Amazon and Future Group are on the opposite sides of a legal battle right now. Back in August, Future Group decided to sell its retail assets to Reliance. Amazon has claimed that the deal violated their “contractual rights”.
Kishore Biyani’s Future Group Retails made a ₹ 24,713 crore ($3.4 bn) deal with Mukesh Ambani’s Reliance Industries Ltd.
The Future Group-Reliance Deal
Under this deal, Future Retail has sold its retail, wholesale, logistics, and warehousing units to Reliance Retail and Fashion style. This deal has angered Amazon who has claimed that the deal breaches Future’s 2019 agreements.
Under the Future-Reliance deal, Future will sell its supermarket chain Big Bazaar, the premium food supply unit Foodhall and fashion and clothes supermart Brand Factory’s retail and wholesale units to Reliance Retail.
Due to the Coronavirus pandemic, a nationwide lockdown was declared in March to contain the virus. Future Group’s retail business was already under huge stress. They had also faced immense pressure from lenders. State Bank of India led this list of debtors. The pandemic also halted sales in most of their Foodhall and Brand Factory branches.
To manage the pile of debts, Future decided to make the deal with Reliance. Biyani also tried to get several business groups to sell shares in Future Group’s numerous companies. Biyani attempted this in order to cut down on the debt but reportedly didn’t see much success.
The problem with Amazon
On the other hand, Future Retail had also signed another deal with Jeff Bezos’ Amazon last year. Under this deal, Amazon had acquired a 49 percent stake in Future Coupons, Future Retail’s promoter firm. The deal was worth nearly ₹ 2,000 crores ($ 0.27 bn).
This allowed Future Retails to place their products on Amazon’s online market. The two entities agreed on another pact wherein the Future Retail products would be delivered to customers within two hours of ordering time. This was supposed to be Amazon’s new plan in select cities.
Amazon has claimed that Future’s new deal with Reliance is in complete violation of a non-compete clause and a right-of-first-refusal pact that they have signed with Future Group. According to the deal, Future Group was also required to notify Amazon before entering into any sale agreement with third parties. Amazon also said that the clause also said that Future could not sell its retail assets to anyone on a “Restricted Persons” list. This list included Reliance too.
On their part, Future Group stated that they have not violated any terms of their contracts with Amazon. They said that they had not sold any stake in the company and were merely selling their assets.
Nonetheless, Amazon went ahead and sent a letter to the Securities and Exchange Board of India (SEBI), the Bombay Stock Exchange, and the National Stock Exchange (NSE) requesting them to not approve the Future-Reliance deal as there was also an interim stay order on the same.
Future Group has also maintained that they have done nothing wrong and are in compliance with the Amazon deal. They have also asserted that the deal with Reliance Retail would go forward without any hurdles and as scheduled.
What’s next in the Amazon-Future-Reliance tussle?
Amazon managed to obtain an interim stay on the deal from the Singapore International Arbitration Centre (SIAC). But this isn’t the end yet. Future claims that they have done no wrong. They have also set aside ₹ 1,000 crores in an escrow account to factor in all present and future liabilities in its arbitration tussle with the worldwide e-commerce giant, Amazon.
Future also plans to move to Delhi High Court seeking an Indian Court’s express approval to go ahead with the deal. They believe that SIAC’s interim orders passed by the emergency arbitrator will hold no value under Indian Laws.
If the Future-Reliance deal goes ahead notwithstanding the interim order, Amazon is likely to move the arbitration tribunal in Singapore once again to pursue a final stay on the issue.