Case BriefsSupreme Court

Supreme Court: The 3-judge bench of NV Ramana, CJ and AS Bopanna and Hima Kohli, JJ has granted liberty to Future Retail Limited (FRL) to approach the Delhi High Court by filing an application seeking continuation of the NCLT proceedings beyond the 8th Stage i.e. Meeting of Shareholders and creditors.

Within a few months of Amazon’s investment, Future Group entered into transactions with Reliance Group which envisaged amalgamation of FRL with Reliance Group. Amazon initiated an arbitration proceeding before the Amazon filed an application for emergency relief with the registrar of the SIAC court of arbitration seeking interim prohibitory injunction to prevent FRL and FCPL from taking further steps in the transaction with the Reliance group. Parallelly, FRL filed a suit before the Delhi High Court, against amazon for tortious interference in the scheme for the sale of assets.

Emergency Arbitrator, by order dated 25.10.2020, injuncted FRL from taking any steps to materialize the deal, including injunction against proceedings before various Regulatory authorities. However, notwithstanding with such directions, Future Group went ahead with the disputed transaction.

By order dated 21.12.2020, Delhi High Court came to a conclusion that Regulatory authorities had to pass appropriate orders considering the representation of both FRL and Amazon, before granting approvals.

On 06.08.2021, the Supreme Court ruled in favour of Amazon in the infamous Future-Amazon dispute. It has been held that the interim award in favour of Amazon, passed by the Emergency Arbitrator appointed under the Arbitration Rules of the Singapore International Arbitration Centre is enforceable under the Indian Arbitration Act.  Read more

The present order of the bench came after Senior Advocate Harish Salve, appearing for FRL, argued that it would take 6-8 months to complete the entire process and for actual sanctioning of the Scheme by the NCLT. Hence, if an order is passed, by the Arbitral Tribunal, in favour of FRL, then it will be difficult to initiate fresh proceedings before NCLT at that stage. Further, FRL is incurring expenditure everyday and there is an imminent threat of insolvency. Any delay in the proceedings before the NCLT will have serious ramifications and virtually render the agreement between FRL-Reliance group redundant. Furthermore, the livelihood of 2,000 employees of FRL are also at stake. He also contended that the continuation of the NCLT proceedings will not adversely affect Amazon in any manner.

[FUTURE COUPONS PRIVATE LIMITED v. AMAZON.COM NV INVESTMENT HOLDINGS LLC, 2022 SCC OnLine SC 188, order dated 15.02.2022]


Counsels

For Amazon: Senior Advocates Gopal Subramanium, Aspi Chinoy and Ranjit Kumar

For FRL: Senior Advocate Harish Salve

For FCPL: Senior Advocate Mukul Rohatgi

Legal RoundUpTribunals/Regulatory Bodies/Commissions Monthly Roundup

Appellate Tribunal for Electricity (APTEL)


State commission disallows benefit of increase in the tariff based on the change in law provision; Tribunal directs reconsideration

A Coram of R.K. Gauba (Officiating Chairperson) and Sandesh Kumar Sharma (Technical Member) decided on an appeal which was filed by Solar Power Project Developer (“SPD”) assailing order passed by respondent Bihar Electricity Regulatory Commission (“the State Commission”) disallowing the benefit of increase in the tariff based on the change in law provision with respect to increased Operation and Maintenance (O&M) costs of its 10MW solar power generating system.

Read full report here…


Armed Forces Tribunal (AFT)


AFT grants war injury pension to soldier who sustained injuries resulting in disability during Operation Hifazat

The Bench of Justice Dharam Chand Chaudhary (Member J) and Vice Admiral HCS Bisht (Member A), granted war injury pension to the ex-serviceman who had sustained injuries resulting in disability during Operation Hifazat.

Read full report here…


Arbitral Tribunal, New Delhi


Arbitral Tribunal finds SJDA at fault; directs to refund bid amount of Rs 84.24 crores to the claimant in New Township Project

“No permission for conversion of land was obtained and, therefore, even if all other conditions were fulfilled, the Claimant-Developer could not have commenced construction activities on the agricultural lands without obtaining conversion of land use.”

Read full report here…


 Competition Commission of India (CCI)


Apple charging a commission of up to 30% on all payments made through its in-app purchase system, is a violation of its dominant position? CCI orders investigation 

“Some consumers may have preference for closed ecosystem like Apple and others may have a preference for open ecosystems like that of Google.” 

Read full report here… 

Why did CCI suspend the Amazon-Future deal? Detailed analysis of CCI order imposing Rs 202 crores penalty on Amazon

“Amazon had misled the Commission to believe, through false statements and material omissions, that the Combination and its purpose were the interest of Amazon in the business of FCPL.”

Read full report here…

Is Google abusing dominant position in news aggregation? CCI gives prima facie findings; discusses Snippets, Mirror Image Websites, Paywall Options, etc.

“Google appears to operate as a gateway between various news publishers on the one hand and news readers on the other. Another alternative for the news publisher is to forgo the traffic generated by Google for them, which would be unfavourable to their revenue generation.”

Read full report here…


 Customs Excise & Service Tax Appellate Tribunal (CESTAT)


“Obiter dictum” not legally binding as precedent; jurisdictional commissioner cautioned for filing frivolous applications

Suvendu Kumar Pati (Judicial Member) dismissed an appeal which was filed in response to the order passed by this Tribunal for rectification of mistake on the ground that the order to the extent of availment of service of outdoor catering was not proper.

Read full report here…

Jurisdiction for claim of refund filed/initiated to be dealt under the provision Central Excise law and not by the provision of CGST law

Ashok Jindal (Judicial Member) dismissed the application filed by the Revenue (CCE & ST, Panchkula) for ratification of mistake in a final order by the Tribunal which was noticed by the Applicant. The Tribunal dealt with two issues (a) whether to ratify previous order & (b) to deal with the jurisdiction

Read full report here…

Is there any provision under Cenvat Credit Rules, 2004 or Finance Act, 1994 for reversal of CENVAT credit for services provided for which no consideration is received by an assessee? CESTAT analyses

“CENVAT Credit Rules or Finance Act there was no provision for reversal of CENVAT credit for the services provided for which no consideration for service provided was received by an assessee.”

