Delhi High Court Commences Hearing In Amazon - Future Dispute

The Delhi High Court on Monday commenced hearing in a bunch of pleas pertaining to disputes between Amazon and Future Group, over the latter's deal with Reliance Retail.

A single judge bench comprising of Justice C Hari Shankar is hearing a batch of petitions and appeals listed pursuant to the judgment dated 1st February, 2022 passed by the Supreme Court in a Civil Appeal.

About the Controversy

The main thrust of the controversy is that three agreements were executed amongst Future Retail Ltd (FRL), Future Coupons Pvt Ltd (FCL) and Amazon.com NV Investment Holdings LLC (Amazon). These agreements were as follows:

- Share Holders Agreement, dated 12th August, 2019, between FRL and FCL: the agreement restrained FRL from disposing of its retail assets to third parties including, for the purpose of the present controversy, Reliance.

- Share Holders Agreement, dated 22nd August, 2019, between FCL and Amazon.

- Share Subscription Agreement, dated 22nd August, 2019, between FCL and Amazon. The SHA and Share subscription agreements were envisaged investment, by Amazon, of Rs. 1,431 crores, to acquire 49% equity in FCL. Clause 3.4 of the FCSSA required Amazon to obtain prior approval from the Competition Commission of India (CCI) before investment.

On 29th August, 2020, Future Coupons Pvt Ltd gave consent to Future Retails Ltd entering into a Scheme of Arrangement with Reliance, vide a Board Resolution. Under the said SOA, the retail assets of FRL and its group companies were to be sold to Reliance for approximately Rs. 25,000 crores, apart from an additional investment of Rs. 2,400 crores to be infused by Reliance.

Accordingly, aggrieved by the same, Amazon initiated arbitral proceedings under Clause 25.2.1 of the Share Holders Agreement dated 22nd August, 2019 between FCL and Amazon, under the aegis of the Singapore International Arbitration Centre (SIAC).

The primary contention of Amazon in the said arbitral proceedings were that firstly, the three agreements in question constituted a single integrated transaction, secondly, Amazon has special protective rights in FRL through FCL and thirdly, the prior consent of Amazon had not been obtained before sale or disposal of the retail assets of FRL.

Amazon therefore sought, from the learned Arbitral Tribunal, a restraint against FRL from proceeding in terms of the Scheme of Arrangement. Simultaneously, an application for emergency reliefs was also filed in the arbitral proceedings.

On 25th October, 2020, an interim order was passed by the Emergency Arbitrator, which formed the basis of the said proceedings. By the said order, the Emergency Arbitrator had restrained Future Coupons Pvt Ltd and Future Retail Ltd from proceeding with the Scheme of Arrangement with Reliance.

On 11th March, 2021, FRL had filed an application before the Arbitral Tribunal, seeking vacation of the order dated 25th August, 2020 of the learned Emergency Arbitrator. 

Vide order dated 21st October, 2021, the Arbitral Tribunal dismissed both the applications seeking vacation of the order dated 25th August, 2020 and confirmed the directions contained in the said order passed by the Emergency Arbitrator.

FCL and FRL have therefore challenged the said order dated 21st October, 2021 of the Arbitral Tribunal, by way of Arbitration appeals. They have also sought stay of operation of the said order passed by the Arbitral Tribunal.

A single judge of the High Court had vide order dated 29th October, 2021, dismissed the challenge to the said order and declined stay of operation of the order passed by the Arbitral Tribunal. Thereafter, the Supreme Court also set aside the order dated 29th October, 2021 of the Single Judge and remanded the matter back to the Single Judge for a decision on merits.

Commencing hearing in the pleas, Justice Shankar had indicated that it will first take up the appeals and more importantly, the IAs filed in the appeals seeking stay of operation of the order dated 21st October, 2021 of the Arbitral Tribunal.

What Transpired in the Hearing?

During the course of hearing on Monday, the Court heard Harish Salve appearing for Future Retail Ltd who took the single judge through the three agreements in question and the order passed by a coordinate bench of the High Court by Justice Mukta Gupta.

Justice Gupta had vide order dated December 21, 2020 refused to grant any interim reliefs on FRL's plea it to direct Amazon not to write to statutory authorities informing them about an award by a Singapore based Emergency Arbitrator.

In this backdrop, Salve today heavily relied upon the observations of the single judge order which had observed that FRL was able to make out a prima facie case of tortious interference by Amazon.

He also relied on the prima facie finding that that the conflation of the three agreements 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 were contrary to FEMA FDI Rules.

It was thus the argument of Salve that the Arbitral Tribunal erred in passing the order thereby confirming the directions passed by the Emergency Arbitrator. He argued that the Arbitral Tribunal was bound by the observations of the single judge which it failed to consider.

"The only reason why the judge (Single Judge) didn't grant injunction is that the EA order is there. Otherwise the finding is as clear as daylight," Salve submitted.

At the outset, Justice Shankar orally remarked thus:

"Even if we treat both as interim, on one side when we have interim view of the High Court and another view taken by the tribunal, then prima facie we would be bind by the interim view of the High Court and not the tribunal."

The matter will now be heard on Thursday at 2:15 PM.

Recently, the Supreme Court had set aside the orders dated 02.02.2021 and 18.03.2021 passed by a single judge of the High Court ordering coercive steps against Future group and the order dated 29.10.2021 which refused to stay the Singapore Arbitration Tribunal's refusal to vacate the Emergency Award which restrained Future's deal with Reliance.

The Supreme Court had then remanded the matters to the Delhi High Court.

A Bench comprising Chief Justice of India NV Ramana, Justice AS Bopanna and Justice Hima Kohli had delivered its judgement in the following two pleas:

- Special Leave Petitions of Future Coupons Private Ltd and Future Retail Ltd against Delhi High Court's Single Bench March 2021 order directing attachment of assets of Future group companies and its promoters for breach of Emergency Award (order passed by a single bench of Justice Midha). In the order dated 18.03.2021, Justice Midha confirmed the earlier order dated 02.02.2021 which directed status quo on FRL-Reliance deal.

- Special Leave Petitions of both FRL and FCPL challenging Delhi HC's 29th Oct order which refused to stay the Singapore Arbitration Tribunal's refusal to vacate the Emergency Award restraining it to continue with Reliance deal.

The Court is also hearing a petition filed by Amazon Wholesale India Pvt. Ltd., challenging the jurisdiction of the Directorate of Enforcement to investigate matters beyond the scope of powers prescribed under the Foreign Exchange Management Act (FEMA).

The dispute involves Amazon Wholesale India Pvt. Ltd, Amazon.com NV Investment Holdings LLC, Future Coupons Private Limited, Future Retail Ltd. and the Enforcement Directorate of India.