BSE to seek Sebi clarification on Amazon's objection to Future-Reliance deal
04 November 2020
Bombay Stock Exchange (BSE) will seek clarification from market regulator, Securities and Exchange Board of India (Sebi), as also from Future Retail and Reliance Industries, about theirRs25,000-crore (about $3.4 billion) transaction, after online retailer Amazon raised objection to the deal.
While both Future Retail and Reliance Industries say Amazon’s so-called dispute order is not binding on them, Amazon insists that an earlier agreement under which it secured a 5 per cent stake in Future Coupons has built-in exclusivity clause in it.
US e-commerce giant Amazon on 25 October secured an injunction from a Singapore arbitrator against Future Retail's deal to sell its retail assets to Reliance for Rs25,000 crore (roughly $3.4 billion), citing violation of certain clauses of its agreement with the Indian retail group.
Amazon had, last year, bought a 49 per cent stake in Future Coupons, the promoter of the Future Retail in a deal worth Rs2,000 crore, which Amazon claims barred the Indian group from dealing with any other entities without its consent.
Also, according to Amazon, the deal specified any disputes would be arbitrated under Singapore International Arbitration Centre rules.
However, the Singapore arbitrator’s order is not automatically enforceable in India and Amazon may need to get a binding order from an Indian court.
According to legal experts, the Future-Reliance deal cannot be challenged by Amazon in a court of law as Future Retail (FRL) is not party to the case. FRL is the flagship food and grocery business of the Future Group that houses Big Bazaar, Easyday, HyperCity and Nilgiris.
Also, as per Amazon’s contract, it has the right to buy promoter shareholding in Future Retail stake only after 2022, so it cannot challenge them now. Further, Amazon cannot invest over and above the government prescribed limit in multi-brand retail business in India unless the government decides to change the rules.
With Future Group and Reliance Retail saying that they want to complete the asset transfer “without any delay”, Amazon has moved market regulator Sebi to stall the business integration process.
Amazon has also written to the BSE and the National Stock Exchange to put the deal on hold in light of the arbitration order.