Amazon Accuses Future Retail’s Directors Of Foul Play
The E-commerce major Amazon has accused Future Retail’s independent directors of ‘facilitating’ alienation and transfer of the latter’s 835 retail stores in favour of Reliance Retail.
These stores — both large-format such as Big Bazaar and small-format such as Easy Day and Heritage Fresh — were transferred in the teeth of binding injunctions and court orders, Amazon said in a letter addressed to independent directors of Future Retail (FRL).
The letter read, “While the scheme has failed, it now appears that FRL sought to purportedly alienate its retail stores in favour of the Mukesh Ambani group by any means possible. You, as independent directors, have facilitated this fraudulent stratagem to defraud the Indian public and regulators.”
Amazon said that the narrative of that transfer was on account of failure to pay huge outstanding rent was a ‘sham’ as the retailer had a month prior to such move stated that outstanding rent was only INR 250 crore.
“Any narrative that there was a purported transfer on account of failure to pay huge outstanding rent for as many as 835 retail stores, that too as quickly as on February 26, 2022, is nothing but a sham and a false narrative to regulators, creditors, the shareholders and the courts,” the letter added.
By scheme, Amazon was referring to the 2020 deal Future Group had signed with Reliance Retail, a subsidiary of Reliance Industries (RIL), to sell its retail, logistics and warehousing businesses for INR 24,713 crore.
It was later cancelled after Future group failed to secure shareholders’ and lenders’ approval.
Amazon also said it had apprised the independent directors and had raised serious concerns regarding various irregularities in the functioning of Future Group, especially the conduct of the Biyanis, through various letters. However, these red flags were ‘deliberately’ ignored.
“The stratagem to erode the value of retail stores of FRL, a listed company, in collusion with the Mukesh Ambani Group and commit fraud is a matter of significant public concern. Thus, a thorough and independent investigation of the financial dealings of FRL and the Biyani family is needed,” it said adding that the investigation has to be conducted by authorities, regulators and enforcement agencies.
What Is The Future-Reliance Deal?
In August 2020, Kishore Biyani’s Future Group entered into an agreement with Reliance Retail to sell its retail, wholesale, logistics and warehousing to the latter as it was under immense pressure from its lenders and the deal in seen as a bid by the group to cut down on the same.
Following the nationwide lockdown in March 2020 in view of the COVID-19 pandemic, the retail business of Future Group had come under more stress. Sales in many of its premium food sales arm Foodhall and Brand Factory had come to a near halt in the lockdown, which lasted more than two months.
Why Is Amazon Objecting To The Future-Reliance Deal?
Biyani’s Future Retail had signed another deal with e-commerce giant Amazon. As part of the deal, Amazon had in 2019 acquired 49 per cent stake in Future Coupons, which has around seven per cent stake in the promoter firm of Future Retail, in a deal worth nearly INR 2,000 crore.
After Future’s agreement with Reliance, Amazon said the deal was a violation of a non-compete clause and a right-of-first-refusal pact it had signed with the Future Group. The deal also required Future Group to inform Amazon before entering into any sale agreement with third parties.
On its part, the Future Group has said that it had not sold any stake in the company, and was merely selling its assets and had therefore not violated any terms of the contract.