Executive Summary:

The recent discussions on the Amazon-Reliance-Future acquisition throws the light on the rights, limits and the modalities of exercising Shareholder rights. This has also thrown open specific issues on the supremacy of:

  • the provisions of the Companies Act 2013 which govern the Company Administration with regard to decisions taken by the shareholders either through the Board or at the General meetings or
  • The dispute resolution mechanism as contemplated under Section 442 of the Companies Act, 2013 or
  • the Provisions of the Arbitration & Conciliation Act, 1996 as amended or
  • the Share Purchase agreement entered between the Promoters and an investor shall overtake the provisions of the Companies Act 2013 regarding
  • Chapter XV, Compromise Arrangements & Settlements that calls for approval by Shareholders at specially convened General Meetings
  • Can a minority shareholder hold the majority decisions difficult to implement through a parallel Share Purchase Agreement with the Promoter?


The write up intends to analyse the relative merits of having options available to companies in ensuring investor protection through restrictions on share transfer, entry of new shareholders, alternative methods of raising capital, enforcement of Commercial Contracts and dispute resolution mechanism. This also makes an attempt to understand the conflicts if any exist among the above options and if so which of the options shall have supremacy or overriding effect on the other.

Brief facts of the subject under discussion

  1. Amazon has entered into a Share Subscription Agreement with Future Coupons Limited and a Share Purchase Agreement with the promoters of Future Retail in October 2019.

Important ingredients of an SPA are:

  • Parties – Amazon & the promoter group of Future Retail
  • Indemnity against non-disclosure of material information – the intention to comply with the terms of SPA must have been disclosed mutually
  • Resolution of dispute and arbitration – If parties are based in India, the seat of arbitration will be India and if one of them is an outsider then the place of choice by that party outside India- Since Amazon is a Company incorporated in the US, the seat of Arbitration has been chosen as Singapore
  • Execution and Effective date – the date of execution here is October 2019 while the effective date has to be after fulfilment of certain conditions. Since we are not privy to the terms of SPA, the conditions precedent could not be ascertained and only know that there is an offer period of a minimum of 3 to a maximum of 10 years meaning that the Amazon’s responsibility shall be completed before the end of 3rd year from the date of signing at the earliest and could be completed before the expiry of 10 years from that date – Not earlier than the end of Oct 2022 and not later than the end of October 2029.
  1. As part of the investment, Amazon is also getting rights to acquire Biyani’s promoter group stake in Future Retail at a future date.
  2. As part of the agreement, Amazon has been granted a call option. This call option allows Amazon to acquire all or part of the Promoters’ shareholding in Future Retail Ltd, and is exercisable between the 3rd to 10th years, in certain circumstances, subject to applicable law
  3. To quote news reports on the subject-
    • Financial details of the transaction were not disclosed.
    • As part of the investment, Amazon is also getting rights to acquire Biyani’s promoter group stake in Future Retail at a future date.
    • “As part of the agreement, Amazon has been granted a call option. This call option allows Amazon to acquire all or part of the Promoters’ shareholding in Future Retail Ltd, and is exercisable between the 3rd to 10th years, in certain circumstances, subject to applicable law,”
    • The promoters have also agreed to certain share transfer restrictions on their shares in the Future Retail for the same tenure, including restrictions to not transfer shares to specified persons, a right of first offer in favour of Amazon, it added.
    • The transaction is subject to regulatory approvals, the company said.
  4. Future Coupons Limited is the holding company of Future Group of companies
  5. By this Share Purchase agreement, Amazon has restricted the investment option in Future Retail by many prospective investors including Reliance, Walmart, Alibaba and a host of around 15 Global and local players from buying into Future’s retail assets [1]
  6. As a part of the deal, Future Retail will sell its supermarket chain Big Bazaar, premium food supply unit Foodhall and fashion and clothes supermart Brand Factory’s retail as well as wholesale units to Reliance Retail[2]
  7. The deal is valued at INR 24,713 crore, subject to adjustments as set-out in the composite scheme of arrangement. This acquisition is subject to SEBI, CCI, NCLT, shareholders, creditors and other requisite approvals
  8. While the Future Reliance deal was going through procedural aspects, Amazon filed a restraint application through Emergency Arbitration at Singapore based on the following points-
  9. The points submitted by Amazon are:

Last year, Biyani’s Future Retail had signed another deal with global e-commerce giant Amazon.

