Amazon has accused independent directors of Future Retail Ltd (FRL) of facilitating “fraudulent stratagem” of transfer of 835 stores to billionaire Mukesh Ambani’s Reliance group, saying the narrative of that transfer was on account of failure to pay huge outstanding rent was a “sham” as the retailer had a month prior to such move stated that outstanding rent was only Rs 250 crore.
The US retailer wrote on May 19 to independent directors of FRL stated that the firm had in meeting with core lender banks on January 1, 2022, “categorically admitted that the unpaid rental dues was Rs 250 crore only. FRL further stated that it voluntarily retained the amount.” “Surprisingly, FRL had managed to do so without discontinuing any of its operations or handing over its stores,” it wrote. “Consequently, any narrative that there was a purported transfer on account of failure to pay huge outstanding rent for as many as 835 retail stores, that too as quickly as on February 26, 2022, is nothing but a sham and a false narrative to regulators, creditors, the shareholders and the Courts.” Future and Amazon have been locked in a bitter legal tussle after the US e-commerce giant dragged Future Group to arbitration at the Singapore International Arbitration Centre (SIAC) in October 2020, arguing that FRL had violated their contract by entering into a deal for the sale of its assets to billionaire Mukesh Ambani’s Reliance Retail on a slump sale basis for Rs 24,713 crore.
The Reliance deal fell last month after the lenders to FRL rejected it. But prior to that, Reliance group, referred to as MDA group by Amazon, took over operations of dozens of Future stores after the retailer failed to pay rent.
“On January 22, 2022, FRL issued a letter to Bank of India, State Bank of India and Saraf and Partners, wherein FRL reiterated its stand on selling the small store formats, in blatant disregard of the binding injunctions operating against it. If the retail stores were not available with FRL, FRL would be incapacitated from making such a statement,” Amazon said.
“The purported handover of retail assets of FRL is, thus, not on account of non-payment of outstanding lease rentals.” “The purported handover is nothing but an intentional fraudulent action in furtherance of the stratagem to ostensibly alienate the retail stores, without following the rule of law. It has been carried out without notice to the Courts, regulators, lender banks and solely motivated by the desire to defeat any final award passed in the Arbitration Proceedings in favour of Amazon,” it said.
An FRL spokesperson did not immediately offer any comments on the story.
“The stratagem to alienate the retail stores grossly undervalues the retail stores and moreover falls under acts amounting to wrongful trading to defraud creditors,” it alleged warning that the promoters, KMPs and directors, including independent, are liable for terms of imprisonment under various provisions of law including the Companies Act, 2013.
Amazon said FRL had on March 9 stated for the first time that termination notices were issued by entities affiliated to the MDA Group. “FRL further went on to disclose that at least 835 retail stores (contributing 55% – 65% of the total revenue of FRL) had been purportedly shut down, possibly making way for stores operated by entities belonging to the MDA Group.” “FRL was colluding, and in continuous discussion, with the MDA Group,” it alleged. “The circumstances surrounding the purported surrender of the retail stores by FRL to the MDA Group establishes that the purported ‘transaction’ was nothing but a guise and a stratagem wrongfully adopted by FRL, with the connivance and collusion of the MDA Group, to purportedly transfer the retail stores.” Amazon accused FRL of devising “a stratagem to purportedly alienate and transfer around 835 retail stores, comprising both large-format stores such as ‘Big Bazaar’ and small-format stores such as ‘Easy Day’ and ‘Heritage Fresh’” to Ambani’s Reliance (MDA Group) “in the teeth of binding injunctions and court orders.” It said the lenders to the retailer rejected sale of assets to Reliance was “a telling fact, and indicates a larger malaise in the manner in which FRL and other associated companies have dealt with constitutional courts, regulators, lender banks, its shareholders and other stakeholder interests.” Stating that the independent directors had in January this year dismissed its proposal of financial assistance to FRL citing the then proposed sale to Reliance, Amazon said, “it now appears that FRL sought to purportedly alienate its retail stores in favour of the MDA Group by any means possible.” “You, as independent directors, have facilitated this fraudulent stratagem to defraud the Indian public and regulators,” it alleged.
Accusing independent directors of “gross failure” in performing their statutory obligations and duties, the US retailer that, “Your inaction and material omissions have resulted in the execution of this stratagem orchestrated to commit a fraud by FRL, its Promoters, directors and KMPs on various stakeholders inter alia constitutional Courts, regulators, lender banks and its shareholders in collusion and connivance with the MDA Group.” Amazon said it had appraised the independent directors regarding various irregularities in the functioning of Future Group and especially the conduct of the Biyanis through various letters.
“You, as independent directors of FRL, failed to discharge even your primary function to act as gatekeepers and custodians for inter alia the public shareholders of FRL. In furtherance of its stratagem to perpetrate this fraud, FRL, knowingly, made false statements to Courts,” it alleged. “FRL, its Promoters, directors and KMPs, through its fraudulent stratagem, purportedly alienated the retail stores of FRL. You have failed to take any actions to prevent the fraud, and rather aided and abetted FRL to violate the binding injunctions and orders of the constitutional Courts of India.” Amazon said FRL had in its 2020-21 annual report stated that it has adequate current assets to fulfil and make payment for its lease liabilities. Contrary to this statement, FRL on February 26 made the disclosure of having “huge outstanding” in relation to payments for access to store premises.
“Evidently, FRL’s February 26 Disclosure is false as it is directly contrary to the statement made in the Annual Report by FRL,” it said.