All eyes are set on the embroiling legal battle between Amazon and Future Group. Future Group has recently filed a suit with the Delhi HC against the e-commerce giant for misusing a stay order obtained from the Singapore International Arbitration Centre.
Some minor but significant developments seem to have gone unnoticed in amidst the courtroom drama.
A) FRL by disclosing the unpublished price sensitive information as regards the issuance of the Interim Award to a proposed acquirer, prior to the dissemination of such information by FRL to the general public, FRL and its Promoters have acted contrary to Regulation 3 of the PIT Regulations.
B) The independent directors have failed to perform their fiduciary duties towards their shareholders by advising the board not to go ahead with the deal before seeking consent from Amazon. The mere act of not reaching out to Amazon is an indication of malafide intent.
C) FRL has been insisting that the arbitration proceedings do not bound it as it is not a party to shareholder agreement between Amazon and Future Coupons. At the same time, FRL is conveniently using the confidentiality clause of the same shareholder agreement and the SIAC Rules to justify the non-disclosure of the contents of the Interim Award to the regulators and minority shareholders.
D) FRL was in advance stage of discussion with potential investors which was in alignment with the contractual obligation. Still, at the last minute, like a T20 cricket game FRL decided to change the investor and that too a restricted party.
While these are smaller nuances to a larger issue but these give a raise to an argument about whether promoters of FRL were interested in their own wellbeing or wellbeing of the company including minority shareholders. This behavioural aspect opens up the debate of ‘wilful default’ ‘malafide intention’ and ‘corporate governance’, the Achilles heel for doing business in India.
The Future Reliance deal is a prime example of poor corporate governance and accountability to not only Future Group’s internal stakeholders but also the e-commerce and retail industry at large. Such wanton breach of contract on the part of India’s largest retailer sets a rather bleak narrative of this being the industry norm, which will only be propagated by the ratification of this deal by the authorities.
India’s e-commerce and retail industry is a key market for investors. Estimated to be worth $99 billion by 2024, the pandemic has accelerated its growth and penetration. The industry is currently projected to register a growth of 18% this year, a promise that has everyone vying for a slice of this lucrative pie. Amazon, a seasoned player in the Indian e-commerce sector, has invested a total of over $6.5billion into the industry and plans to invest more in the near future. Their investment has not only boosted the economy but has also flagged India as a prime market for investors. The community that has gained the most other than the consumers are SMBs. The SMB community can ride the e-commerce wave and etch a revival of their fortunes.
The SIAC was the chosen arbitrator of both parties, at the time of the investment, in case of any disputes. Their challenging the order from the arbitrator claiming the SIAC to not have enforcement powers in India is another example of them not standing by the specifics of the Amazon-Future investment deal.
The pandemic has adversely affected the country’s economy, and in such an economic climate, investments are a welcome respite. Union Minister Nitin Gadkari, earlier this year, had mentioned that the country would need foreign investments worth Rs50-60 trillion to accelerate the wheels of the coronavirus-hit economy. The behaviour of Future Group may have dampened the growing interests of investors towards India’s thriving e-commerce and retail industry.
The most viable market for an investor is that which is stable, both in terms of economy and policy. However, the current scenario does not communicate market stability which is another deterrent for future investments. This instability is further promulgated by the responsible authorities’ silence and inactivity.
Condemning poor corporate governance policies and unethical practices is imperative so that businesses and investors view India as a stable and investment-friendly market.
Disclaimer: The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of the publication