Last year in August, Mukesh Ambani cracked a deal that would have established Reliance Jio’s presence in India’s e-commerce market and overturned the competition posed by Amazon and Flipkart. Reliance Industries Limited bought Kishore Biyani led Future Retail Limited for 3.4 billion dollars.
It was a win-win deal because Future Group was looking for cash to stay afloat as the Coronavirus-induced lockdown has destroyed its business and Reliance was looking for a partner which could help it to take on the existing e-commerce players like Amazon.
However, it has been more than six months since the deal was finalised but it has not been materialised yet, because Amazon India, which would have faced an existential crisis from the entry of Reliance into e-commerce, has taken the Future Group to the Indian judiciary. And, like most of the cases lingering in the web of the Indian judiciary for decades, the case of Reliance-Future Group deal too has been delayed.
Amazon took Future Group to the court on the basis of a non-competitive clause that it has signed with a wholly owned but not listed subsidiary of the future group. According to Amazon, the non-competitive clause prohibits the Future Group from handing over the ownership to a competitive company like Reliance. However, the lower court ruled that as the clause was signed with a subsidiary and not the Future Retail Limited which Reliance bought, the claims made by Amazon are not valid.
Amazon very well knows that the ruling is ultimately going to be in favour of the Future Group but it wants to delay the deal as much as possible. The company is using India’s judicial sluggish system to its advantage and has roped in an army of India’s top lawyers like Gopal Subramanium, Amit Sibal, and Rajiv Nayar to delay the deal.
A few weeks ago, on February 22, the Supreme Court of India, where Amazon India appealed after losing in lower courts, halted the deal. Justice Rohinton F. Nariman who was heading the two-judge panel said that the court would hear the case again in five-weeks, around the first week of April. Amazon is thus, buying time by delaying the process and in the meantime would strengthen its infrastructure to compete with Reliance.
The Jeff Bezos-led company has already been able to delay the deal by almost six months and if it gets another six months, it would put the infrastructure in place to compete with Reliance’s Jiomart given the deep pockets of the company.
On the other hand, cash-strapped Future Group is being forced to set up a joint venture with other foreign firms to stay afloat. The company has already defaulted on few interest payments and does not have the capital to keep the operations going, therefore, it has floated joint ventures with New-Zealand-based dairy major Fonterra and American food firm Hain Celestial in order to get access to more capital.
The delay in the judicial process in India is being used by a foreign firm to get rid of its competitors in the Indian market, and this is destroying one Indian firm while harming the other. While arguing for Future Group in Delhi High Court, Harish Salve said, “Please don’t allow this American giant to kill Future Group only to further its illegitimate interest to make sure that Reliance does not get its hands in. That’s its game plan—if I can’t get it, let Reliance not get it too.”
“Amazon is playing a game—it hasn’t come to an Indian court for enforcement because it knows the case will go belly up. They’re trying to interfere [with the statutory approvals for the deal with Reliance],” he added.
Those aware of the proceedings know very well that Amazon’s only motive is to delay the deal using its deep pockets, but no one is able to do anything, thanks to the sluggish Indian judiciary which takes years to rule on simple cases.
But future biyani also did wrong by allowing stake sale in future coupons. He knows the clause that he can not sell future retail to Reliance as per this contract.