Read full report here…


District Consumer Disputes Redressal Commission, Kolkata


Consumer cannot be forced to pay “service charge” in a restaurant: Consumer Forum finds conduct of restaurant contrary to principles of Consumer Protection Act

“The OPs must have been aware of the guidelines of Fair Trade Practice related to changing of service charge from the consumers by hotels/restaurant issued by Department of Consumer Affairs, Government of India, inter alia, stipulating that service charge on hotel and restaurant bill is “totally voluntarily” and not mandatory.”

Read full report here…


Income Tax Appellate Tribunal (ITAT)


If lessee is not actual owner of property, can actual rental expenses be claimed on return of income? ITAT decides

“The assessee-company has merely taken the assets on lease from the owner, and it is accordingly eligible to claim actual rental expenses in the return of income.”

Read full report here… 

Can merely disowning bank accounts exempt assessee from paying tax? Read why ITAT approved addition of Rs 12.81 Crores under S.68 of Income Tax Act

“Merely disowning the bank accounts by the assessee does not lead to the conclusion that the accounts are not maintained by him when there is a direct evidence contrary to the contention of the assessee.”

Read full report here…


 National Consumer Disputes Redressal Commission (NCDRC)


Homebuyers cannot be expected to wait indefinitely for taking possession: NCDRC allows consumer complaint against Builder, directs refund, imposes costs

Commission dealt with a complaint filed under Section 21 read with Section 2(c) of the Consumer Protection Act, 1986 by the complainant in respect of a plot allotted to him promoted by the OP, claiming deficiency of service due to delay in handing over possession of the plot allotted and claiming refund of amount deposited with compensation.

Read full report here… 

Insurer refuses to issue insurance policy as Risk Confirmation letter obtained on concealment of material fact by Insurance Broker: Policy will be vitiated? NCDRC answers

“Section 19 of Contract Act, 1872, provides that when the consent of an agreement is caused by coercion, fraud, or misrepresentation, the agreement is voidable at the option of the party whose consent is so caused.”

Read full report here…

Plastic pieces found in slices of bread, but compensation denied to consumer. Read why NCDRC set aside State Commission’s order of compensation

Ram Surat Maurya (Presiding Member) addressed a matter wherein Britannia was alleged to have pieces of plastic in its bread, but the complainant failed to prove that the bread was manufactured by the said company.

Read full report here…

Minor treated for “Measles” instead of “Stevens-Johnson Syndrome” due to wrong diagnosis and leading to medical negligence: Read detailed report on NCDRC’s decision

“The patient at her young age of 12 years suffered very serious and potentially fatal SJ syndrome. It was the patient’s sheer good luck that she survived in spite of such grossly inappropriate/inadequate treatment at every stage.”

Read full report here…


National Company Law Appellate Tribunal (NCLAT) 


Is it proper for NCLT to record finding regarding default when RP is yet to consider it and submit report? NCLAT discusses Ss. 95, 97, 99 IBC

“…there cannot be any dispute with the statutory scheme as contained in Section 97 that when application is filed by the Resolution Professional under Section 95, the Adjudicating Authority shall direct the Board within seven days of the date of the application to confirm that disciplinary proceedings pending against the Resolution Professional or not and the Board was required within seven days to communicate in writing either confirming the appointment of the Resolution Professional or rejecting the appointment of the Resolution Professional and nominating another Resolution Professional.” 

Read full report here…

Aggrieved with the categorisation as ‘unsecured creditor’, Tribunal secures ‘secured creditor’, having relinquished the security interest

The Coram of Ashok Bhushan J, (Chairperson), and Dr Alok Srivastava (Technical Member) while accepting the appeal and rejecting the claim of the respondent, the Tribunal was of the opinion that the Adjudicating Authority committed an error in rejecting the claim of the appellant to be ‘secured creditor’.

Read full report here…

Is approval with 90% vote of CoC required before allowing withdrawal of CIRP application even where CoC was not yet constituted? NCLAT clarifies law on S. 12-A IBC 

“…when the application is filed prior to the constitution of Committee of Creditors, the requirement of ninety percent vote of Committee of Creditors is not applicable and the Adjudicating Authority has to consider the Application without requiring approval by ninety percent vote of the Committee of Creditors.”

Read full report here…

Dominant position and Predatory Pricing or Win-Win for riders and drivers? NCLAT upholds CCI’s decision

“We do not think that Ola could operate independently of other competitors in the relevant market, and hence it did not enjoy a dominant position in the market.”

Read full report here…

Once Adjudicating Authority approves Resolution Plan, does it still remains a confidential document? Read what NCLAT says

“The category of creditors including the Members of the suspended Board of Directors or the partners of the corporate persons, who are entitled to participate in the meeting of the Committee of Creditors are entitled to receive copies of all documents.”

Read full report here…


 National Green Tribunal (NGT)


Rampant noise pollution, incessant use of horns; a Deplorable state of affairs! NGT finds Rajasthan in contempt of Supreme Court’s order 

While addressing the issue of pressure/air horns and motor vehicles being driven with intolerable sound in Rajasthan, the Bench comprising of Justice Sheo Kumar Singh (Judicial Member) and Dr. Arun Kumar Verma (Expert Member) found the State of Rajasthan in contempt of the Supreme Court’s order and issued notice to the state government to reply within three weeks.

Read full report here…


Securities Exchange Board of India (SEBI)


Twitter, Telegram and the tattered chances-Illicit act of swindlers recommending stock tips on social media; Tribunal acts immediately

“The tips circulated through the Channel create an inducing impact which are then followed by the subscribers and ironically, such stock tips may also prove to be true, if large number of recipients of such tips believe it and collectively act on it. Slowly and gradually, after seeing the price of the said thinly traded scrip actually rising, more and more subscribers start believing in the tips and start acting on it, which further strengthens the belief of such tips being genuine, as large number of individuals end up acting on such tips and by their collective buying actions, convert the deceitful, specious and baseless tips to realty”

Read full report here…

‘Billionaire’ dream turns into dread-Unauthorsied investment advisory amounted to fraud & misrepresentation

S.K. Mohanty, Whole Time Member while affirming an ex-parte interim order of SEBI, was of the view that the activities of the Noticees, Billionaire Solutions Pvt. Ltd. (Sole proprietor Akash Jaiswal) was covered within the definition of “fraud” defined under regulation 2(1)(c) of the PFUTP Regulations, 2003. And therefore was held liable for the violation of provisions of Section 12A (a), (b), (c) of the SEBI Act, 1992, Regulations 3 (b), (c) & (d), 4(1), 4(2)(k) of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003 (PFUTP Regulations, 2003).

