Amazon letter to independent FRL directors alleging irregularities
The battle between Amazon and Kishore Biyani-owned Future Retail Ltd (FRL) boiled over on Thursday after Amazon sent a letter to the independent directors of FRL alleging “significant irregularities” in the retail player’s related party transactions with group entities that warrant “a thorough and independent examination”.
Amazon said it was bringing these facts to the attention of the independent directors so that they could — “consistent with their statutory and fiduciary obligations” — evaluate and investigate these issues in detail in the interests of public shareholders, creditors, bankers and third party suppliers of FRL.
Amazon’s letter puts the independent directors in a quandary since they had written to the Competition Commission of India recently in which they claimed that Amazon had concealed material information about their deal with the Future group while seeking approvals for its investment in Future Coupons Ltd in August 2019. The stack of agreements with the Biyanis had given Amazon a 49 per cent stake in Future Coupons and an indirect stake of 9.82 per cent in Future Retail.
While writing those letters, the independent directors said they were driven by their fiduciary responsibilities in urging the CCI to revoke the approval it granted to the Amazon-Future Coupons deal which, they claimed, violated foreign direct investment (FDI) rules, provisions of the Foreign Exchange Management Act and Sebi’s takeover regulations.
If the CCI withdraws its approval, Amazon will no longer be able to block the Rs 24,713 crore deal that Future Retail struck with the Reliance group in August 2020 by seeking to enforce an order handed down by the Singapore International Arbitration Centre that went in favour of the Jeff Bezos-owned retailing giant.
Earlier in the day, the legal and regulatory battle between the two sides grew even more complicated after the Supreme Court admitted a plea filed by Amazon to stay an order that the Delhi High Court issued on a petition by the Confederation of All India Traders directing the CCI to issue a ruling in the Amazon-Future Retail battle by November 29. The Supreme Court has set the hearing on the latest Amazon petition for November 29.
FRL has asserted the US e-commerce major has no locus to address its letter and that Amazon's communication was “nothing but an after-thought and a counterblast” to a showcause notice issued by the CCI.
Amazon, in its letter dated November 24 to the independent directors, said FRL has consistently entered into “Significant Related Party Transactions” with various Future Group entities, including Future Enterprises , Future Supply Chain Solutions , Future 7-India Convenience and others, and that some of these related parties predominantly depend on FRL for their business.
“...the audit committee members (present and past members) have expressed concerns about financial management of FRL, including related party transactions, despite substantial equity and debt fund mobilisation through December 2019 and January 2020,” the letter said.