In what comes as a relief to the Indian retailer company Future Retail Ltd, the Supreme court has refused to pass an interim order to stay the alienation of Future Retail’s assets, as pleaded by Amazon.
The supreme court did allow Amazon Inc. to move High court and Supreme Court if required, against the deal between RIL and Future Retail.
To explain one the of the biggest retail wars of India that has spanned around 18 months, here is some context.
Future retail is India’s second biggest offline retailer and owns popular supermarket stores across the country, called Big Bazaar. At their peak, Future retail owned 800 Big Bazaar stores in india. Reportedly, after the impact of COVID-19 pandemic on the retail market, Future Retail has been plummeting, with multiple stores closing down due to failure of rent payment. The company reportedly has 357 functional stores remaining.
The Mukesh Ambani owned spearhead RIL have had ambitions to expand into the Indian Retail market, the world’s fastest growing retail market. Their subsidiary, Reliance Retail, made a deal with Future Retail to acquire Future Group’s Retail and Wholesale assets for around ₹24700 crore.
Amazon Inc. objection to the deal.
Amazon Inc., another contender looking for a stake in India’s retail market, had made moves in 2019 to establish it’s presence. RIL, thus, become their chief competitors in the retail market.
How can Amazon object to the deal on a legal basis?
The simple answer is, by pleading breach of contract. The more detailed answer would be (Cracks fingers and knuckles) , Amazon Inc. acquired a 49% stake in one of Future Group’s subsidiaries, called Future Coupons, in 2019. Future coupons is a promoter entity for Future retail, and holds a 7.3% stake in future retail. Hence, indirectly, Amazon inc., has a stake in future retail.
As part of their contract in 2019, Future Coupons provided a “call” option, which made them bound to prefer Amazon Inc. as a buyer in case of alienation of assets. Since this clause was not respected, and Future Retail was offered to RIL, Amazon took Future Retail into emergency arbitration at the SIAC (Singapore International Arbitration Centre)
Past Developments at SIAC and Supreme Court.
An emergency Arbitrator at the SIAC ruled in favor of Amazon Inc. and enforced a stay on the deal between Future Retail and Reliance Retail (RIL Subsidiary). In a ruling in August 2021, the Supreme court of India decide to uphold the ruling of SIAC and put an interim stay on any alienation of assets by Future Retail.
Recent ruling and reactions of parties involved
The supreme court, providing a major relief to future retail, has refused to pass an interim order to put a stay on Future Retail’s alienation of assets. Amazon has alleged that the takeover by RIL is “a sham” and that the SC must put a stay on the deal until an arbitration order is passed by the SIAC
As the situation stands right now, Future Retail is legally allowed to alienate retail assets surrounding Big Bazaar to Reliance Industries Ltd. Amazon is expected to further pursue the matter legally.