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Amazon, Future agree to talk to end dispute; RIL begins taking over Future Group stores

SC suggested that Amazon, Future work things out by 'gentleman’s understanding'

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It is almost two years now that US e-comerce giant Amazon and Kishore Biyani-owned Future Retail have been in a legal stand-off over the sale of the latter’s retail assets to Reliance Industries. Now, the two sides are reportedly open to initiate a dialogue to settle their disputes, even as differences continue between the two sides.

In the Supreme Court hearing on Thursday, lawyers of both the parties seemed to have agreed to at least initiate a dialogue to resolve their disputes, according to various reports. The proposal for a dialogue came from Gopal Subramanium, senior counsel representing Amazon.

The Supreme Court too has suggested that Amazon and Future Group work things out by “gentleman’s understanding,” and has allowed time till March 15 for the parties to explore a settlement via negotiations.

"We will simply adjourn the matter for 10 days and we don't say anything on record. Meanwhile, work out by gentleman's understanding. It will be better in interest of business. If you can find out some solution, tell us, or we will hear and pass orders," Chief Justice N.V. Ramana was quoted as saying by Bar & Bench.

This assumes importance considering the two sides have fought a bitter battle for over 18 months. A news agency had reported earlier on Thursday that Amazon, miffed over lease of many Future Group stores being transferred to RIL, was likely to file a criminal case in the matter.

The dispute goes back to August 2020 when Future Group had agreed to sell the retail, wholesale, and logistics and warehousing business to Mukesh Ambani-owned Reliance Retail for Rs 24,713 crore.

Amazon managed to get a stay on the deal from an arbitration court in Singapore. Amazon argued that its 2019 deal to acquire 49 per cent stake in promoter company Future Coupons, which gave it a 3.6 per cent stake in Future Retail, had clauses that prohibited Future Group from selling the assets to anyone else.

However, even as the legal cases drag on, Reliance Industries has begun taking over many large format stores of Future Group and plans to re-brand them as its own outlets.

According to a source aware of the developments, the troubles at Future Group started when the country imposed a lockdown back in March 2020. With stores shut for months together and business only picking up slowly, the company failed to meet its rental payments. Over time, several property owners started terminating the lease agreements or refused to renew the leases where they were expiring.

Subsequently, many of these properties were leased to Reliance, which in turn allowed Future Group to continue running the stores, the source said. Now, however, the failure of Future Group to pay the rentals and as the legal cases regarding the acquisition of Future’s retail assets continue to drag on, RIL has decided to start taking the possession of these properties and is re-branding them to Reliance.

“RIL has already started the process of taking over 200-odd stores, and another 200 plus stores of Future Group across formats are likely to be taken over in the next several months,” said another source.

Future Group has 1,700 outlets across various formats spanning grocery to apparel retail.

Reliance has not commented officially on this.

Hit hard by the Covid-19 pandemic, Future Group says it has incurred a loss of Rs 4,445 crore in the last four quarters and is finding it difficult to finance the working capital needs.

“Increasing losses at store level is a grave concern and is a vicious cycle where larger operations are leading to higher losses. Termination notices have been received for significant number of stores due to huge outstanding, and we would no longer have access to such store premises,” it said in its recent stock exchange filing.

It is “scaling down its operations,” a move that will help it reduce losses in coming months, Future Group added.

According to a source, terminating the lease rentals and then leasing the property out to another party was well within the rights of the landlord, and there was no legal issue here.

But, whether Future Group hid this information during legal proceedings that the leases to many of its stores had been transferred, even as there was a stay on the sale of Future Retail assets, is likely to be Amazon’s argument in court.

Amazon has not officially commented on this matter either.

Last year, the Competition Commission of India had suspended Amazon’s deal to invest in Future Coupons, citing suppression of information related to the deal. Amazon has already filed a legal challenge against this order. If Amazon does file a criminal case against Future Retail over the transfer of its store leases, then things could become messier.

Meanwhile, the National Company Law Tribunal on February 28 passed an order, allowing Future Retail to convene meetings of its shareholders and creditors to seek their approval for the 2020 deal between Future Retail and Reliance Industries.

Getting approval of shareholders and creditors will move Future Retail one step closer in its deal to sell the retail assets to RIL. The schedule of the meetings of shareholders and creditors is expected to be intimated soon. 

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