How would a guardian feel when it is taking care of some person and that person rather than asking the guardian first before making any decision approaches the other person and locks the deal?
Same is the case with Amazon – the guardian, Future Retail Ltd – the person who is being taken care of & Reliance Retail Venture Ltd – the other person. Amazon being a major stake holder in Future Coupons was not given the Right of First Refusal in the deal between the other two, only after the refusal the Future Group could have approached any other investor and hence Amazon filed a case accusing the Future Retail of INSIDER TRADING and asked SEBI to investigate into this matter involving a hefty amount $ 3.4 billion as this deal had price sensitive details and RIL was not a party to the arbitration proceedings also the details related would have been undoubtedly received from Future Group.
Whenever a company is getting listed on the stock exchange, as per the SEBI guidelines of LODR (Listing Obligations and Disclosure Requirements) and Listing Agreements, the company has to adhere to some strict rules and regulations laid by SEBI stating that whatever the decision or information is framed during any board meeting, the company has to circulate it to SEBI first which will be further passed on to the general public shareholders. If an investor holding shares of Vodafone / Idea would have traded before the merger news reached the public then this could have been a clear case of Insider Trading and that particular investor could have gained enormous profits or completely avoided the losses based on the “unpublished price sensitive information”. Raj Rajaratnam a Sri Lankan hedge fund manager who owned the Galleon Group in USA, performed insider trading by purchasing shares of McKinsey & Co (when the price sensitive information of Warren Buffet investing $ 5 billion in the company was leaked by one of the Board of Director, Rajat Gupta), IBM and Intel in the year 2019, USA and gained huge profits, later he was imprisoned for 11 years and his company was shut.
As Amazon was not given the first priority by FRL, it dragged up this deal to SIAC (Singapore International Arbitration Centre) and it passed an interim award in favour of Amazon which stated that FRL cannot take any further step with respect to this deal and got a stay order on it. Onto which, FRL replied by suing Amazon for the necessary reliefs from SIAC regarding the interim order further arguing that its contract with Amazon is not valid in the deal with RRVL.
However CCI (Competition Commission of India) has given a green signal to this deal giving a huge setback for e-commerce giant. By seeking to stall RIL’s deal with Future, Bezos may be signalling that he would rather remain a rival.
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