Future Retail says Amazon sought Rs 1.4K crore in damages, ecomm's dispute order not binding on company

Amazon on October 25 won an injunction from the arbitrator to halt FRL's deal to sell its retail assets to Reliance Industries

Kishore Biyani-led Future Retail Ltd on Sunday said Singapore arbitrator’s interim order against its Rs 24,713 crore deal with Mukesh Ambani -led RIL is “not binding”, and any attempt to enforce it will be “resisted”.

Future Retail Ltd (FRL), in a regulatory filing, noted that as an alternative to its claim and injunctive reliefs against the scheme, Amazon has sought Rs 1,431 crore damages along with interest, the amount invested by the US e-commerce major into Future Coupons Pvt Ltd (FCPL). "If such claim is approved by the Arbitration or at any other judicial forum, the same would be payable by Promoters and there would not be any financial impact on the company (FRL)," it said in a six-page long regulatory filing.

Questioning the validity of the order, it said that order was passed in arbitration proceedings initiated by Amazon by invoking an arbitration clause in a contract to which FRL is not a party. “The EA Order is not enforceable under the provisions of the Arbitration and Conciliation Act, 1996 and is not binding on FRL. Any attempt on the part of Amazon to enforce the EA Order shall be resisted by FRL to the fullest extent available under Indian law. FRL is also in the process of taking appropriate legal action to protect its rights," it said.

Read | Amazon tells Sebi its partner Future Retail is 'misleading public'

Emails sent to Amazon remained unanswered till the filing of the story.

On October 25, Singapore International’s Arbitration Center (SIAC) had passed an interim award in favour of Amazon, with a single-judge bench of V K Rajah 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.

As per the order, a three-member arbitration panel, with one judge each would be appointed by Future and Amazon - and a third neutral judge would preside, would decide on the issue in 90 days.

In its Sunday filing, FRL said that it has been advised that "an Emergency Arbitrator (EA) has no legal status” under Part I of the Indian Arbitration and Conciliation Act 1996 and therefore, the proceedings are “void and Coram non‐judice".

The EA Order having been passed by an authority without jurisdiction is a “nullity under Indian law”, it added.

Last week Amazon had written to markets regulator Sebi and stock exchanges urging them to take into consideration the Singapore arbitrator''s interim judgement.

Over allegation by Amazon that public shareholders of FRL are being misled, the Future group contended that “it is a bit rich for such an argument to be made from someone who is not even a shareholder in FRL. "Evidently, Amazon’s letter is motivated by other considerations… Amazon’s claims are a contractual dispute between Amazon and the promoters of FRL, and Amazon has already initiated arbitration for the same,” it said.

FRL said it has complied with all SEBI requirement, and “EA Order cannot and does not in any manner restrict SEBI or the stock exchanges from considering and approving the Scheme” with RIL.

“It is humbly submitted that BSE and NSE ought not to take cognizance of Amazon’s letter or the EA Order… It is submitted that SEBI and the stock exchanges should consider the Scheme independently on its merits, and as per SEBI regulations,” said FRL in the filing adding.

A similar filing was also made by another Future group firm, Future Lifetstyle Fashions Ltd.

Also Read | The Retail Saga: Future-RIL vs Amazon battle explained

On 29 August, Future Group had announced merging certain companies carrying on the retail and wholesale business and the logistics and warehousing business into Future Enterprises Limited (FEL), which would be transferred to Reliance Retail Ventures Ltd (RRVL), subsidiary of RIL.

In August last year, Amazon had acquired 49 per cent stake in FCPL, the promoter entity which owns a 7.3 per cent interest in FRL that operates more than 1,500 stores across India including grocery chain Big Bazaar. Amazon's investment in Future Group came with contractual rights that include a right of first refusal and a non-compete-like pact. Also, the deal came with the right to buy into their flagship, Future Retail, after a period of between 3 and 10 years.

In its filing, the Future group firm said it is “undergoing serious financial difficulties” particularly in light of the unprecedented impact of the pandemic and deal with RIL is “the only way it can come out of the situation”.

FRL - which has defaulted on lenders’ payment and has seen its credit rating being downgraded - the deal is in the “best interest of all stakeholders”, that includes shareholders, financial institutions, vendors and suppliers, and its employees and delay in the implementation “will cause irreparable losses” to all.

Amazon, Reliance and Walmart Inc's Flipkart are in a battle to gain market share in India, where millions of middle-class customers are newly adopting online purchases of food and groceries due to the Covid-19 pandemic. The booming e-commerce market in the country will be worth $86 billion by 2024, according to research firm Forrester.

The stakes are particularly high for Amazon, which believes India is a big growth market after shutting its online store in China last year. The oil-to-telecom conglomerate Reliance has since September 9, sold an 8.48 per cent stake in its retail unit to investors such as Silver Lake, KKR and Mubadala for Rs 37,710 crore to expand its so-called new commerce venture, which uses neighbourhood stores for online deliveries of groceries, apparel and electronics. The firm, whose retail operations already runs close to 12,000 stores, is looking to dislodge Amazon and Flipkart, which together control about 70 per cent of the online market in India.