The world has been observing series of events. The events have dragged the two business giants into courts over the same for dispute resolution. This is about the Amazon, Reliance and Future Groups. All three names are common to the world when talked about the greatest enterprises or businesses. The incident invoked a more dramatic turn since it involved the two business tycoons- Jeff Bezos and Mukesh Ambani. It also put the laws of contract and arbitration to test. This article aims to track the events and developments of the story along with the legal context and issues covered.
About the involved Parties in brief:
Future Groups– Future Group is a prominent company in the sector of retail and fashion stores. They are the owners of the supermarket chains like Bigbazar, Food Bazar and many more. The company has been operating for 8 years and till date.
Future Coupons– Future Coupons is one of the many subsidiary companies under Future Groups.
Reliance Industries– Reliance Industries is an Indian company having an international presence. It is owned by the richest man of India, Mr Mukesh Ambani. The company has many businesses in varying sectors. Prime areas are petroleum and natural gas, textiles, media and entertainment, Finance.
Amazon– Amazon is an American Company involved in e-commerce. One of the most influential economic giants of the world, the company brought a new era for e-commerce. The company has its presence in the sectors of e-commerce, cloud computing, digital distribution and AI and entertainment.
Timeline of events:
In August 2019, Amazon entered into an agreement with Future Coupons. They bought a 49% stake in the company. The deal was of amount as huge as Rs 1500 Crore. The deal was completed in December when the financial transaction was settled by Amazon.
Future Coupons has 7.3% of stake in Future Groups. The 49% of Future Coupons was entitled to Amazon after the deal. It implied that half of the 7.3% of Future Groups i.e. 3.5% of Future Groups (approximately) was now acclaimed and held by the Amazon.
The deal came along with a few privileges to Amazon. It was agreed that since Amazon is a major stakeholder in the company, any further sale of Future Group will first be up on the table for Amazon. Any proceedings on such decisions of sale and transaction should be brought to the notice of Amazon in which it will have its say.
In August 2020, Reliance and Future Retail indulged in a deal. The deal was about the sale of Future Group’s wholesale, retail and logistics business to Reliance Industries. The deal was of Rs. 24,713 crores.
This deal was the pinpoint of the whole conflict. Amazon contested that the Future Group did not refer Amazon for this significant sale. The Future-Reliance deal was finalized and approved on August 29, 2020 by its board. Amazon considering the violation of the agreement moved to Singapore International Arbitration Centre. It was agreed in the agreement clauses that the parties can refer to SIAC for any arising dispute. The Singapore Emergency Arbitrator barred the deal in its interim order.
The Future-Reliance deal was meticulously completed with ground requirements which included affirmative nods from the Competitive Commission of India (CCI) and Securities and Exchange Board of India (SEBI).
The first legal issue in the question was whether it was legally correct to approach SIAC with the issue. This can be looked upon by referring to some relevant sections from The Arbitration and Conciliation Act, 1996.
Section 11 of the act says about the appointment of arbitrators.
Reading its sub-section it says,
“In the case of appointment of a sole or third arbitrator in an international commercial arbitration, the Chief Justice of India or the person or institution designated by him may appoint an arbitrator of a nationality other than the nationalities of the parties where the parties belong to different nationalities.”
It is common between the parties in contemporary times to agree upon the seat/venue of arbitration for settlement of the dispute. On one hand, it became a practice of convenience, it was seen that the venue of arbitration became a matter of disputes in various contracts.
The complexity increased further referring one of the significant cases of Indus Mobile Distribution Private Limited v. Datawind Innovations Private Limited.
Amazon bringing the matter to SIAC which was agreed was along section 20 of the Arbitration and Conciliation act but has a strong precedent against it. The ambiguity is that where the parties are free to choose their place of arbitration, the rule of the primacy of business place is a significant factor.
Section 20 of the act elaborates on the Place of arbitration.—
(1) The parties are free to agree on the place of arbitration.
(2) Failing any agreement referred to in sub-section (1), the place of arbitration shall be determined by the arbitral tribunal having regard to the circumstances of the case, including the convenience of the parties.
(3) Notwithstanding subsection (1) or sub-section (2), the arbitral tribunal may, unless otherwise agreed by the parties, meet at any place it considers appropriate for consultation among its members, for hearing witnesses, experts or the parties, or for inspection of documents, goods or other property.
The interim order by SIAC was challenged by the Future Group in the Delhi High Court. The matter was dealt several times by different benches. It was in the Supreme court that these series of events saw a stable direction.
The case was referred to the bench headed by Justice Rohinton F Nariman. The court upheld the interim decision given by Singapore Emergency Arbitrator. The judgement read that Amazon had rightly objected to the deal between Future retail Limited and Reliance industries.
The hottest question in front of the Supreme Court was whether the invoke of the decision by SIAC was in accordance with the provisions of the law or not.
The bench read section 17 of the Act which read that “Unless otherwise agreed by the parties, the arbitral tribunal may, at the request of a party, order a party to take any interim measure of protection as the arbitral tribunal may consider necessary in respect of the subject-matter of the dispute.”
The decision though came as a disappointment for the Indian enterprise. The decision was commended and lauded due to its neutral and non-biased nature.
The Future Group did argue that Amazon was asked for Financial assistance and collaboration of nature many times but in vain. These claims were quashed by Amazon.
The further developments of the corporate-legal story would be a great watch since the final order of the SIAC is yet to come