Amazon flags Future Retail’s independent directors’ conduct as corporate governance lapse

E-com firm asks independent directors to conduct investigation into alleged fraud

July 06, 2022 10:14 pm | Updated 10:14 pm IST - New Delhi

FILE PHOTO: People move past a Future Retail’s closed Big Bazaar retail store in Mumbai.

FILE PHOTO: People move past a Future Retail’s closed Big Bazaar retail store in Mumbai. | Photo Credit: FRANCIS MASCARENHAS

E-commerce major Amazon alleged that independent directors of Future Retail had failed to exercise their statutory duties and that their ‘conduct and attitude’ raised substantial questions on accountability, transparency and the fairness regime for corporate governance in India.

In a strongly-worded letter to Future Retail's independent directors on July 4, Amazon has also raised objection to an alleged attempt by the Future Group to transfer its logistics and warehousing business to Reliance in violation of binding legal orders.

In August 2020, Future Group had announced a ₹24,713-crore deal to sell 19 companies operating in retail, wholesale, logistics and warehousing segments to Reliance Retail Ventures Ltd (RRVL).

However, the deal could not go ahead as secured creditors of the Future Group had voted against it after continuous scrutiny by judicial forums, including the Supreme Court, the Delhi High Court and the NCLT. Besides, Amazon had moved the Singapore International Arbitration Center against the deal.

In the latest letter to independent directors of Future Retail, Amazon said, "You, the Independent Directors of FRL, have failed to exercise your statutory duties and functions independently in accordance with law. Moreover, you have failed to safeguard the interest of shareholders, and have in fact facilitated commission of fraud perpetuated by FRL and the MDA group (Reliance).

"Your conduct and attitude, as the Independent Directors of FRL, raises substantial questions on accountability, transparency and fairness regime for corporate governance in India," Amazon said.

An email query sent to FRL and Reliance did not elicit any reply on the matter while Amazon declined to comment.

The U.S. based e-commerce major alleged that FRL's independent directors' letter dated May 28 had "admitted" that FRL had entered into an illegal arrangement with the MDA group to continue running the retail stores even when no money was paid to the MDA group as rent for these premises.

FRL’s independent directors in their letter on May 28 had charged Amazon of spiking the FRL-Reliance deal and rubbished Amazon’s allegation that they had facilitated the so-called fraud to hand over stores to Reliance.

Amazon, however, claimed that the independent directors' letter vindicated its stand that the entire sequence of surrendering of stores by FRL, and termination by the MDA group of such leases, had been a stratagem.

The e-commerce firm claimed that despite FRL’s admission that the MDA group had forcefully taken over 55-65% of its retail business, the retailer firm now intended to enter into a business transaction with the MDA group for sale of its supply chain and logistics businesses.

Amazon said that FRL and its promoters on one hand had sought termination of arbitration proceedings as their scheme of arrangement with MDA group had failed, and on the other hand, they were seeking to give effect to the transactions that were part of the scheme by circumventing the binding orders.

The e-commerce firm has asked independent directors to conduct thorough investigation into the alleged fraud committed by FRL, its promoters, directors and key managerial personnel and raise concern over proposed transactions between FRL and the MDA group.

Top News Today

Sign in to unlock member-only benefits!
  • Access 10 free stories every month
  • Save stories to read later
  • Access to comment on every story
  • Sign-up/manage your newsletter subscriptions with a single click
  • Get notified by email for early access to discounts & offers on our products
Sign in

Comments

Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.

We have migrated to a new commenting platform. If you are already a registered user of The Hindu and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.