Future Group, which has engaged senior advocate Harish N Salve for its potential legal battle with Amazon, may argue that Future Coupons is not part of the deal with Reliance Retail and involves its listed entities such as Future Retail and Future Lifestyle. Worth mentioning here is that Amazon has sent a notice to Future Coupons over the Group's deal to sell retail assets to Reliance Industries without the US firm's approval.
The Economic Times citing industry sources familier with Future's strategy, mentioned in a report that in case of a legal confrontation, the deal can not be challenged by Amazon. “Future Retail (FRL) is not party to the case,” the publication quoted one of the sources as saying. FRL is the flagship food and grocery business of the Future Group that houses Big Bazaar, Easyday, HyperCity and Nilgiris.
The publication citing a legal expert mentioned that Amazon’s contractual rights to buy Future Retail shares come into force only after 2022 and in any case are contingent on a change in the rules — by the current BJP-led government — barring foreign direct investment (FDI) in retail. “As per Amazon’s contract, it has the right to buy promoter shareholding in Future Retail stake only after 2022, so it cannot challenge them directly now,” Chandubhai Mehta, managing partner of law firm Dhruve Liladhar & Co told the business daily. “Also, if the foreign investment rules are not amended by then, it cannot acquire shares of Future Retail because of the foreign ownership rules that bar ecommerce companies from holding shares in entities selling on their platforms.”
Another legal executive also said the Reliance deal involves only listed entities owned by Future, which should not be affected by Amazon’s challenge. “At best, Amazon can seek damages for breach of its contract,” Sudip Mahapatra, partner at law firm S&R Associates, told the business daily.
According to an earlier ET report, Amazon said that Future Group did not seek required consent from it before the deal with Reliance Retail.
On October 5, Amazon sent a legal notice to Future Group and also approached the Singapore International Arbitration Centre (SIAC) for breach of contract. Amazon has about 5% stake in Future Retail after buying 49% of Future Coupons for Rs 1,500 crore last year. As per Amazon’s interpretation of their contract, Future cannot sell any shares of FRL to Reliance or any other competitor, besides the American company having the right of first refusal.
Besides Salve, two law firms, Trilegal and Naik Naik & Co., are already representing Future Group and its promoters, while P&A Law Office and AZB & Partners are advising Amazon in the dispute, the publication mentioned. The Amazon-Future agreement had a ‘call option’ that gives the buyer a right to buy an asset from a seller at a pre-determined price within a specific time period. “This call option allows Amazon to acquire all or part of the promoters' shareholding in Future Retail and is exercisable between the 3rd to 10th year, in certain circumstances, subject to applicable law,” said Future Retail in a stock exchange announcement in August last year.
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