Future Group, its promoters ‘orchestrated and committed’ fraud, says Amazon

Amazon alleged that such fraudulent and malicious behavior on the part of Future Group and its promoters had robbed Amazon of its bona fide investment base. It said it amounted to fraud, misdemeanor and misdemeanor with intent to defraud itself and the “MDA (Mukesh Dhirubhai Ambani) Group” and gain undue advantage.

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“All of the foregoing acts on behalf of the Promoters and the Entities involved (including FRL) have been spearheaded and orchestrated by the addressees herein, in particular Mr Kishore Biyani and Mr Rakesh Biyani,” Amazon said in a letter sent on June 6, 2022, which was rated by Business Standard. “The acts mentioned above are culpable, constitute fraudulent conduct and also entail sanctions under the criminal laws and also amount to contempt.”

Amazon called on Future Group and its promoters not to proceed with the proposed transaction, directly or indirectly, and to abide by the EA (Emergency Arbitrator) orders in the EA Order, as affirmed by the Tribunal Order.

“Please note that any attempt to fraudulently or maliciously circumvent and circumvent the binding orders in the EA Order would make all parties, whether acting directly, liable for actions or consequences in accordance with the law” Amazon said.

Amazon said the transfer of supply chain and logistics companies was part of the settlement, which was approved by FRL’s board of directors on August 29, 2020, in violation of Amazon’s rights under the agreements (disputed transaction). It was then ordered via EA warrant, which was also reaffirmed by the tribunal.

The Scheme of Arrangement provided for the amalgamation of several companies of the Future group into Future Enterprises Limited (FEL), and a simultaneous split of ‘Logistics & Warehousing Undertaking’ and ‘Retail & Wholesale Undertaking’ from FEL as a continuity in a slump – sales base to certain entities of the MDA Group (Reliance Retail Ventures Limited and Reliance Retail and Fashion Lifestyle Limited).

Since the Scheme of Arrangement was rejected by FRL’s creditors, Amazon alleged that FRL had already transferred 835 stores (stores) to MDA Group through a fraudulent and complicated ruse. The company claimed that FRL now intended to transfer its entire supply chain, warehousing and logistics operations to MDA Group through the proposed transaction.

“The renewed controversial discussion belies FRL’s statements in the March 16 disclosure, in which FRL alleged that MDA Group had taken over the stores ‘by force’ and that the board of directors had expressed a ‘strong objection’ to such actions by MDA. Group.”

Rather, Amazon claimed that the Future group was now planning to enter into a new commercial transaction for the sale of its supply chain and logistics operations. These are in addition and complementary to the business of the stores of the same entity (MDA Group), which supposedly has forcefully acquired the stores, which accounted for 55 to 65 percent of FRL’s retail sales.

Amazon claimed that “it is shocking to note that despite MDA Group causing such a huge loss of revenue to FRL’s retail business, and has in fact allegedly been handing FRL’s stores against lease fees of only Rs 1,100 crore (the size of the small store itself was valued by the lenders at Rs 3,000 crore) the Future group is negotiating the proposed transaction and plans to continue a business relationship with MDA Group.

Amazon said it had continuously expressed its willingness to provide FRL with financial support to enable it to pay off its debts. Amazon had facilitated a potential investment through an institutional investor (Samara Capital), which would lead to an infusion of Rs 7,000 crore into FRL.

Although FRL had rejected such offers of extension of financial support from Amazon, on April 26, 2021, FRL entered into a framework agreement, which envisaged generating revenue from the small format stores in the amount of Rs 3,000 crore. In reality, however, there were no outstanding lease tenancy rights as evidenced by multiple documents. “FRL falsely allowed the termination of its leases, which led to MDA Group acquiring as many as 835 stores,” Amazon said.

Amazon claimed that the aforementioned facts and circumstances clearly showed that the Futures group continued to work with MDA Group to fully transfer its retail operations.

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