The Delhi High Court on Monday declined to restrain U.S.-based e-commerce major Amazon from writing to Indian statutory authorities such as the SEBI and CCI about an arbitral order against the assets sale deal between Future Retail Ltd. (FRL) and Reliance Retail.
The high court said that though a prima facie case was made out by FRL for grant of interim injunction, “the balance of convenience lies both in favour of FRL and Amazon”.
FRL, in its plea before the high court, had accused Amazon of interfering with its assets sale deal with Reliance by writing to various regulatory authorities about an order passed by the Singapore International Arbitration Centre on October 25, restraining FRL from taking any steps to transfer its retail assets. Amazon has 49% stake in Future Coupons Pvt. Ltd. (FCPL), which holds 9.82% in FRL.
Justice Mukta Gupta opined that a combination of the shareholding agreements (SHA) of FRL and FCPL and the FCPL SSA (share subscription agreement), besides “creating protective rights in favour of Amazon for its investments, also transgress to ‘control’ over FRL requiring government approvals and in the absence thereof are contrary to FEMA FDI Rules”.
Another reason for declining FRL’s plea, the high court said, was that both FRL and Amazon had already made their representations and counter representations with the statutory authorities/regulators and now it was for the latter to take a decision.
FRL had stated in its plea that it was a listed company with more than three lakh shareholders and more than 25,000 employees, operating retail chains in more than 400 cities in every State of the country through digital platforms and also through about 1,534 physical stores across India.
It said the pandemic had had a devastating impact on the Indian retail sector, including FRL, which is in serious economic peril. FRL’s financial condition was rapidly deteriorating with notices being received from banks, financial institutions, creditors, landlords and vendors, it added.
FRL said that Reliance was acquiring the retail and wholesale business as also the logistics and warehousing business from the Future Group as going concerns on a slump sale basis for a lump sum aggregate consideration of ₹24,713 crore.
The petition 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.
If the transaction falls out, FRL will go into liquidation, causing damage to the public shareholders, livelihood of the employees etc., the company said.
