Tough legal battle ahead for Future group as it loses arbitration case

Corporate lawyers say Indian courts usually go along with orders given by foreign arbitration courts as witnessed in several cases before

The Future Group has a tough legal battle ahead in the Delhi High Court after it lost an important legal war at Singapore International Arbitration Centre.

The Future group moved the Delhi High Court seeking to be heard if any plea is filed by its partner-turned-foe, Amazon Inc, which is objecting to Future’s sale of its entire retail and logistics business to Reliance Industries Ltd.

In its arguments before the Singapore International Arbitration Centre, Future had said as the "horse has bolted" after the RIL transaction, Amazon no longer has any legitimate interests meriting protection. “This is incorrect. The horse has not bolted, even though Future has opened the stable door. Even assuming that the "horse has bolted", it is apparent that the Future group are contractually obliged to work with Amazon to cajole the "unruly horse" to return to its stable,” the arbitration panel said in its order dated October 25.

Corporate lawyers said the Indian courts usually go along with the orders given by the foreign arbitration courts as witnessed in several cases before. In the case of Tata Sons versus NTT Docomo, the Delhi High Court had ordered the Tata group to abide by the orders of the London Court of Arbitration which had ruled in favour of Docomo. “A similar fare now awaits Future in India,” said a corporate lawyer.

While giving the relief to Amazon, the Singapore court said the more delay in giving relief, the greater the prejudice to Amazon. It is apparent that at some point of time in the very near future, restoring Amazon’s rights will become impossible, the Singapore court said and asked Future from taking any further steps in connection with the RIL transaction. RIL had agreed to take over the entire retail and logistics business of the Future group for a consideration of Rs 24,700 crore.

 

A caveat is filed by a litigant in the courts to make sure that no adverse order is passed against the party without it being heard first. A copy of the caveat petition has already been served to Amazon.

Amazon Inc is opposing the deal between Future and RIL as it held around 5 per cent stake in Future Coupons Ltd, which in turn, had stake in Future Retail Ltd – the biggest company in Future group. Amazon also had the option to increase its stake in FRL – as and when the government relaxes FDI (foreign direct investment) rules for the retail sector.

Amazon has claimed right to be present at any table considering the restructuring of Future Retail Ltd and said the core assets of FRL cannot be compromised without its consent.

Notwithstanding Amazon's desire to work with them, the Future group decided to enter into a transaction with a contractually prohibited entity to strip FRL of its core assets. This disregarded their obligations to Amazon, the arbitration court said.

The Singapore court said Future group are the primary authors of this unhappy situation and granted that the Covid-19 pandemic had caused them unforeseeable difficulties as well as substantial losses and, without fresh capital, FRL's future appears unstable. “’But, even in these situations, the law expects business persons to honour their contractual commitments unless these have been legally vitiated or modified. Economic hardship alone is not a legal ground for disregarding legal obligations. The Future group have given no good legal reasons for effecting the sale of FRL's retail assets behind Amazon’s back and thereby gravely compromising its interest," the court had said.

On November 1, the Future group informed the stock exchanges that the emergency arbitrator has no legal status under the Indian Arbitration and Conciliation Act 1996 and therefore, the proceedings before an “Emergency Arbitrator” are void and coram non‐judice. The EA order having been passed by an authority without jurisdiction is a nullity under Indian law. FRL’s participation in the proceedings before the emergency arbitrator was expressly without prejudice to its jurisdictional objection and under protest. FRL only participated for the limited purpose of appraising the emergency arbitrator of the above factual and legal position," it said.

Future Vs Amazon
 

• Aug 29 2020: RIL announces acquisition of Future group's entire retail, logistics arms
• October 25: Singapore arbitration stays RIL-Future deal aftear Amazon's appeal
• Nov 1: Singapore arbitration court order is not binding: Future
• Nov 3: Future files caveat in Delhi HC