Amazon has asked the Reserve Bank of India (RBI) to undertake a forensic audit against Future Retail for the past 3 financial years to investigate alleged fraud by the company.
Amazon said that Future Retail, its promotors and directors have defrauded by alienating over 945 store premises to Reliance Retail. It has also alleged that Reliance Industries has committed fraud while the lenders have failed to take cognizance of it.
“It is incumbent upon RBI to conduct a thorough investigation into the fraud committed by FRL, its promoters, directors and key managerial personnel (KMPs). Accordingly, it is requested that a forensic audit be conducted for FRL for the past 3 financial years as the RBI is empowered to inter alia under the RBI Fraud Circular, financial documents, and framework agreement,” Amazon said in a 14-page letter.
Points finger at lender banks of FR
Amazon has further alleged that the lender banks of Future Retail too, “have failed to take cognizance, let alone, prevent FRL and the Mukesh Dhirubhai Ambani (MDA) Group from committing fraud. The conduct and attitude of lender banks raises substantial questions on accountability, transparency and fairness regime in the banking system,”
In August 2021, Future Retail entered into an agreement to sell its assets to Reliance Retail for ₹24,713 crore.
Amazon, which had invested ₹1,400 crore in one of the Future Group companies in 2019, had opposed the deal. It had dragged Future Group’s companies into arbitration on grounds that it violated an agreement in which Reliance was a restricted party.
After the e-commerce giant won an interim award in its favour, it moved Indian courts to seek enforcement of the award. This was countered by the Future Group. Since then, multiple cases have been filed in different courts by both sides. These cases may be withdrawn now since the deal in question itself is in jeopardy.
Alongside this, in August 2021, since Future Retail’s stock prices had taken a hit, it was facing a liquidity crisis, and its deal with Reliance was stuck, it had approached its lenders to restructure its debt.
Amazon in its letter stated that Future Retail had violated this injunction. It said that Future Retail did not inform the banks about the injunction.
Not only that, recent events indicate that FRL purportedly handed over 945 retail stores to Reliance Industries “in complete disregard of, and contrary to binding injunctions, and in the backdrop of assurances to banks that these assets were available with FRL. FRL has surreptitiously attempted to purportedly hand over these stores to the Mukesh Dhirubhai Ambani (MDA) Group through a stratagem and an egregious fraud on various stakeholders including the statutory regulators, Courts and other entities including entities regulated by the RBI.”
Further, Amazon alleged that Future Retail has been making contrary statements in its annual reports, and in the courts on whether it was facing a liquidity crisis or not. Amazon alleged that in its Annual Report for the financial year 2020-21, Future Retail stated that it did not face any liquidity crisis.
However, “Contrary to the statement made by FRL in its Annual Report, FRL made a false statement in the February 26 Disclosure, claiming for the first time that it allegedly had ‘huge outstanding’ in relation to payments for access to store premises.”