Amazon.com Inc. has contractual rights against Future Coupons Pvt. but it wants to assert them against Future Retail Ltd., Senior Advocate Harish Salve told the Delhi High Court on Thursday.
Representing Future Retail, Salve made three key arguments while responding to issues raised by Amazon’s counsel Gopal Subramanium.
- That Amazon isn’t a shareholder in Future Retail, and thus has no investor protection rights.
- That Future Retail is entitled to ask the court to direct Amazon to not interfere with the approval process of the scheme of arrangement proposed by it.
- And, that an agreement between two parties [Amazon and Future Coupons] cannot dilute the fiduciary duty of Future Retail’s directors who have to take every measure - in this case a scheme of arrangement - to save the sinking company.
For this, Salve argued, Future Retail doesn’t require Amazon’s prior consent.
“When did you [Amazon] become the Bhishma Pitamaha of Future Retail that it needs your prior written consent for a scheme?” - Senior Advocate Harish Salve
To recap, Future Retail has approached the court to direct Amazon to not interfere with the approval process for Rs 27,513-crore deal between Future Retail and Reliance Retail Ventures Ltd. Amazon, which invested in Future Coupons, a promoter company of Future Retail, has won a temporary stay on the Future Group-Reliance Retail deal.
Here are the key arguments that were made by Harish Salve before the high court on Thursday
Amazon Has No Investor Protection Rights Vis-à-Vis Future Retail
Amazon had cited the Supreme Court’s ArcelorMittal’s ruling to say that it has certain restrictive protective rights that have been upheld as investor protection rights.
Salve countered this by saying that Amazon isn’t even a minority investor in Future Retail.
- Arcelor judgement granted recognition of such rights to investors who have at least a 10% shareholding. Without even being a minority shareholder in Future Retail, how can Amazon get the benefit of Supreme Court’s Arcelor judgment?
- Companies Act, 2013, too, recognises minority rights at 10%; not less than that.
- There's a difference between acting in concert and minority protection rights. If A and B come together and say we'll control company C and if that's the right you've entered into, then it becomes acting in concert.
- They are asserting, through these conflated agreements, rights which are way beyond shareholder rights.
By investing Rs 1,400 crore, you think you’re entitled to kill a Rs 25,000-crore company? Power to strangulate is not minority rights. Does Amazon think it’s living in the days of East India Company?Senior Advocate Harish Salve
‘Have The Right To Stop Amazon From Making Misrepresentations’
Amazon has argued that Future Group had agreed to a list of Restricted Persons. Any sale of retails assets to entities on this list, Amazon has said, required its prior consent. Salve refuted these arguments.
- When did you [Amazon] become the Bhishma Pitamaha of Future Retail that it needs your prior written consent for a scheme?
- All I’m saying is Mr Amazon, please stop interfering in my attempts to salvage my company by raising money from Reliance. I’ve not entered into any such agreement by which I should hand over my reins to Amazon.
- Compare what Amazon has put in (Rs 1,400 crore) to what Reliance is bringing (Rs 25,000 crore) to Future Retail.
Amazon is preventing a lawful transaction. All that a scheme requires is board approval. I have the right to stop him from misrepresenting to the world.Senior Advocate Harish Salve
- The list of restricted persons for Future Retail could be intimated from time to time and the promoters had the right to update the list. Amazon’s right on this issue was restricted to Future Coupons.
- List of Restricted Persons in Future Retail’s SHA says as intimated from time to time. My list will be as informed by my promoters—there’s that essential check and safeguard, which can’t be compromised.
- In contrast, Future Coupons SHA says Restricted Persons is those listed in Schedule 3, which may be mutually updated by the parties (Amazon and Future Coupons).
- Amazon has no voting rights, no nominee directors on Future Retail but says you must listen to me even if you’re facing death.
Restricted Person is an anti-competition right. You have that against Future Coupons but you want to assert it against Future Retail.Senior Advocate Harish Salve
Future Retail’s Directors Were Discharging Their Duty To Save the Company
- In a situation where Future Retail is sinking and monies have to be raised, it’s the fiduciary duty of its directors to save the company. It doesn’t matter if Future Coupons has nominee directors on Future Retail’s board (to protect the interests of Future Coupons and Amazon).
- By virtue of its shareholders’ agreement with Future Coupons, Amazon is saying, Future Retail’s board is obliged to act in a particular manner.
- In a listed company, by an agreement, you cannot dilute the fiduciary duty of directors, which is a statutory right.
- Bombay High Court has held pooling agreements cannot restrict statutory rights given to directors.
Harish Salve will continue his rejoinder arguments on behalf of Future Retail on the next date of hearing and will be supported by Senior Advocate Darius Khambatta.
Senior Advocate Gopal Subramanium will also argue subsequently to reply to certain points argued in the rejoinder. The Delhi High Court bench of Justice Mukta Gupta will take up the case for hearing next on Nov. 19.
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