Future Group has decided not to legally challenge the Singapore International Arbitration Centre’s (SIAC) interim ruling that has put the sale of its retail business to Reliance Industries on hold as it has taken the view that the SIAC-appointed emergency arbitrator’s verdict cannot be enforced in India, said a person familiar with the development. This is in contrast to its earlier position when it was planning to move the Delhi High Court against the verdict.

Amazon had filed an arbitration petition with SIAC earlier this month to block the Future-Reliance deal on the grounds that the sale breached its contract with Future Coupons (FCPL), which included a right of first refusal over the retail business and explicitly prohibited a sellout to Reliance. Future, on its part, has argued that Amazon’s deal was with FCPL, a promoter holding company, and not with Future Retail (FRL).

But SIAC in its interim ruling in favour of Amazon last week said FRL was party to its agreement with FCPL and the US etailer had the right to be present at ‘any table’ where restructuring of FRL or its entire group was being discussed.

“FRL is prima facie a proper party to the FCPL shareholders’ agreement arbitration clause. This is because the core assets of FRL cannot be compromised without its consent,” said the arbitration court adding that economic hardship alone is not a legal ground for disregarding legal obligations. “Notwithstanding Amazon’s desire to work with them, Future Group decided to enter into a transaction with a contractually prohibited entity to strip FRL of its core assets.”

‘Need to Honour Commitments’
SIAC said FRL chains are unique and are of strategic importance and value to Amazon. Future Group has given no good legal reasons for affecting the sale of FRL’s retail assets behind Amazon’s back and therefore ‘gravely compromising its interests’, it added.

“In sum, 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 the claimant’s rights will become impossible,” states the summary of key findings by SIAC. “Without fresh capital, FRL’s future appears unstable. But even in these situations, the law expects businesspersons to honour their contractual commitments unless they have been legally vitiated or modified,” it added.

Future has received legal advice that it doesn’t need to do anything, said the person familiar with the group’s strategy. “It’s up to Amazon to approach an Indian court to get the verdict legally enforced, after the emergency arbitrator delivers his final judgment. Future will present its arguments then,” said this person. The group spokesperson declined comment.

According to Sudip Mahapatra, a partner at law firm S&R Associates, Amazon can try to file a civil suit to enforce the interim order in India but that is a fairly lengthy process. Alternatively, it can consider an application for interim relief under Section 9 of the Arbitration Act.

“In Section 9 proceedings, an Indian court will make an independent determination on whether the RIL-Future deal should be put on hold. The SIAC order will have persuasive value before the Indian court but it is not bound to follow it,”said Mahapatra.

News Source: Livemint


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