Amazon vs Future Group & Reliance

Written by: Maitreyi Upadhyay

It is reasonable to say that Amazon, the US e-commerce behemoth, has faced a barrage of criticism from a variety of sources and businesses over the years regarding its business methods and policies, which have called into question the company's ethics. Amazon has been accused of anti-competitive, anti-trust, and monopolistic practises in numerous publications. The corporation has also been chastised for its abrasive work environment, as well as its treatment of employees, workers, and customers.

With Walmart's acquisition of Flipkart in 2018, India became a new worldwide battleground for the online retail business. As a result, Amazon and Flipkart have been fighting for supremacy in the Indian market. And for Reliance Retail, India's largest brick-and-mortar retailer, the market at more than $450 billion is too lucrative to pass up. Furthermore, with the Indian retail industry expected to reach $1.3 trillion by 2025, up from $700 billion last year, the competition for dominance of the country's forecasted $1.3 trillion retail sector has become fierce. Everyone is striving to find their way onto the weekly purchase lists of 1.4 billion consumers, from multinational companies (MNCs), well-funded startups, huge reputable business houses, and little neighbourhood businesses.

This time, Amazon is going up against Reliance Industries, an Indian conglomerate. The legal battle has pitted two of the world's wealthiest men against each other over the Future group's assets. Amazon and Mumbai-based Future Group are involved in a fierce fight over Mukesh Ambani's $3.4 billion purchase of Future Group's assets.

Over the previous six months, the feud has only grown more heated and acrimonious, with neither side backing down in the national capital's courtrooms. Foreign investors are finding it tough to keep up with the swaying court orders as a result of this tussle between the two titans. The outcome of this case could set a significant legal precedent, especially for foreign investors, in terms of the legality of emergency rulings made by international arbitrators in India. Following a huge setback, Future Group petitioned the Supreme Court on August 12 for a stay of the Delhi High Court's Single Bench ruling. It appears that a new round of lawsuits in the Amazon-Reliance-Future Group issue is on the way. The Supreme Court decided in favour of Amazon last year in a verdict dated August 6, 2021, jeopardising India's largest retail transaction. The Supreme Court has upheld that Amazon’s challenge to Future Retail Ltd.'s (FRL) merger with Reliance NSE -1.10 percent Retail, which is worth Rs 24,731 crore.

The Supreme Court (SC) granted Future Group a big victory by staying proceedings brought by e-commerce giant Amazon to execute an emergency award issued in its favour by a Singapore-based arbitrator to prevent the $3.4 billion merger between Future Retail (FRL) and Reliance Group. The bench, which included Chief Justice of India N V Ramana, Justices Surya Kant and A S Bopanna, also ordered the National Company Law Tribunal, the Competition Commission of India, and the markets regulator Securities and Exchange Board of India not to issue any final orders in the case for four weeks. In response to a special leave petition filed by Future Coupons and FRL, they issued the aforesaid order. According to the law platform LiveLaw, it was in response to an order issued by a single bench of the Delhi High Court (HC) that directed the attachment of assets of Future Group companies and their promoter Kishore Biyani, as well as a show cause notice for the civil arrest of Biyani and other Future Group directors for breach of the emergency award. Amazon is disputing FRL's merger with RRL, claiming that the deal violated an agreement with the American e-commerce giant. Amazon has referenced the Biyani-led chain's non-compete agreement. Any disputes would be arbitrated under the rules of the Singapore International Arbitration Centre (SIAC). The Supreme Court ruled that a Singapore arbitrator's emergency order to halt the FRL-Reliance contract could be implemented under Indian law. Under Section 17(1) of the Arbitration and Conciliation Act, an emergency arbitrator's award in an emergency settlement remains valid, and an award made by a single judge under Section 37(2) cannot be appealed.

ISSUES

Two significant points were presented in the above-mentioned appeal:

· Is an "award" of the Singapore International Arbitration Centre (SIAC Rules) an order under Section 17(1) of the Arbitration and Conciliation Act, 1996 (Arbitration Act)?

· Whether a learned Single Judge of the High Court possess appellate jurisdiction over an order executing an Emergency Arbitrator's award issued under Section 17(2) of the Arbitration Act?

Chronology of events :

•August 2019: Amazon enters into an agreement with Future Coupons, a Future Group promoter entity, to buy 49% stake for Rs 1,500 crore. Future Coupons holds a 7.3% stake in Future Retail, effectively giving Amazon an indirect stake of 3.58% in Future Retail as a result of the deal with Future Coupons.

•August, 2020 : Kishor Biyani’s Future Group entered into an agreement with Reliance Retail, a subsidiary of the umbrella Reliance Industries Limited (RIL) group, to sell its retail, wholesale, logistics and warehousing business to the latter in a Rs 24,731 crore merger deal.

•As a part of the deal, Future Retail will sell its supermarket chain Big Bazaar, premium food supply unit Foodhall and fashion and clothes supermart Brand Factory’s retail as well as wholesale units to Reliance Retail.

•October, 2020 : Amazon approaches Singapore International Arbitration Centre ( SIAC ) objecting to Future-Reliance Retail deal

•October, 2020 : Singapore Emergency Arbitrator bars Future Retail-Reliance Group deal with an interim award

•November, 2020 : Future Retail moves Delhi HC against Amazon alleging interference.

•December, 2020 : Single-judge bench of Delhi HC refuses to stay deal, upholds FRL August 29 board resolution, but allows Amazon to write to regulators. Also, it upholds Future Retail's claim of torturous interference by Amazon

•January 2021: SIAC constitutes a 3-member panel to pass the final verdict.

