The Delhi High Court Wednesday sought response of Kishore Biyani-led Future Retail Ltd (FRL) on Amazon's plea challenging the prima facie observations by a single judge that the US e-commerce giant's attempt to control the Indian entity was violative of FEMA and FDI rules.
A bench of Chief Justice D N Patel and Justice Jyoti Singh issued notice to FRL, Future Coupons Pvt Ltd (FCPL), Reliance Retail and the Biyanis seeking their stand on the plea by Amazon against the observations made by the single judge in a December 21, 2020 interim order.
Amazon has sought setting aside of the observations as they have a bearing on its case in arbitration proceedings that were initiated before the Singapore International Arbitration Centre (SIAC).
The US firm, represented by senior advocateGopal Subramanium, has contended that the observations are inconsistent with the findings in the SIAC emergency arbitral (EA) order of October 25, 2020 against FRL's asset sale under a Rs 24,713 crore deal with Reliance Retail.
It has also contended in its appeal that the observations in the December 21, 2020 order "effectively resulted in allowing FRL to collaterally bypass the EA order".
"The Respondent 1 (FRL) has been relying on these prima facie observations to misconstrue the true import of the impugned order in an effort to mislead regulators to grant approval to the potential transaction, which has constrained the appellant to file the present appeal to quash and set aside the prime facie observations as set out in detail in the appeal," Amazon has said.
Senior advocate Harish Salve, appearing for FRL, told the court, "We have serious objections to the appeal. It is misconceived. We will file our reply as a lot of things have been said (in the appeal) to which we have to respond."
The court then listed the matter for hearing on February 12.
The December 21, 2020 interim order had come on FRL's plea seeking to restrain Amazon from writing to the SEBI, Competition Commission of India and other authorities about the SIAC arbitral order.
The SIAC on October 25, 2020 had passed an interim order in favour of Amazon barring FRL from taking any step to dispose of or encumber its assets or issuing any securities to secure any funding from a restricted party.
The single judge had upheld the validity of the SIAC order and had also declined to grant FRL's plea to restrain Amazon from writing to the statutory authorities and regulators about the arbitral award.
However, the judge had made some prima facie observations like the August 29, 2020 FRL board resolution approving the deal with Reliance was not invalid or void as claimed by Amazon and the e-commerce giant's representations to that effect to statutory authorities and regulators was "based on incorrect assertions" which meant that its action was based on "unlawful means".
Therefore, FRL has made out a prima facie case of "tortious interference", the judge had said and added that "the act of Amazon would fall foul of the freedom of FRL and Reliance to enter into the transaction thereby causing loss to both FRL and Reliance which would be a civil wrong actionable by both FRL and Reliance in case they suffer any loss".
The judge had also observed that FRL's suit to permanently restrain Amazon from interfering with the deal was maintainable and a combined reading of the shareholding agreements (SHA) of FRL and FCPL and the share subscription agreement (SSA) between Amazon, FCPL and the Biyanis show that they not only protect Amazon's rights in respect of investments it made in FCPL, they also "transgress" to control over Future Retail which requires government approvals and in absence thereof, were contrary foreign direct investment (FDI) rules framed under the Foreign Exchange Management Act (FEMA).
Amazon has said it was constrained to initiate arbitration proceedings in SIAC "on account of grave and material contractual breaches" committed by FRL, FCPL and the Biyanis.
It also claimed that it had parted with substantial sums of money as investment in FCPL which is controlled by the Biyanis, "on the express inducement that certain special, protective and material rights in respect of FRL, including a requirement to seek the prior written consent of the appellant (amazon) prior to disposal of the retail assets of FRL".
The e-commerce giant has further claimed that there was also an absolute prohibition on dealing with a limited set of persons, including entities from the Mukesh Dhirubhai Ambani (Reliance Industries Limited) Group.
In August last year, Future had reached an agreement to sell its retail, wholesale, logistics and warehousing units to Reliance.
As per the SIAC interim order, a three-member arbitration panel needs to be set up within 90 days (from the date of the judgement) with one judge each being appointed by Future and Amazon, along with a third neutral judge.
On November 10, 2020, Amazon had told the court that it and FCL have appointed their respective arbitrators.
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