Read full report here…

Case BriefsTribunals/Commissions/Regulatory Bodies

Competition Commission of India (CCI): Coram of Ashok Kumar Gupta (Chairperson) and Sangeeta Verma and Bhagwant Singh Bishnoi (Members) in view of a deliberate design on the part of Amazon to suppress the actual scope and purpose of the Combination, levied the maximum penalty of INR One Crore each under the provisions of Sections 44 and 45 of the Competition Act. Due to failure to notify combination under Section 6(2) of the Act, Section 43A of the Act, a penalty was imposed.

Purpose of this Order

The present order shall govern the disposal of the proceedings initiated against the Amazon.com NV Investment Holdings LLC (Amazon) under Sections 43A, 44 and 45 of the Competition Act, 2002 in relation to its acquisition of 49% shareholding in Future Coupons Private Limited (FCPL) in pursuance of the show cause notice based on application dated 25-3-2021 of FCPL.

CCI had approved the Combination under Section 31(1) of the Act upon competition assessment of the overlapping business activities of Amazon, FCPL and their group entities and after arriving at the opinion that the Combination is not likely to cause any appreciable adverse effect on competition in India.

 Initiation of proceedings under Sections 43A, 44 and 45 of the Act

 FCPL filed an application stating that Amazon had initiated arbitration proceedings in relation to transfer of assets of FRL, a company in which FCPL holds 9.82% of the shareholding and there are related litigations pending before the constitutional courts.

It was alleged that Amazon took completely contradictory stands in the arbitration proceedings and constitutional courts with respect to its investments in FCPL as compared to the representation and submissions made before the Commission. Such contradictions were said to establish false representation and suppression of material facts before the Commission.

Commission was of prima facie view that

(a) Amazon failed to identify and notify FRL SHA as a part of the Combination, in terms of Regulation 9(4) and Regulation 9(5) of the Combination Regulations;

(b) Amazon had concealed its strategic interest over FRL; and

(c) Amazon had made false and incorrect representations and concealed/suppressed material facts in contravention of the provisions of the Act.

In view of the above, Commission issued SCN under Sections 43A, 44 and 45 of the Act to Amazon, on 4th June, 2021.

Commission received a letter on 20-10-2021 from Amazon inter alia intimating that it has shared with Future Group, the Response to SCN and related correspondence with the Commission.

Later, Commission decided to hear both FCPL and Amazon on 4-1-2022.

Question for Consideration:

Whether alleged conduct (s) of Amazon is in contravention of the provisions of Sections 43A, 44 and 45 of the Act?

Whether Amazon has made misrepresentation, false statement or suppression/concealment of material facts in relation to the scope and purpose of the Combination and failed to identify and notify FRL SHA as an inter-connected part of the Combination, in terms of Regulations 9(4) and 9(5) of the Combination Regulations?

Analysis and Discussion

Commission noted the contract summary and internal e-mail dated 19th July, 2019 of Amazon Group with the subject ‘Request for APPROVAL for Project Taj [Future]…’, which elaborated the business summary and summary of key terms of the Combination (Approval Request). This e-mail was sent by Mr Rakesh Bakshi to Mr Jeff Bezos, seeking approval to sign definitive documents in relation to the Combination.

As per the internal communications and negotiations between the parties relating to the Combination, wherein Amazon initially planned to partner with Future Group, being a key player in the offline retail market, by acquiring 9.99% shareholding in FRL as well as entering into a business commercial framework to build and accelerate ultra-fast delivery services across the top-20 cities in India, leveraging the national footprints of Future Group.

The Approval Request dated 18th July, 2019 suggests that, in view of certain developments relating to foreign investments in India, instead of directly acquiring 9.9% shareholding in FRL, Amazon would use a twin-entity investment structure to invest in FRL i.e., Amazon would acquire 49% shareholding in FCPL which, in turn would hold 8 – 10% of the shareholding in FRL.

Coming to the Notice, it required the notifying party to disclose ‘Economic and Strategic purpose (including business objective and rationale for each of the parties to the combination and the manner in which they are intended to be achieved) of the Combination’.

Further, the Internal Correspondence of Amazon made it abundantly clear that Amazon was all along focussed/interested in FRL. The Internal Correspondence of Amazon did not speak about the business potential of FCPL, as had been claimed and projected in the Notice and in the responses to the letters of the Commission. Similarly, the Notice presented the rationale of indirect rights over FRL, as protection to investment in FCPL.

The expressions used by Amazon to describe the rationale behind the indirect rights over FRL varied from time to time: ‘strategic rights’ in its Internal Correspondence; ‘protection to investment in FCPL’ in the Notice given to Commission; and ‘rights derived from FRL SHA are to protect the interest of the investor [Amazon]’ in the response to SCN.

Commission observed that, in every case of investment, the acquirer would want to protect the value of its investment and the returns.

The purpose of securing strategic interest over FRL and commercial partnership with FRL is much different from FRL, a company with strong financials and futuristic outlook, being merely taken as an element of financial strength and protection to the investment in FCPL.

How has the Suppression of fact continued?

The Internal Correspondence of Amazon clearly showed different purposes for envisaging the Combination (i.e., ‘foot-in-door’ in the Indian retail sector, secure rights over FRL that are considered as strategic by Amazon and Commercial Arrangements between the retail business of Future Group and Amazon).

Amazon in its responses to the letters of the Commission, continued to suppress the actual purpose of the Combination. It was obvious that the purpose of Amazon to pursue the Combination was not the potential of the gist and loyalty card business of FCPL, as had been claimed in the Notice. Rather, FCPL was envisaged only as a vehicle in the Combination to which no value or purpose is ascribed in the Internal Correspondence.

In Commission’s opinion the present matter was a clear, conscious and wilful case of omission to state the actual purpose of the Combination despite the disclosure requirement under Item 5.3 of Form I read with Regulation 5 of the Combination Regulations and Section 6(2) of the Act.

Amazon failed to provide any material or plausible explanation in its response to the SCN and in the subsequent submissions to demonstrate that its disclosures against Item 5.3 are correct and that business potential of FCPL was consideration for Amazon to pursue the Combination.

