In his final submissions to the Delhi High Court in the Amazon-Future Retail case, senior advocate Harish Salve reiterated his arguments that Amazon had no right to control voting in the listed Indian retail company. He said that the emergency award by a Singapore arbitrator Amazon was passing off as a court order had no sanctity under Indian law, and appealed to the court to pass an injunction against its false representations.
Amazon, which doesn’t have a direct stake in Future Retail, contends that Future Group’s deal with Reliance Retail breached agreements it had with the Biyani-led group. It convinced a Singapore emergency arbitrator to halt the Future-Reliance deal. Future Retail has decided to ignore the award saying it is invalid under Indian law.
Questioning the Emergency Arbitrator role, Salve asked, "Arbitrator is sole Arbitrator or panel?" He clarified that an arbitrator is one who is entitled to decide the dispute, while an emergency arbitrator (EA) cannot act as an arbitrator under Indian law.
“We say this award has no existence in Indian law. That's all that I need to show,” said Salve. “That's the whole game [for Amazon]... to be mischievous on the basis of the award.”
After winning an injunction against the Future-Reliance deal, Amazon wrote to SEBI and other regulators asking them to withhold permission on the basis of the emergency arbitration. Separately, on Friday evening, the Competition Commission of India tweeted that it had approved the deal.
The former solicitor general of India drove home the point by asking, “Why doesn't he [Amazon] enforce the award? If it's an award, you enforce it. My suit is to stop him from making representation.”
Salve also said there was no question of Future retail taking advantage.
“For me, FRL [Future Retail] has not received a dollar from you. I got it from FCPL [Future Coupons] and it has no objection. You can scream at Biyanis,” said Salve.
Since Indian laws have a string of stringent riders attached to foreign companies’ investments in multi-brand retail, Amazon opted for a two-step approach to get a foot in the door of this sector.
It bought a 49 percent in Future Coupons in what was essentially a private treaty transaction. Future Coupons in turn holds 9.8 percent in Future Retail. In the process Amazon secured some rights, giving itself effective veto power over Future Retail.
"Amazon has an agreement with FCPL. Then he says controllers are common. The obligation of the promoter to Amazon cannot be attributed to the company [Future Retail]. I am not bound by the commitment made by the promoter to the third party," said Salve. Previously, he had emphasized that the board of directors had a fiduciary duty to prevent a company from sinking.
Salve also pointed out that “when it comes to FRL, although there are back to back agreements, the promoters are not to act in concert”. Indeed, to try and insulate itself the charge of violating FDI rules, Clause 15.17 was included in the shareholder agreement with Future Coupons. It states that Amazon’s investment is in Future Coupons only and that there is no agreement or understanding in relation to the acquisition of shares voting rights, or exercising control over Future Retail. It also made clear that Future Coupons, the Promoters and Amazon do not intend to act in concert with each other in any way.
After hearing the arguments from both sides, the Court reserved its order and asked them to file written submissions by Monday.Disclaimer: Reliance Industries Ltd. is the sole beneficiary of Independent Media Trust which controls Network18 Media & Investments Ltd.