Advantage Amazon But Future’s the real winner

Blitz Bureau

The Singapore International Arbitration Centre (SIAC) has ruled in favour of Amazon in its long-standing legal battle with Kishore Biyani-led Future Group, holding that Reliance Retail-Future merger deal breached its pre-existing contract. However, Amazon has managed to get minuscule damages of Rs 23.7 crore against claimed amount of Rs 1,436 crore.
In a final award issued late on June 26, the three-member tribunal said the 2020 board resolution by Future Retail Ltd (FRL) approving the sale of its retail, wholesale, and logistics assets to Reliance was in breach of contractual obligations under the Shareholders’ Agreement (SHA) and Share Subscription Agreement (SSA) signed between Amazon and Future Coupons Pvt Ltd (FCPL).
While Amazon had sought damages of Rs 1,436 crore, the tribunal awarded a significantly smaller sum of Rs 23.7 crore. It directed 11 promoters and parties, including Kishore Biyani, to jointly and severally pay the amount, along with interest at 10.3 per cent annually (compounded) from March 9, 2022, until full payment. The parties are also liable to bear Amazon’s arbitration and litigation costs.
The tribunal noted that 835 of FRL’s 1,534 retail stores were transferred in a manner that breached Amazon’s contractual rights stemming from its 2019 acquisition of 49 per cent in FCPL for Rs 1,400 crore. FCPL held a 10 per cent stake in FRL.
Amazon claim trimmed
The Tribunal held that Amazon was entitled to damages due to the promoters’ repudiatory breaches of FCPL shareholders’ agreement, but it rejected the quantum of Rs 1,436 crore claimed by the company.
Amazon had based its claim on “reliance loss,” arguing that it should be compensated for the full value of its 2019 investment in FCPL including Rs 1,430 crore paid under the SSA and Rs 5 crore in associated costs.
However, the Tribunal found that even if all contractual agreements had been fully performed, Amazon would not have recovered its entire investment due to the declining financial condition of Future Retail the ultimate beneficiary of Amazon’s stake in FCPL.
Citing the impact of the Covid-19 pandemic and FRL’s deteriorating business value, the Tribunal observed that awarding full damages would unfairly shield Amazon from a commercial loss it was likely to incur regardless.
“Such an award would essentially allow Amazon to escape a bad bargain,” the final award stated.
Nonetheless, the Tribunal awarded Amazon total legal and related costs of Rs 77.3 crore and SGD 68,550.
Tribunal on Reliance deal
In its 253-page final award, the Tribunal said that it is “uncontroversial that the Mukesh Dhirubhai Ambani Group Group is a “Restricted Person” under the FCPL SHA, which provided a specific and absolute prohibition on dealing with Restricted Persons for sale of FRL’s retail assets.
The tribunal noted that the Reliance-FRL deal “clearly” involved the transfer of retail assets and required Amazon’s written consent and a formal waiver of this restriction, neither of which were provided. It found that the Majority Respondents, referring to the Future Group promoters, were contractually obligated to ensure that FRL did not “take-up, decide, act upon or implement” the transaction.
However, not only did they fail to prevent it, but they also facilitated it by passing board resolutions through both FRL and FCPL on August 29, 2020, allowing the deal to proceed. This, the tribunal ruled, was a clear breach of key provisions of the FCPL SHA, including Sections 4.1, 8.1, 13.1.1, and 14.
The Amazon-Future legal dispute began in October 2020, when SIAC’s emergency arbitrator restrained Future Retail from proceeding with the Reliance deal. The Future Group had challenged the arbitration, citing the Competition Commission of India’s 2022 suspension of the Amazon-FCPL deal.