  1. As part of the deal, Amazon had acquired 49 per cent stake in Future Coupons, the promoter firm of Future Retail in a deal worth nearly Rs 2,000 crore.
  2. While Future Retail would be able to place its products on Amazon’s online market place, the two had also agreed that the Future Retails products would also be a part of Amazon’s new plan, which intended to deliver products in select cities within two hours of a customer ordering them.
  3. Future Retails has more than 1,500 stores pan India.
  4. The deal had also given Amazon a ‘call’ option, which enabled it to exercise the option of acquiring all or part of Future Coupon’s promoter, Future Retail’s shareholding in the company, within 3-10 years of the agreement.
  5. After Future’s agreement with Reliance, Amazon said the deal between Reliance Future Group 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.

  1. On October 25, emergency arbitrator VK Rajah issued an emergency arbitration order (EA order) in favour of Amazon. The order restrains Future Group entities from proceeding with the share seal deal or any such agreement with Reliance and other restricted parties mentioned in the non-compete clause signed between Amazon and Future Coupons.

Now the following questions arise:

  • Will the Share Purchase Agreement provide the voting rights under the Companies Act 2013 even before the parties have fulfilled the investment obligations?
  • Does the Articles of Association of a Company allow a contracting party even before he has invested in the company’s shares the right of pre-emption under Section 62 of the Companies Act 2013?
  • By signing a Share Subscription agreement which allows Amazon to invest in the shares of Future Coupons Limited and through a Share Purchase agreement a call option to buy out the promoters’ shares in Future Retail in the future ranging from 3 to 10 years stop Future Coupons or its promoters from exercising their present rights as Shareholders in Future Retail to transfer their shares and vote on resolutions concerning Amalgamation and Mergers under Chapter XV- Sections 230 to 240 of the Companies Act 2013?
  • Will Arbitration and Conciliation Act ,1996 as amended have overriding powers above the contractual rights of the parties under the
    1. Indian Contract Act,1872 –
    2. the provisions of Companies Act under
      • Section 62 (1) (a) & (b) – Pre-emptive rights
      • Section 42 – Private placement
  • Section 62(1) (c) – Preferential allotment
  • Will the filing of the Share Subscription Agreement between Amazon & Future Coupons and the Share Purchase Agreement with the promoters of Future Retail with the Stock exchanges give rise to conclusive rights to the “acquirer” or is it only a disclosure requirement under SEBI (Substantial Acquisition of Shares and Takeover) Regulations, 2011?
  • Does the action by Future Retail to enter a scheme of reconstruction under the provisions of Chapter XV (Sections 230 to 240) of the Companies Act, 2013 transferring the assets, brand and liabilities with a non-compete clause not to indulge in retail business for a period of 15 years, to subsidiaries of Reliance Industries, a breach of contract between the promoters of Future Retail and Amazon entered in October 2019?[3]

We will briefly consider the above questions with reference to the provisions under

  • The Indian Contract Act 1872
  • The Companies Act 2013
  • The Provisions of SEBI(SAST) Regulations,2011
  • The Arbitration & Conciliation Act 1996 as amended.

SEBI (SAST) Regulations 2011

Under SEBI (SAST) Regulations, 2011, the following points are pertinent:

