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US e-commerce giant Amazon has warned Future Retail Ltd (FRL) against holding of next week’s meetings of its shareholders and creditors to approve the sale of its retail assets to Reliance Retail as part of the $3.4 billion deal.
In a letter written to Future Group founder Kishore Biyani, his daughter Ashni Kishore Biyani and other promoters, Amazon has said such meetings are illegal and would breach 2019 agreements, when Amazon made investments into FRL’s promoter firm. It said such meetings would also breach the Arbitration Rules of the Singapore International Arbitration Centre (SIAC Rules), that the parties had agreed. Amazon said the deal violate the Singapore arbitral tribunal’s injunction on the sale of retail assets to Reliance.
Amazon has also sent the 16-page letter to the Registrar of Companies, Madhabi Puri Buch, Chairman, Securities and Exchange Board of India, Neeraj Kulshreshtha, Chief Regulatory Officer, BSE Limited and Priya Subbaraman, Chief Regulatory Officer, National Stock Exchange of India Limited. It has also sent the letter to other top executives at these organisations.
Future has convened a shareholders’ meeting on April 20 and that of creditors on April 21 to seek their approval for the proposed $3.4 billion-deal with Reliance. This comes after the National Company Law Tribunal (NCLT) in February had allowed it to go ahead and convene those meetings to consider a scheme of arrangements to sell its assets to Reliance Retail.
“FCPL and the promoters of FRL are injuncted from taking any steps in furtherance of, or in aid of the Scheme, including on account of the fact the Hon’ble Delhi High Court has not passed any order permitting the convening of any meetings of shareholders and creditors of FRL, or undertaking of any steps in pursuance of the Scheme,” said the letter sent by Amazon and which was reviewed by Business Standard.
The letter said that In terms of the FCPL SHA (Future Coupons Pvt Ltd Shareholding Agreement) and the FRL SHA (both of which agreements have been executed by the Promoters, and FCPL), various covenants and undertakings were given by the Promoters, including that they will remain in management and control of FRL. Further, pursuant to the aforesaid agreements, the retail assets of FRL (“Retail Assets”) were entrusted with the Promoters on the express condition that Retail Assets could only be disposed of in the manner prescribed under the Agreements, and in any case, never to a Restricted Person.
“Further, as part of the terms of entrustment, the Promoters and FCPL undertook not to act without Amazon’s consent with respect to any of the matters mentioned in the Agreements,” said the letter.
Amazon said that the MDA (Mukesh Dhirubhai Ambani) Group is expressly listed as a ‘Restricted Person’ under the FCPL SHA and the FRL SHA. The letter said that it is categorically stated that Amazon did not consent, or approve any transaction involving a ‘Restricted Person’. In complete disregard of these binding covenants, and undertakings, FRL, on August 29,2020, issued a disclosure stating that it had entered into binding agreements relating to the Impugned Transaction.
“We are distressed to note that the Promoters, FCPL and FRL are still intent on moving forward with the Scheme with the MDA Group, which constitutes a continuing non-compliance of the order of the duly constituted Arbitral Tribunal which is enforceable as any court order,” said the letter.
Any voting by FCPL, or the Promoters, in favour of the Scheme during the meeting of the shareholders and creditors of FRL or any steps taken in furtherance of or in aid of the Scheme without Amazon’s consent, would be in material violation of the shareholder agreements.
Amazon said any person or entity assisting FRL, FCPL or the Promoters in violating these valid and binding injunctions will be liable for consequences, severally and jointly, under law at their own cost and peril.
“Any attempt to act contrary would be treated as a willful, illegal and fraudulent attempt to avoid the injunction by those who are expressly named and by those who assist them, even if they are not expressly named in such an injunction,” said the letter.
Future Group declined to comment.
On February 28, The National Company Law Tribunal (NCLT) passed an order allowing Future Group companies to convene meetings of its shareholders and creditors to seek their approval for the scheme it signed in 2020 that allows Future Group to sell its retail, logistics, and warehousing businesses to Reliance Retail for Rs 24,713 crore.
On February 15, Supreme Court granted Future Retail the option to seek permission from the Delhi High Court to continue proceedings at the NCLT on its deal with Reliance Industries.
In a stock exchange filing, Future Enterprises said that it will hold a meeting of members of the company on April 20 and a meeting with its secured and unsecured creditors of the company will take place on April 21.
Future Retail will also hold meetings with its shareholders and creditors on April 20 and 21.
The issue between Amazon and Future goes back to August 2019, when Amazon acquired 49 per cent in FCPL (Future Coupons Pvt Ltd), the promoter entity of FRL, for around Rs 1,500 crore. One year later, in August 2020, Future Group struck a $3.4-billion asset-sale deal with RIL.
In October 2020, Amazon sent legal notice to Future for doing the deal. It alleged it breached Future’s agreement with Amazon. It cited its non-compete agreement with Future. The deal specified any disputes would be arbitrated under the Singapore International Arbitration Centre (SIAC) rules. The same month, October 2020, Amazon got a favourable ruling for its plea at the SIAC. In November 2020, Future moved the Delhi High Court (HC) against Amazon, alleging interference by the US firm in the deal with RIL. Since then, Amazon has been fighting a legal battle with FRL to stop Future’s $3.4-billion deal with RIL.
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