Amazon India head Amit Agarwal has been summoned by the Enforcement Directorate next week over alleged irregularities in a deal with Future Group, sources have said. Amazon had bought 49 per cent stake in Future Retail in a deal worth some ₹ 1,400 crore in 2019.
The Enforcement Directorate’s angle in the case is to see whether the deal violated India’s law on foreign exchange, or the Foreign Exchange Management Act (FEMA), which outlines the formalities and procedures for all such transactions in the country.
The FEMA case against Amazon India was filed in January this year.
The Enforcement Directorate’s summons came after the Delhi High Court made certain observations on the court fight between Amazon and Mukesh Ambani’s Reliance Industries Ltd.
Reading together the three agreements – Future Retail shareholders agreement with Future Coupons, Future Coupons’ shareholders agreement with Amazon, and Future Coupons’ share subscription agreement with Amazon, the high court had said they have “prima facie transgressed from a protective right to a controlling right in favour of Amazon.”
Simply explained, the high court observed that Amazon through these three agreements took control of Future Retail without the permission of the government, which would violate the FEMA and foreign direct investment, or FDI,rules.
An Amazon spokesperson in a statement said they are examining the summons. “We are in receipt of summons issued by the ED (Enforcement Directorate) in connection with Future Group. As we have just received the summons, we are examining it and will respond within the given time frame,” the spokesperson said.
Mr Ambani’s company has plans to take over Future Retail, a move that Amazon has been working hard to block. Amazon and Mr Ambani have been fighting in courts in India and abroad.
Amazon has so far used the deal with Future Retail to argue breach of contracts when the Indian company announced plans to sell its retail assets to rival Reliance Industries last year.
Amazon says Future Retail’s plan to sell its stores to Reliance Industries violates the 2019 partnership contract, while the indebted group says it would collapse if the transaction fails.