in India as a stable destination where rules on taxation and dispute resolution are followed.

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