ReutersMUMBAI: The Singapore International Arbitration Centre (SIAC) passed an interim order asking Future Group to hold its sell-out plans to Reliance Group and wait for the final judgment on the plea filed by Amazon.
Amazon had filed an arbitration petition with SIAC claiming that Future Group breached the contract under which the US online giant took an indirect stake in their retail business in 2019. The terms of the proposed deal between Future Retail and Reliance Industries does not have its approval and hence should not go through, it had said.
“SIAC must have seen some merit in Amazon’s appeal and passed an emergency order to hold the sale process temporarily until they pass the final judgement,” said two people privy to the development. “However to enforce the order, Amazon will have to approach an Indian court and seek a similar judgement.”
At the SIAC, Future Group is represented by Harish Salve while former solicitor general Gopal Subramanium appeared for Amazon.
SIAC in its order also said Amazon has to submit a proposal to the court within a week, outlining its plans with Future Retail, in case the outcome is in its favour.
Amazon has about 5% stake in Future Retail — which houses all food and grocery stores such as Big Bazaar and Easyday — after it bought 49% in promoter holding firm Future Coupons for Rs 1,500 crore last year. As per Amazon's interpretation of their contract, Future cannot sell any shares to Reliance or any other competitor and that Amazon had the right of first refusal.
While the agreement said Amazon has the first right to buy Biyani’s entire holding in this company between three and ten years after the transaction, Future Group was restricted to sell off or transfer its assets to third party without their consent from day one, a clause that was clearly breached.
“In case, Amazon wins the case and decides to exercise its option, it will have to buy promoters’ stake in Future Retail and also trigger an open offer to buy shares from minority shareholders,” said an analyst from a domestic brokerage firm.
In August, Reliance Retail agreed to acquire the retail assets of Future Group in a complex deal which will see the merger of five listed entities, including Future Retail, into Future Enterprises (FEL) that currently houses the group’s retail back-end infrastructure. The retail business will then be transferred to Reliance in a slump sale for nearly Rs 25,000 crore, thus obviating any need for a stake sale. Amazon, like other shareholders of these listed companies, will get shares in FEL, which will manage consumer goods and insurance business.
SIAC, a non-profit body, provides an alternative method of dispute resolution arising from cross-border transactions involving foreign’ companies, settling cases privately and confidentially outside the public court system.
However, an arbitration court’s ruling against an Indian company can be challenged before Indian courts.
Amazon had filed an arbitration petition with SIAC claiming that Future Group breached the contract under which the US online giant took an indirect stake in their retail business in 2019. The terms of the proposed deal between Future Retail and Reliance Industries does not have its approval and hence should not go through, it had said.
“SIAC must have seen some merit in Amazon’s appeal and passed an emergency order to hold the sale process temporarily until they pass the final judgement,” said two people privy to the development. “However to enforce the order, Amazon will have to approach an Indian court and seek a similar judgement.”
At the SIAC, Future Group is represented by Harish Salve while former solicitor general Gopal Subramanium appeared for Amazon.
SIAC in its order also said Amazon has to submit a proposal to the court within a week, outlining its plans with Future Retail, in case the outcome is in its favour.
Amazon has about 5% stake in Future Retail — which houses all food and grocery stores such as Big Bazaar and Easyday — after it bought 49% in promoter holding firm Future Coupons for Rs 1,500 crore last year. As per Amazon's interpretation of their contract, Future cannot sell any shares to Reliance or any other competitor and that Amazon had the right of first refusal.
While the agreement said Amazon has the first right to buy Biyani’s entire holding in this company between three and ten years after the transaction, Future Group was restricted to sell off or transfer its assets to third party without their consent from day one, a clause that was clearly breached.
“In case, Amazon wins the case and decides to exercise its option, it will have to buy promoters’ stake in Future Retail and also trigger an open offer to buy shares from minority shareholders,” said an analyst from a domestic brokerage firm.
In August, Reliance Retail agreed to acquire the retail assets of Future Group in a complex deal which will see the merger of five listed entities, including Future Retail, into Future Enterprises (FEL) that currently houses the group’s retail back-end infrastructure. The retail business will then be transferred to Reliance in a slump sale for nearly Rs 25,000 crore, thus obviating any need for a stake sale. Amazon, like other shareholders of these listed companies, will get shares in FEL, which will manage consumer goods and insurance business.
SIAC, a non-profit body, provides an alternative method of dispute resolution arising from cross-border transactions involving foreign’ companies, settling cases privately and confidentially outside the public court system.
However, an arbitration court’s ruling against an Indian company can be challenged before Indian courts.
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