The Enforcement Directorate (ED) has summoned the top management of Amazon Inc. and Future Coupons Pvt Ltd. (FCPL) for questioning and verification of documents in connection with their August 2019 deal. The ED has summoned Amazon’s India head, Amit Agarwal, besides promoters of the Future Group to turn up next week at the New Delhi headquarters of ED.
Amazon is taking legal consultation about the summon issued by the ED, adding that the company will respond within the given time frame. “We are in receipt of summons issued by the ED in connection with the Future Group. As we have just received the summons, we are examining it and will respond within the given time frame,” Amazon India said in a statement.
In 2019, Amazon had invested Rs 1,431 Crore to purchase a 49% stake in Kishore Biyani led FCPL. The ED is investigating whether Amazon had violated Foreign Exchange Management Act (FEMA) and complied with other regulations. FCPL owns a 9.82% stake in Future Retail Ltd, the promoter entity that runs a chain of retail stores namely Big Bazaar, Food Bazaar, and Easyday. Therefore, by acquiring the 49% stake in FCPL, Amazon had gained control of 4.81% in Future Retail, which also granted it veto power in the company.
Amazon is using this stake in Future group to block the proposed acquisition of Future group by Reliance group, and is engaged in a bitter legal war over the issue. Amazon founded by Jeff Bezos has been opposing the proposed Rs 24,700 sale of assets of Future Retail to Mukesh Ambani led Reliance Industries Ltd, alleging breach of control. Amazon contested and prevented the deal stating that according to the August 2019 deal, Future Group can’t finalize any deal with Reliance Retail Ventures Ltd which is a subsidiary of Reliance Industries Ltd.
The Independent directors of the Future group have alleged that Amazon violated FEMA regulations in the FCPL deal, and has asked the Competition Commission of India (CCI) to revoke the approval given to the deal. The directors have accused the American online retail giant of misleading authorities to obtain approvals for the purchase of stake at the FCPL. They alleged that Amazon had concealed information and misrepresented facts while seeking approval for the investment from CCI. Taking cognizance of the complaint, the CCI issued a show-cause notice to Amazon after examining documents.
Citing internal communications of Amazon, the directors also alleged that Amazon had originally planned to buy stakes in Future Retail directly, but after the govt banned FDI in retail, it had cancelled the initiative. It then took an alternate route, and purchased the 49% stake at Future Coupons Pvt Ltd, which had 9.82 % stake in Future Retail, thereby gaining control over the Indian retail giant bypassing the ban on foreign ownership of Indian retail companies.
When Amazon approached Delhi High Court against the acquisition of Future Retail by the Reliance Group, the court had made certain observations against Amazon. The court had observed that through the conflation of three agreements, Amazon had attempted to gain control over the entity without the permission of the government.
While the Delhi High Court had already made observations, the Confederation of All India Traders (CAIT) also shot a letter to Department for Promotion of Industry and Internal Trade (DPIIT). CAIT accused major e-commerce players like Flipkart and Amazon of violating FEMA and FDI rules. DPIIT which comes under the Ministry of Commerce forwarded the representation of CAIT to ED and asked to look into the matter.