Amazon – BigBazaar – Reliance Saga.

The Amazon – BigBazaar – Reliance Saga.

Future Retail runs BigBazaar , fbb , Foodhall, Easyday Club and Heritage Fresh and positioned itself as the India’s second largest offline retailer.

In Aug 2019, When amazon was hinted about Reliance showing interest in Future Retail, Amazon took a backdoor entry by acquiring 49% stake in a separate entry Future Coupon Private Ltd for Rs. 1500 Cr which in turn held 7.3% stake in Future Retail.

The Amazon lawyers thought that it was an intelligent move to follow the twin entity investment model, wherein the Share holders agreement with Future Coupons included several non-compete clauses that prevented Future Retail from selling out to Amazon rivals including Reliance

Amazon were also granted a call option which allowed Amazon to acquire all or part of the promoter’s shareholding in Future Retail once rules for foreign investment in retail are eased.

In Oct 2020 , when FRL was further hit by the Covid-19 pandemic, Reliance Retail offered Rs 24,500 crore to FRL to sell its retail businesses. Amazon in view of its SHA in 2019 approached the Singapore Arbitration Tribunal and had the proposed sale stayed

But in the meantime, Reliance took a move which can be considered as a masterstroke. Reliance approached all the landlords of 800+ odd stores who were as such not getting timely payments and offered to restructure the lease agreement.

By anticipated offer of Rs. 24,500 Cr, Reliance also managed to take the management of FRL into confidence and change all the lease agreements which now allowed Reliance to become lessee and then sub-lease the properties to FRL.

Reliance waited patiently for FRL to default on rents for more than 3 months and , in the dead of the night on Feb 25, Reliance Executives entered 893 stores and handed over termination notices for leased outlets cancelling the sub-lease for rent default.

In the morning, all the 30000+ employees of Big Bazaar who came for their routine job were told that either they can wear Reliance jerseys or can leave! The stock taking process was undertaken and this is how Reliance rebranded all the stores overnight.

What Reliance did is rightful possession or seizure of assets ? Is Amazon SHA an agreement in restraint of trade or valid ?

While there may be more nuances to this Saga which will have a see-saw litigation, Reliance seems to have outsmarted the E-commerce giant as the recent cloak-and-dagger operations proved that in a street fight in India, right to possession is the King.