‘Future Retail bound by the agreement between Amazon and Future Coupons’

Forum Gandhi Mumbai | Updated on October 21, 2021

Singapore Tribunal holds that agreements at the heart of the dispute must be read together

In another blow to Kishore Biyani’s plan to sell Future Retail to Reliance Retail, a Singapore arbitration tribunal has held that the Indian company is bound by the agreement it had signed with Amazon in 2019.

Future Retail has been arguing that it was not a party to this agreement that had specifically barred asset sale to certain entities, including Reliance.

Amazon had claimed that the ₹25,000-crore deal between Future Retail and Reliance was in violation of an agreement done in August 2019 when the American online retailer had picked up 49 per cent stake in Future Coupons Ltd, which owns 7.3 per cent of Future Retail. That deal also gave Amazon roughly 3.6 per cent in Future Retail. The American e-commerce player argued that the deal with Future Coupons is linked with the agreement with Future Retail.

Future Retail, on the other hand, had taken the view that Amazon’s claim that the stipulations under the deal struck with Future Coupons in 2019 extend to Future Retail, too, was misconceived because these were two separate agreements. Therefore, Future Retail argued, it should be excluded from arbitration.

On Wednesday, the arbitration tribunal said it disagreed with Future and the three agreements at the heart of the Future-Amazon dispute must be read together, and not separately.

“Future Retail is bound by the Future Coupons shareholders agreement such as to make it a proper party to this arbitration,” it said.

While the tribunal did not give a final order on the effectiveness of the agreement, it said, “it appears to the tribunal at this stage that each of the parties to any of the three agreement is also bound by all the terms of the other agreements.”

The tribunal relied on the doctrines of Group of Companies to state that all agreements between Future Retail, Future Coupons and Amazon must be read and construed as constituting a complex commercial transaction executed with a view of achieving a common objective. The tribunal also rejected Future Retail’s challenge on the jurisdiction of the arbitration to hear and decide on the ongoing dispute.

While the order is only interim in nature, the tribunal’s stand defeats Future Retail’s primary defence in the dispute with Amazon. If it had been able to convince the tribunal that the three agreements are separate then Future Retail could have gone ahead with the deal with Reliance Retail.

Published on October 20, 2021

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