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"Sher Ko Sava Sher Mil Hi Jata Hai". Jeff Bezos may be the richest person in the world and is one of the most influential people in the world but not in Asia (Remember the fiasco in China), definitely not in India.
If one has been following the news then one would know that there is some tussle going on between Ambani and Bezos over Biyani’s assets. Biyani’s retail business essential for both Amazon and Ambani in their ambitions to capture the retail market of India. So when Ambani said that he would buy Biyani’s assets, Bezos was not happy. He moved quickly to stop the transfer of assets and brought in a favourable order from Singapore’s Arbitration tribunal to stop the sale. However, Ambani’s response was, “Meh”. I don’t care, I will go ahead. Biyani just wants the money and being with someone who can mold (Remember TRAI’s change in definition for predatory pricing, or change in E-commerce rules) the regulations to his will, Biyani also agreed to ignore the ruling.
What was the basis of Bezos' argument?
In 2019, Amazon had invested INR 1500 cr to acquire a 49% stake in Future Coupons, an entity owned by Future Group. In the hopes of tapping into the vast retail network, Biyani had created. Amazon is also looking to have an omnichannel play where Future retail was supposed to be pivotal. As a part of the agreement, Amazon was supposed to have the first ‘Right of First Refusal’ in case Mr. Biyani chooses to sell the business. Additionally, all the disputes were to be settled in the arbitration court of Singapore (More on it later). Hence, when Biyani was desperate to sell off his business, Ambani came and said, “I will rescue you”. But Bezos always thought he would be the knight in the shining armor for Biyani. He would win the crown. Feeling betrayed and heartbroken Amazon went to Singapore to claim what he believes is rightfully his. Ambanis, the first family of India, who have already conquered the petrochemicals and telecom sector, now wanted to firm his grip on the retail sector. This is why he is unrelenting to let go of Future Group’s assets, international contracts and supply chain networks. This deal directly puts him miles ahead of Mr. Damani’s D Mart (Somehow all three’s surnames end with ‘ani’)
What not Indian Courts, why SIAC (Singapore International Arbitration Centre)?
Typically, Indian Courts are notorious for their delays and are highly inefficient. On the other hand, Singapore over the years has emerged as a viable alternative. In fact, as per 2019 SIAC’s annual report, India (495 cases) is the biggest user of Singapore’s Arbitration Centre. It is efficient and acts as neutral ground.
Even though the judgment is not binding as per the Indian law, as Reliance pointed out. It has been a practice that people do follow the rulings, as it is what was agreed upon in the contract.
What then for Amazon, Game over?
Not outrightly, in case the parties who agreed to the arbitration choose not to follow it, then the party which obtained the favourable judgment can go to the Indian High court to make the losing party comply. Section 9 of the Arbitration and Conciliation Act, 1996 provides this relief. However, not sure how long will it take and how the decision would move.
Reliance and Future group have decided to move quickly and close the deal. Their move as of now is only unethical but not illegal.
Why should the reader be concerned?
I really don’t care about Amazon. Actually, I have invested in shares of Reliance. Still, with a heavy heart, I wish that Reliance would heed the ruling.
Because if the richest man in the world can not enforce a contract in India, then what would the poor do. It would set an extremely horrible precedent. In the ease of doing business, we have an abysmal rank of 163 out of 185 nations. On average it takes about 1500 days to enforce a contract in India, meanwhile, about 30% value of the asset under the claim is generally lost. Even government agencies nullifying the contracts or amending it is not unheard of. If the defendant is the jury, then it is highly problematic.
If the government is serious about inviting countries to set up manufacturing facilities in the country, then no one should be allowed to pull such tricks. It was Tamil Nadu’s corruption that forced Nokia’s hand into closing its factory in the early 2010s (In addition to Android), we had a Vodafone embarrassment handed to us recently. And now this. At the world stage, we would lose the name.
Contracts should be legally enforceable, otherwise, the small businessman would crumble under those who have the money. That will definitely not lead to “Sabka Vikas”.
GEEK CORNER
Arbitration: If one has seen Hindi movies of 60's and 70's, the tribe /villagers would go to the Mukhia (Sarpanch) if there was a decision to be taken on a dispute. Parties would put their point of view, the head would take the call. That is exactly what arbitration is. The only difference is that there is no head, but people mutually choose a neutral third party (Generally an ex-judge) to take the decision. Unlike the movies, people end up following the decisions. (with some exceptions)
Right of First Refusal: Suppose you like someone, but the other party says that he/she is not interested in a relationship right now. He/she loves you, just not like that. If he/she chooses to get in a relationship with someone, that person would be you. Hence, in your head you are the person, the other party would come to first before exploring the market. Now, the ball would be in your court. This is what we mean by the Right of First Refusal. Bezos was the lover in waiting, and he was left waiting.(Channa mereya playing in background)
