In 2019, Amazon had entered into an agreement with Future Coupons where Amazon agreed to buy a 49 percent ownership in Future Coupons, a Future Retail promoter entity, for INR 1,500 crore. Future Coupons owns 7.3 percent of Future Retail, effectively giving Amazon a 3.58 percent indirect ownership in the company as a result of the agreement. A call option was included in the deal, allowing Amazon to purchase all or part of Future Retail’s stake in the company within three to ten years following the agreement’s execution. Furthermore, Future Retail was unable to transfer its retail assets without the authorization of Future Coupons, which could only be provided if Amazon agreed. According to the agreement, Future Retail was also prohibited from encumbering, transferring, selling, divesting, or disposing of its retail assets to “restricted individuals”, who were prohibited entities with whom Future Retails, Future Coupons, and the Future Group could not deal. Those prohibited entities were listed in the agreement.
Future retail was impacted by the nationwide lockdown induced by the Covid-19 pandemic. Faced with debt, the Future Group approved an INR 24,713-crore slump sale of its retail, wholesale, and logistics businesses to Reliance Retail. Future Group’s retail and wholesale assets would have been consolidated into one company, Future Enterprises Ltd, and then transferred to Reliance Retail under the scheme of arrangement. Amazon was against it since Reliance was a prohibited entity under the deal and Amazon had the right to buy Future Retail retail assets after a few years of the agreement with Future Coupons.
Amazon initiated arbitration proceedings and filed an application on October 5, 2020, in Singapore, seeking emergency interim relief in the form of injunctions against the aforementioned transaction from the emergency arbitrator under the Singapore International Arbitration Centre Rules 2016 (“SIAC Rules”). The emergency arbitrator made a decision in Amazon’s favour. In March 2021, Amazon filed a petition with the Hon’ble Delhi High Court under Section 17[1] of the Arbitration and Conciliation Act, 1996 (“Act”) to have the emergency arbitration award against Future Retail enforced. The hon’ble Delhi High Court passed a judgment holding that an emergency arbitrator’s award is an order under Section 17(1) of the Act, hence enforceable. In a first appeal, the Future Retail Group challenged the order before a division bench of the Delhi High Court. The Delhi High Court’s division bench stayed a prior ruling of the same court. Amazon has filed an appeal with the hon’ble Supreme Court of India (“Supreme Court”). The Supreme Court ruled that emergency arbitration was covered by the Act, and that an EA was included in the definition of an arbitration tribunal. Further, the Supreme Court pointed out the importance of party autonomy and the right of parties to appoint anyone to resolve a conflict that had developed between them in reaching its conclusion.
The Supreme Court’s decision brought ‘Emergency Arbitrations’ to the forefront, which are now recognized interim relief remedies and are enforceable under Indian law as a result of the decision. It was also a significant step toward decongesting civil courts and giving parties prompt interim relief.
But there’s an amusing twist in the story. The Competition Commission of India (“CCI”) approved Amazon’s acquisition of 49 percent of Future Coupons in 2019. However, recently after receiving Future’s complaint against Amazon, CCI ruled that Amazon misled them and withheld information about the scope and purpose of the deal, necessitating a re-examination of the deal, given that the two companies (Amazon and Future Retail) were well-known in the online marketplace and offline retailing, and had considered strategic alignment between their businesses. Practically, voiding the agreement between Amazon and Future Coupons.
Furthermore, the CCI has levied a penalty of INR 200 crore on Amazon, which must be paid within 60 days of the order’s receipt.
The order given by CCI is considered to be a landmark as it stopped the deal between two retail giants but it can also be considered in a way as it completely negated the judgment given by the Supreme Court on emergency arbitrations. Now Amazon has pulled CCI to National Company Law Appellate Tribunal (“NCLAT”) over the suspension matter. So far, it’s unclear whether CCI’s stated goal of getting foreign investors to quit violating India’s rules and regulations was achieved through this order or if it just overreached with its powers.
For further information, please contact:
Kritika Krishnamurthy, Partner, AK & Partners
kritika@akandpartners.in
[1] Section 17, Arbitration and Conciliation Act, 1996: (1) 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.
(2) The arbitral tribunal may require a party to provide appropriate security in connection with a measure ordered under sub-section (1).
