HC stays direction to maintain status quo on Future-Reliance deal

The Delhi High Court on Monday stayed its single judge direction to Future Retail Ltd (FRL) and various statutory authorities to maintain status quo with regard to the Rs 24,713 crore deal with Reliance Retail.

A bench of Chief Justice D N Patel and Justice Jyoti Singh passed the interim direction on FRL's appeal challenging the February 2 order of the single judge.

It said that statutory authorities, like National Company Law Tribunal, Competition Commission of India (CCI) and SEBI, cannot be restrained from proceeding in accordance with law with regard to the deal.

The bench also declined Amazon's request to keep its order in abeyance for a week so that it can explore appropriate remedies.

The court issued notice to Amazon and sought its stand on FRL's appeal by February 26 when it will commence day-to-day hearing of the matter.

Amazon had first filed a plea before the single judge for enforcement of the October 25, 2020, Emergency Arbitrator (EA) award by the Singapore International Arbitration Centre (SIAC) restraining FRL from going ahead with its Rs 24,713 crore deal with Reliance Retail.

In the interim order on Monday, the division bench said it was staying the single judge order as firstly, FRL was not a party to the share subscription agreement (SSA) between Amazon and Future Coupons Pvt Ltd (FCPL) and the US e-commerce giant was not a party to the deal between FRL and Reliance Retail.

The bench further said it was of the prima facie view that the shareholding agreement (SHA) between FRL and FCPL, the SSA between FCPL and Amazon and the deal between FRL and Reliance Retail "are different" and "therefore, the group of companies doctrine cannot be invoked".

Another reason given by the court for its interim order was that there was prima facie no reason to seek a status quo order before the single judge.

Read | Amazon's claims of wanting to salvage FRL are humbug: Future Retail Ltd to HC

The bench said there were a lot of contentious issues involved in the matter and it was not going to adjudicate on them at this stage.

It also said that its observations were only prima facie and the single judge ought not to be influenced by them when pronouncing the order on Amazon's plea for enforcement of the October 25, 2020 Emergency Arbitrator (EA) award by the Singapore International Arbitration Centre (SIAC) restraining FRL from going ahead with its Rs 24,713 crore deal with Reliance Retail.

The order by the division bench came after the conclusion of arguments, over a period of three days, by FRL and Amazon on Future Retail's plea challenging the single judge's February 2 order.

Kishore Biyani-led Future Retail Ltd (FRL), represented by senior advocate Harish Salve, told the court on Monday that Amazon's claims that it wanted to salvage the Indian company was "humbug".

Amazon, represented by senior advocates Gopal Subramanium and Rajiv Nayar, had reiterated that FRL's appeal against the single judge order was not maintainable.

They had also argued that the EA order was a valid award and enforceable.

Salve, in rebuttal, said that if Amazon wanted to salvage FRL, it could have easily invested Rs 25,000 crore which was "peanuts" for the US e-commerce giant.

He said that Amazon keeps saying it wanted to and wants to help FRL, but it was all "humbug" as it did not take any steps to do so.

Salve further argued that the EA order was not valid as an earlier single judge order of December last year had held that there was no arbitration agreement between FRL and Amazon.

He further said that the instant appeal against the February 2 order was maintainable under the Civil Procedure Code.

FRL, in its appeal filed through law firm Naik and Naik and Company and advocate Harshvardhan Jha, has claimed that if the February 2 order was not stayed it "would be an absolute disaster" for it as the proceedings before the National Company Law Tribunal (NCLT) for approving the amalgamation scheme have been put on hold.

It has contended that the single judge's status quo order will effectively derail the entire scheme which has been approved by statutory authorities in accordance with law.

In its suit before the single judge for enforcing the EA award, Amazon has sought to restrain FRL from taking any steps to complete the transaction with entities that are a part of the Mukesh Dhirubhai Ambani (MDA) Group.

Amazon has 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 EA order.

In August last, Future had reached an agreement to sell its retail, wholesale, logistics and warehousing units to Reliance. Subsequently, Amazon took FRL into an emergency arbitration before the SIAC over alleged breach of contract.

After the SIAC's EA order of October 25, 2020, was passed, Amazon wrote to the SEBI, stock exchanges and CCI, urging them to take into consideration the arbitrator's interim decision as it is a binding order.

FRL, thereafter moved the high court to restrain the Amazon from writing to SEBI, CCI and other regulators about SIAC's order, saying it amounts to interfering with the agreement with RIL.

A single judge on Dec 21, last had on FRL's plea passed an interim order allowing Amazon to write to the statutory authorities, but also said that prima facie it appeared the US e-commerce giant's attempt to control Future Retail was violative of FEMA and FDI rules.

Against the observations, Amazon moved an appeal before a division bench and during its pendency, Amazon filed the suit for enforcement of the EA award.