If ‘control’ is read, as sought by Amazon now, its investment would be violation of FDI policy

New Delhi, Nov 18 : The Future Retail shareholders agreement, the Future Coupons shareholders agreement and the Future Coupons share sales agreement are not an integrated transaction and if these agreements were to be treated as a single integrated transaction, it would tantamount to Amazon’s investment in FCPL being actually an indirect investment in FRL, and Amazon’s exercising control over FRL, both of which would be held illegal.
It is precisely for this reason that Amazon chose to invest in FCPL, i.e. FDI in a non-MBRT business venture, where FDI is allowed under the automatic route.
Amazon, as part of its notice to CCI regarding its investment in FCPL, while calling out the background to FCPL SHA (and FRL SHA), expressly stated that the investment is in FCPL for promoting its interest in FCPL business only. Thus, the CCI, while approving Amazon’s investment, studied the FCPL business alone to assess if there’s any appreciable adverse impact on competition. The MBRT business was not there in the scope of CCI’s study at all.
It is for this precise purpose the FCPL SHA in Clause 15.17 specifically calls out that that Amazon’s investment is in FCPL only and there’s no agreement or understanding whatsoever in relation to the acquisition of shares or voting rights in, or exercising control over, FRL and that FCPL, the promoters and Amazon otherwise do not intend to act in concert with each other in any way whatsoever.
Without the clause 15.17 of FCPL SHA, a conflated (combined) reading of FRL SHA, FCPL SHA, and FCPL SSA will reveal that Amazon’s rights to dictate and direct FCPL (and the Kishore Biyani Group) together holding in excess of 50 per cent equity in FRL, as on August 2019, to ‘act and not act’, and ‘to vote and not vote’ regarding each and every matter concerning FRL’s affairs, would amount to Amazon exercising ‘control’ over FRL.
If ‘control’ is read, as is sought by Amazon now, its investment would be treated as a violation of the FDI policy for FDI in MBRT business.