Supreme Court sets aside NCLAT's order approving penalty on Amazon for investment deal with Future group

New Delhi: The Supreme Court on Wednesday set aside the National Company Law Appellate Tribunal’s (NCLAT) June 2022 order that had rejected US e-commerce giant Amazon’s appeal against the suspension of its investment deal with the Future Group.

A bench of Justices Vikram Nath and Sandeep Mehta held that the Competition Commission of India (CCI) exceeded its statutory powers in suspending the approval for the 2019 Amazon -Future Coupons investment, saying that merger regulation must be rigorous but also predictable, fair and anchored in law.

The court quashed the CCI's December 17, 2021 order, which had imposed a Rs 202 crore penalty on Amazon and halted its deal with the Future Group.

“In view of the findings recorded, the appeal is allowed. The impugned judgement dated June 13, 2022 passed by the NCLAT and order dated December 17, 2021 passed by the CCI are set aside,” the bench ruled.

In the case, the bench said, "The findings of suppression, omission, and misrepresentation recorded against the appellant, cannot be sustained."

The bench also held the proceedings were vitiated for breach of principles of natural justice.

"The final findings and consequential directions rested, to a material extent, on a case whose evidentiary emphasis and proposed consequences were materially sharper than what the show cause notice had clearly put the appellant on notice to meet," the bench said.

The bench said the CCI and the NCLAT were entitled to treat the internal communications as relevant surrounding material. However they proceeded further to equate internal deliberations with the notified transaction itself,

to equate differences in descriptive characterisation with statutory falsehood, and to equate non-furnishing of those materials, including materials pertaining to structures not finally adopted, with penal suppression, without a sufficiently exact demonstration of statutory materiality. Each step in that chain is legally unsound, it held.

The bench pointed out the CCI’s authority is statutory. "Its actions must therefore satisfy the minimum standards of legality, fairness, and reasoned decision-making that apply to all public authorities. These standards are not technicalities. They are the basis on which regulatory legitimacy is maintained, compliance is encouraged, and market participants can plan their affairs with confidence," the bench said.

In its judgment, the court also emphasised that the importance of a stable and fair regulatory framework was heightened in the present global economic climate.

"Foreign investment, in this sense, is not an extraneous concern. It is one of the channels through which capital, technology, managerial expertise, and efficiencies enter markets" the bench said.

The court underscored a fair and rule-bound regulatory environment therefore serves the national interest. It protected domestic markets from anticompetitive harm, protected consumers, and assured investors, foreign and domestic, that outcomes will turn on law and evidence rather than on ad hoc approaches.

The court passed the order on a plea filed by Amazon challenging the NCLAT verdict. The court directed that any amount deposited or recovered from Amazon in pursuance of these orders be refunded within eight weeks.

It further stipulated that if the refund is not made within the stipulated period, the unpaid amount shall carry simple interest at the rate of 9 per cent per annum from the expiry of eight weeks till the date of actual payment.

The dispute related to proceedings initiated by the CCI against Amazon.com NV Investment Holdings LLC concerning its 2019 investment in Future Coupons Pvt Ltd (FCPL), a promoter entity of Future Retail Ltd.

The CCI had initially cleared Amazon’s acquisition of a 49 per cent stake in FCPL in November 2019.