Reliance Allowed to Seek Creditor Nod for Future Group Deal

In an interesting development, the NCLT Mumbai Bench permitted Reliance Retail Ventures to call for an Extraordinary General Meeting (EGM) to seek approval of its creditors and shareholders for the Future group merger deal. The NCLT Mumbai Bench also ruled that the objections raised by Amazon were premature and could be dealt with later.

The Rs.24,713 crore merger deal between Future group and Reliance Retail Ventures had run into legal wrangles after Amazon had objected to it. Amazon has an indirect stake in Future Retail due to its 49% stake in Future Coupons. Amazon’s contention was they should have been given the first right of refusal on account of the non-compete clause.

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This ruling of the NCLT is all the more interesting because on 28-Sep, the NCLT had permitted six of the Future group companies to seek approval of creditors and shareholders via EGM for the proposed restructuring of companies ahead of the merger with Reliance Retail. However, since the Supreme Court final order on the subject is still pending, the NCLT has underlined that this is just a preparatory step ahead of the final Supreme Court order.

As the next step, the Future group companies will hold their respective EGMs between 10-Nov and 14-Nov while RRVL will hold its EGM on 30-Nov. The merger will still be subject to the final verdict of the Supreme Court in this subject. Future group companies and Amazon are parties to the litigation, which is pending with the Supreme Court.

Post the merger deal announcement in Aug-20, Amazon had approached the Singapore International Arbitration Centre (SAIC), which had asked for the merger to be put on hold till the final verdict. Future had objected to the jurisdiction of the SAIC, but the Supreme Court has set that debate to rest by ruling that Future group is bound by the SAIC decision.

Under the terms of the merger deal, Future Retail, Future Consumer, Future Supply Chain and Future Lifestyle Fashion will first merge into Future Enterprises. While the retail and wholesale business will be transferred to a subsidiary of RRVL, the logistics and warehousing business will be directly transferred by Future group to RRVL. 

Post the deal, Future group will repay its debt, but will be only left with a handful of businesses, including the 2 insurance joint ventures.