  • Under Section 2(1)(a), Amazon is an acquirer – ,” ―acquirer‖ means any person who, directly or indirectly, acquires or agrees to acquire whether by himself, or through, or with persons acting in concert with him, shares or voting rights in, or control over a target company”
  • Under Section 2(1)(b)―acquisition‖ means, directly or indirectly, acquiring or agreeing to acquire shares or voting rights in, or control over, a target company; since there is a Share Subscription agreement between Amazon & Future Coupons
  • Under Section 2(1)(p) – “―offer period means the period between the date of entering into an agreement, formal or informal, to acquire shares, voting rights in, or control over a target company requiring a public announcement, or the date of the public announcement, as the case may be, and the date on which the payment of consideration to shareholders who have accepted the open offer is made, or the date on which open offer is withdrawn, as the case may be; – Here the date of signing of Share Subscription Agreement is available – October 2019 but the date of receipt of payment of Consideration from Amazon is Not available as it has not exercised its Call option to subscribe to the shares in Future Coupons or its subsidiaries
  • Under Section 2(1)(s) – “promoter” has the same meaning as in the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009 and includes a member of the promoter group
    1. Under Section 2(1)(oo) of SEBI(ICDR) Regulations,2009 (oo) “promoter” shall include a person:
      1. who has been named as such in a draft offer document or offer document or is identified by the issuer in the annual return referred to in section 92 of the Companies Act, 2013; or
      2. who has control over the affairs of the issuer, directly or indirectly whether as a shareholder, director or otherwise; or
      3. in accordance with whose advice, directions or instructions the board of directors of the issuer is accustomed to act:

2. In this context, we can safely conclude that Mr Biyani of the Future group represents the promoter under SEBI (ICDR) & SEBI (SAST) Regulations.

  • Issuer under section 2(1)(aa) of SEBI (ICDR) Regulations – (aa) “issuer” means a company or a body corporate authorized to issue specified securities under the relevant laws and whose specified securities are being issued and/or offered for sale in accordance with these regulations – Here the company with which the Share Subscription Agreement has been signed is the company that will issue the securities – Here Future Coupons Pvt Ltd is a private limited company whose ability to issue shares is restricted under the provisions of the Companies Act 2013- Section 2(68) of the Companies Act 2013. Hence Future Coupons is not an ISSUER
  • Under Section 2(1) (z) ―” target company” means a company and includes a body corporate or corporation established under Central legislation, State legislation or Provincial legislation for the time being in force, whose shares are listed on a stock exchange – Here Future Coupons Pvt Limited is a private limited company whose shares are not listed on any stock exchange. Hence Future Coupons Private Limited could not be the Target Company
  • The Share Purchase Agreement is not between Amazon and the promoters of Future Retail Limited- CHAPTER – V DISCLOSURES OF SHAREHOLDING AND CONTROL of SEBI (SAST) Regulations, govern the disclosures to be made with respect to the aggregate of shares held by the acquirer or the promoter together with persons acting in concert. – Regulation 28(1). We understand that post signing the Share Subscription Agreement/ Share Purchase Agreement, Future group had made the Exchange filings giving details of the proposed investment by Amazon ( SSA to buy into 49% in Future Coupons with a First Right of refusal to acquire the promoter group’s shares in Future Retail Limited). Thus the SSA is with Future Coupons but a call option to buy out the promoters’ shares in Future Retail Limited. This brings to the following conclusions:
    1. Though the SSA is between Future Coupons Pvt Limited a private company to which SEBI Regulations do not apply, there is a call option given to Amazon to buy into the promoters’ shares in Future Retail Limited ( a right of first refusal) to be exercised over an offer period of 3 to 10 years.
    2. Thus Amazon becomes the “acquirer” in Future Retail Limited,
    3. Amazon has an option to buy the shares of Future Retail over an offer period of 3 to 10 years and
    4. This makes Future Retail the Target Company
    5. Hence under Regulation 28(1) Future Retail has made Exchange filing in October 2019.

