InvestorQ : What does the latest ruling by the Delhi High Court indicting the Biyani brothers mean for the deal?
Khushi Patel made post

What does the latest ruling by the Delhi High Court indicting the Biyani brothers mean for the deal?

Dhwani Mehta answered.
1 year ago

The Delhi High Court has finally ruled that Future Retail and its promoters, the Biyani brothers, had wilfully violated the order of the Singapore International Arbitration Centre or SIAC. It must be remembered that SIAC is the Singapore based arbitrator whom Amazon had approached after Future group had signed a deal to sell all its retail and wholesale assets to Reliance Industries in a slump sale.

To begin with, this is surely a victory for Amazon and a setback for the Biyani brothers of the Future group. The order has restrained the FRL deal between Future group and Reliance Industries from going ahead till the final order has been passed. That still looks some time away and could easily push Future group to the brink of bankruptcy. However, the Delhi Court has refused to accept that argument has been fallacious.

How did the Amazon relationship come about? Amazon had a 49% stake in Future Coupons which has a 9% stake in Future Retail. When Amazon invested Rs.1300 crore in Amazon Coupons the agreement apparently was that Future group will not sell out to any company with a strong retail franchise without giving the first right of refusal to Amazon. According to Amazon, the deal with RIL was invalid as FRL had breached its agreement with Amazon.

As a result, the court has also ordered the attachment of assets of Future Coupons as well as the assets of Mr. Biyani and other promoters of Future group. The whole problem started when Amazon objected to the merger deal between Future Group and Reliance Industries. The court has also directed Biyani to be present at the next hearing in the case which is scheduled on 28 April.

The Delhi High Court has imposed a penalty of Rs.20 lakhs on the Future group. The court rejected FRL’s argument that if the deal failed, Future group would go into liquidation, since that cannot be a reason for the breach of contract. Now it looks like the options for Biyani would considerably narrow as the court has almost said that Future group had reneged on its commitment to Amazon. It remains to be seen what happens to the Reliance deal.