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ED investigating Amazon for FDI violations in Future Retail deal

BusinessToday.In     January 28, 2021

The Enforcement Directorate (ED) is investigating e-commerce giant Amazon for alleged violation of foreign exchange laws in its dealings with Kishore Biyani-led Future Retail.

The law enforcement agency has filed a case against Amazon after a Delhi High Court bench last month made observations about the deal while hearing Amazon's challenge to acquisition of Future Retail by the Reliance Group.

The US-based firm had objected to Future Group selling its wholesale, retail, warehouse and logistics units to Mukesh Ambani's Reliance Retail.

The Delhi HC had observed that Amazon had indirectly gained control over Future Retail without government's approval, which is a violation of Foreign Direct Investment rules under the Foreign Exchange Management Act (FEMA).

Amazon had bought 49 per cent stake in Future Coupon, an unlisted firm of Future Group, with the right to buy a stake in the group's listed entity, Future Retail Ltd, after a few years if the government ended the restriction on foreign ownership of multi-brand retailers.

Amazon, in its shareholders' agreement, had barred Future Coupon from selling its assets to 15 firms, including Reliance Industries. However, in August last year, Reliance Retail acquired a 30 per cent stake in Future Group businesses for Rs 24,000 crore, which started the row with Amazon.

Amazon had first approached the Singapore International Arbitration Centre, and after getting an interim award in its favour, it approached Delhi HC.

In its last hearing, the Delhi HC rejected Future Retail's request that Amazon be restrained from writing to SEBI, CCI and other authorities about the arbitration panel's order against its proposed deal with Reliance Retail.

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