Delhi High Court Upholds Emergency Award Passed in Favour of Amazon Against Future-Reliance Deal, Imposes Cost on Future of 20 lakh
The Delhi High Court (HC) on 18 March 2021 issued a show-cause notice (SCN) in the case titled Amazon.Com NV Investment Holdings LIC (Petitions) v. Future Coupons Pvt. Ltd. & Ors. (Respondents) to Kishore Biyani (Respondent No. 3) & others asking why they should not be detained in civil prison for a term not exceeding three months.
In what can be termed as a big win for Amazon Inc., Justice JR Midha of the Delhi High Court imposed costs of Rs. 20 lakhs on Future Group stating that Future Retail, Future Coupons, Kishore Biyani, and others violated the Emergency Award. It further directed that the amount is to be deposited with the Prime Minister's Relief Fund for providing COVID vaccination to the Below Poverty Line category- senior citizens of Delhi.
The HC noted that "The respondents (Future Retail, Biyani, and others) have taken Rs.1431 crore from the petitioner (Amazon) solely on the basis of the rights provided by Future Retail Limited (FRL) to Future Coupons Pvt. Ltd. (FCPL) that they would not transfer their retail assets without the prior consent of the petitioner and never to a Restrict Person. Admittedly, the respondents have breached the agreements. However, there is no remorse. The intention of the respondents does not appear to be honest."
The Single Judge last month had ordered to maintain status quo regarding the Future Retail-Reliance deal till the pronouncement of the next order. The said order was subsequently stayed by a Division Bench of the HC.
An appeal was filed by Amazon against the stay order on status quo and the said appeal is pending before the Supreme Court.
In the instant case, Amazon contended that Future Group, Kishore Biyani, and other promoters and directors were "deliberately and maliciously" disobeying the Emergency Award in spite of their participation in the arbitration proceedings.
The Emergency Arbitrator had passed an order of injunction against Future Retail and Future Coupons from taking any steps in regarding the Board Resolution of 29 August 2020 regarding the transaction with Reliance.
It was asserted by Amazon that Future Coupons Pvt. Ltd. is a shareholder in Future-Retail and it holds 49 percent stake, could not have given its consent to the Future Retail Limited-Reliance deal in the absence of its approval.
Amazon further stated that it had protective rights in Future Retail Limited- Reliance Deal and not controlling rights it. It added that the same was being breached by the sale of the assets to a restricted entity i.e. Reliance.
Justice Midha agreed to the submissions of Amazon regarding the Future Retail suit against Amazon.
Future Retailed pointed out that the Single Judge had already prima facie opined that the Board Resolution approving the transaction with Reliance was valid. It argued that the Emergency Award was not enforceable under Section 17(2) of the Arbitration Act.
The Court added that "The respondents (Future Retail, Kishore Biyani, and other parties) have deliberately and willfully violated the interim order dated 25 October 2020 and are liable for the consequences enumerated in Order XXXIX Rule 2A of the Code of Civil Procedure."
The HC based on the above observations issued the SCN to Respondent No. 3 and other promoters, directors of Future Group companies, and the Court asked them as to why they should not be detained in civil prison for a term not exceeding three months.
The Court further gave directions of the attachment of assets of Biyani, Future Retail, Future Coupons and other respondent parties; it ordered the filing of an affidavit detailing their assets.
The Court stated that in the emergency award it had rightly invoked the 'Group of Company' doctrine in relation to the Future Group companies. In the said order the Future Group has been directed to not take any further action regarding the deal with Reliance and approach the authorities for recall of the approvals granted for the Future Retail-Reliance deal.
It was further directed that the respondents do not take any further action violating the interim order. It directed Future Group to place on record any action taken by it in connection with the Reliance deal after 25 October 2020.
The Court upheld the emergency award and stated, "The Emergency Arbitrator is an Arbitrator for all intents and purposes; order of the Emergency Arbitrator is an order under Section 17(1) and enforceable as an order of this Court under Section 17(2) of the Arbitration and Conciliation Act."
The HC further held that combining/treating all the agreements between Amazon-Future Coupons Ltd. and Future Coupons-Future Retail as a 'single integrated transaction' did not amount to control of Amazon exercising control over FRL and therefore, would not be in violation of any law.
The HC directed Kishore Biyani and others to appear before it on 28 April 2021, i.e. on the next date of hearing.