The Delhi High Court in its recent hearing, stopped Future Group from going ahead with the sale of its retail assets to Mukesh Ambani owned Reliance.
Delhi High court backing Amazon, upholded its argument that the Emergency Award of the Singapore International Arbitration Centre (SIAC) should be adhered to.
In a shock to Kishore Biyani’s Future Group, its proceeding with the reliance industry has been stalled. Biyani backed Future Group, had been reportedly waiting for Delhi High court’s order to relieve it of its deplorable predicament, but little did it know that it was in for disappointment. This comes as many financial experts have already advised it to proceed with the deal, in order to keep it from defaulting on its obligation.
The order, passed by a single-judge Bench of Justice J R Midha, will systematically restrain Future Retail from going ahead with its $3.4 billion deal. In a larger blow to the Future Retail, the court slapped a penalty of Rs 20 lakh on Future and maintained, the money to go into the Prime Minister’s Relief Fund.
The court held that Future Coupons, the promoter entity of Future Retail, and others had violated the Emergency Award. Additionally, issuing a show-cause notice to Biyani and others, the court questioned the parties that why they should not be detained in civil prison for violating the law.
The court also held that the Emergency Arbitrator’s ruling was right and in adherence to the international law. The arbitration committee had rightly invoked the ‘Group of Company’ doctrine in relation to the Future Group companies.
Though the deal has been put on hold, Biyani and others are not off the leash. Biyani and others have been asked to appear before the High Court in its hearing due in April.
Advocate K Narasimhan stated that “The verdict passed by Justice Midha is probably one of the most poignant ones and will have an empirical impact on the ease of doing business ranking for India and ensuring corporate governance standards,”. Additionally he added that “For me, this verdict will strengthen faith in our judicial system and let businesses know that contracts matter for a reason,” said Narasimhan.
But ahead of the order, Future Group (here future coupons) had reportedly moved the Singapore arbitration authority to remove Future Retail from the fight against the tech giant Amazon. Future Group’s request to exclude Future Retail comes as Biyani tries to save his debt-ridden Big Bazaar chain. Biyani’s plan of action includes sale of its debt-ridden assets to Mukesh Ambani to repay his obligations. In contradiction to Amazon’s reasoning, Future Retail’s group has been reiterating that Amazon’s deal is with Future Coupons and not with Future Retail and thus Amazon has no right to interfere in its independent deal with Reliance.
Interestingly, in December last year, the Delhi High Court order had essentially ruled that Amazon cannot use an agreement with Future Coupon to exert control over a deal struck by Future Retail. It had stated that unsolicited control would be in violation of India’s Foreign Exchange Management Act (FEMA).
The long drawn legal battle comes after Amazon had exerted that it was denied the Rights of First Refusal for the deal with Future Group.