Amazon has obtained a stay on Future's sale to Reliance from an Emergency Arbitrator in Singapore. Legal experts say this order has no legal force in India. The matter is now before the Delhi High Court. The final decision in this matter could have a bearing on foreign investment sentiment.
The fight for control of the Indian retail market, the only billion-plus country in the world that is open to foreign and multinational retailers, has taken a messy turn. The Jeff Bezos-led Amazon has obtained an emergency order from the Singapore International Arbitration Center (SIAC) directing the Kishore Biyani-led Future Retail not to go ahead with its proposed sale to the Mukesh Ambani-led Reliance Retail.
This makes for a mouth-watering clash between Bezos, who is the world's richest man, and Ambani, Asia's wealthiest man and the world's fourth richest.
Reliance Retail, India's largest retailer, seemed to have consolidated its position and extended its lead over in the country over Amazon, the world's largest e-tailer, when it sealed a $3.4-billion deal to buy the retail, wholesale and logistics & warehousing business of Future Group, a leading Indian retail group, subject to receiving regulatory approvals from the relevant authorities.
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The transaction would have given Ambani an iron grip over India's organised retail market. "A combined entity (Reliance Retail and Future Group) with larger market share will also increase potential strategic investor interest, in our view," said global brokerage firm Nomura Securities. CLSA, another major global brokerage firm, added that Reliance Retail's acquisition of Future Group would expand its retail outlets by 15 per cent, retail footprint and warehousing area by more than 80 per cent and increase Reliance's share in India's organised retail market to 17.8 per cent, up from 13.7 per cent now.
There was, however, a rather substantial fly in the ointment, or so it seemed at first sight. Amazon has a 49 per cent stake in Future Coupons, which, in turn, owns a 9.83 per cent stake in Future Retail. Now, it has emerged that Future Coupons has an agreement with Future Retail under which its consent is necessary of the latter wishes to sell any or all of its assets.
It is this agreement that Amazon is involving to claim a right of first refusal over Future Retail assets and it is on this basis that it has obtained a stay order from SIAC on Future Retails asset sale to Reliance on October 25.
This is where things get complicated. The Indian Express quoted Ashish Kabra, Head of International Disputes Resolutions and Investigations for leading law firm Nishith Desai & Associates in Singapore as saying that there is no explicit provision in Indian law to enforce the orders of SIAC unless the parties voluntarily agree to comply with them.
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If they don't, then the party that has won an emergency order - Amazon - can move the High Court having jurisdiction in India under Section 9 of the Arbitration and Conciliation Act, 1996, to get the reliefs granted by the Emergency Arbitrator at SIAC.
That's exactly what Future Retail told the Delhi High Court, which is now hearing the matter. Appearing for the company, Senior Advocate Harish Salve told the court that the SIAC order had not been valid under Indian law.
"I am entitled to ignore it. I am subject to Indian Courts. If a gentleman sitting in Singapore says something, I can bin that order. It is not to show any disrespect. I'm saying as a matter of law...," Salve told the court.