Under the Companies Act 2013

  • The SSA allows Amazon to invest into Future Coupons an investment up to 49% of the Future Coupons Issued capital. – this is a materialized contract where compliance requirements under the Companies Act 2013 with reference to 62(1) (c) – preferential allotment have to be fulfilled
  • The SPA allows Amazon the first right of refusal to buy out the promoters’ shares in Future Retail. – This is contractual between Amazon and the promoters of Future Retail and outside of the provisions of the Companies Act 2013.
  • The disclosure made by Future Retail on signing of this SSA & SPA is from the possibility that Amazon might exercise the option quickly and hence there could be a change in the promoter status in Future Retail
  • The contractual fulfilment of the SPA by either of the parties (Amazon or Mr Biyani and other promoter group members) will be governed by the provisions of the Indian Contract Act 1872 and can also be resolved under Arbitration & Conciliation Act 1996 if there is a dispute resolution mechanism provided for in the SPA[4]
  • The Future Retail have chosen to enter into a composite scheme of amalgamation with Reliance Retail, a subsidiary of Reliance Industries Ltd whereby the assets and liabilities of Future Retail shall be transferred to Reliance Retail for an agreed consideration of US$3.4 billion ( approximately INR 24,711 Crores). This is a composite scheme that is subject to approvals from SEBI, CCI, NCLT, shareholders, creditors and requisite approvals[5] and which will be governed by the provisions of Chapter XV Compromises, Arrangements and Amalgamations under the Companies Act 2013.
  • As shareholders of Future Retail, the promoter group that has signed the SPA with Amazon in October 2019 will have to exercise their voting rights when the approval of shareholders for the proposed scheme of arrangement comes up for voting as required under section 230 (6) of the Companies Act 2013.
  • With the obligation to sell their promoter shares to Amazon based on the SPA, whether they will be permitted to exercise their voting rights at the EGM held for the purpose of approval of the scheme is a question to be answered.
  • The above is a contractual right/obligation which requires study under the provisions of the Indian Contract Act 1872.

Under the Indian Contract Act 1872

  • Whether the Amazon – Future promoters’ Share Purchase Agreement over a period of 3 to 10 years is a contract or a contingent contract?
  • If it is a Contract because
    1. It is made by the free consent of parties competent to contract, for a lawful consideration and with a lawful object, and is not hereby expressly declared to be void
    2. The consideration of Amazon’s 49% investment in Future Coupons Pvt Ltd, could not be for its acquiring Call options to buy out the promoters’ shares in Future Coupons at a future date (3 to 10 years). The allotment of 49% shares in Future Coupons against the Subscription money received is the consideration
    3. The Call option rights can at best be considered as a promise which though agreed and accepted by the promoters under the SPA does not provide the consideration – it has to be tangible and not a promise
  • Could it be a Contingent Contract?-
    1. Section 31 of the Indian Contract Act, 1872 – “Contingent contract” defined.—A “contingent contract is a contract to do or not to do something, if some event, collateral to such contract, does or does not happen.
      1. The contract specifies by which the promoters of Future Retail have to sell their shares to Amazon when the latter offers to buy them which will be exercised not earlier than 3 years from October 2019 and not later than October 2029
      2. If Amazon chooses to exercise its call option to buy the shares not before the end of the 3 year period, or chooses to wait till the close of the offer period i.e.10 year period ( close to October 2029), then there is a risk of the valuation of Future Retail shares getting completely wiped out considering the financial stress the company is going through with reference to settling its materialised liabilities
    2. Under Section 32 of the Indian Contract Act,1872 – Enforcement of contracts contingent on an event happening.—Contingent contracts to do or not to do anything if an uncertain future event happens cannot be enforced by law unless and until that event has happened. If the event becomes impossible, such contracts become void
    3. Till the expiry of a minimum of 3 years and a maximum of 10 years for which Amazon has time to make a decision to acquire the promoters’ share is a long shot for the promoters to wait and not do anything till the expiry of the uncertain future event.
  • The Call option as understood from the SPA gives Amazon a first Right of refusal to buy out the equity shares of the promoters
  • This also has a condition that each time a suitor approaches the promoters, they are expected to communicate Amazon of the offer from the suitor and Amazon shall either exercise the call option or refuse to exercise in which case the promoters shall be permitted to sell their holdings to the other suitor.
  • The SPA also provides that the promoters shall not sell their stakes to a host of 15 investors that includes Reliance, Walmart, Alibaba and other names included in the SPA.
  • Do we understand that if proposed suitor who offers to buy out the promoters’ shares is one of those in the list of 15, then Amazon will compulsorily acquire the promoters’ shares?
  • It does not specifically say that but only show a restricting clause that prevents the promoters from selling to any one from the list
  • Is it not an agreement in restraint of Trade?-
    1. According to Section 27 of the Contract Act, Agreement in restraint of trade, void.—every agreement by which any one is restrained from exercising a lawful profession, trade or business of any kind, is to that extent void.
    2. Restraining the promoters from selling their shares to any suitor who is named in the prohibited list in the SPA is clearly an agreement in restraint of the lawful right of the promoters to sell their shares to anyone of their choice based on commercial consideration. This restraint also does not come within the Exception 1provide in the section.—Saving of agreement not to carry on business of which goodwill is sold

