Arbitration proceedings between Amazon and Future Group for its deal with Reliance Industries is expected to start in November. The proceedings in Singapore could go on for at least 9-12 months. Amazon has sent intimation notices alleging Future Group's compliance issue to Singapore International Arbitration Centre (SIAC), Future Group, its investors and shareholders.
The arbitration process is yet to start. It would require representation from all the parties including Amazon, Future and its investors. Amazon said that the Future Group did not seek permission from them before striking a deal with Reliance Industries. A company spokesperson said that Future did not seek required consent for the transaction and no consent was given by Amazon, as mentioned in a report in Business Standard. The Seattle-based giant is enforcing contractual obligations citing a non-compete agreement with Kishore Biyani's group and has sent them a legal notice.
Amazon had bought 49 per cent stake in one of Future's unlisted firms, Future Coupons for Rs 1,430 crore. Future Coupons owns 7.3 per cent in Future Retail, the daily stated. The deal between the two companies included a few conditions including a 'non-compete clause' and 'right of first refusal' clause. This meant that Future would need Amazon's approval to sell its shares. The ROFR clause also gave Amazon the right to be the first to invest in Future Retail if it decided to sell its shares. The non-compete ensured that Future could not deal with certain competing parties without prior approval from Amazon.
In August, Reliance Retail Ventures Ltd (RRVL) announced a deal to acquire the entire retail, wholesale, logistics and warehousing businesses of the Future Group for Rs 24,713 crore. The deal is yet to be cleared for regulatory approvals.
The Biyanis were planning to expand their business and had raised capital to this end last year. They had taken personal loans and pledged their own shares as collateral. However, the COVID-19 pandemic impacted the business as most of their stores are inside malls, stated the daily. As pressure to pay back the loans mounted, the Biyanis started to reach out to multiple investors to raise capital. However selling only Future Retail would have put brakes on plans to monetise other companies. Which is how RIL came into the scene.
Amazon, Flipkart and Reliance's JioMart are all competing with each other and eyeing a chunk of the online retail market in India.