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Interim order comes in favor of Amazon asking Reliance-Future deal to be put on hold

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On Sunday, Jeff Bezos owned Amazon.com Inc won an interim order in the arbitration case against the Reliance-Future deal. The leading e-commerce website filed a complaint against its partner Future Group for selling its retail business to Reliance Industries Ltd. without seeking prior permission from it. The deal is valued at Rs. 24,713 crore and has been put on hold by the Singapore-based single-judge arbitration panel.

Amazon had a deal with one of Future Group’s unlisted firms last year to purchase its 49% share. This gave it a right to into flagship Future Retail Ltd after a period of three years to 10 years. In reference to this agreement, Amazon had declared the deal between future and Reliance unlawful and dragged Future to arbitration after it signed a pact to sell retail, wholesale, logistics, and warehousing units to billionaire Mukesh Ambani’s Reliance.

VK Rajah, the judge hearing the appeal, has passed an interim award in favor of Amazon and has asked the indebted Kishore Biyani group firm to put the deal on hold as of now. He declared that until the matter is finally decided, the deal cannot go further.

Amazon has confirmed this via a spokesperson who said that the panel has granted the interim jurisdiction in favor of the company by granting the reliefs sought by it. He also said that the company expects an expeditious conclusion of the arbitration process. To quote the spokesperson, “We welcome the award of the Emergency Arbitrator; we are grateful for the order which grants all the reliefs that were sought and we will remain committed to an expeditious conclusion of the arbitration process.”

Reliance Industries Ltd’s retail arm Reliance Retail Ventures Limited (RRVL) has commented on this development by saying that the company has been informed about the emergency Arbitrator passed interim jurisdiction in the arbitration proceedings invoked by Amazon. RRVL also informed that it intends to not let go of its rights and will do anything to execute the Future deal without any delay. To justify its part, RRVL also made clear that the transaction it has entered into for the acquisition of Future Retail Limited was, is, and will be carried out under proper legal advice. The rights and obligations the deal demands are fully enforceable under Indian Law.

With this dispute in place, Amazon is directly standing against India’s richest person, Mukesh Ambani, in the race for the country’s estimated USD 1 trillion retail markets. Online shopping is a gaining ground in the country with growing technology, especially post-covid. The US-based company requires the India-based partner firm for strengthening its foothold after becoming the authorized online sales channel for Future group’s subsidiary, Future Retail’s stores. These stores store and sell everything from groceries to cosmetics and apparel.

As per the latest reports, Future and Amazon had appointed one representative each along with a third neutral umpire to the three-member arbitration panel that would decide on the dispute in 90 days. Future Retail’s part was represented by advocate Harish Salve while Amazon was represented by Gourab Banerji, Amit Sibal, Gopal Subramanium, and Alvin Yeo. The hearing was concluded by the panel at Singapore International Arbitration Centre earlier on October 16.

The Future group had announced the deal involving the sale of its wholesale, retail, and logistic business to Reliance Retail Ventures Limited on August 29, 2020. On the other hand, Amazon had last year bought a 49 percent stake in Future Coupons Ltd, which gave it the right to buy into flagship Future Retail in the future. A 7.3 percent stake in Future Retail is owned by Future Coupons Ltd. This legal battle between the millionaire parties is quintessential at the moment for Reliance as it has been bolstering its position in the country’s retail segment under its retail sector called Reliance Retail Ventures Ltd. Reliance Industries, run by Mukesh Ambani, has already raised as much as Rs. 37,710 crores by selling a stake in its retail arm in its fundraising spree, since September.

Currently, RRVL holds an extravagant retail market share in India and operates the fastest-growing, largest, and most profitable retail business across all consumer electronics chain stores, cash and carry wholesale business, supermarkets, fast-fashion outlets, and online grocery store JioMart.

How did the public react to this news?

The market investors did not quite like this halt imposed by the arbitration panel in the Future-Reliance deal.

Reliance Industries and Future Group stocks fell on Monday after a Singapore arbitration panel put on hold Future Group’s $3.38 billion asset sale to Reliance Industries, an interim win for Amazon. The deal which has been stopped by the arbitrator would have helped Reliance almost double its footprint as India’s largest retailer.

The shares of Reliance Industries fell to Rs 2,064.45 per share, marking a drop of nearly 2.2 percent on the Bombay Stock Exchange. The shares of  Future Group also plummeted as Future Retail plunged as much as 9 percent to Rs 70.55 while Future Enterprises and Future Consumer slid down by 5 percent on the Bombay Stock Exchange.

What can be expected as a future course?

Reliance Retail Ventures Ltd (RRVL) has clearly laid forward its plan to go ahead with the deal to acquire Future Retail despite an interim stay by the arbitrator.

In a statement, the retail of Reliance Industries said, “RRVL intends to enforce its rights and complete the transaction in terms of the scheme and agreement with Future Group without any delay”.

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