Why Amazon Objected Reliance-Future Deal?

   In August 2020, Future Retail made a deal with Reliance Retail to sell its retail, wholesale, warehousing & Logistic business for Rs. 24,713 crores. This deal has gone into legal trouble with e-commerce global giant Amazon, who is claiming it as their pre contract with Future is violated.

Future group had taken a lot of debt and was under the pressor from its various lenders to repay the debt which was led by State Bank of India. Before making the deal the promoter of Future Biyani tried to sell its stake from several companies of Future group but was not successful to do the same. After Lockdown in March 2020 the business of Future had seen downfall and the business came to halt.

Future so made a deal with Reliance Retail to get rid of the debt. The deal between the Reliance Retail and Future Retail was to sell its retail supermarket chain Big Bazar, Food Supply chain Food hall & Fashion Super mart Brand Factory retail outlets.

Last Year, Future Retail had made a deal with E-Commerce global giant Amazon. In the deal Amazon will take over 49% od stake in Future Coupons and Future Retail will received Rs 2,000 Crores. Also, Future Retail will list its products on Amazon Online Market where the products will be delivered within 2 hours in selected cities. Future Retail had more than 1500 store all over India which could provide this service.

The Deal also had a clause that Amazon will have a priority option when Future Retail will sell all or part of its stake to any one within 10 years of the contract, this means that Amazon has priority to offer to buy the stake in Future Retail over anyone. The deal also had a clause if Future Retail enters into any agreement to sell its stake need to intimate Amazon before doing so.

Amazon filed an Arbitration case in Singapore International Arbitration Centre (SIAC) over the violation of Contract done by Future Group by making a deal with Reliance Retail before consenting Amazon. Amazon got Interim relief from the Emergency Arbitrator of SIAC by getting a stay on Future Retail – Reliance Retail Deal on 25th October 2020.

Future Retail will now have following options –

• Challenge the Stay order in SIAC.
• Move to an Indian Court for the same.
• Wait for the Amazon to act on the same then react according to their actions.

Also, the stay order by SIAC is not enforceable in India , it needs to be ratified by any Indian court before it is enforceable. Competition Commission of India (CCI) will also look into this matter and also check for online as well as offline market and the effect of the same on the sector.

This stay is bad news for Future Group as legal battle may take a time but the lenders led by State Bank of India won’t wait for anyone for the recovery of debt. Which may lead to selling of assets of Future Group.

 

 

-Akash Girish Doshi