The Delhi High Court has ruled that US e-commerce giant Amazon’s attempt to control Future Retail through a conflation of agreements it has with an unlisted unit of the Indian company will be violative of the FEMA FDI rules, the Kishore Biyani-led firm said on Wednesday, according to a PTI report.
Giving out its analysis of the Delhi High Court’s December 21 judgment, Future Retail Ltd (FRL) in a filing to stock exchanges said its board approving a Rs 24,713 crore deal to sell assets to Reliance Retail has been held “valid in law” by the court.
It said the entire legal basis of the emergency arbitration award that Amazon secured to halt the Rs 24,713 crore deal, “stands vitiated”.
The High Court had on Monday upheld Amazon’s right to make representations to statutory authorities against the Future Group-Reliance Retail deal.
It however made several observations in its order that could potentially upend the US giant’s 2019 investment in Future Coupons Pvt Ltd (FCPL) – Future Retail’s parent.
The High Court analysed the clauses of three agreements – Future Retail’s shareholder’s agreement with FCPL (FRL SHA), FCPL’s shareholder’s agreement with Amazon (FCPL SHA) and FCPL’s share subscription agreement with Amazon (FCPL SSA).
Read together, the court ruled, the covenants prima facie transgress from a protective right to a controlling right in favour of Amazon.
“Besides creating protective rights, the conflation of the three agreements showed that it transgressed to control over Future Retail, which would require government approvals and, in its absence, will be contrary to FEMA-FDI rules,” the court said referring to FDI policy for multi-brand retail which permits foreign investment of up to 51 per cent under the government route.
Amazon had initiated arbitration to stop the Future-Retail deal and secured an emergency award (EA) temporarily pausing the deal.
FRL in the filing said the court held that the EA has jurisdiction.