A week after the Singapore International Arbitration Centre (SIAC) order to put the INR 24,713 Cr deal between Kishore Biyani’s Future Group and Mukesh Ambani’s Reliance Retail Ltd. on hold, the Future Group said that the emergency arbitrator’s order is not enforceable under Indian law and is not binding on the company.
On Friday, Amazon wrote to the Securities and Exchange Board of India (Sebi) to consider the interim judgment stopping the $3.4 billion sale.
“Future Retail is advised that an emergency arbitrator (EA) has no legal status under Part I of the Indian Arbitration and Conciliation Act 1996 and, therefore, the proceedings before an “Emergency Arbitrator” are void and coram non judice,” Future Retail wrote to the stock exchanges, adding that any attempt on the part of Amazon to enforce the order will be resisted.
Future Retail said that it is in the process of taking appropriate legal action to protect its rights, requesting the exchanges not to take cognizance of Amazon’s letter or the emergency arbitrator’s order.
The deal is yet to get approvals from various authorities, including the capital market regulator.
In its filing, Future Retail added that the emergency arbitrator order was passed in arbitration proceedings initiated by Amazon by invoking an arbitration clause in a contract to which Future Retail is not a party.
“Instead, the only parties to the arbitration agreement are Amazon and various promoters of Future Retail. Future Retail is not a party to the arbitration agreement and, as such, could not have been joined as a party to the arbitration proceedings before the Singapore International Arbitration Centre,” Future Retail added.
Following the Singapore court’s order, Reliance had said it entered the transaction to acquire assets and business of Future Retail “under proper legal advice and the rights and obligations are fully enforceable under Indian law. RRVL intends to enforce its rights and complete the transaction in terms of the scheme and agreement with Future group without any delay.”
BSE To Consult SEBI On Deal
Meanwhile, the Bombay Stock Exchange (BSE) has decided to consult markets regulator Securities and Exchange Board of India (SEBI) to seek clarifications from Future Retail and Reliance Industries about the deal, following Amazon’s objection.
The development comes after the ecommerce giant wrote to SEBI, BSE and National Stock Exchange (NSE), urging them to take into consideration the Singapore arbitrator’s interim judgment that has put the deal on hold.
India’s antitrust watchdog, the Competition Commission of India (CCI) is also reviewing the online and offline aspects of the Reliance and Future Group deal and their impact on competition in the sector.
Speaking to Inc42, Mayank Mishra, a partner at law firm IndusLaw, said that the interim order by the emergency arbitrator is binding on both parties concerned — Amazon and Future Group.
An emergency arbitrator is appointed, pending the constitution of an actual arbitral tribunal, to consider applications for urgent relief that cannot wait until the constitution of the actual tribunal.
Reliance can challenge the SIAC interim order under Section 37 of the Arbitration and Conciliation Act, 1996.
Notably, the delay in the proposed deal between Reliance and Future Group could see the latter’s creditors see their loans to the company turn into non-performing assets (NPAs). The Future Group stakes sale was expedited by its creditors after Biyani had defaulted on loan repayments in March this year.
The Big Two Battle For India Market
Amazon’s decision to pursue legal action against Future Group will also have a bearing on the competition among the retail giants in India.
With the launch of its online store JioMart earlier this year, Reliance Retail entered into direct competition with Amazon in the ecommerce sector. Both platforms have beefed up their online offerings, in terms of product categories and discounts, as the Diwali festive season nears.
In the last couple of months, Reliance Retail has been attracting investments from several companies, some of which have previously invested in Reliance’s digital venture Jio Platforms as well. On October 6, Inc42 reported that the United Arab Emirates (UAE)-based sovereign wealth fund Abu Dhabi Investment Authority (ADIA) has committed to invest INR 5,512.50 Cr in Reliance Industries’ retail unit Reliance Retail in exchange for 1.20% equity stake on a fully diluted basis.
When the investment comes through, Reliance Retail will have raised INR 37,710 Cr from global investors including Silver Lake, KKR, General Atlantic, Mubadala, GIC, TPG and ADIA in less than four weeks.