The Delhi High Court on Tuesday provided interim relief to e-commerce major Amazon by directing Future Retail Limited (FRL) to maintain ‘status quo’ with regard to transfer of its retail assets to Reliance Retail.
Justice J.R. Midha also said he was of the ‘prima facie’ view that an order of the emergency arbitrator (EA) at the Singapore International Arbitration Centre (SIAC) restraining FRL from taking any steps to transfer its retail assets was enforceable in India.
“This court is of the prima facie view that the emergency arbitrator has rightly proceeded against respondent number 2 (FRL). The order dated October 25 is enforceable under Section 17(2) under the Arbitration and Conciliation Act, the same manner as an order of this court,” Justice Midha said in an interim order.
“This court is satisfied that immediate orders are necessary to protect the rights of the petitioner (Amazon) till the pronouncement of the reserved order. The respondents are directed to maintain status quo... till the pronouncement of the reserved order,” he added.
The court, which was hearing Amazon’s plea seeking enforcement of the arbitrator’s order, also directed Future Coupons Pvt. Ltd. (FCPL), FRL and others to submit within 10 days an affidavit detailing the actions taken by them after October 25, 2020, and the present status of all those actions.
Amazon, which has 49% stake in FCPL, contends that it had invested ₹1,43l crore on the clear understanding that FRL would be the sole vehicle for its retail business and that the retail assets would not be alienated without Amazon’s consent and never to a Restricted Person, including the Mukesh Dhirubhai Ambani (MDA) Group.
Amazon stated that FRL had taken various steps to transfer the retail assets to the restricted person in violation of the arbitrator’s order and were continuing with it.
FCPL, which has 9.82% stake in FRL, had objected to the enforcement of the arbitrator’s award on various grounds including that the emergency arbitrator was neither an arbitrator nor an arbitral tribunal. It had also argued that the EA order was not an order under Section 17( 1) of the Arbitration and Conciliation Act and hence not enforceable.
The high court, however, said it was of the prima facie view that the EA is an Arbitrator and the October 25 is not a nullity.
In December, the high court had declined to restrain Amazon from writing to Indian statutory authorities such as the SEBI and CCI about the EA. FRL had then accused Amazon of interfering with its assets sale deal with Reliance by writing to various regulatory authorities about the EA order.
The pandemic has had a devastating impact on the Indian retail sector, including FRL, which is in serious economic peril. FRL said its financial condition was rapidly deteriorating with notices being received from banks, financial institutions, creditors, landlords and vendors.
FRL had said that Reliance was acquiring the retail and wholesale as also the logistic and warehousing businesses from the Future Group as going concerns on a slump sale basis for a lumpsum aggregate consideration of ₹24,713 crore.
It had claimed the transaction would address the concerns of FRL’s creditors as Reliance would acquire not only FRL’s retail assets, but also its liabilities amounting to approximately ₹12,801 crore.