Amazon Wins Round in India Retail Battle with Future Group, Reliance

Delhi’s top court has rejected a plea from a retail unit of billionaire Kishore Biyani’s Future Group to quash Singapore arbitration proceedings filed by e-commerce giant Amazon, dashing the troubled Indian retailer’s hopes to overturn a case that has blocked a potential lifeline deal with competitor Reliance Retail Ventures for over a year.

In an order published Tuesday afternoon, the High Court of Delhi dismissed the petition of Future Retail to nullify the arbitration proceedings initiated by Amazon at the Singapore International Arbitration Centre (SIAC) in which the US firm has alleged contract breaches by the Indian retailer.

The court ruled that it cannot intervene in the ongoing arbitration, nor in scheduling of hearings, and maintained that SIAC has provided both parties with equal opportunities to present their cases.

“The intent of the Arbitration and Conciliation Act is to ensure expeditious disposal of disputes between the parties and that there is minimum interference by the Courts with the arbitration proceedings,” the order said. “If the parties are encouraged to approach the Court at every stage of the arbitration proceedings, the whole purpose of the arbitration would stand frustrated.”

The development comes more than a year after the commercial dispute started when Amazon dragged Future Retail to the Singapore tribunal over an alleged contract breach, blocking a INR 25,000 crore ($3.4 billion) retail asset sale to Reliance Retail Ventures that could potentially save the cash-strapped unit of billionaire Kishore Biyani’s Future Group conglomerate.

Singapore Arbitration Remains

Future Retail, along with Future Coupons, an online retailer controlled by Future Group founder Biyani, petitioned the Delhi high court on Monday to declare the Singapore arbitration proceedings illegal based on a 17 December decision by an Indian antitrust body suspending a 2019 contract under which Future Group had sold a 49 percent stake in Future Coupons to Amazon.

The court dismissed the petition the following day, saying that “for this Court to interfere in the aforesaid issues would be violative of the autonomy vested in the Arbitral Tribunal.”

Future Retail in a filing on Wednesday said the company would challenge the high court’s order, with Future Coupons and other units of Future Group expected to file similar appeals.

In Future Retail’s view, Jeff Bezos’ company has been using the terms of the two-year-old deal to block Future’s attempts to sell its retail assets to Reliance Retail Ventures, the retail business owned by India’s richest man, Mukesh Ambani, even as Future Retail teeters on the verge of bankruptcy. The company’s net loss widened to INR 1,117 crore in the July-September period from INR 692 crore a year earlier as expenses nearly doubled, based on the firm’s latest financial report.

Testing the Non-Compete Clause

The court battle turns on Amazon’s August 2019 purchase of a 49 percent stake in Future Coupons, which also gave the US firm a 3.6 percent indirect interest in Future Retail, one of India’s biggest brick-and-mortar retail chains, with an option to expand that stake within three to 10 years.

That deal also forbade Future Retail from selling its assets to a shortlist of competitors, including Reliance, within the period. Just one year after inking that deal, however, Future Group agreed to sell Future Retail to Reliance for $3.4 billion. Amazon filed suit two months later, with yesterday’s judgement marking the latest episode in the ongoing court battle.

On 17 December, the Competition Commission of India had revoked its earlier approval of Amazon’s investment in Future Coupons, citing the US e-commerce giant’s failure to fully disclose its intentions, and slapped the company with a INR 200 crore fine.

Future Retail now argues that the prolonged commercial dispute has prevented it from selling assets to Reliance and blamed the dispute for its failure to repay INR 3,495 crore in debt obligations by a 31 December deadline, which resulted in a credit downgrade from India’s CARE Ratings.

Shares of the NSE-listed firm slid further to INR 50.60 on Wednesday after the high court’s decision, and are down 86 percent since February 2020.

Representatives from Future Retail and Amazon had not replied to Mingtiandi’s requests for comment at the time of publication.

Race for Indian Retail

While the case was being heard in the courts of India, Amazon turned the Singapore arbitrator to assert its rights under the 2019 contract with Future Group, accusing the latter of a breach in contract when it moved to sell its assets to “restricted persons” under the 2019 deal, a list that includes Reliance.

Ambani’s INR 16.37 trillion Reliance Retail is considered the largest retailer in India, owning supermarkets, clothing stores, convenience stores and even its own online grocery platform.

The SIAC issued an interim order in October 2020 that placed the asset sale between Future Retail and Reliance on hold while the legal dispute remained unresolved. Future appealed to the Singapore tribunal to be excluded from the proceedings last year but was rejected, followed by another plea to terminate the arbitration.

Aside from the Delhi high court and SIAC, several cases are also pending before India’s Supreme Court, which is expected to conduct its next hearing on 11 January. In August, the Supreme Court upheld the Singapore tribunal’s emergency award granted to Amazon that blocked the sale agreement between Future Retail and Reliance.

Future Retail is the second-biggest retailer in the country, operating 1,500 stores such as the popular retail chain Big Bazaar and neighbourhood stores like EasyDay Club and Heritage Fresh.