Kishore Biyani-led Future Retail and e-commerce giant Amazon have been in a dispute for nearly two years. Now, even as the court cases continue, both the companies find themselves in a spot, after Reliance Retail started taking over many of the Future Group stores, after the later had failed to pay rents.
Future Retail, which has already told the Supreme Court they have no money, now finds itself in a position where over 800 stores, which had contributed to 55-60 per cent of its retail revenue, are suddenly in control of Reliance. Amazon, which had fought so hard to stop Future Retail’s August 2020 deal to sell its business to Reliance Retail, seems to be running out of options.
Hit hard by the Covid-19 pandemic, Future Group inked a deal with Reliance in 2020 to sell its assets to the later for Rs 24,713 crore.
Amazon moved court, arguing that its deal with Future Group’s promoter entity, Future Coupons, a year earlier, prohibited Future Retail from selling the stake to anyone else. This deal had given Amazon a 3.58 per cent indirect stake in Future Retail.
It even managed to get a stay on the Future Reliance deal in a Singapore Arbitration Tribunal. The case has been ongoing in the Supreme Court.
When Future Retail was unable to pay rents on some of the stores, the lease was cancelled by the landlords and Reliance signed up, according to people in the know. It in turn sublet them to Future Retail. But, earlier this month, Reliance started taking over many of these stores.
Future Retail, which has over 1,700 stores, disclosed on March 10 that it had received termination notice for over 835 stores.
In the Supreme Court hearing on March 3, the lawyers of the two sides had agreed to initiate a dialogue to resolve the disputes. But, that has since fallen apart and Amazon has accused Future and Reliance of “fraud” in relation to the transfer of the outlets.
“These actions have been done in a clandestine manner by playing a fraud on the Constitutional Courts in India, the Arbitral Tribunal and Indian statutory authorities/agencies,” Amazon said through advertisements in leading newspapers this week.
The accusation is that Future Retail made false submissions before the Supreme Court that the assets would continue to remain with it until the Reliance deal was approved.
Now, suddenly Amazon finds that a large chunk of the prized assets that it was fighting for are suddenly owned by its rival.
“There seems to be a collusion (in Reliance taking over Future’s stores) and violation of the order also,” said Sonam Chandwani, partner at KS Legal and Associates.
Future Group, though, has claimed that this move by Reliance came as a surprise and has termed it as a “unilateral move” by the later.
“Future Retail’s board has taken strong objection to of such action by Reliance group and has put Reliance group to notice to reconsider all other actions initiated over the last few days,” it said.
Banks too seemed to be alarmed and may be weighing legal action of their own over the transfer of stores, since the assets including the store fixtures, infrastructure, merchandise, inventory etc. in the stores are hypothecated as security by Future Retail in their favour.
Therefore, the Future Retail board has called upon Reliance that the possession of the secured assets is retained unharmed for the lenders’ benefit.
“Future Retail and its board remain committed to take all such action as may be necessary to seek value adjustments and reversal of takeover of the stores (leases) by Reliance group,” it said.
With the talks for a potential out-of-court settlement collapsing, both sides are likely to go all out and fight till the end. Amazon has sought an interim order from Supreme Court restraining the takeover of any stores. The companies have also sought resumption of arbitration proceedings in Singapore, which were earlier put on hold by the Delhi High Court. The next hearing in the Supreme Court is scheduled on March 23.
“This hearing is crucial considering Reliance has already taken over the stores and Amazon is pushing for the restrain order,” feels Chandwani.
Its not just Amazon and Future Retail, but the lenders to Future Retail as well as its investors will be keeping a close watch on which way the Supreme Court rules.