Future Group and Amazon case Explained
The most controversial case between the Future group and E-Commerce giant Amazon has been in the news from quite some time. The case is regarding the deal of Future group with Reliance Retail. In this Future Group and Amazon case Explained article, we will try to explain in details what is the ongoing case and its details as available in the public domain.
The fight is essentially for the dominance of India’s estimated $1 trillion consumer retail market. Future Group is caught in the middle of this tussle between companies helmed by two of the world’s richest men.
The case began when Future group and Mukesh Ambani owned Reliance Retail announced a deal worth ₹27,513 crores. Mukesh Ambani owned Reliance Retail Reliance Industries has agreed to buy Future Group’s retail business across apparel, lifestyle and grocery segment, a deal that will help the Mukesh Ambani oil-to-media firm control more than a third of India’s organised retail market.
This deal is in accordance with the plans of Reliance to enter and capture the Indian eCommerce and retail markets. The market size is expected to grow in the future and with India being one of the fastest-growing economies, the market will only increase multiple folds in the coming decades. Hence the major players have been aiming at the sectors like e-commerce and retail. And Reliance industries in that manner agreed to buy the Future group.
The future group is suffering from debt which got even worse during the lockdown that was announced during Covid19 pandemic. Hence this deal will help the future group to sustain. And for Reliance Retail, which is looking to expand at a rapid phase, the long developed retail infrastructure of Future groups will be a big asset. The deal thus became beneficial for both the parties and hence concluded with reliance investing ₹27,513 crore rupees.
But not all the parties are happy with the Deal. The Ecommerce giant Amazon is also entering the retail space and is expanding from quite some time. It has already developed its eCommerce user base and is also looking to capture the retail base. But the competition from Reliance retail will be a big blow on the plans of Amazon. It will face challenging difficulties in the coming days with fierce competition from the Reliance Retail. There became a big battle between a foreign eCommerce giant and an Indian Retail Group.
Explanation about Amazon Case
Amazon-owned 49% stake in an Unlisted business of Future group and has also the right to buy the Future group retail business at some time in the future This 49% ownership in the unlisted Business and also the contract agreement which amazon claims to be breached is the basis for the Amazon’s case against the future group.
In May 2020, Amazon according to its plan to expand retail business has panned to increase its stake in Future Retail and possible but it. But that deal never went through and no further information is available regarding that deal. But later some time due to the nationwide lockdown, the Stores of Future group are shut completely for months courtesy the Pandemic cause by Covid19.
During this pandemic, the future groups suffered from the cash crunch and increase debts and payments that to be paid to vendors and all burden growing with each day. To make the ship sustain the blow and allow it to stay afloat, Kishore Biyani owned Future Group agreed for a deal with Mukesh Ambani Owned Reliance retail to sell its assets and also a contract Banning Kishore Biyani and his family members from entering into retail sector for few years in the future.
Now Amazon claimed that this deal of future group with its competitor Reliance Retail is a violation and a breach of contract.
Amazon approached the Singapore court claiming the breach of contract and in the month of October 2020 Singapore arbitration court Emergency retrained order to the future group from proceeding with the Deal with Reliance. But that didn’t stop the deal with Mukesh Ambani claiming that the deal will be done as per the timeline and the arbitration order from Singapore court is not binding and will not affect the deal in any manny.
Amazon sought enforcement of the arbitration order in India and asked a local court in January to detain Biyani as well as seize Future Group’s assets if it doesn’t comply. A judge at the Delhi High Court earlier this month agreed with Amazon and halted the asset sale.
Future Retail appealed the order before a two-judge panel, which within days overturned the ruling saying that the agreement between Amazon and another Future Group firm cannot be enforced as Future Retail was not a party.
The setback for Amazon comes weeks after it wrote letters to local regulators requesting them to stop approvals for the deal. The local antitrust regulator gave its approval in November. The stock exchanges said in January that they had no adverse observations. Future Group is now awaiting a company court’s nod on the deal. Source ET
The case is in Delhi High Court. With the top minds from across the country are presenting their arguments for the companies. Some of the legal hotshots include India’s former Attorney General Mukul Rohatgi, 2 former solicitor generals Harish Salve and Gopal Subramanium as well as former additional solicitor general and politician, Abhishek Manu Singhvi
Amazon has argued that the Business contract between amazon and Future group should have some value if allowed to violate will only indicate that Indian Market is not a trusted market to invest and will degrade the opinion of the global players. the contract between Future group and Amazon should be followed and the deal between Future group and Reliance Retails is a breach of contract.
On the other side, Future group have argued that the Assets which are to be sold to reliance deal as the part of the deal are completely different from the unlisted company of future in which Amazon has 49% stake. And also if the deal is not moved forward, the retail company will be on the way to bankruptcy. The foreign company is only trying to cripple the Indian retail and the deal between Future group and Reliance will allow the retail market to sustain and come out of the damage caused by the pandemic.
Conclusive View
The case is very important for the two companies involved 1. Amazon and 2. Reliance retail. This will pave path for the company which wins to capture the Indian Retail Sector.
The fight is in fact between the Foreign e-commerce giant Amazon and Indian Oil Company Reliance. But the Future group is caught between the battle with the side it moves will decide the future market leader in the retail segment.
Hence it is a fight of the top millionaires to capture one more business sector in the developing nation.
Bu for the Future group led by Kishore Biyani, the case is completely different. It is the case of survival. The company is just trying to survive and come out of the loses caused during the pandemic. The company already defaulted payments from July last year.
