Amazon Accuses Future Group of Dishonest Strategy [CA Suprio Ghatak]



#amazon #futureretail #relianceretail #arbitration #businessstrategy #independentdirectors

The Future-Reliance deal fell through in April after Future’s (Future Retail Ltd.) independent directors rejected it. But before that, Reliance Retail (Reliance) took over operations of a huge number of Future stores after it failed to pay rent. Reliance Projects & Property Management, a unit of Reliance Industries, had taken possession of the outlets, citing non-payment of rents for the properties it had subleased to Future.

What has Amazon Said?

Amazon has accused independent directors of Future of enabling a dishonest strategy of transfer of 835 stores to billionaire Mukesh Ambani's Reliance. Officially the transfer happened on failure to pay huge outstanding rent. But it was a big lie as Future had a month before admitted outstanding rent was only Rs. 250 cr.

On 19th May Amazon has written the letter signed by senior corporate counsel Hina Doon. Amazon told independent directors of Future that in a meeting with core lender banks on 1st January it had admitted that unpaid rental dues was Rs. 250 cr only and it voluntarily retained the amount. It had managed to do it without discontinuing operations or handing over its stores.

So any story being circulated now that the transfer was to pay the huge outstanding rent for 835 retail stores, as soon as on 26th February, is a big lie to regulators, creditors, shareholders and the judiciary.

Future and Amazon are locked in a big legal battle after Amazon dragged Future to arbitration at the Singapore International Arbitration Centre (SIAC) in October 2020, saying Future had violated their contract by entering into a deal for the sale of its assets to Reliance on a slump sale basis for Rs. 24,713 cr.

The Future-Reliance deal fell through in April 2022 after Future’s lenders rejected it. But before that Reliance took over operations of a huge number of Future stores after it failed to pay rent.

On 22nd January, Future issued a letter to Bank of India, State Bank of India and Saraf and Partners, wherein it restated its belief on the sale of the small store formats, in glaring neglect of the mandatory directives against it. If the retail stores were not available with Future it could not make such a statement.

The surrender of retail assets of Future is not for default of outstanding lease rentals but a deliberate action to facilitate the dishonest strategy to isolate the retail stores illegally. It was done without notice to courts, regulators, lender banks and motivated by the desire to defeat any final award passed in the Arbitration Proceedings in favour of Amazon.

The strategy to isolate the retail stores undervalues them and it is improper trading to rob the creditors. The promoters, key managerial personnel and directors, including independent directors, are liable for terms of imprisonment under various laws including the Companies Act, 2013.

Future had on 9th March said for the first time that termination notices were issued by entities affiliated to Reliance.

Future disclosed 835 retail stores, comprising large-format stores such as Big Bazaar and small-format stores such as Easy Day and Heritage Fresh, contributing up to 65 per cent of the total revenue of Future, had been shut down, making way for stores operated by Reliance. Future was conspiring and was in continuous discussion with Reliance.

Future’s lenders rejected sale of assets to Reliance. It indicates a larger conspiracy in the way Future and other associated companies have dealt with courts, regulators, lender banks, its shareholders and other stakeholder interests.

As the independent directors had in January dismissed its proposal of financial assistance to Future citing the then proposed sale to Reliance, it seems that Future wanted to isolate its retail stores in Reliance’s favour by any means.

Amazon concludes by saying the independent directors, have enabled this dishonest strategy to rob the Indian public and regulators.

Conclusion

In the big mess created by Future, Amazon and Reliance, is anybody thinking about the small individual shareholders, the aam aadmi, whose investments have been wiped off? Will the National Company Law Appellate Tribunal (NCLAT), SEBI, Supreme Court act suo moto to get back their money? Small shareholders were never in the mind of big creditors when they voted against the deal. Were they even not in the mind of our regulators? This is what we need to think and worry about.

Stop blaming Reliance. Amazon is responsible for the debacle. Now it's cribbing. It should know that asset doesn’t include rental properties. Rented properties are obligations.

NCLAT takes more than 6 months to pronounce the judgment on approving the Competition Commission of India (CCI) decision for cancelling Amazon-Future deal. Reliance group is the wealthiest corporate group but they are not willing to pay Rs. 1500 cr to Amazon and move forward.

Future management and independent director's premises should be thoroughly checked by Directorate of Enforcement (ED), Central Bureau of Investigation (CBI) for money laundering. Their accounts abroad should be checked. It is a fraud on investors whose value of shares came down heavily after the takeover of stores by Reliance this way.

To be continued

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