Adding to the above, Coram also stated that Amazon, in addition to the omission to state the purpose of the Combination, has misrepresented the Commission by stating that the purpose of the Combination is an opportunity arising from the business potential of FCPL and to add credibility to FCPL’s financial position, FCPL invested and proposed to further invest in FRL, a company with strong financials and futuristic outlook.

Amazon had misled the Commission to believe, through false statements and material omissions, that the Combination and its purpose were the interest of Amazon in the business of FCPL.

Further, the Coram added in respect to disclosure against Item 8.8 of Form I that,  True and complete disclosure against Item 8.8 enables the Commission to determine the appropriate framework for competition assessment of the Combination.

In response to Item 8.8, Amazon had furnished a presentation titled ‘Taj Coupons – Business Plan for 5 years’. The eight- page presentation provides only a brief idea of the gift voucher business of FCPL, its business operating model, estimated five-year business size, organisation design, sales team and financial summary, without any reference to FRL.

Commission in view of the above stated that Amazon knowingly suppressed relevant and material documents to be furnished under Item 8.8. of Form I.

Hence, Commission held that the conduct of Amazon amounted to suppression and misrepresentation of the purpose of the Combination and the said was in contravention of the provisions contained n clauses (a) and (b) of Section 44 and clause (a) and sub-section (1) of Section 45 of the Act.

The conduct of Amazon in supressing relevant and material documents against the disclosure requirement under Item 8.8 of Form I is a contravention of clause (c) of sub-section (1) of Section 45 of the Act. Similarly, the rights over FRL that were considered as strategic in the Internal Correspondence of Amazon, were represented as mere investor protection rights. Such repeated assertions, contrary to their actual purport, amount to statements that are false in material particular, in contravention of the provisions contained in clauses (a) and (b) of Section 44 and clause (a) of sub-section (1) of Section 45 of the Act.

Whether FRL SHA was identified and notified as an inter-connected part of the Combination?

In the present matter, Combination was a composite of acquisition of shares, rights and commercial contracts. These together were for the purpose of strategic alignment amongst the business of the parties, in particular to expand the ultra-fast delivery service of Amazon.

The fact that FRL SHA was part of the Combination and was executed at the behest of Amazon, was overwhelmingly evident from the email dated 4-1-2019 of Amazon to Future Group. Commission observes that mere consideration of the values of the asset and turnover of FRL cannot be considered as notification of FRL SHA and BCAs, as parts of the Combination.

Coram stated that details of FRL SHA were not mentioned in Item 5.2. As has emerged now, FRL SHA and the commercial agreements were inter-connected parts of the Combination and accordingly, their details ought to have been disclosed against Item 5.1.2.

The Notice, nowhere disclosed the fact that FRL SHA was negotiated as part of the Combination and was executed for the purpose of Amazon acquiring rights over FRL, through FCPL SHA, and that Amazon had insisted for FRL SHA to be entered into as a prerequisite to Transaction III. In the absence this material fact being disclosed, footnote 3, read with the disclosures and statements in the Notice and subsequent submissions of Amazon, including those against Items 5.1.2 and 5.2 of Form I, statements made in paragraphs 34 of the Notice and paragraph 44 of the submission dated 15th November, 2019 (in response to the letter dated 9th October, 2019 of the Commission), the impugned statement was self-evidently misleading to the effect that FRL SHA was not a part of the Combination and is only pursuant to the Warrants Transaction.

CCI held that, the categorical statements that FRL SHA and BCAs were independent of the Combination sufficiently establish that the same were not notified to the Commission as a part of the Combination, which is a contravention of the obligation contained in Section 6(2) of the Act, which attracts penalty under Section 43A of the Act.

Coram noted that Section 6(2) of the Act requires any person proposing Combination ‘to give notice to the Commission in the form as may be specified…disclosing the details of the proposed combination’.

If a party conceals/suppresses and/or misrepresents to the Commission the scope and purpose of the Combination and obtains approval, the same would effectively amount to approval/consent having been obtained by way of fraud.

Therefore,

Amazon ought to have notified the combination, inter alia, consisting of the following inter-connected steps: (a) Transaction I; (b) Transaction II; (c) Transaction III; (d) FRL SHA for the purpose of acquisition of strategic rights over FRL through FCPL SHA; and (e) commercial agreements between Amazon and Future groups, for the purpose of establishing strategic alignment and partnership between Amazon Group and FRL as well as have a ‘foot-in-the-door’ in the India retail sector.

The Commission directed Amazon to give notice in Form II within a period of 60 days from the receipt of this order and till disposal of such notice, the approval granted vide Order dated 28-11-2019, in Combination, shall remain in abeyance.

Penalty

The Commission considers it appropriate to levy the maximum penalty of INR One Crore each under the provisions of Section 44 and Section 45 of Act. Accordingly, Amazon is directed to pay a penalty of INR Two Crore.

Due to failure to notify combination in terms of the obligation cast under Section 6(2) of the Act, Section 43A of the Act enables the Commission to impose a penalty, which may extend to one percent of the total turnover or the assets, whichever is higher, of such a combination. Accordingly, for the above-mentioned reasons, the Commission hereby imposes a penalty of INR Two Hundred Crore upon Amazon.[ Proceedings against Amazon.com NV Investment Holdings LLC under Sections 43A, 44 and 45 of the Competition Act, 2002, In Re., 2021 SCC OnLine CCI 71, decided on 17-12-2021]


Advocates before the Commission:

For Amazon: Mr. Gopal Subramanium and Mr. Amit Sibal, Senior Advocates with Mr. Anand S. Pathak, Ms. Sreemoyee Deb, Ms. Anubhuti Mishra and Mr. Rajat Moudgil, Advocates alongwith Mr. Rakesh Bakshi, Mr. Ankur Sharma, Ms. Ujwala Uppaluri and Ms. Hina Doon, representatives of Amazon

For FCPL: Mr. Harish Salve and Mr. Ramji Srinivasan, Senior Advocates with Mr. Raghav Shankar and Mr. Pranjit Bhattacharya, Advocates alongwith Mr. Sanjay Rathi, representative of FCPL

For CAIT: Mr. Krishnan Venugopal and Mr. Saurabh Kirpal, Senior Advocates with Mr. Rajat Sehgal and Mr. Debayan Gangopadhyay, Advocates

Case BriefsHigh Courts

Karnataka High Court: P. S. Dinesh Kumar, J., dismissed the petitions and did not interfere with the impugned order.

