FRL making a mockery of Indian courts, says Amazon in SC submission

US e-commerce giant Amazon has made a submission to India’s Supreme Court against Future Retail Limited (FRL) alleging that the Kishore Biyani-led retailer is making false statements before the Indian Courts, including the SC, related to its $3.4 billion asset deal with Reliance Industries Limited. (RIL).

“The Applicant (Amazon) is currently faced with a situation where it has valid, binding, subsisting and operating injunctions in its favour, but is not being able to prevent FRL’s utter disregard of the binding injunctions,” said Amazon’s petition, dated April 02, 2022, submitted to the SC and was reviewed by Business Standard. “The proceedings before the Arbitral Tribunal are stayed, while FRL is alienating its Retail Assets to the MDA (Mukesh Dhirubhai Ambani) Group in the garb of forceful takeover by making false statements before the Indian Courts, including this Hon’ble Court.”

The relief sought by Amazon is in aid of its final relief of resumption and continuation of the Arbitration Proceedings, as in case the Retail Assets of FRL are alienated in breach of the specific and categorical injunctions against it, nothing will remain in the Arbitration Proceedings. “As set out above, the stratagem is being used to consummate the Impugned Transaction even prior to the final order of sanction to be passed by the NCLT (National Company Law Tribunal),” said the petition.

It said that FRL and the Applicant (Amazon) are on common ground that status quo ought to be maintained in respect of the retail stores purportedly handed over to the MDA Group. It said this is stated in such terms in the disclosure dated 16 March 2022: “The Company is in continuous discussion with Reliance Group to maintain status quo and for safeguarding the interest of various stakeholders.”

Amazon has made a prayer for interim relief which mentioned there should be no alienation or disposal of FRL’s retail stores to the MDA Group pending the final award in the Arbitration Proceedings. It also made a prayer that FRL’s retail stores shall remain in control of FRL. Amazon said that in the event FRL succeeds in the Arbitration Proceedings, it shall be able to transfer Retail Assets in accordance with the scheme and upon final sanction by the NCLT.

“The above arrangements are intended to continue until the conclusion of the Arbitration Proceedings,” said the petition. “They do not in any manner deprive any of the parties of their rights to initiate such proceedings as are available in law upon the conclusion of the Arbitration Proceedings.”

Legal experts said that by filing these ‘Written Note on Submissions’ before SC, Amazon is seeking the apex courts intervention so as to prevent alienation or disposal of FRL’s retail stores to the MDA Group pending the final award in the Arbitration Proceedings.

“Amazon wants Court order to ensure that FRL’s retail stores shall remain in control of FRL,” said Salman Waris, managing partner at technology law firm TechLegis Advocates & Solicitors, who analysed Amazon’s petition. “Amazon claims fraud by FRL as the purported surrender deeds record that FRL was obtaining a refund of the security deposits for the premises in Udaipur and Bangalore and None of these purported surrender deeds record any failure to make payments by FRL, and the fact that security deposit was being refunded incontrovertibly demonstrates that the landlord did not have any dues against FRL.”

Waris said Amazon claims in the petition that all such purported arrangements were done between December 2020 and March 2021, i.e., subsequent to the orders of the emergency arbitrator.

Amazon’s petition said any statement that FRL is at the brink of insolvency is irrelevant and is an attempt to confound matters. However, it said the threat of such proceedings cannot be used to defraud Courts and legitimise a stratagem to defeat lawful and binding injunctions. “Further, this Hon’ble Court has consistently held that economic hardship cannot be a basis to avoid contractual obligations, binding judgments and giving false undertakings to this Hon’ble Court,” Amazon submitted to the court.

Amazon alleged that it is clear that FRL has played an elaborate and orchestrated fraud on this “Hon’ble Court as well as on the Hon’ble High Court of Delhi and the Arbitral Tribunal” to procure favourable orders by continuously making false assurances and undertakings in relation to the continued vesting of its retail stores in FRL

The issue between Amazon and Future goes back to August 2019, when Amazon acquired 49 per cent in FCPL (Future Coupons Pvt Ltd), the promoter entity of FRL, for around Rs 1,500 crore. One year later, in August 2020, Future Group struck a $3.4-billion asset-sale deal with RIL.

In October 2020, Amazon sent legal notice to Future for doing the deal. It alleged it breached Future’s agreement with Amazon. It cited its non-compete agreement with Future. The deal specified any disputes would be arbitrated under the Singapore International Arbitration Centre (SIAC) rules. The same month, October 2020, Amazon got a favourable ruling for its plea at the SIAC. In November 2020, Future moved the Delhi High Court (HC) against Amazon, alleging interference by the US firm in the deal with RIL. Since then, Amazon has been fighting a legal battle with FRL to stop Future’s $3.4-billion deal with RIL.

An Amazon spokesperson declined to comment on the issue.

Future Retail Ltd. (FRL) has also filed a reply to Amazon’ special leave application in the Supreme Court (SC) and opposes the grant of interim relief to Amazon. It said in its response that Amazon’s special leave petition as it is beyond the scope of the present proceedings, the petitioner (Amazon) is seeking to circumvent the jurisdiction of the Delhi High Court (HC) and deprives FRL of its statutory right of appeal against interim orders passed by any arbitral tribunal and the application is based on the false premise that FRL has alienated its retail assets in violation of orders of an arbitral tribunal.

On January 5, Delhi High Court stayed Singapore International Arbitration Centre (SIAC) arbitration proceedings in the Amazon- Future case.

It also said that the petitioner (Amazon) is seeping to enlarge the scope of the present proceedings and brings issues before SC that were not before the court.

“The present application, on the other hand, not only seeks the grant of various interim reliefs travelling far beyond the resumption of arbitration proceedings but additionally prays that such reliefs be directed to operate till the final award is pronounced by the Tribunal,” FRL said in its response.

It also said that the application under reply is an abuse of the process of aourt, since the petitioner (Amazon) has filed petition for enforcement of the interim order passed by the Arbitral Tribunal, in which the Amazon has advanced substantially the same pleas as in the present application and prayed for analogous reliefs.

It also said that amazon contends that while FRL has given SC and Delhi High Court an assurance that its retail assets would not be alienated until a final order of approval of the scheme is granted by NCLT, it has engaging in “stratagems’ to alienate its assets through other means.

It also said that Amazon has falsely contended the between February-March 2021, FRL willingly surrendered lease deeds in relation to the premises where it carries on is retail business and entered into back-to-back arrangements with constituents of the Mukesh Dhirubhai Ambani Group to operate out of the leases premises as a licensee.

It also said that due to the uncertainty surrounding the implementation of the scheme due to the legal actions initiated by Amazon, FRL’s creditors began to initiate adverse actions against it.

“Among FRL’s creditors are the lessors who had leased the store premises too FRL. FRL’s stores operate out of these leases premises,” FRL said in its reply.

It also said that from December 2020/January 2021 onwards, lessors of the store premises began terminating the leases on account of non-payment of lease rentals by FRL and took back passions of the premises.

It also said that landlords approached Reliance and Reliance Projects & Property Management Services Ltd. (RPPMSL) entered into lease arrangements with the landlords of the stores.

RPPMSL allowed FRL to continue its business activities from these store premises on leave and licence basis on payment of agreed licence fees for a period of one year.

It also said that FRL has been classified as a non-performing asset by banks and FRL has not paid RPPMSL any license fees in respect of these 835 store premises. The aggregate outstanding of license fees due from FRL to RPPMSL is over Rs 1,100 crore.