The Supreme Court’s Friday ruling, which said that Singapore’s Emergency Arbitrator’s (EA) award is enforceable in India, is a huge setback for debt-laden Future Group.
Its retail operations have struggled in the aftermath of the COVID-19 led lockdowns that caused large stores to shutter for long durations, impacting sales at the company’s popular retail chains such as Big Bazaar, Nilgiris, Fashion at Big Bazaar, among others.
Legal experts said SC’s judgment poses new hurdles for Future Group’s plan to sell its retail, wholesale and other assets to Reliance Industries Ltd for ₹24,713 crore. The acquisition would have given Reliance an edge in India’s retail market that is set to touch $1 trillion in 2025.
“So, the more important question here is that how progressive the judgement of the Supreme Court is for arbitration. RIL and Future Retail will most definitely want to file a review of the judgement,” said Sameer Jain, managing partner, PSL Advocates & Solicitors.
Debt-laden Future Group has been entangled in a bitter legal battle with Amazon over its proposed deal with RIL, which entails selling Future Group’s retail, wholesale, logistics and warehousing assets to two RIL subsidiaries to repay the group’s lenders.
The deal would have also helped Reliance expand its clout in the grocery and fashion retail market, where it has already built a sizable business.
“At least from the reporting of the judgement, there is a direction of upholding the Emergency Arbitration award. So, by implication, that would also mean that the Reliance and Future Retail deal would be stalled. So at least we foresee that there is a hurdle for the deal to go ahead unless this is appealed by Future Retail and there is a review to this deal,” said Jayashree Parihar, senior associate, PSL Advocates & Solicitors.
The disputing parties could also seek an out-of-court resolution, Jain said. “All three parties can always sit together and say that they have mutually decided,” he said.
In August 2020, RIL Reliance Retail Ventures Ltd, a unit of Reliance Industries Ltd said it will acquire the retail and wholesale business and the logistics and warehousing business from the Future Group as going concerns on a slump sale basis.
Meanwhile, in a petition, Amazon argued that the deal violated its investment agreement with Future Group that barred the company from selling its retail assets to Mukesh Ambani’s conglomerate, among other specified entities without Amazon’s consent.
Amazon indirectly owns about 3.5% in Future Retail after buying 49% of Future Coupons for ₹1,500 crore in August 2019. The company has argued that the 2019 deal prevents Future Group from selling shares of Future Retail to rivals in the retail space.