[BREAKING] Delhi High Court upholds Emergency Award passed against Future-Reliance deal, imposes 20 lakh costs on Future

In a big win for Amazon, the Delhi High Court today upheld the Emergency Award passed against Future-Reliance deal (Amazon.com NV Investment Holdings LLC v. Future Coupons Pvt Ltd & Ors)..The Court also imposed costs of Rs 20 lakh on Future, to be deposited with the Prime Minister's Relief Fund for providing COVID vaccination to the Below Poverty Line category - senior citizens of Delhi..The order was passed by a Single Judge Bench of Justice JR Midha, who held that Future Retail, Future Coupons, Kishore Biyani and others violated the Emergency Award. ."The respondents (Future Retail, Biyani and others) have taken Rs.1431 crore from the petitioner (Amazon) solely on the basis of the rights provided by FRL to FCPL that they would not transfer their retail assets without the prior consent of the petitioner and never to a Restrict Person. Admittedly, the respondents have breached the agreements. However, there is no remorse. The intention of the respondents do not appear to be honest...The respondents (Future Retail, Kishore Biyani and other parties) have deliberately and willfully violated the interim order dated 25th October, 2020 and are liable for the consequences enumerated in Order XXXIX Rule 2A of the Code of Civil Procedure.", the Court said. .The Court accordingly issued a show-cause notice to Biyani and other promoters, directors of Future Group companies, asking why they should not be detained in civil prison for a term not exceeding three months..Directing the attachment of assets of Biyani, Future Retail, Future Coupons and other respondent parties, the Court ordered the filing of an affidavit detailing their assets..It further held that the Emergency Arbitrator had rightly invoked the 'Group of Company' doctrine in relation to the Future Group companies. .Future Group has been directed to not take any further action in furtherance of the deal with Reliance and approach the authorities for recall of the approvals granted for the Future Retail-Reliance deal..The respondents are directed not to take any further action in violation of the interim order dated 25th October, 2020. The respondents are further directed to approach all the competent authorities for recall of the orders passed on their applications in violation of the interim order dated 25th October, 2020 within two weeks..Kishore Biyani and others are required to appear before the High Court on the next date of hearing in April..The Court has also directed Future Group to place on record any action taken by it in connection with the Reliance deal after October 25, 2020..Recognizing the legal status of the Emergency Award, the Court said, ."The Emergency Arbitrator is an Arbitrator for all intents and purposes; order of the Emergency Arbitrator is an order under Section 17(1) and enforceable as an order of this Court under Section 17(2) of the Arbitration and Conciliation Act.".Significantly, the Court also held that combining/treating all the agreements between Amazon-Future Coupons Ltd and Future Coupons-Future Retail as a "single integrated transaction" did not amount to control of Amazon exercising control over FRL and therefore, would not be in violation of any law. .The matter would be heard next on April 28. .Last month, the Single Judge had ordered maintenance of status quo in relation to the Future Retail-Reliance deal till the pronouncement of this order.The status quo direction was subsequently stayed by a Division Bench of the High Court.Amazon's appeal against the stay order on status quo is presently pending before the Supreme Court..Before Justice Midha, Amazon had argued that Future Group, Kishore Biyani as well as other promoters and directors were “deliberately and maliciously” disobeying the Emergency Award in spite of their participation in the arbitration proceedings..The Emergency Award had injuncted Future Retail and Future Coupons from taking any steps in furtherance to the Board Resolution of August 29, 2020 in relation to the transaction with Reliance..Amazon asserted that Future Coupons Pvt Ltd, a shareholder in FRL and in which it holds 49% stake, could not have given its consent to the FRL-Reliance deal in the absence of its approval..The e-commerce giant maintained that had it not been for the assurance given by Future Group promoters and FCPL that the retail assets of FRL would be protected, there would have been no investment in FCPL by the American e-commerce company..Amazon thus stated that it had "protective rights" in FRL and not "controlling rights" in FRL and the same were being breached by the sale of FRL assets to a restricted entity i.e. Reliance..FRL, on the other hand, has argued that Emergency Award was a nullity.Relying on the prima facie view given by the Single Judge in FRL suit against Amzaon, FRL contended that there was no arbitration agreement or privity of contract between Amazon and FRL.It was also pointed out that the Single Judge had already prima facie opined that the Board Resolution approving the transaction with Reliance was valid.FRL also argued that the Emergency Award was not enforceable under Section 17(2) of the Arbitration Act..Senior Advocates Gopal Subramaniam, Rajiv Nayar, Gourab Banerji, Nakul Dewan and Amit Sibal, briefed by P&A Law Offices and AZB & Partners, appeared for Amazon.Senior Advocates Harish Salve, Vikram Nankani, and Darius Khambata appeared for FRL and other respondents..Read the judgement: