India’s Future Retail Ltd (FRL) has issued a warning that it could face liquidation if its asset sale agreement with Reliance Industries falls through. This information was disclosed in a legal order obtained by Reuters, where FRL argued against Amazon’s attempt to block the deal. Amazon recently secured an injunction from a Singapore arbitrator to halt FRL’s agreement to sell assets to Reliance. The e-commerce giant claims that FRL violated certain contract provisions agreed upon in a separate deal last year.

The disagreement centers around FRL’s decision in August to sell its retail, wholesale, logistics, and other businesses to Reliance for $3.38 billion, including debt. Amazon contends that a 2019 deal it had with a Future unit included clauses that prohibited FRL from selling its retail assets to companies on a “restricted persons” list, which includes firms from Reliance’s group. The contract stipulated that any disputes would be resolved through the Singapore International Arbitration Centre.

Following the arbitrator’s ruling, both Reliance and FRL saw their shares decline. However, both companies expressed their commitment to moving forward with the deal without delay. This sets the stage for a showdown between Reliance and Amazon, both led by two of the richest individuals in the world.

In a 130-page order, the arbitrator stated that Amazon accused Future of breaching agreements that prevented it from selling retail assets to entities like Reliance. Future argued before the arbitrator that if the deal falls through, its retail unit, which operates over 1,500 outlets, will have to cease operations. This would have a significant impact on the livelihoods of thousands of employees and workers at Future’s vendor firms. However, it’s worth noting that the arbitrator’s order is not publicly available.

Representatives from FRL informed the arbitrator that if the disputed transaction does not proceed, the company will be forced into liquidation, resulting in the loss of over 29,000 jobs. Future maintained that the FRL-Reliance deal was aimed at safeguarding the interests of all stakeholders by injecting substantial capital and acquiring liabilities. Nevertheless, the arbitrator ruled that economic hardship alone is not sufficient grounds to disregard legal obligations.

Amazon, FRL, and Reliance have yet to respond to requests for comment.

This conflict adds to the challenges Amazon is facing in India, where it has been grappling with antitrust investigations and stringent regulations on foreign investment. Now, in addition to its disputes with FRL, Amazon also finds itself at odds with Reliance, which is rapidly expanding its e-commerce business. Reliance poses a threat to Amazon and Walmart’s Flipkart, both of which have dominated the Indian e-commerce industry.

It is important to note that the injunction obtained by Amazon in Singapore does not automatically apply in India. It would need to be endorsed by an Indian court. If a subsequent legal order in India halts the deal, Amazon would have the opportunity to negotiate with Reliance, Future, and the banks involved. Murali Neelakantan, a corporate lawyer at Indian law firm Amicus, explains that if Amazon fails to secure an injunction against the deal in India, they may only be entitled to damages even if they win the final arbitration.

For more information on the topic, you can visit these links:
1. Reuters: India’s Future Retail warns of liquidation if Reliance deal fails
2. Financial Times: Amazon pushes on in India despite legal setbacks