Amazon vs the Future Group Line of Control: Did Amazon as an investor cross it?

Written by Sakshi Garg

Graduate, Hansraj College, Delhi University

Disclaimer: Please note that the views expressed below represent the opinions of the article's author. The following does not necessarily represent the views of Law & Order.


De facto control of an organization has been a bone of contention in the courts for a long time now. From concept of corporate veil to indirect ownership, the question which often ends up in court is who is actually controlling the organization. Determination of the entity that has control over the management and decisions is an abstruse task. However, a myriad of legal obligations, tax considerations and policy regulations depend on it. Thus, organizations often end up in court while contending over control power. Due to the line being so thin, courts often have to peruse through each case to decide the matter.

One such issue was raised by Future Retail in its case with Amazon[1] when it was brought before the Delhi High Court to adjudicate on the validity of an interim award passed by the emergency arbitrator appointed by the Foreign Seat of Arbitration. The court held that the award given by Emergency Arbitrator shall be binding. Inter-alia, the dispute regarding the ambit of Amazon’s control over Future Group was also brought forward. It was observed that prima facie the control asserted by Amazon was within the meaning of control and seemed to be contradictory to the FDI Rules and Foreign Exchange Management Act which restricts foreign investors in multi retail whether directly or indirectly.

Brief overview of the case:

The case dates back to the time when Amazon signed a contract with the future group to acquire a 49% stake in Future Coupons Private Limited in 2019. The deal was executed in three transactions. Transaction 1 issued voting equity shares of Future Coupons Private Limited(FCPL) to Future retail. Transaction 2 transferred 2.52% shares of FCPL held by Future Corporate Resources Private Limited (FCRPL) to FCPL. Transaction 3 dealt with the acquisition of 49% shares of FCPL by Amazon. Amazon also added certain clauses to the Shareholder’s Agreement (SHA) to ensure the protection of rights that were agreed upon by the Promoters. As per clause 14, prior written consent was required from Amazon if any transfer of retail assets was to be made to a person from the mutually agreed list of restricted persons. Unfortunately, due the COVID 19 pandemic, the business of FCRPL was plummeting, besieging them with debt. In order to sustain the business, Future Retail agreed to sell its retail, wholesale, logistics and warehousing businesses to Reliance Retail for INR 24,713 Cr. Amazon claimed that the deal was in violation of the Shareholder’s Agreement(SHA). In rebuttal, Future Group contended that the control asserted by Amazon over the group itself seems to be more than what is allowed by FEMA and FDI Rules. Thus, the nature of Amazon’s control over the Future group became the issue that was dragged to Singapore International Arbitration Center and the Delhi High Court.

Defining ‘Control’:

Before discerning whether Amazon crossed the line of control, understanding what control itself is would be very important. The term ‘control’ has been defined under Section 2(27) of the Companies Act, 2013 wherein it is stated that control shall include the right to appoint a majority of the directors or to control the management or policy decisions exercisable by a person or persons acting individually or in concert, directly or indirectly, including by virtue of their shareholding or management rights or shareholders agreements or voting agreements or in any other manner. Even in FDI rules (Rule 2.1.8 as given in consolidated FDI policy 2020[2]) the definition remains the same.

It can be construed from the definition that the scope of control is wide and determination would be based on influence rather than a number of voting rights., it can be reckoned that in this case, Amazon by the virtue of its shareholding agreement with Future group is indirectly essaying control over Future retail by objecting to their deal with Reliance.

It was contended by the counsel of Amazon that the precedent established in Arcelor Mittal case[3] shall apply wherein it was held that the expression ‘control’ denotes positive control, which means that the mere power to block special resolutions (negative control) of a company cannot amount to control under the Code. The Delhi High Court deduced the contrary, i.e., the rights granted to Amazon by the conflation of the two Shareholders Agreements are prima facie disproportionate to the actual shareholding of Amazon and by camouflaging of words, the extensive rights held by Amazon by the provisions of the inter se agreements set out above, cannot be masked as mere protective rights so as to fall beyond the test of control as elaborated in Arcelor Mittal. It is the author’s assertion that application of such precedence shall be circumstantial as a negative control when exercised beyond a limit may in umpteen cases amount to Positive control. The claim of Amazon can be viewed as one such case. The rationale for the investor protection right clause in the shareholding agreement was to ensure investment security and prospects of future investment. These clauses give the right to participate and to have a voice in matters but they could not provide explicit right to control the management decisions of the organization by the means of certain contractual agreements with alternate objectives. By the virtue of Section 23 of the Indian Contract Act, 1872[4], any contract/clause whose object is unlawful or if permitted, would defeat the provision of any law shall be declared void and would be not enforceable. Amazon vide clauses 13 and 14 of FCPLSHA asked for voting rights or consent which could be interpreted as asking for permission from Amazon thus establishing indirect control which would defeat the FDI provisions. Clause 14 of SHA expressly states that the Promoters have agreed not to transfer, encumber, divest or dispose of these Retail Assets (as defined in the SHA), directly or indirectly, in favour of a mutually agreed list of Restricted Persons (as defined in the SHA) and sale/disinvestment would require a mutual written agreement. These investor protector rights seem to be disproportionate to its shareholding in Future retail when it is calculated indirectly via FCPL.

Additionally, in Para 30 of the SHA dated August 22, 2019, it was notified by Amazon that the rationale for investment in FCPL was its belief that FCPL holds potential for long term value creation and providing returns on its investment. If Amazon seeks to buy a shareholding in Future retail by the virtue of its agreement with FCPL, it could be interpreted as the real inspiration behind investment which would be contrary to what Amazon has iterated in front of the Competition Commission of India in order to obtain approval for the deal.


Amazon, who contends that the deal violates certain clauses of its SHA with Future Group and promoters of Future Retails, and Future retail who question the nature of amazon’s claim itself, seems to be at crossroads. If the final decision swings in favour of Amazon, Future of Future Retail would end up in quandary and would initiate insolvency proceedings leaving many employees unemployed. However, if the decision is vice-versa, it could attenuate the confidence of foreign investors who plan to invest in India. It could impact the FDI of the country as the investors could be sceptical about the investor protection rights and their enforcement. All these issues shall make the final decision, for which SIAC has already constituted a panel[5], even more significant for future investments in the country and also for Indian business entities that already find it difficult to operate freely in the midst of a complicated legal framework.

[1]Future Retail Ltd. Vs Amazon, CS (COMM) 493/2020 (Delhi High Court, 21/12/2020)

[2] Consolidated FDI Policy Circular of 2020, can be accessed at (last visited on 12th November, 2021)

[3]ArcelorMittal India Private Limited v. Satish Kumar Gupta & Ors., (2019) 2 SCC 1 "83

[4]Indian Contract Act, 1872

[5] Aniruth Laskar, Siac panel set up for verdict in Future Group vs Amazon case, can be accessed at , (last visited on 23rd November, 2021)


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