The facts of the case are such that Delhi Vyapar Mahasangh (Respondent 2) is a Society comprising of Micro, Small and Medium Enterprises which filed information alleging contravention of Section 3(1) read with Section 3(4) and Section 4(1) and 4(2) of the Competition Act by Amazon and Flipkart directing an investigation under Section 26(1) of the Competition Act, 2002. It is alleged by the informant that petitioners entered into vertical agreements with ‘preferred sellers’ which led to foreclosure of ‘non-preferred sellers’ from the Online Market places and the complexity involving the parameters of ‘inter platform’, ‘intra-platform’ and ‘inter-channel distribution’. Commission has recorded the existence of preferred sellers, preferential listing etc., in the impugned order. The instant petitions are filed assailing the impugned order of investigation by the Competition Commission of India.

Both the petitioners and the Commission relied on judgment CCI v. SAIL, (2010)10 SCC 744 wherein it was observed

“38. In contradistinction, the direction under Section 26(1) after formation of a prima facie opinion is a direction simpliciter to cause an investigation into the matter. Issuance of such a direction, at the face of it, is an administrative direction to one of its own wings departmentally and is without entering upon any adjudicatory process. It does not effectively determine any right or obligation of the parties to the lis.”

  1. Section 26(1), as already noticed, requires the Commission to form an opinion whether or not there exists a prima facie case for issuance of direction to the Director General to conduct an investigation. This section does not mention about issuance of any notice to any party before or at the time of formation of an opinion by the Commission on the basis of a reference or information received by it.” Language of Sections 3(4) and 19 and for that matter, any other provision of the Act does not suggest that notice to the informant or any other person is required to be issued at this stage. In contradistinction to this, when the Commission receives the report from the Director General and if it has not already taken a decision to close the case under Section 26(2), the Commission is not only expected to forward the copy of the report, issue notice, invite objections or suggestions from the informant, the Central Government, the State Government, statutory authorities or the parties concerned, but also to provide an opportunity of hearing to the parties before arriving at any final conclusion under Sections 26(7) or 26(8) of the Act, as the case may be. This obviously means that wherever the legislature has intended that notice is to be served upon the other party, it has specifically so stated and we see no compelling reason to read into the provisions of Section 26(1) the requirement of notice, when it is conspicuous by its very absence.\\

 The Court also relied on CCI v, Bharathi Airtel, (2019)2 SCC 521 wherein it was observed:

 Even if it is a direction under any of the provisions and not a decision, conclusion or order passed on merits by the Commission, it is expected that the same would be supported by some reasoning. At the stage of forming a prima facie view, as required under Section 26(1) of the Act, the Commission may not really record detailed reasons, but must express its mind in no uncertain terms that it is of the view that prima facie case exists, requiring issuance of direction for investigation to the Director General.

In other words, the Commission is expected to express prima facie view in terms of Section 26(1) of the Act, without entering into any adjudicatory or determinative process and by recording minimum reasons substantiating the formation of such opinion, while all its other orders and decisions should be well reasoned.

The Court thus observed that an order under Section 26(1) of the Act passed by the Commission is an ‘administrative direction’ to one of its wings departmentally and without entering upon any adjudicatory process and Section 26(1) of the Act does not mention about issuance of any notice to any party before or at the time of formation of an opinion by the Commission on the basis of information received by it.

The Court observed that perusal of the impugned order shows that the Commission has analyzed the information under various heads such as exclusive launch of mobile phones, preferred sellers on the market places, deep discounting, and preferential listing of private labels. It has recorded that mobile manufacturing Companies like One plus, Oppo and Samsung have exclusively launched several of their models on Amazon and Vivo, Realme, Xiaomi etc., have exclusively launched several of their models on Flipkart. Commission has noticed that Flipkart has launched 67 mobile phones and Amazon has launched 45 mobile phones exclusively on their platforms. Commission has recorded that petitioners have their own set of preferred sellers and there are only few online sellers which sell the exclusively launched smart phones. Commission has prima facie inferred that there appears to be exclusive partnership between smart phone manufacturers and e-Commerce platforms for exclusive launch of smart phones. It was further recorded that certain smart phone brands/models are available at significantly discounted price on petitioners’ platforms and are sold largely through the sellers identified by informant as ‘preferred sellers’.

The Court further stated that the informant has filed information and appended material papers, which according to the informant support its allegations. It was submitted that the Commission has also called upon the informant to file a Certificate under Section 65B of the Indian Evidence Act and the penalty for incorrect information is upto Rs. One Crore under Section 44 of the Competition Act. 

The Court observed that it is expected that an order directing investigation be supported by ‘some reasoning’ which the Commission has fulfilled and thus held that it would be unwise to prejudge the issues raised by the petitioners in these writ petitions at this stage and scuttle the investigation.[Amazon Seller Services (P) Ltd. v. Competition Commission of India, Writ Petition No.3363 OF 2020, decided on 11-05-2021]


Arunima Bose, Editorial Assistant has reported this brief.

Case BriefsHigh Courts

Delhi High Court: In the notable ruling of Amazon v. Future Retail, J.R. Midha, J. of Delhi High Court considered three crucial questions:

♦ What is the legal status of an Emergency Arbitrator?

♦ Whether the Emergency Arbitrator misapplied the Group of Companies doctrine which applies only to proceedings under Section 8 of the Arbitration and Conciliation Act?

♦ Whether the interim order of Emergency Arbitrator is Nullity?

Amazon.com invested Rs 1431 Crore in Future Coupons Private Limited (FCPL) based on certain special, material protective/negative rights available to FCPL in Future Retail Limited (FRL), namely, that the Retail Assets of FRL would not be alienated without the prior written consent of Amazon.com (Petitioner), and never to a Restricted Person. Further, an agreement was attained wherein it was stated FRL would be the sole vehicle for the conduct of FCPL and FRL’s conduct of business, resulting in benefit of the entire investment to FRL.

Within months of investment it was noted that the Biyanis which controls FRL breached the agreements by violating the contractual obligations, approved transaction relating to the transfer of its retail assets to Mukesh Dhirubhai Ambani Group (MDA) which is a Restricted Person as per Shareholders’ Agreement between petitioner and respondents (FCPL-SHA) [Disputed Transaction].

