Future Retails Vs Amazon: Delhi High Court's Findings On 4 Major Issues

Future Retail Ltd(FRL) suffered a set back on Monday as the Delhi High Court refused to allow its plea for interim injunction to restrain Amazon Inc from writing to Indian statutory authorities objecting to FRL's proposed asset sale to Reliance group.A single bench of Justice Mukta Gupta refused to grant any interim reliefs on FRL's plea to direct Amazon not to write to statutory authorities informing them about an award by a Singapore based Emergency Arbitrator.Here are the findings of the Court on the key issues in the caseOn Validity of Emergency Arbitration"Where the parties exercising autonomy expressly choose different procedural rules for conduct of arbitration, they are assumed to be aware of the provisions of such rules, including the procedure for obtaining interim relief, and the fact that such rules provide for emergency arbitration by appointment of an emergency arbitrator. In the present case, the parties had with open eyes left it for themselves, to choose between availing interim relief from the emergency arbitrator on the one hand, or the Courts under Section 9 of the A&C Act on the other hand. Thus, Amazon has exercised its choice of the forum for interim relief as per the arbitration agreement between the parties. Nothing in the A&C Act prohibits the parties from doing so."The court held that, "Firstly, the parties in an international commercial arbitration seated in India can by agreement derogate from the provisions of Section 9 of the A&C Act; Secondly, in such a case where parties have expressly chosen a curial law which is different from the law governing the arbitration, the court would look at the curial law for conduct of the arbitration to the extent that the same is not contrary to the public policy or the mandatory requirements of the law of the country in which arbitration is held; Thirdly, inasmuch as Section 9 of the A&C Act along with Sections 27, 37(1)(a) and 37(2) are derogable by virtue of the proviso to Section 2(2) in an International arbitration seated in India upon an agreement between the parties, it cannot be held that the provision of Emergency Arbitration under the SIAC rules are, per se, contrary to any mandatory provisions of the A&C Act. Hence the Emergency Arbitrator prima facie is not a coram non judice and the consequential EA order not invalid on this count."On Validity of FRL's Resolution Approving Deal with Reliance Industries"From the documents filed by Amazon it is clear that Kishore Biyani in March, 2020 informed Amazon expressing its fear of Covid-19 disrupting capital markets globally leading to significant deterioration of FRL's market capitalization with the stock falling down per share, leading to a requirement for increased encumbrances of FRL‟s shares and a shortfall in security in two of their facilities under UBS AG and L & T Finance Ltd.Amazon was also asked to step in and nominate lenders of financial institutions (replacement financial institutions) to avoid alienation or disposal of FRL‟s shares held by the promoter groups. Considering the down turn in the market in April and May, 2020 several of FRL‟s lenders began recalling their facilities. From the documentation it is clear that the grim situation of FRL was duly notified to Amazon and though Amazon through its various options including from SAMARA was trying to negotiate however, nothing concrete resulted. It is in this peculiar circumstance and the fact, as the shares of FRL fell down with investors recalling their securities, it was essential for FRL to act, to survive. This is thus a case of supervening circumstance and as noted by the Supreme Court in Energy Watchdog's decision (supra) a multi-factorial approach should be adopted and the acts of both FRL and Amazon have to be tested on the said anvil.Though the claim of Amazon in the representation to statutory authorities regarding the transaction is that the same is in breach of FCPL SHA and FRL SHA and the resolution dated 29th August, 2020 passed by the Board of Directors of FRL is void, however, no material has been placed on record by the FRL to show that the resolution dated 29th August, 2020 passed by the Board of Directors of FRL is void or contrary to any statutory provision. Case of FRL is that its Board Resolution dated 29th August, 2020 does not violate any provision of the FRL's Article of Association or any provision of law and that the same is in compliance with the fiduciary duty owed by FRL to its stakeholder, which averments have not been seriously disputed by Amazon except contending that the Board Resolution dated 29th August, 2020 is in breach of FCPL SHA and FRL SHA. The resolution being in breach of the FRL SHA and FCPL SHA is distinct from the resolution being void or contrary to any statutory provision or contrary to the Articles of Association of FRL. Further contention of Amazon is that the Board Resolution dated 29th August, 2020 of FRL is in contravention with FCPL's Article of Association. However,...

Future Retails Vs Amazon: Delhi High Court's Findings On 4 Major Issues

Shreya Agarwal

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Future Retails Vs Amazon: Delhi High Court's Findings On 4 Major Issues

Shreya Agarwal

This is a premium content Available exclusively to Our subscribers

INR 1099+GST

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This is a premium content
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