Recourse when one of the parties refuse to perform the Contract

Now with the composite scheme being signed and the process put in motion for the necessary approvals by the Shareholders, SEBI, Competition Commission and NCLT, Amazon’s option is to ensure specific performance under the Contract (SPA).

Chapter V of the Contract Act 1872 deals with the performance of the contract. Since the discussion veers around whether the SPA between Amazon and the promoters of Future Retail is a contract under Section 10 or a Contingent Contract under Section 31, it is not possible to decide on who will start the performance whether Amazon or Future Retails promoters. Though the SPA is signed in October 2019, there is no visible offer to exercise their call option by the Amazon and with the mounting debt in Future retail, it is only commercially prudent to allow a cash rich suitor (Reliance Retail) to acquire the Target Company (Future Retail) which will save the company from going into liquidation and also give the promoters the much needed Return on their Investment. Whether the SPA comes under the provisions of Section 29 of the Contract Act is a matter for judicial interpretation- 29. Agreements void for uncertainty.—Agreements, the meaning of which is not certain, or capable of being made certain, are void.

Now comes the dispute resolution

  • The Share Purchase Agreement (SPA) provides for arbitration to settle the disputes between Amazon and the promoters of Future Retail
  • The seat of arbitration is fixed at Singapore
  • Once the Composite scheme of arrangement between Future Retail and Reliance Retail was signed and the process to obtain the necessary approvals( regulatory and under the Companies Act) is set in motion, Amazon invoked the arbitration clause in the SPA and On October 25, emergency arbitrator VK Rajah issued an emergency arbitration order (EA order) in favour of Amazon. The order restrains Future Group entities from proceeding with the share seal deal or any such agreement with Reliance and other restricted parties mentioned in the non-compete clause signed between Amazon and Future Coupons
  • Now the EA order is being contested in the Delhi High Court on merits whether they are executable in India. –

The Delhi High Court declined Future Retail Ltd.’s plea that Amazon.com Inc. must be stopped from writing to statutory authorities. The statutory authorities and regulators are directed to decide in accordance with the law, the high court said.

The request for the relief was rejected by the High Court for the following reasons –

a) In case Amazon is not permitted to represent its case before the statutory authorities/regulators, it will suffer an irreparable loss. This because Amazon claims to have created preemptive rights in its favour in contemplation of any change in Indian law that would permit it to hold substantial shareholding of FRL.

b) Future Retail may not suffer an irreparable loss to FRL because even if Amazon has made representations based on incorrect facts, it will be for the statutory authorities/regulators to apply their mind and come to the right conclusion.

  • India is a signatory to New York Convention – United Nations Conference on International Commercial Arbitration, New York, 20 May–10 June 1958
  • PART II ENFORCEMENT OF CERTAIN FOREIGN AWARDS CHAPTER I- New York Convention Awards provide under section 44, the circumstances and conditions subject to which Foreign Arbitral awards can be executed in India.
  • Section 44. Definition.—In this Chapter, unless the context otherwise requires, “foreign award” means an arbitral award on differences between persons arising out of legal relationships, whether contractual or not, considered as commercial under the law in force in India, made on or after the 11th day of October, 1960—
    1. in pursuance of an agreement in writing for arbitration to which the Convention set forth in the First Schedule applies, and
    2. In one of such territories as the Central Government, being satisfied that reciprocal provisions have been made may, by notification in the Official Gazette, declare to be territories to which the said Convention applies.
  • Thus under Section 44 of the Arbitration & Conciliation Act 1996 , for a foreign award to be executed in India the following have to be complied with
    1. The Emergency award is to be from a territory that has signed the convention. Singapore which is a signatory to the New York convention is one that has issued the Emergency Award.
    2. The definition of foreign award in order that it becomes executable in India expects that the dispute between Amazon and promoters of Future Retail is due to a legal relationship and that dispute is considered as commercial under currently existing law in India in force. This is a matter for Courts to decide
  • Whether an Emergency Award is a Foreign award under the New York Convention and so covered under Section 44 of the Arbitration Act 1996 –
    • Volume 19. Kluwer Law International, 2017, p. 814: “[…] institutional rules typically provide that the relief granted by the emergency arbitrator lapses once the arbitral tribunal is constituted. Therefore, any such relief cannot be construed to be final and would not be enforceable under the New York Convention.”[6]