Timeline of Events:

05-10-2020
  • Arbitration Proceedings initiated.
  • Application filed to seek an ‘Emergency Interim Relief to restrain respondents from pursuing Disputed Transaction.
06-10-2020
  • Respondent 2 raised an objection with respect to Emergency Arbitrator’s jurisdiction.
09-10-2020
  • Petitioner requested for status quo to be maintained, however, respondents declined to give any assurance during the pendency of proceedings before the Emergency Arbitrator.
13-10-2020

Emergency Arbitrator called upon both the parties to submit their response pertaining to the following 4 Supreme Court Judgments:

Respondents raised objection to Emergency Arbitrator’s Jurisdiction.

16-10-2020 Arbitrator heard all the parties.
25-10-2020

Emergency Arbitrator passed an interim order and held that:

“the Emergency Arbitrator is an Arbitral Tribunal for all intents and purposes. The Emergency Arbitrator further noted that the Emergency Arbitrators are recognized under the Indian Arbitration framework.

Arbitrator observed that the petitioner made out a strong prima facie case that respondents were in breach of the contractual obligations. Further, the arbitrator added that the petitioner would suffer irreparable injury if the interim injunction was not granted.

Conclusion of Emergency Arbitrator

Petitioner has a strong prima facie case on the merits of the dispute, the petitioner’s rights under the FCPL-SHA, the SSA, and the FRL-SHA (insofar as it has been incorporated into the FCPL SHA) have been apparently compromised by the Respondents and the Respondents have given no good legal reasons for effecting the sale of FRL’s Retail Assets to the Restricted Person behind the petitioner’s back.

Point-Wise Analysis of the crucial questions raised in the present matter:

Legal Status

 Status of an Emergency Arbitrator is solely based on the party autonomy and the powers of such an arbitrator are similar to Arbitral Tribunal to decide an interim measure. Though Arbitral Tribunal is empowered to reconsider, modify, terminate or annul the order/award of the Emergency Arbitrator.

Emergency Arbitration is a very effective and expeditious mechanism to deal with the Emergency Interim Relief Application and has added a new dimension to the protection of the rights of the parties.

With this mechanism, a litigant gets justice within 15 days, though if the order of Emergency Arbitrator is not enforced, it would make the entire mechanism redundant.

In the present matter, by agreeing to incorporate the Rules of SIAC into the arbitration agreement, parties agreed to the provisions relating to Emergency Arbitration.

Current legal framework is sufficient to recognize the Emergency Arbitration and no amendment in this regard was required.

Section 2(1)(d) defines “arbitral tribunal” to mean a sole arbitrator or a panel of arbitrators, it is wide enough to include Emergency Arbitrator.

Under Section 17(1) of the Arbitration and Conciliation Act, the Arbitral Tribunal has the same powers to make interim order, as the Court has, and Section 17(2) makes such interim order enforceable in the same manner as if it was an order of the Court. The Interim Order is appealable under Section 37 of the Arbitration and Conciliation Act.

Whether Doctrine of Group of Companies applies only to proceedings under Section 8 of the Arbitration and Conciliation Act? 

Law relating to the Group of Companies doctrine is well settled by the Supreme Court in Chloro Controls India Private Limited v. Sever N Trent Water Purification Inc., (2013) 1 SCC 641, Cheran Properties Limited v. Kasturi and Sons Limited, (2018) 16 SCC 413 and MTNL v. Canara Bank, (2020) 12 SCC 767.

Group of Companies doctrine binds the non-signatory entity where the multiple agreements reflect a clear intention of the parties to bind both the signatory and non-signatory entities within the same Group.

 Supreme Court has laid down various tests for invoking the said doctrine.

Following are the Tests:

  • direct relationship to the party signatory to the arbitration agreement,
  • direct commonality of the subject-matter and
  • the agreement between the parties being a composite transaction.
  • The transaction should be of a composite nature where performance of the mother agreement may not be feasible without aid, execution and performance of the supplementary or ancillary agreements, for achieving the common object and collectively having bearing on the dispute.
  • Besides all this, the Court has to examine whether a composite reference of such parties would serve the ends of justice.

Bench also observed that the said doctrine has been very succinctly explained in the 4th Edition of Malhotra’s Commentary on the Law of Arbitration by Justice Indu Malhotra.

Here’s a Summary for a quick glance at the principles laid down by the Supreme Court on Group of Companies doctrine:

  • As the law has evolved, it has recognised that modern business transactions are often effectuated through multiple layers and agreements. There may be transactions within a Group of Companies. The circumstances in which they have entered into them may reflect an intention to bind both signatory and non-signatory entities within the same group.
  • The Group of Companies doctrine is essentially intended to facilitate the fulfilment of a mutually held intent between the parties, where the circumstances indicate that the intent was to bind both signatories and non-signatories. The effort is to find the true essence of the business arrangement and to unravel from a layered structure of commercial arrangements, an intent to bind someone who is not formally a signatory but has assumed the obligation to be bound by the actions of a signatory.
  • Doctrine can be invoked to bind a non-signatory entity where a Group of Companies exist and the parties have engaged in conduct, such as negotiation or performance of the relevant contract or made statements indicating the intention assessed objectively and in good faith, that the non-signatory be bound and benefited by the relevant contracts.
  • Doctrine will bind a non-signatory entity where an arbitration agreement is entered into by a company, being one within a group of companies, if the circumstances demonstrate that the mutual intention of all the parties was to bind the signatories and non-signatory affiliates.
  • A non-signatory party can be subjected to arbitration where there was a clear intention of the parties to bind both, the signatory as well as the non-signatory parties who are part of Group of Companies. In other words, ―the intention of the parties‖ is a very significant feature that must be established before the scope of arbitration can be said to include the signatory as well as the non-signatory parties.
  • Direct relationship to the party signatory to the arbitration agreement, direct commonality of the subject-matter and the agreement between the parties being a composite transaction. The transaction should be of a composite nature where performance of the mother agreement may not be feasible without aid, execution and performance of the supplementary or ancillary agreements, for achieving the common object and collectively having bearing on the dispute. Besides all this, the Court has to examine whether a composite reference of such parties would serve the ends of justice.
  • Where the agreements are consequential and in the nature of a follow-up to the principal or mother agreement, the latter containing the arbitration agreement and such agreements being so intrinsically intermingled or interdependent that it is their composite performance which shall discharge the parties of their respective mutual obligations and performances, this would be a sufficient indicator of intent of the parties to refer signatory as well as non-signatory parties to arbitration. The principle of ‚composite performance would have to be gathered from the conjoint reading of the principal and supplementary agreements on the one hand and the explicit intention of the parties and the attendant circumstances on the other.
  • While ascertaining the intention of the parties, attempt should be made to give meaning and effect to the incorporation clause and not to invalidate or frustrate it by giving it a literal, pedantic and technical reading.
  • Tests laid down are:

◊ The conduct of the parties reflect a clear intention of the parties to bind both the signatory as well as the non-signatory parties.

