Future Reliance v. Amazon: The tussle goes on!

Dated: November 29, 2020

                                                                                                                                       - By Megha Bhatia

For the last couple of weeks, Amazon-Future retail arbitration has been in the headlines. By way of background, on October 9, Amazon launched arbitration proceedings before the Singapore International Arbitration Centre (SIAC) against Future Retail, arguing that a deal between Amazon and Future Coupons was broken by the arrangement between the Future Group and Reliance Industries Ltd., declared in late August 2020.

An emergency arbitration order (EA order) in favour of Amazon was issued by emergency arbitrator VK Rajah on October 25. The order forbids entities in the Future Party from entering into the share seal arrangement or other agreement with Reliance and other limited parties referred to in the non-compete contract agreed between Amazon and Future Coupons.

As predicted, whether and how Amazon will impose this order in India is the talk of the world. In the last month, much has been written on this subject, which is welcome given the relative absence of EA jurisprudence and the enforceability of EA orders in India.

The explanation why the enforceability issue is widely debated is that the 1958 New York Convention only involves the acknowledgment and compliance of international arbitral awards but not of foreign-seated arbitral tribunals’ interim/provisional/interlocutory orders, the latter being EA orders. In view of this, the most widely proposed analysis is that a “duplicative approach” is likely to be attempted because EA directives are not enforceable on their own in India under the Arbitration & Conciliation Act, 1996.

This duplicative solution includes filing a motion pursuant to Section 9 of the Act demanding temporary relief (through Amazon in this case), asking the court to effectively duplicate the relief provided by the emergency arbitrator. This approach is deemed to be originating from the decision of  Avitel Post Studioz Ltd & Ors. v. HSBC PI Holdings (Mauritius) Ltd.

In this situation, as the petitioner requested, by (somewhat) duplicating it into a court-ordered temporary measure under Section 9 of the Act, the implementation of the EA relief by a foreign-seated tribunal was indirectly achieved.

However, even though a claimant has received a favourable EA from a foreign-seated tribunal and tries to implement it through Section 9 , two considerations must be considered:

(a) Any other application applying the tests controlling a petition under Section 9 on the basis of standards under Indian law will have to be separately reviewed by Indian courts (Raffles Design Int'l India Pvt. Ltd. v. Educomp Professional Education Ltd. & Ors). This is because the courts do not exercise compliance authority and are not allowed, under Section 9, to offer any deference to an EA order and are only in a position to grant temporary security measures.

(b) As it was before the emergency arbitrator, a respondent will be able to re-agitate any objections, formal and factual. Therefore the duplicative method will, if not entirely, make the whole procedure conducted to obtain the EA order obsolete to a large degree.

Delhi High Court

The Delhi High Court reserved orders in the suit filed by Future Retail against Amazon in connection with its contract with Reliance on November 20, after hearing as many as eight senior advocates over the span of five days.

As an ad-interim remedy, Future Retail (FRL) requested the Court’s orders to prohibit Amazon from intervening with Reliance on the execution under the lawful deal.

Senior Advocate Harish Salve for FRL

  • The case by FRL aims to stop the illegal involvement of Amazon in the execution of a lawful arrangement with Rely. 
  • Amazon has no say in a deal between Future Retail and Reliance, as an investor in FCPL and not FRL. Amazon gained no control over FRL’s affairs.
  • In the event of a lawsuit, it is appropriate to obtain redress against the FCPL and the promoters. 
  • The motion approving the arrangement was duly passed by the FRL Board and FCPL consented to save the corporation from sinking. 
  • Interest of creditors worth Rs. 18,000 crore and if the transaction goes through, the employment of thousands of Indians will be secured.
  • FRL’s directors have a fiduciary responsibility against the owners of the company and so the Dependence agreement was necessary to alleviate the financial pressure. 
  • The arrangement would preserve and guarantee the existence of market competition. 
  • A breach of the Foreign Exchange Management Act (FEMA) and Foreign Direct Investment (FDI) policy would arise if the claim of Amazon on taking its approval for the transaction is approved and the two separate shareholding agreements qua FRL and FCPL are merged.

