A prolonged conflict between US multinational company Amazon, and an Indian conglomerate Future Retail group, took a foothold when Future Retail petitioned an Indian court to declare arbitration on the whole matter.
Founded by Mr. Kishore Biyani, Future Group is an Indian conglomerate, headquartered in Mumbai, Maharashtra, India. The group holds a strong grip in the retail and fashion sector, owning some big names like Brand Factory, Central and Big Bazaar. A noteworthy presence of the group is also seen in the integrated food and FMCG sectors.
On the other side, Amazon Group Inc. is a multinational technology company focused on e-commerce, cloud computing, streaming video, and artificial intelligence.
Like other retail chains, Future Retail also faced an economic slam due to the pandemic. Since the company was in debt for a long time, various lenders started applying extreme pressure on it. According to Care Ratings, Future Retail has outstanding debt of Rs 6,278 crore to its lenders which includes Union Bank of India, Bank of India, Bank of Baroda, State Bank of India, Indian Bank, Central Bank, Axis Bank and IDBI Bank.
A continued operational decline and these lenders' pressure forced the company to sell its assets in the market. Seeing this, Asia's richest man led Reliance industries in august 2020, came up as a buyer. Future Retail was to sell its supermarket chain Big Bazaar to Reliance Retail along with its sister chains Brand Factory, Home Town, Central, and Ezone.
Perceiving this, Amazon went to Singapore International Arbitration Centre (SIAC) saying, this deal is a violation of an agreement signed back in 2019 and should be halted immediately. The SIAC ruled in favor of Amazon and put the Reliance-Future deal on hold. Future and Reliance refused to abide by this order in absence of any mechanism available in India that enforces international arbitration's order.
Amazon then approached the SEBI to prevent the Reliance-Future deal from going through, and urged Reliance and Future to follow their order. An interim order passed in arbitration with a foreign seat is enforceable through the Arbitration and Conciliation Act, 1996. The matter is currently pending before the Delhi High Court.
In august 2019, Future Coupons—a promoter group entity of future retail sold its 49 percent stakes to Amazon. The whole deal included an investment of USD 200 million at that time. Future Coupons owns 7.3 percent of Future Retail, which makes Amazon a 3.58 percent stakeholder in future retail. At the time of the deal, an agreement was also signed by future coupon that the company would not sell its stake to a list of Indian companies, which includes Reliance industries. According to this argument, the deal between Reliance and Future is invalid. This whole 26,000 crore-buyout deal is now on a cliff as Amazon has stopped the company to sign a deal with Reliance industries.
The company argues that without approval of the deal with Reliance, it will have no choice but to close down and this will directly affect 29,000 jobs. It would be intriguing to see what company does in this situation.
