The Enforcement Directorate (ED) has now stepped into the dispute between Future and Amazon.
The central agency has reportedly asked the Kishore Biyani-led Future group to submit documents with it in regard to the 2019 deal with the US retail giant.
The agency is investigating a possible breach of foreign investment laws, a Reuters report said.
The demand indicates heightened scrutiny of a deal which is at the heart of legal battles between Amazon and Future after the Indian company decided to sell its retail assets to rival Reliance Industries for Rs 24713 crore in 2020.
That transaction has been put on hold by an arbitrator and the Indian courts after Amazon argued Future had violated its contracts with the US company by entering into the sale.
Future denies that, and says Amazon is illegally exerting control over the Indian company’s business decisions.
The ED had sent a confidential notice to Future Coupons Pvt Ltd (FCPL), a promoter entity, seeking all correspondence including emails with Amazon on the 2019 investment, according to Reuters.
In August 2019, FCPL, Amazon and other promoter entities of the Future group entered into a subscription agreement and shareholders’ agreement following which Amazon invested Rs 1,431 crore in FCPL.
The Reuters report quoting sources said that the notice was part of an ongoing investigation by the Indian agency to establish whether there were any violations of foreign investment law when Amazon made the investment.
The notice was sent on October 28, which is before the recent letter of the independent directors of Future Retail Ltd (FRL) to the Competition Commission of India (CCI).
The ED has given Future Coupons 15 days to respond to the notice.
In their letter, the independent directors of the listed firm asked the CCI to revoke its approval given in November 2019 due to which Amazon picked up the 49 per cent stake in FCPL.
The directors have alleged that Amazon concealed facts, made misrepresentations and false representations to the commission when the approval was sought.
They directors claimed that Amazon did not notify to the commission that its rights over the key matters of FRL were strategic in nature and the investment in FCPL was made only for the purpose of obtaining the strategic rights in FRL.
They have also claimed that Amazon’s acquisition of the strategic rights will be in violation of FEMA FDI Rules. Any acquisition of shares or rights as a shareholder by a foreign entity in FRL which is a multi-brand retail company requires prior approval of the government — a charge which is now being investigated by the enforcement department.
Apart from the agreement between FCPL and Amazon, a shareholder agreement was entered among FRL, FCPL and other Kishore Biyani -companies on August 12, 2019 under which the listed entity — FRL — was required to obtain the prior consent of FCPL for certain key matters including the disposal of its retail business and assets to any third party and particularly to certain restricted persons which included the Reliance group.
The ED has also asked Future for copies of various legal filings and supporting documents submitted by Amazon and Future group representatives to Indian courts and the Singapore arbitration panel.
The Singapore panel has so far backed Amazon’s contentions, saying Future breached its agreements with the US company and must not proceed with the Reliance deal while the proceedings are ongoing.
The shares of Future Retail on Tuesday ended lower by 1.20 per cent on the BSE.
On Monday, the National Company Law Tribunal (NCLT) stayed a proposed shareholders meeting of the company for the approval of its Rs 24,713 crore deal with Reliance Retail.
Future is India’s second largest retailer with more than 1,700 retail outlets, including popular chain Big Bazaar. Before the Reliance deal, Amazon had its sights on ultimately owning some of Future’s assets itself if regulations changed to allow that.