  1. Matter is sub-judice before the Delhi High Court
  2. The promoters are contesting Amazon’s argument by stating that there is no violation of the conditions of the Share Purchase Agreement but only the relative assets and liabilities of the Future Retail are being sold to Reliance Industries. If so, why should the transaction go through the Chapter V covering Compromise and Arrangements and not through the provisions of Section 180(1) (a) of the Companies Act 2013 which allows with Shareholder approval, the Board of Directors the power to sell, lease or otherwise dispose of the whole or substantially the whole of the undertaking of the company or where the company owns more than one undertaking, of the whole or substantially the whole of any of such undertakings?
  3. Amazon’s SPA giving them time to a long period of 10 years to decide on their Call option to buy or not the promoter shares may be viewed as a ploy to get a very diluted valuation for the shares since it is an attempt to bind the promoters to the SPA without a corresponding financial commitment on Amazon to buy the promoter shares. There is no valuation indicated in the SPA
  4. The contractual terms are open to legal and judicial interpretation due to
    1. The SPA could be a contingent contract
    2. The consideration is not defined or paid under the Amazon – Promoters of Future Retail SPA
    3. Whether the dispute is due to legal relationship is a matter for judicial interpretation
    4. Whether the Emergency Award is a Foreign Arbitral award covered under Section 44 of the Arbitration & Conciliation Act 1996?
    5. If Amazon is keen on entering the e-commerce space in India directly, then why did it not offer a deal value and get into the similar composite scheme of amalgamation or arrangement in October 2019 instead of just signing a SPA with the promoter group? Is this knowing well that Future Retail is into huge debts and there is liquidity crunch and if Amazon could buy some more time, they could get a low valuation and buy out an existing brand with a huge distribution network for a song?
    6. This doubt comes when FDI in e-commerce since 2018 is through the automatic route up to 100%[7]

This article is written by CA Chandrasekaran Ramadurai, Proprietor at C Ramadurai & CO | Chartered Accountants. He is a chartered accountant, Insolvency Professional and a Registered Valuer.

You can reach him at – LinkedIn, Twitter

Sources and References are given at the End Notes:-

[1] https://economictimes.indiatimes.com/industry/services/retail/amazon-future-coupons-deal-named-15-cos-as-untouchables/articleshow/79052969.cms?from=mdr

[2] https://www.barandbench.com/dealstreet/sam-khaitan-cam-trilegal-wadia-ghandy-act-on-reliance-acquisition-of-future-group

[3] https://reorg.com/asia-future-group/#:~:text=The%20composite%20scheme%20of%20arrangement,with%20subsidiaries%20of%20Reliance%20Industries.

[4] https://blog.ipleaders.in/analysis-of-shareholders-agreement-share-purchase-agreement-and-share-subscription-agreement/#:~:text=Share%20Subscription%20agreement%20is%20drafted,new%20shares%20of%20the%20company.&text=A%20share%20subscription%20agreement%20acts,investor%20at%20a%20certain%20price.

[5] https://www.barandbench.com/dealstreet/sam-khaitan-cam-trilegal-wadia-ghandy-act-on-reliance-acquisition-of-future-group

[6] https://www.soutocorrea.com.br/en/artigos/english-the-enforceability-of-emergency-arbitrators-decisions-under-the-new-york-convention/#:~:text=Kluwer%20Law%20International%2C%202017%2C%20p,under%20the%20New%20York%20Convention.%E2%80%9D

[7] https://dipp.gov.in/sites/default/files/pn2_2018.pdf

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