Delhi High Court Issues Notice To Future Retail, Reliance in Amazon Appeal Against December Order

The court has asked the parties to file their replies in the case by Feb 12.

While Amazon was represented by Sr. Adv. Gopal Subramanium, who submitted a brief of his case, Sr. Adv. Harish Salve appeared for Future Retail Ltd. Subramanium submitted that even though the single judge bench had ordered that the Emergency Arbitrator was not coram non judice, and the order was valid, by holding the resolution passed by Future Retail on its Reliance deal as valid, the order had effectively defeated Amazon's case.

To this, Sr. Adv. Salve replied saying, "Atleast now they're admitting that the order is against them. Up until now they were showing it off as if it's in their favour."

The division bench of Chief Justice Patel and Justice Jyoti Singh, however, said that they would need to hear Amazon first, and remarked, "Atleast let us hear the appellant, Mr. Salve. Let us issue notice."

Salve submitted in response that FRL would want to file a reply, "as a lot of things have been said which need to be controverted."

A single judge bench of Justice Mukta Gupta earlier held as "not void" Future Retail Ltd's (FRL) board resolution approving Reliance Industries Ltd's (RIL) deal worth nearly Rs.24,000 crore and said that the statutory authorities would decide approval on the deal as per law. However, the court had refused to grant any interim reliefs on FRL's plea asking it to direct Amazon not to write to statutory authorities informing them about an award by a Singapore based Emergency Arbitrator.

The court was hearing FRL's challenge to Amazon Inc seeking to stall the deal by writing to various authorities including the Competition Commission of India, Securities Exchange Board of India, etc with an Emergency Arbitrator award which was passed by an arbitral tribunal in Singapore in Amazon's favor.

It was held that the Emergency Arbitrator was not coram non judice but has held the award to be valid. On the question of Amazon seeking conflation of agreements of FRL shareholder agreement and Amazon-Future Coupons Ltd shareholder agreements, the court has held that such conflation is contrary to FEMA.

The case relates to a deal between Reliance-Future Retail under which, Future Retail was to sell its retail, wholesale, logistics and warehousing units to Reliance Retail and Fashion Lifestyle Ltd – a wholly owned subsidiary of Reliance Retail Ventures Ltd.

On Amazon's challenge to the deal before an Emergency Arbitrator appointed under the Singapore International Arbitral Tribunal Rules, an injunction was awarded on the deal by the Emergency Arbitrator earlier.

Future Retail claimed before the Delhi High Court that Amazon had written to regulatory authorities including the Competition Commission of India, SEBI, etc mentioning that this order by the Emergency Arbitrator is 'binding' and was thereby trying to hinder approvals to the Future-Reliance deal.

Future Retail also submitted that it did not accept the order by the Emergency Arbitrator as binding at all in the first place and therefore there was no question of challenging it. FRL further submitted that Amazon was "content" with the arrangement with Future Coupons Pvt Ltd as it had a call option in the agreement, which Future Retail claimed would allow Amazon into the multi-brand retail sector if the Government of India at some point allowed FDI in the sector.

FRL's main case was that Amazon was not a party to its agreement with its own shareholders, and Amazon was not its shareholder – it was merely a shareholder of FCPL, and therefore, it could not deny FRL's right to enter into an agreement with Reliance.

FCPL, on the other hand, was represented by Sr. Adv. Mukul Rohatgi, who pleaded that the arbitration was illegal as Indian arbitration law was to apply to the case and any injunctive relief could be obtained under Section 17 of the Arbitration Act only. He agreed with FRL that the award was not binding or valid in the first place.

He prayed that the court would ignore Emergency Award while deciding on the question whether Amazon had the right to tinker with the FCPL-FRL amalgamation at all, and submitted that it would deal with Amazon, on the question of Amazon not exercising its call option when the company was sinking, later in an appropriate arbitration.

He had concluded stating, "As of today, Amazon has no right to invest in FRL and if they can't invest they have no right to stop Reliance from investing in us."

Sr. Adv. Abhishek Singhvi appearing for Reliance Retail and Reliance Retail & Fashion Lifestyle Ltd submitted that the award of the Emergency Arbitrator was a foreign concept for India, and found no place in Indian law. Further, that Emergency Arbitrator was consciously not included under the Arbitration Act despite the 246th Law Commission Report's recommendation, and therefore this award passed by an Emergency Arbitrator could not be binding at all.

Amazon, represented by Sr. Adv. Gopal Subramanium, argued that most, if not all the arguments presented by FRL, FCPL and Reliance had already been dealt with by the Emergency Arbitrator. He also submitted that Amazon had not in the least contradicted or intended to violate any FDI policy of India's as, FCPL being an Indian entity, money coming into FRL from FCPL would not be considered as FDI at all.

He had further pointed out that since Amazon had 49% stake in FCPL, which has 9.82% shares in FRL, Amazon's stake in FRL becomes half effectively and would not cross the 10% limit imposed by India's FDI policy in multi-brand retail sector.

He also argued that all FCPL and FRL's Shareholder Agreements under the common umbrella of the Biyanis had already been brought to the notice of the CCI. Against the Law Commission recommendation argument he responded that, Justice Nariman had already noted in a judgment by the Supreme Court that "recommendations by a Law Commission Report need not detain the court from interpreting the words as they are susceptible to being interpreted."