•January 2021: Delhi High Court's division bench issues notice to Future Retail on Amazon's plea against December 2019 order which allowed regulators to decide.

•January 2021 : SEBI gives nod to Future Retail-Reliance Group deal

•February 2021 : Single-judge bench of Delhi High Court orders status quo on Future Retail-Reliance Group deal.

•February 2021: Future Retail contests status quo order before 2-judge bench in Delhi HC.

•February 2021 : Two-judge bench lifts single bench's status quo order on FRL-Reliance retail deal.

•February 2021: Amazon moves SC challenging lifting of "status quo" orders by a division bench of Delhi High Court.

•August, 2021 : The Supreme Court held that Singapore's Emergency Arbitrator (EA) award is enforceable in a plea by e-commerce giant Amazon against the Rs 24,731 crore merger deal of Future Retail Ltd (FRL) with Reliance Retail.

•Sep 2021: In a major relief to Future Group, Supreme Court stays proceedings before Delhi HC, orders no coercive action. The Court also directed the NCLT, CCI, and SEBI not to pass any final order in relation to the dispute for four weeks.

Issues involved

- Future Group was under immense pressure from its lenders, led by the State Bank of India, to manage its debt

- In August 2020, Biyani’s Future Group entered into an agreement with Reliance Retail, a subsidiary of the umbrella Reliance Industries Limited (RIL) group, to sell its retail, wholesale, logistics and warehousing to the latter. As a part of the deal, Future Retail will sell its supermarket chain Big Bazaar, premium food supply unit Foodhall and fashion and clothes supermart Brand Factory’s retail as well as wholesale units to Reliance Retail.

- After Future’s agreement with Reliance, Amazon said the deal was a violation of a non-compete clause and a right-of-first-refusal pact it had signed with the Future Group. The deal also required Future Group to inform Amazon before entering into any sale agreement with third parties.

- Future Group has said that it had not sold any stake of the company, and that it was merely selling its assets and had therefore had not violated any terms of the contract.

In a case pitting Amazon against India's original retail king Kishore Biyani's Future Group and Mukesh Ambani's Reliance Retail, which is preparing to go big on e-commerce, the Supreme Court decided in favour of Amazon. For the time being, the $3.4 billion merger plan between Future and Reliance has been placed on hold. Amazon's appeal against a Delhi High Court ruling delaying attachment of properties of Future Group firms and Biyani in connection with a Future-Reliance Retail merger agreement worth Rs 24,713 crore ($3.4 billion) was granted by the Supreme Court. Under Section 17(2) of the Arbitration Act, the order of an emergency arbitrator is enforceable in India, according to a bench of Justices Rohinton Fali Nariman and BR Gavai. The shares of Reliance Industries finished at Rs 2,133.30 on the BSE, down by 2% from the previous close. The stock dropped as much as 2.6 percent during trade hours. Future Retail shares were down 9.94% to Rs 52.55 at the close.

The issue revolves around Amazon's lawsuit against Future's merger with Reliance Retail, saying that the deal violated an agreement with the American e-commerce giant. Amazon has referenced the Biyani-led chain's non-compete agreement. "It (the Supreme Court's decision) focuses everyone's attention on the arbitral tribunal," said Faisal Sherwani, a partner at legal firm L&L Partners. “For the time being, the $3.4 billion agreement will be put on hold and will be submitted to the Emergency Arbitrator's decision. You can consider Amazon to have thrown a spanner in a profitable agreement until the order is dismissed or reconsidered by the tribunal." He went on to say that the decision looks to be fair and serves as a reminder that in arbitration, ‘'party sovereignty rules supreme."

On Friday, Justice Nariman read the verdict, saying, "We posed two questions and responded that the Emergency Arbitrator's ruling is valid and enforceable under Section 17(2). It is possible to file an appeal." A single judge's order has been stayed by a division bench of the Delhi High Court. In relation to the arrangement, it had ordered the attachment of properties owned by Future Group firms and Biyani. The award of an emergency arbitrator was sustained by a single judge order of the Supreme Court. It ordered that the assets were to be attached and barred Future Retail Limited from combining with Reliance Retail.

A division court later delayed the order, forcing Amazon to file an appeal. "We applaud the Supreme Court's decision upholding the Emergency Arbitrator's award," an Amazon spokeswoman said. "We expect that this would expedite the conclusion of the Future Group's dispute." The verdict, according to Future Retail, only addresses two minor matters concerning the enforcement of the Emergency Arbitrator's order, not the merits of the disputes. "FRL has been notified that it has legal remedies available, which it will pursue," Future Retail stated. The business also stated that the Arbitral Tribunal's verdict is pending. "To protect the interests of its stakeholders and personnel, FRL plans to seek all possible routes to close the sale."

By granting Amazon's appeal against a Delhi High Court order dated March 22 which allowed Reliance and Future Retail to proceed, the Supreme Court ruled in its favour. The court ruled that Amazon's emergency arbitrator's judgement in Singapore can be legally enforced in India.

The above-mentioned conclusions and references outlined from the judgement in the Amazon vs Future Retail case make it one of the most important landmark judgments not only in the field of arbitration law, but also in the domain of competition law, especially when we consider how the Supreme Court's decision stalled the Rs. 24,731 crore merger of the FRL-Reliance group by holding the EA's award valid.

Due to Justice Nariman's departure, the Future Group's new SLP, which was filed on August 12th, will be heard by a different bench. With the filing of the SLP, there are many questions that will be answered in the following months, and it will be fascinating to see how the case develops. Foreign investors who are keeping a wary watch on the situation will need to be patient.The eventual ruling, however, appears extremely certain to set a precedent that many investors, global firms, and legal professionals have been anticipating.