The Supreme Court of India on Friday ruled that the order of the arbitrator that put on hold the deal between Future Retail and Reliance Retail is valid. Effectively it means that the acquisition of Future Retail’s business by Reliance is now on hold and India’s most valued company may have to find another way if it still wants to acquire the deal.
In August 2020, Reliance Retail Ventures Limited (RRVL), a subsidiary of Reliance Industries Limited, announced to acquire the retail, wholesale, logistics and warehousing business from the Future group. The deal was valued at Rs24,713 crore at the time of the announcement.
Soon after the deal, retail and technology giant Amazon had opposed the deal. It accused its Indian partner – Future Group – of breaching terms of mutual agreement by announcing the deal with Reliance.
Amazon had bought a 49% stake in one of the unlisted firms of Future group in 2019, with a right to buy into listed entity Future Retail at an appropriate time. However, the second part of the deal could not be implemented due to the onset of the pandemic in early 2020.
As per its deal, Amazon challenged the agreement between two Indian companies in the arbitration court in Singapore and won the case in its favour. The order was challenged in Delhi High Court by Future that deals in India can not be put on hold by an international arbitrator.
Effectively, with today’s order, the Supreme Court has ruled that the order by Singapore’s Emergency Arbitrator (EA) to put the deal on hold was valid in India. A bench of Justices R F Nariman held that an award of an EA of a foreign country is enforceable under the Indian Arbitration and Conciliation Act even though the term EA is not used in arbitration laws here.
The deal is a major blow to Kishore Biyani promoter of Future Group as he is trying to reduce his debt to the banks and other lenders. For Reliance, which operates the country’s largest and most profitable retail chain, the deal is a significant loss on its efforts to get the largest market share of India’s growing market share. However, Amazon, which is the biggest e-commerce platform it’s a moral victory to expand its footprints in India.
After the verdict, shares of Reliance and all Future group companies are trading with major losses.
