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If Reliance deal fails, it will be liquidation for Future Retail

Future Retail Ltd.'s (FRL) decision to sell retail, wholesale, logistics businesses to Reliance for $3.38 bn, including debt, is the dispute.

Amazon won an injunction from a Singapore arbitrator to halt FRL's deal to sell assets to Reliance (RIL).

FRL will go into liquidation if the deal to sell assets to RIL fails.

Amazon alleged FRL had violated the 2019 contract provisions in a separate deal.

The deal had clauses saying FRL couldn't sell its retail assets to any restricted person including firms from Reliance group. Also, disputes would be arbitrated under Singapore International Arbitration Centre rules.

Both companies want to complete the deal ASAP, setting the stage for a big showdown of Reliance and Amazon.

The arbitrator's order reveals how Amazon argued that FRL breached agreements which barred it from selling retail assets to entities like Reliance. It also shows the level of concern at FRL if the deal breaks.

Future's retail unit having 1,500 outlets will pack up if the deal with Reliance doesn't go through, hitting the livelihoods of thousands of employees and workers at its vendor firms, FRL argued before the arbitrator.

If FRL liquidates, 29,000 employees will be lost. The pandemic has hit Indian retail businesses; the FRL-Reliance deal wanted to protect interests of all stakeholders by large infusion of funds, acquisition of liabilities.

The arbitrator ruled that economic hardship alone is not a legal ground for disregarding legal obligations

Amazon welcomed the arbitrator's decision. FRL would take steps to ensure the deal, while Reliance said it will complete the transaction

Amazon counts India as a key growth market where it has invested $6.5 bn, been bogged down by antitrust probes, strict foreign investment rules.

The latest tussle puts Amazon at odds not just with FRL but also Reliance group which is fast expanding its e-commerce business, threatening dominance of Amazon and Wal-Mart’s Flipkart.

The injunction was not automatically enforceable in India; the order would have to be ratified by an Indian court.

Any subsequent legal order in India to halt the deal would allow Amazon to negotiate with Reliance, Future and banks on the other side.

If Amazon doesn't get injunction against the deal, they may get damages if they win the final arbitration.