New Delhi: The Delhi High Court on Monday allowed Amazon to oppose before regulators a Rs 24,713 crore deal by Kishore Biyani-led Future Retail Ltd to sell assets to Reliance Retail but said that the US e-commerce giant’s attempt to control Future Retail is violative of FEMA and FDI rules.
Asking statutory authorities/regulators to take a decision on Amazon’s objections in accordance with the law, Justice Mukta Gupta however did not void Future Retail’s board approval for the Rs 24,173 crore deal with richest Indian Mukesh Ambani’s firm.
The interim order came after Future Retail approached the court last month against a temporary injunction Amazon got from a Singapore arbitration tribunal to halt the Reliance deal.
Justice Mukta Gupta said that while FRL has made out a prima facie case of interim injunction, the relief cannot be granted as the balance of convenience lies in favour of both Future Retail and Amazon, and whether any irreparable loss would be caused to either side, has to be determined during trial of the suit or by a competent forum.
The high court said another reason why it did not grant an interim injunction was that both FRL and Amazon have already made their representations and counter representations to the statutory authorities or regulators and “now it is for the statutory authorities/regulators to take a decision thereon”.
It further said that FRL’s August 29 board resolution approving the deal was not invalid or void as claimed by Amazon and the e-commerce giant’s representations to that effect to statutory authorities and regulators was “based on incorrect assertions” which meant that its action was based on “unlawful means”.
Therefore, FRL has made out a prima facie case of “tortious interference”, the high court said and added that “the act of Amazon would fall foul of the freedom of FRL and Reliance to enter into the transaction thereby causing loss to both FRL and Reliance which would be a civil wrong actionable by both FRL and Reliance in case they suffer any loss”.
The term ‘tortious interference’ means to intentionally damage someone’s contractual or business relationships with a third party.
The other findings of the court in favour of FRL were — its suit to permanently restrain Amazon from interfering with the deal was maintainable and a combined reading of the shareholding agreements (SHA) of FRL and Future Coupons Pvt Ltd (FCPL) and the share subscription agreement (SSA) between Amazon, FCPL and the Biyanis show that they not only protect Amazon’s rights in respect of investments it made in FCPL, they also “transgress” to control over Future Retail which requires government approvals and in absence thereof, were contrary foreign direct investment (FDI) rules framed under the Foreign Exchange Management Act.
However, the high court did not agree with FRL’s contention that the October 25 emergency arbitration (EA) order was without legal jurisdiction and for this reason the award was invalid.
It disposed of FRL’s application for interim injunction, saying the relief sought cannot be granted.
“However, the statutory authorities/regulators are directed to take the decision on the applications /objections in accordance with the law,” the court said.
The Singapore International Arbitration Centre (SIAC) on October 25 had passed an interim order in favour of Amazon 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.
Subsequently, Amazon wrote to market regulator SEBI, stock exchanges and the Competition Commission of India, urging them to take into consideration the Singapore arbitrator’s interim decision as it is a binding order.
The high court had on November 10 sought response of Amazon on FRL’s suit alleging that the e-commerce major was interfering in its Rs 24,713 crore deal with Reliance Retail on the basis of an interim order by a Singapore arbitrator.
The high court had also issued summons to Amazon, Future Coupons and Reliance Retail Ltd (RRL) on the FRL suit and asked them to file their written statements within 30 days.
FCL and its promoters had also supported FRL’s claims and contentions.
All three — FRL, FCL and Reliance — contended that if Amazon’s claim — that it indirectly invested in FRL by investing in FCL — was accepted then it would amount to a violation of Indian foreign direct investment (FDI) laws which permit only 10 per cent investment by a foreign entity in the multi-brand retail sector.
Amazon had contended that FRL’s suit was not maintainable as all the arguments raised here by it were made before the emergency arbitrator which considered and rejected them.
In August this year, Future had reached an agreement to sell its retail, wholesale, logistics and warehousing units to Reliance.
As per the SIAC interim order, a three-member arbitration panel needs to be set up within 90 days (from the date of the judgement) with one judge each being appointed by Future and Amazon, along with a third neutral judge.
On November 10, Amazon had told the court that it and FCL have appointed their respective arbitrators.