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Delhi HC order: Setback for Future Group and Amazon

The Delhi High Court on Monday upheld the offered merger of Future Retail Limited (FRL) including Reliance Retail Ventures Limited (RNRL) while granting permission Amazon Inc to continue opposing the merger in appropriate legal forums. In its judgment, the Delhi High Court stated it can’t bar the e-commerce giant from writing to regulators opposing to the Future group’s plan to trade its assets to Ambani’s Reliance Industries Ltd but the board sanctioned alliance was not in violation of any statutory legal prerequisites and both sides were vacant to seek permission for the deal from local regulators.

With this, fresh conflict lines are expected to be drawn before Securities and Exchanges Board of India (SEBI) and the Ministry of Corporate Affairs (MCA) where Amazon is currently challenging the dealings. The Competition Commission of India (CCI), the third regulator freed the business in November. The judgment by a single-judge bench can be summoned before a higher court. On 12 August 2019, Amazon had obtained 49% in Future Coupons Pvt. Ltd., which then earned a 9.82% stake in FRL. The promoters of FCPL are the major shareholders of FRL. The FCPL agreement with Amazon declares that no transfer of the retail assets of FRL could be affected by FCPL and the promoters to any firm, including RIL, without the approval of Amazon.

Kishore Biyani led-Future Retail Ltd (FRL) had requested the Delhi High Court in November asking relief facing an intervention judgement stated by the Singapore International Arbitration Centre (SIAC) with respect to ₹24,713-crore contract with Reliance Industries. The Future group firm has disputed that Amazon is "misusing" the interim decision given by an emergency arbitrator of the Singapore International Arbitration Centre (SIAC) on October 25, 2020.

The SIAC had announced an interim award in favour of Amazon banning FRL from taking "any step to dispose of or encumber its assets or issuing any securities" to acquire any funding from a blocked party. Debating the deal Amazon has written two letters so far to SEBI, requesting the regulator not to allow the transaction. Amazon challenged Future Group of misleading investors and involving in insider trading but also has complained to SEBI against the FRL board for passing a judgment in August to support the deal with RIL, without its consent.

On Monday, the HC moreover announced that the rights awarded to Amazon in the two shareholders arrangements (with FCPL and FRL) are prima facie disproportionate to the original shareholding of Amazon and by “camouflaging of words", the unrestricted rights held by Amazon cannot be disguised as mere protective rights so as to fall beyond the test of “command".

The court additionally added against Amazon that the Jeff Bezos-run retail giant has not only been safeguarding its investments by creating protective rights but also creating pre-emptive rights in contemplation of any change in Indian law that would permit Amazon to hold a substantial shareholding of FRL. The court, nevertheless, refused to grant FRL’s plea an interim injunction to prevent Amazon from approaching regulators, affirming that Amazon can approach any competent authorities such as SEBI and CCI if the corporation intends to halt the RIL-FRL deal.

Sources reported on November 4 that lenders to Future group have acknowledged inter-creditor agreements (ICA), covering the way for a possible restructuring of the group’s stressed loans, two people aware of the expansion stated  The move by the lenders, comprising a clutch of banks, is part of a contingency plan to cope with a possible collapse or inordinate delay of Reliance Industries Ltd’s (RIL’s) planned acquisition of Future group’s assets because of Inc.’s legal challenge.