SEBI Levies Rs 10 Lakh Penalty On Future Retail For Disclosure Lapses

The Securities and Exchange Board of India levied a penalty of Rs 10 lakh on Future Retail Ltd. on Thursday due to inadequate and delayed disclosure on the interim order issued by the Singapore International Arbitration Centre.

The order from the capital markets regulator stems from concerns expressed by Amazon.com over the scheme of arrangement between Future Group and Mukesh Dhirubhai Ambani Group.

The regulator found that Future Retail violated the Listing Obligations and Disclosure Requirements norms.

According to SEBI's order, Future Retail had disclosed the initiation of arbitration proceedings by Amazon before SIAC on Nov. 1, 2020. And this was only after intervention of stock exchanges.

Under the LODR rules, the company should have disclosed this development within 24 hours of the event—on or before Oct. 6, 2020.

The SIAC issued an interim order on Oct. 25, 2020, which favoured Amazon. This order prevented Future Retail from taking any steps to further its Board Resolution of Aug. 29, 2019, regarding the "scheme of arrangement" with the Future group and Mukesh Dhirubhai Ambani Group.

However, Future Retail's disclosure on October 26, 2020, was inadequate. It simply clarified news about the SIAC interim order favouring Amazon in the Future-RIL deal, rather than detailing the arbitration and its financial impact.

"I note that only after active intervention by stock exchanges, noticee (Future Retail) made disclosure regarding the SIAC interim order on November 1, 2020 wherein FRL provided full details of the initiation of arbitration proceedings, chronology of the events, details of interim order, impact of the interim order and all the direction of SIAC under...the LODR Regulations," SEBI Adjudicating Officer Amit Kapoor said.

The interim order was required to be disclosed adequately, accurately, explicitly timely and presented in a simple language not later than 24 hours. In this case on or before Oct. 26, 2020, instead of Nov. 1, 2020.

As Future Retail has violated LODR norms, SEBI levied a penalty of Rs 10 lakh on the company.

The legal dispute between the Future group and Amazon pertained to the sale of Future's retail assets to Reliance Industries Ltd. for Rs 24,713 crore. In April 2022, RIL called off the deal with Future Group.

In August 2020, Reliance Retail Ventures Ltd. had said it would acquire the retail and wholesale business, as well as the logistics and warehousing business of Future Group for Rs 24,713 crore.

The scheme of arrangement entailed the consolidation of Future Group's retail and wholesale assets into one entity Future Enterprises Ltd. and then transfer to Reliance Retail.

The deal was contested by Amazon, an investor in Future Coupons.

In August 2019, Amazon had agreed to purchase 49% of Future Coupons (which owned 7.3% equity in BSE-listed Future Retail Ltd. through convertible warrants), with the right to buy into the flagship Future Retail after a period of three to 10 years.

Amazon later dragged Future into arbitration at SIAC, which passed an interim award in favour of the US e-commerce major.

(With PTI inputs)