Senior Advocate Abhishek Manu Singhvi for Reliance

  • An arbitral award cannot prohibit statutory action and the statutory path would be followed by the contract.
  • The idea of emergency arbitration, especially where any arbitration is located in India, is foreign to Indian courts. 
  • The SIAC laws must be followed in compliance with Indian regulations. 
  • By stalling the offer that stops FRL from going down, Amazon plays havoc. 
  • The appropriate parties and agencies have already given their consent to the transition scheme.

Senior Advocate Mukul Rohatgi ran for the promoters and FCPL was represented by Senior Advocate Vikram Nankani. In terms of the FRL Share Holders Arrangement(SHA), FCPL asserted that it agreed to the agreement with Reliance. The promoters have also argued that Amazon has no right to intervene with the sale and that it is appropriate to ignore the Emergency Award.

Senior Advocate Darius Khambata for FRL

No Emergency Arbitration is accepted in Section I of the Arbitration and Conciliation Act, 1996. 

  • The Emergency Award was awarded without jurisdiction and transferred without jurisdiction. 
  • Because the Emergency Arbitrator has no legal status and is null and void, it does not need to be questioned and may be disregarded. 
  • In defiance of Section I, the parties cannot contract and thus no arrangement can be reached to name an Emergency Arbitrator in the present situation.
  • Before commencement of arbitration, relief can be granted by a court only under Section 9 of the Arbitration Act.
  • Only under Section 9 of the Arbitration Act a relief can be provided by a judge before arbitration commenced. 
  • FRL’s presence before the Emergency Arbitrator was under protest and acquiescence is not disputed. 
  • The laws of the Arbitration Centres of the High Court cannot direct the application of Part I in a way that permits emergency arbitration. 

Reliance, FCPL and the Biyanis backed FRL’s claims.

Senior Advocate Gopal Subramaniam’s arguments on behalf of Amazon

  • In the present situation, the ship of arbitration has sailed and the suit is now not maintainable. 
  • The parties are bound by the Emergency Tribunal's instructions. 
  • All the claims presented before the Judge, following review of Indian law, were considered and determined in depth by the Emergency Arbitrator. 
  • The FRL SHA, the FCPL SHA and the Share Subscription Arrangement were in touch with each other and a single consolidated transaction took place. 
  • FRL is bound by the Group of Companies ideology.
  • The sovereignty of the parties is the cornerstone of arbitration and in this situation, the parties have agreed to follow the SIAC Principles as the rules of engagement for the Emergency Arbitration. 
  • SIAC Principles are embedded in the arbitration arrangement according to Section 2(8) of the Arbitration Act and thus, it cannot be said that Emergency Arbitration is not accepted. 
  • There is no mandatory clause in Part I for disempowering an emergency arbitrator.
  • There should be no apparent loss of jurisdiction as parties to an arbitration arrangement agree to an Immediate Arbitration. Till it is laid aside, the Emergency Award is binding. 
  • Amazon has some security powers as an owner, but has little “control” over the FCPL or FRL. 
  • The sponsors, i.e. FCPL and FRL became acquainted with Biyanis and exerted influence and privileges over them. There was an understanding that the retail properties of FRL would not be transferred without the permission of the FCPL. In exchange, FCPL required the consent from Amazon.
  • 9.82% of FCPL's stock in FRL would be worthless if the supermarket company had vanished. 
  • All contracts and arrangements have been carried out in conjunction with FEMA and FDI regulations.
  • Improper interference with contractual obligations cannot be tortuous if the contract itself is not legitimate.

For Amazon, Senior Advocates Amit Sibal and Rajiv Nayar have appeared. They also argued that it is important to allow the arbitration proceedings under the SIAC to follow their course. 

Meanwhile the Competition Commission of India (CCI) approved the acquisition by Reliance Retail Ventures Limited and Reliance Retail and Fashion Lifestyle Limited of the retail, wholesale, logistics, and warehousing businesses of the Future Group.


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