◊ The non-signatory company is a necessary party with reference to the common intention of the parties.

◊ The non-signatory entity of the group has been engaged in the negotiation or performance of the contract.

◊ The non-signatory entity of the group has made statements indicating its intention to be bound by the contract.

◊ A direct relationship between the signatory to the arbitration agreement and the non-signatory entity of the group; direct commonality of the subject-matter and composite nature of transaction between the parties.

◊ The performance of the agreement may not be feasible without the aid, execution and performance of the supplementary or ancillary agreement for achieving the common object.

◊ There is a tight group structure with strong organizational and financial links so as to constitute a single economic unit or a single economic reality.

◊ The funds of one company are used to financially support or restructure other members of the group.

◊ The composite reference of disputes of fresh parties would serve the ends of justice.

Bench in view of the above, decided that the Group of Companies Doctrine is applicable to the present case and respondent 2 is a proper party to the proceedings – Why? Lets’ read the reasons:

  • Signatory and non-signatory company (FRL) belong to the same Biyanis
  • Parties Conduct reflected clear intention to bind the signatory as well as non-signatory company (FRL) of Biyanis
  • Common negotiating and legal team represented the signatory and non-signatory company (FRL).
  • Statutory disclosure made by the non-signatory company to the public.
  • Direct relationship of the non-signatory company to the signatory company of the Group, direct commonality of the subject matter and composite nature of transactions.
  • Funds of Signatory Company used to financially support the non-signatory company of the Group.
  • Agreements are so intrinsically intermingled that their composite performance only shall discharge the parties of their respective mutual obligations.
  • Common intention of all the parties, to arbitrate.
  • Supreme Court’s observation in the decision of Cheran Properties Limited v. Kasturi and Sons Limited, (2018) 16 SCC 413 would squarely apply to the present matter.

Whether the Interim Order is Nullity?

In Court’s opinion, respondent plea of Nullity is to mislead this Court.

Bench agreed with the Emergency Arbitrator that the protective rights do not amount to control of the petitioner over FRL and do not violate the law.

In the present matter, since the respondents were continuing to violate the agreement even after the Emergency Arbitrator’s decision, the petitioner approached this Court for enforcement of the interim order of the Emergency Arbitrator.

Respondents did not dispute the breach of the agreements either before the Emergency Arbitrator or before this Court.

High Court noted that the whole thrust of the respondents before this Court is that the petitioner is a trillion-dollar company and Rs 1430 crore invested by them in the present case is peanuts for them and they should forget about this money as it is worth zero today.

Bench also quoted the senior counsel for respondent 2 for the above-said observation:

“…What happens to his 1430 crores………that is worth zero today. FRL is zero. FCPL coupon business is gone. For this American behemoth, 1400 crore would be rounded off………..”

Before parting with this decision, High Court stated that Emergency Arbitrator, V.K. Rajah SC is a well-known jurist.

Conclusion

All the objections raised by the respondents were rejected with a cost of Rs 20,00,000 to be deposited by the respondents with the Prime Minister Relief Fund for being used for providing COVID vaccination to the Below Poverty Line (BPL) category – senior citizens of Delhi.

Since the respondents deliberately and willfully violated the interim order, hence they are liable for the consequences enumerated in Order XXXIX Rule 2A of the Code of Civil Procedure.[Amazon.Com NV Investment Holdings LLC v. Future Coupons (P) Ltd., 2021 SCC OnLine Del 1279, decided on 18-03-2021]

Case BriefsDistrict Court

State Consumer Dispute Redressal Commission, Odisha (SCDRC): Dr D.P. Choudhury (President) modified the compensation amount awarded to a Law Student in light of being subjected to ‘Deficiency of Service’ and ‘Unfair Trade by ‘Amazon’.

The instant appeal was filed under Section 15 of the erstwhile Consumer Protection Act, 1986.

Factual Matrix

While the appellant was in his first year of law school, the OP had floated an offer for sale of a Laptop without Laptop Bag for Rs 190 against the price of Rs 23,499.

OP had confirmed for placing of the order and two hours after receiving the confirmation, the appellant received a phone call from the OP’s Customer Care Service Department stating that the subject order stood cancelled due to the price recession issue.

Since the complainant was in need of a laptop to prepare his project, he raised an objection for such cancellation.

On not receiving any response from the OP, complainant issued a legal notice.

Deficiency in Service

Appellant had to purchase another laptop but suffered from mental agony for such cancellation, hence filed a complaint alleging the deficiency in service and unfair trade practice.

Complainant claimed compensation of Rs 50,000 and Rs. 10,000 towards litigation cost.

District Forum had allowed the complaint partly by directing the OP to pay compensation of Rs 10,000 for mental agony and to pay Rs 2,000 towards the cost of litigation.

Hence, the aforesaid impugned order was challenged by the complainant/appellant stating that the District Forum committed error in law by not deciding to direct to pay Rs 50,000 as compensation.

Analysis, Decision and Law

Bench observed that “When there is an advertisement made for offer placed by the OP and made the offer as per the material available on record and complainant placed the order and same got confirmed, the agreement is complete.”

Another aspect to be noted was that, when the OP had allowed Rockery Marketing at his platform as per written version, the responsibility of the OP could not be lost sight of.

Since there was a breach of contract by OP, OP is held to be liable to pay the damages.

Commission agreed with District Forum’s observation that OP not only negligent in providing service but was also involved in unfair trade practice.

Taking all the factors discussed above for consideration, Bench concluded that compensation awarded should be of Rs 30,000 for unfair trade practice and punitive damages of Rs 10,000. Further, with regard to the cost of litigation Rs 5000 needs to be awarded.

