HC directs Future Retail to maintain status quo on deal with Reliance

HC said the court was satisfied that an immediate interim order was required to be passed to protect the rights of Amazon.

New Delhi: The Delhi High Court Tuesday directed Future Retail Ltd (FRL) to maintain status quo in relation to its Rs 24,713 crore deal with Reliance Retail, which has been objected to by US-based e-commerce giant Amazon.

Justice J R Midha said the court was satisfied that an immediate interim order was required to be passed to protect the rights of Amazon.

"Respondents (FRL) and other respondents are directed to maintain status quo as on today at 4:49 PM till pronouncement of the reserved order," the judge said.

Amazon has approached the high court seeking direction to order enforcement of the award by Singapore's Emergency Arbitrator (EA) restraining FRL from going ahead with its Rs 24,713 crore deal with Reliance Retail.

Amazon has sought to restrain Kishore Biyani-led Future Group from taking any steps to complete the transaction with entities that are a part of the Mukesh Dhirubhai Ambani (MDA) Group.

The high court, which heard the matter for four consecutive days, reserved its order on the main petition and also directed all other concerned authorities to maintain status quo in relation to the matters which are in violation of the emergency award and to file status report with regard to the present status within 10 days.

While pronouncing the interim order, the high court said it was of the prima facie view that the emergency arbitrator is an arbitrator and he has rightly proceeded against FRL and its order was not in nullity.

The court said it was clear that the October 25, 2020 order of the emergency arbitrator passing the award was enforceable and appealable under the relevant provisions of the Arbitration and Conciliation Act.

The high court directed FRL to file an affidavit stating the steps and actions taken by it from october 25, 2020, when the emergency award was passed, till now in connection with the deal with Reliance.

The high court had earlier issued notices and sought responses of FRL, Future Coupons Pvt Ltd (FCPL), Biyanis and other related parties on the petition by Amazon.

Amazon.com NV Investment Holdings LLC, in its plea, also sought detention of the Biyanis, directors of FCPL and FRL and other related parties in civil prison and attaching of their properties for alleged "wilful disobedience" of the emergency arbitrator's order.

It also sought to restrain Future Group from taking any steps to transfer or dispose of FRL's retail assets or the shares held in FRL by the Biyanis in any manner without prior written consent of Amazon.

The Future Group and Amazon have been locked in a battle after the US-based company took FRL into the emergency arbitration over alleged breach of a contract between them.

The three domestic firms -- FRL, FCPL and Reliance -- have however contended before the high court that if Amazon's claim -- that it indirectly invested in FRL by investing in FCL -- was accepted then it would amount to a violation of Indian foreign direct investment laws which permit only 10 per cent investment by a foreign entity in the multi-brand retail sector.

According to Amazon, the EA award passed under the Singapore International Arbitration Centre (SIAC) Rules is enforceable under Section 17(2) of the Arbitration and Conciliation Act.

It referred to an order passed by the high court on December 21, 2020, prima facie holding that the EA's award was valid under the Indian law.

Senior advocate Gopal Subramanium, representing Amazon, contended that FRL has deliberately and willfully violated and continues violating the October 25, 2020 order of the EA and immediate interim order be passed to protect them.

Senior advocate Harish Salve, representing FRL, had earlier submitted that Amazon had a deal with FCPL and signed an agreement with Biyani. FCPL has a shareholding agreement with FRL which has no agreement with Amazon.

In the petition, Amazon has alleged that Future Group, Kishore Biyani and other promoters and directors have “deliberately and maliciously disobeyed” the EA award despite it being binding on them and not having challenged it in accordance with the law.

“The majority respondents' action of simply ignoring the order (of EA) and continuing with the impugned transaction (deal) is not only contumacious but calls into serious question their respect for enforceability of contracts, the rule of law and the administration of justice..,” it said.

It sought to injunct Future Group and its officials from taking any steps in furtherance of the deal with Reliance.

In August last year, Future had reached an agreement to sell its retail, wholesale, logistics and warehousing units to Reliance.

The SIAC on October 25 last year, had passed an interim order 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.

Subsequently, Amazon wrote to market regulator SEBI, stock exchanges and Competition Commission of India (CCI), urging them to take into consideration the Singapore arbitrator's interim decision as it is a binding order, FRL had earlier told the high court.

As per the SIAC interim order, a three-member arbitration panel needs to be set up within 90 days (from the date of the judgement) with one judge each being appointed by Future and Amazon, along with a third neutral judge.

On November 10, 2020, Amazon had told the court that it and FCL have appointed their respective arbitrators.

(PTI)