The Confederation of All India Traders (CAT) has accused Amazon of violating the provisions of the Government of India and FDI policy and Foreign Exchange Management Act (FEMA). CAT has demanded immediate strict action against the company for not asking the government’s mandatory permission for Amazon to conduct multi-brand retail activities in India. It has also requested to impose the maximum penalty on Amazon and take other necessary actions under various rules. For this, CAT has sent a letter to Union Minister of Commerce and Industry Piyush Goyal on Wednesday.
CAT has sent a similar letter to Union Finance Minister Nirmala Sitharaman, Enforcement Directorate, Reserve Bank of India and SEBI and has demanded action against Amazon. Kat says that no company has any freedom to kill small businesses in India and if needed, we will not hesitate to take to the streets or go to court to get justice.
Various amazon investments
Addressing a press conference in New Delhi on Wednesday, CAT’s National General Secretary Praveen Khandelwal said that various publicly available documents show that Amazon has invested Rs 35,000 crore in Amazon India. Amazon India is an e-commerce marketplace to say but is actually indirectly through which multi-brand retail trade is taking place. Approximately 4200 crores have been invested in More Retail Ltd (a multi-brand retail company), which is controlled by Amazon through alternative investment of Samara Capital.
On the other hand, Amazon invested Rs 1,430 crore in Future Coupons Private Limited but actually made a controlled investment in Future Retail Limited (a multi-brand retail company). All the above investments are in violation of FEMA rules and regulations, for which CAT has demanded immediate action from the government.
Amazon is cheating the government
National President of CAT, BC Bhartia said that the fundamental principle of the law is that the work done directly is prohibited, even indirectly. But after mastering the law and rules aside, Amazon never disclosed to the government and other concerned authorities that it would do multi-brand retail business even after the deal, without the government’s permission. In a way, Amazon has cheated the government and other government institutions to capture India’s retail business and usurp the business of small traders.
Bhartia and Khandelwal said that businessmen in India are extremely concerned about Amazon destroying their business. Amazon is doing arbitrary business activities by taking any authorized or unauthorized route to occupy India’s retail business. This is a fight between the Future Group and Amazon, due to which, during the cross-examination of the Arbitration Panel in Singapore, Amazon admitted that it would retain its hold in multi-brand retail through Future Retail.
Future Group and Amazon put light on deal
To shed more light on this, Bhartia and Khandelwal cited some details of the deal between Future Group and Amazon. In an agreement with Future Retail, Amazon acquired 49% shares of Future Coupons (P) Ltd, the controlling authority of Future Retail Limited and is a listed company. On 12 August 2019, both Future Retail Limited and Future Coupons Limited executed a shareholder agreement, in which certain exclusive rights were stamped. This includes acceptance of Future Coupons Limited for any important content decision and prohibiting promoters to take any material decision.
The justification of the agreement became clear on 22 August 2019 when Future Retail revealed to the stock exchange its agreement with Amazon that Amazon would buy 49% stake in Future Coupons. However, it was not disclosed that all the rights of Future Coupons have also been handed over to Amazon. Based on this agreement, Amazon also gained control over Future Retail. It is a fact that no regulator in India especially ED and SEBI has been informed about this.
Bhartia and Khandelwal further said that Amazon was not a shareholder in Future Retail. Therefore, the sole purpose of such a ban was to ensure that Amazon had control over Future Retail, and Future Coupons also made changes to its Articles of Association to fulfill this condition of the agreement. In this agreement, Amazon was also given a full power of attorney to act on behalf of Future Coupons.
What laws violate
CAT says Amazon’s investment (through Future Coupons) is a violation of section 13 of the FEMA 1999 Act. It also violates Explanation (D) of FEMA Rule 23, violates the entry route prescribed under Schedule-1 of FEMA, it is also a clear violation of Section 15.4 of Schedule-1. It also grossly violates the conditions laid down under Press Note No. 2 of the FDI policy. Such a violation of FEMA by Amazon is a certified case for imposing a penalty specified in Section 13 of the FEMA Act, according to which the monetary penalty is up to three times the amount involved in the violation.
This means that Amazon is responsible for the monetary penalty of Rs 1 lakh 20,000 crores. Additionally, the Enforcement Directorate may direct that the Central Government may confiscate “any currency, security or other money or property in respect of which the violation has taken place”. Finally, the interim award passed by the Singapore Arbitrator has reportedly established that even on Amazon’s own entry, its entire investment in Future Retail is towards its exclusive controlling rights.
