Future-Reliance v Amazon before Delhi High Court: Fate of Emergency Award, Group Company Doctrine and rights of investor

A look at the broad arguments made by as many as eight Senior Advocates before a Single Judge Bench of Justice Mukta to this end:
Future-Reliance v Amazon before Delhi High Court: Fate of Emergency Award, Group Company Doctrine and rights of investor
Senior Advocates Gopal Subramanium and Harish Salve

After hearing as many as eight senior advocates over the course of five days, the Delhi High Court on Friday reserved orders in the suit filed by Future Retail against Amazon in connection with its deal with Reliance. [Future Retail v. Amazon].

The suit was filed soon after Future Group was injuncted by an Emergency Arbitrator from going ahead with its deal with Reliance.

Amazon, an investor in one of the shareholders of Future Retail - Future Coupons (FCPL), initiated the Emergency Arbitration under the Singapore International Arbitration Centre (SIAC) Rules. Its primary grievance was that Reliance fell in the negative list of 30 entities with which Future Group could not transact.

As ad-interim relief, Future Retail (FRL) sought directions from the Court to restrain Amazon from interfering in its performance of the lawful contract with Reliance.

Senior Advocates Gopal Subramanium and Harish Salve
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Here's a look at the broad arguments made before a Single Judge Bench of Justice Mukta to this end:

Senior Advocate Harish Salve for FRL

Senior Advocate Harish Salve
Senior Advocate Harish Salve

- The suit by FRL seeks to prevent Amazon's unlawful interference in the performance of a lawful contract with Reliance.

- Being an investor in FCPL and not FRL, Amazon has no say in a transaction between Future Retail and Reliance. Amazon acquired no control over the affairs of FRL.

- In case of any grievance, remedies must be sought against FCPL and the promoters.

- The resolution approving the deal was duly passed by the Board of FRL and was consented to by FCPL to save the company from sinking.

- Interest of creditors worth Rs. 18,000 crore and the jobs of thousands of Indians will be protected if the deal goes through.

- Directors of FRL have a fiduciary duty towards the company's shareholders and thus the deal with Reliance was necessary to mitigate financial distress.

- The deal will maintain and ensure the presence of competition in the market.

- If Amazon's argument on taking its consent for the deal is accepted and the two separate shareholding agreements qua FRL and FCPL are conflated, there will be a violation of the Foreign Exchange Management Act (FEMA) and Indian Foreign Direct Investment (FDI) policy.

Senior Advocate Darius Khambata for FRL

Senior Advocate Darius Khambata
Senior Advocate Darius Khambata

- Part I of the Arbitration and Conciliation Act, 1996 does not recognise an Emergency Arbitration.

- The Emergency Award was non est and passed without any jurisdiction.

- Since the Emergency Arbitrator has no legal status and is a nullity, it need not be challenge and can be ignored.

- Parties cannot contract in defiance of Part I and therefore, there cannot be an agreement to appoint an Emergency Arbitrator in the present case.

- Before commencement of arbitration, relief can be granted by a court only under Section 9 of the Arbitration Act.

- Participation of FRL before the Emergency Arbitrator was under protest and there is no question of acquiescence.

- Rules of High Court Arbitration Centres cannot guide the interpretation of Part I in a manner allowing Emergency Arbitration.

FRL's contentions were supported by Reliance, FCPL and the Biyanis.

Senior Advocate Abhishek Manu Singhvi for Reliance

Senior Advocate AM Singhvi
Senior Advocate AM Singhvi

- An arbitral award cannot stop statutory proceedings and the deal will take its statutory course.

- Concept of Emergency Arbitration is alien to Indian courts, especially when any arbitration is India-based.

- SIAC Rules have to adopted in consonance with the Indian law.

- Amazon is playing mischief by stalling the deal that will save FRL from going down.

- Necessary parties and entities have already given consent to the scheme of transfer.

Senior Advocate Mukul Rohatgi appeared for the promoters and Senior Advocate Vikram Nankani represented FCPL.

FCPL asserted that it has consented to the deal with Reliance in terms of the FRL Share Holders Agreement (SHA).

The promoters also maintained that Amazon has no right to interfere with the transaction and that the Emergency Award must be ignored.

Senior Advocates Gopal Subramanium and Harish Salve
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Senior Advocate Gopal Subramanium's arguments on behalf of Amazon

Senior Advocate Gopal Subramanium
Senior Advocate Gopal Subramanium

- Ship of arbitration has sailed in the present case and the suit was now not maintainable.

- The parties are bound by the directions of the Emergency Tribunal.

- All contentions raised before the Court were heard and decided by the Emergency Arbitrator in detail after considering the Indian law.

- The FRL SHA, the FCPL SHA and the Share Subscription Agreement were at the heels of each other and there was a single integrated transaction.

- FRL is bound by the Group of Companies doctrine.

- Party autonomy is the backbone of arbitration and in this case, the parties chose to adopt SIAC Rules as rules of engagement, which provided for an Emergency Arbitration.

- By virtue of Section 2(8) of Arbitration Act, SIAC Rules are embedded in the arbitration agreement and thus, it cannot be said that Emergency Arbitration is not recognised.

- Part I contains no mandatory provision to disempower an Emergency Arbitrator.

- When parties to an arbitration agreement agree to an Emergency Arbitration, there can be no inherent lack of jurisdiction. Emergency Award is binding until it is set aside.

- As an investor, Amazon has certain protective rights but did not have "control" over FCPL or FRL.

- The promoters i.e. Biyanis were common to FCPL and FRL and exercised control and rights over them. There was an agreement that FRL's retail assets will not be sold without FCPL's consent. FCPL, in turn, needed consent from Amazon.

- 9.82% shares of FCPL in FRL would be meaningless if the retail business is gone.

- All transactions and agreements were in compliance of FEMA and FDI law.

- There cannot be a tort of unlawful interference with contractual obligations when the contract itself is not valid.

Senior Advocates Amit Sibal and Rajiv Nayar also appeared for Amazon. They also contended that the arbitration proceedings under the SIAC must be allowed to take their course.

After hearing the arguments, the High Court reserved its order the matter yesterday.

Meanwhile, the Competition Commission of India (CCI) approved the acquisition of the retail, wholesale, logistics, and warehousing businesses of Future Group by Reliance Retail Ventures Limited and Reliance Retail and Fashion Lifestyle Limited.

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