On failing to make the above payments to the complainant within 30 days, the said amounts will carry interest at the rate of 12% per annum.

In view of the above, the appeal was disposed of. [Supriyo Ranjan Mahapatra v. Amazon Development Centre India (P) Ltd., First Appeal No. 492 of 2018, decided on 11-01-2021]


Read More:

District Consumer Forum directs ‘Amazon’ to pay compensation for “deficiency in services”

Case BriefsTribunals/Commissions/Regulatory Bodies

National Green Tribunal (NGT): Full Bench of Justice Adarsh Kumar Goel (Chairperson) and Justice S.P. Wangdi (Judicial Member)and Dr Nagin Nanda (Expert Member) asked CPCB to consider an environmental audit of certain entities.

Present applications sought enforcement of ‘Extended Producer Responsibility’ under the Plastic Waste Management Rules, 2016.

The first petition sought enforcement of liability against Amazon and Flipkart using excessive plastic packaging material without meeting the statutory liability.

On earlier occasions, the matter was considered wherein it was observed that the statutory regulators were not taking coercive measures including invoking of “Polluter Pays Principle” for enforcing the statutory norms.

Central Pollution Control Board (CPCB) was directed to look into the matter and file a further report.

CPCB in its report mentioned reasons of why the law was not enforced but does not mention the coercive measures adopted either directly by CPCB or in coordination with State PCBs/PCCs.

Further, the tribunal stated that CPCB can also consider ordering an environmental audit against the entities concerned and assess and recover compensation for violation of environmental norms.

Matter to be considered on 14-10-2020. [Aditya Dubey (Minor) v. Amazon Retail India (P) Ltd., 2020 SCC OnLine NGT 228, decided on 10-09-2020]

Case BriefsTribunals/Commissions/Regulatory Bodies

National Company Appellate Tribunal: A Bench of Justice S.J. Mukhopadhaya, Chairperson and Justice A.I.S Cheema, Member (Judicial) and Kanthi Narahari, Member (Technical) admitted the appeal filed by the All India Online Vendors Association (“AIOVA”) against the order of the Competition Commission of India, dated 6-11-2018, whereby it held that no case of contravention of the provisions of Section 4 (abuse of dominant position) of the Competition Act, 2002 was made out against Flipkart and Amazon.

AIOVA’s case

AIOVA — company registered under the Companies Act, 2013 — is a group of more than 2000 sellers, selling on e-commerce marketplaces such as Flipkart, Amazon, Snapdeal, etc. It informed the CCI regarding abuse of dominant position by Flipkart alleging that small vendors have become allies of the big vendors and suppliers to leading sellers such as Cloudtail., WS Retail, etc. on the Flipkart and Amazon platforms, rather than selling directly to consumers through the online e-commerce marketplace sites. Further, it was apprehended that unfair trade practices were being carried and corporate veil on it was required to be lifted to assess the economic nexus and the wrongdoings being committed.

CCI’s Order

The Commission vide its order dated 6-11-2018, found no contravention of the provisions of Section 4 by Flipkart. Holding that the relevant market in the instant case may be defined as “services provided by online marketplace platforms for selling goods in India”, the Commission further held that “looking at the present market construct and structure of online marketplace platforms market in India, it does not appear that any one player in the market is commanding any dominant position at this stage of evolution of market.”

Finding that Flipkart was not a dominant player in the “relevant market”, it was held that the question of abuse of dominant position did not arise. Furthermore, it was held that the information provided by AIOVA was not sufficient to substantiate the allegations against Flipkart. Though the information was filed against Flipkart, the Commission held a conference with Amazon as well as it is also a key player in the relevant market. On the same reasoning, the Commission held that no contravention of the provisions of Section 4 could be said to be made out against either Flipkart or Amazon.

Appeal before NCLAT

Aggrieved by the decision passed by the CCI, filed a company appeal before the NCLAT challenging the same. Chanakya Basa along with Nidhi Khanna, Advocates, appearing for AIOVA argued on the errors in the impugned order. Per contra, Senior Advocate Amit Sibal is representing the opposite party along with Rajshekhar Rao, Yaman Verma, Sonali Charak and Neetu Ahlawat, Advocates.

The Appellate Tribunal has admitted the appeal for hearing. The respondents have been given 10-days time to file an affidavit in reply. The appeal is further posted for hearing on 30-07-2019.[All India Online Vendors Assn. v. CCI, Company Appeal (AT) No. 16 of 2019, decided on 15-05-2019]

Case BriefsDistrict Court

District Consumer Disputes Redressal Forum, Ganjam Behrampur: The Bench comprising of Karuna Kar Nayak (President) and Sri Purna Chandra Tripathy (Member), partly allowed a case filed against O.P i.e. “AMAZON”  for ‘deficiency in services’.

In the present matter, the complainant Supriyo Mahapatra had filed a consumer complaint under Section 12 of Consumer Protection Act, 1986 for ‘deficiency in services’ against AMAZON.  The complainant had placed an order for an ASUS X450-cawx214d 14 INCH Laptop for an amount of Rs 190/- against the original price of Rs. 23,499/- by offering a discount of Rs 23,309/-, on placing the order for the same with the option of ‘cash on delivery’, the complainant received a confirmation on his e-mail id and further on acceptance of the order, the complainant was assured with its delivery of the product soon. Though in accordance with the facts as stated, the complainant’s order was cancelled after a couple of hours and he was intimated for the same through a phone call from the customer service department of O.P. Further, the O.P. in response to the reason for cancellation stated that there was some ‘Pricing issue’ due to which the order stands cancelled.

The primary issue that arose in the matter was due to no-response on behalf of the O.P after continuous efforts made by the complainant through customer care service and e-mail in regard to a valid reason for cancellation of his order, which finally forced the complainant to issue a legal notice, which again was not responded by the O.P.

For the above-stated submissions, the District Consumer Disputes Redressal Forum stated that the “O.P. was not only negligent in rendering proper service to the complainant but also involved in unfair trade practice; as such we hold there is deficiency in service by O.P.”. Therefore, complainant’s case was partly allowed and O.P. was directed to pay Rs 10,000 for mental agony as compensation and Rs 2,000/- for the cost of litigation. [Supriyo Ranjan Mahapatra v. Amazon Development Centre India (P) Ltd., Consumer Complaint No. 42 of 2015, Order dated 05-09-2018]