Apex court overturns Delhi HC decision, restores freeze on deal and legal advantage for Amazon
The Supreme Court on Monday prevented the National Company Law Tribunal (NCLT) from taking a final call on the Rs 24,713-crore deal between Kishore Biyani-led Future Retail (FRL) and Reliance Retail, even as it allowed the tribunal to go ahead with the proceedings for merger of Future group and Mukesh Ambani’s Reliance group firms.
The apex court’s decision to overturn the Delhi High Court’s February 8 ruling that lifted a freeze on the deal and allowed the NCLT to grant its approval for it based on merits is a positive for American e-commerce giant Amazon, which is keen to scuttle the deal. Amazon had secured an interim stay on the deal from a Singapore arbitration tribunal in October, over alleged violation of a partnership contract by Future Group when it agreed to sell the assets to Reliance.
The fruition of the deal is critical to Future Group’s efforts to repay its large debt and ward off insolvency. FRL’s stock fell as much as 10% and its dollar bond maturing in 2025 dropped 3.8 cents on the dollar after the court order on Monday, Bloomberg reported. Reliance Industries also slipped as much as 2.8%.
Market regulator Sebi, stock exchanges and competition watchdog CCI have already cleared the Future-reliance Retail deal.
The apex court posted the matter for further hearing after three weeks.
An SC bench comprising justices Rohinton F Nariman and BR Gavai while seeking written response from the Future group companies, Biyanis and others came down heavily on the Delhi High Court’s Division Bench. “… it seems that the HC has decided the appeal at the interim stage only,” justice Nariman observed.
The apex court said that the NCLT Mumbai shall not pass its final decision with regard to sanctioning of the amalgamation scheme between FRL, Reliance Retail Ventures and Reliance Retail and Fashion Lifestyle, which is the first step towards paving way for the FRL-Reliance deal. “The NCLT proceedings will be allowed to go on, but the will not be culminate in any final order of sanction of scheme,” the SC said.
When Amazon senior counsel Gopal Subramanium sought restoration of the status quo on the FRL-Reliance deal, justice Nariman without commenting on the merits of the case, said: “We know exactly what is happening. We have read each and every page.”
Future’s senior counsel Harish Salve while opposing the stay on NCLT proceedings said that even if the tribunal continued its hearing, the meeting for amalgamation between the companies would not take place before six weeks as the procedure for the amalgamation was a long drawn process. He said that the stay will only delay the process.
The NCLT on February 12 had reserved its order on Future Group’s plea to hold shareholders meeting and seek their approval for consolidation of its entities before its ultimate sale to Reliance Retail.
Amazon had moved the top court on February 11 in its bid to block the HC’s Division Bench’s order, saying it will face “irreparable harm” if the SC did not intervene as “the more progress made to complete the Future-Reliance deal, the harder it will be to unravel it. Over time, the interests of additional third parties may also become entwined with the impugned transaction and be subsequently compromised”.
Terming as “illegal” and “arbitrary” the division bench’s order, the e-commerce giant said that the division bench had hastily passed the impugned order without waiting for the detailed order of the single judge and without appreciating the “Group of Companies” doctrine.
A division bench on February 8 had said that FRL was not a party to an arbitration agreement with Amazon. Prima facie, Amazon had no reason to seek a status quo order from the single judge when it was not interested in the deal and statutory authorities like the Sebi and the CCI could not be restrained from proceeding in accordance with law, the HC had stated.