DSK Legal | View firm profile
In the case of Amazon.com NV Investment Holdings LLC v. Future Retail Limited & Ors.[1], the Supreme Court of India has decided 2 important questions of law with regard to enforcement of an emergency award by courts in India viz.,
- whether an “award” delivered by an Emergency Arbitrator under the Arbitration Rules of the Singapore International Arbitration Centre (“SIAC Rules”) can be said to be an order under Section 17(1) of the Arbitration and Conciliation Act, 1996 (“Act”); and
- whether an order passed under Section 17(2) of the Arbitration Act in enforcement of the award of an Emergency Arbitrator by a learned Single Judge of the High Court is appealable.
Brief facts of the disputes are as follows:
Future Retail had signed a deal with Amazon whereby Amazon acquired 49% stake in one of the promoter firms of Future Retail, giving Amazon a call option to acquire all or part of the promoter company’s shareholding in Future Retail within 3-10 years. The transaction between Future Group and Amazon contained a specific embargo with respect to the assets of Future Retail wherein Future Retail was prohibited from transferring or encumbering its assets to certain ‘restricted persons’. The Mukesh Dhirubhai Ambani Group (‘Reliance Group’) was one such ‘restricted person’ under the transaction documents.
Thereafter, sometime in August 2020, Future Group entered into an agreement with Reliance Retail (part of the Reliance Group) to sell its retail, wholesale, logistics and warehousing businesses to Reliance Retail. Future Group was under tremendous financial stress and the COVID-19 related lockdown had made it worse for them. Future Group’s rationale for entering into this transaction was to pare its debt.
After the Future Group – Reliance Retail deal was announced, Amazon alleged that Future Group was in violation of its non-compete ROFR obligations. It further alleged that Future Group was required to inform Amazon before entering into any such agreement. Future Group’s response was that it had not sold any stake in the company and was merely selling its assets to pare its debt and hence it had not violated any terms of the contract.
Amazon invoked arbitration against Future Group and applied for an emergency arbitration award by an emergency arbitrator. The emergency arbitrator passed an emergency award in favour of Amazon, inter alia restraining Future Group from proceeding with the Reliance Retail transaction in any manner, and not to take any steps to transfer / assign / dispose / alienate any assets of Future Group. The emergency award was to be in place till further orders from the arbitral tribunal.
Future Group filed a suit before the Delhi High Court questioning the legal status of the emergency arbitrator. The legality of the emergency award itself was not made an issue. Future Group argued that the concept of emergency arbitration is outside the scope of Part 1 of the Act and consequently the emergency award is bereft of jurisdiction and is a nullity. The suit filed by Future Group sought an injunction against Amazon unlawfully interfering with the performance of the transaction between Future Retail and Reliance Retail.
In the meantime, Amazon fled an application under Section 17(2) of the Act for enforcement of the emergency award. The Single Judge of the Delhi High Court passed a status-quo order in which the Biyani Group was restrained from going ahead with the impugned transaction. The Appeal Court stayed the operation, implementation, and execution of the Single Judge’s order. The matter reached the Supreme Court of India with respect to the enforceability of the emergency award.
On issue no. (i) set out above, the Supreme Court held that party autonomy is the pillar of arbitration under the Arbitration Act. The Act makes it clear that parties are at freedom to authorize any person including an institution to determine issues between parties. While the Act permits the parties to agree on the rules that shall govern the arbitration proceedings, it also confers upon parties the freedom to agree on the procedure to be followed.
Taking note of Section 21 of the Act read with Rule 3.3 of the SIAC Rules, the Supreme Court of India held that it can be said that the arbitral proceedings are deemed to commence on the day when the Registrar of the SIAC receives a complete notice of arbitration. Therefore, in the absence of any bar to the recognition of the emergency arbitration award, the same would be covered under the Act, if so provided for under the institutional rules.
The Supreme Court also held that the expression ‘during the arbitral proceedings’ is wide enough to include the emergency arbitration proceedings which commence only upon receipt of the notice of arbitration by the Registrar of the SIAC. The Supreme Court further held that the expression ‘arbitral tribunal’ as defined under Section 2(1)(d) of the Act would include an emergency arbitrator. Consequently, the Supreme Court held that the expression arbitral tribunal as contained in Section 17(1) of the Act would, when institutional rules apply, include an emergency arbitrator.
The Supreme Court of India held that the introduction of Sections 9(2) and 9(3) into the Act and the amendment to Section 17 of the Act brought into its ambit an award passed by an emergency arbitrator, when the parties have agreed on application of SIAC Rules. It also held that if the institutional rules chosen by parties to govern the arbitration provide for an emergency arbitrator, party autonomy requires that an award passed under such rules will come within the ambit of Section 17 (1) of the Arbitration Act. Once a party agrees to institutional rules and participates in emergency arbitration proceedings, it is estopped from not obeying it on the ground that it is a nullity.
On issue no. (ii) set out above, the Supreme Court of India held that Order XXXIX Rule 2A of the Code of Civil Procedure, 1908 is primarily intended to enforce orders passed under Order XXXIX, Rules 1 and 2, and for that purpose, civil courts are given vast powers which include the power to attach property, apart from passing orders of imprisonment, which are punitive in nature. While examining maintainability of such an appeal, the Supreme Court of India, while interpreting Sections 9, 17 and 37 of the Act held that Section 17 of the Act was amended in 2015 to bring it at par with Section 9 of the Act. It held that the expression ‘in relation to’ coupled with the expression ‘any proceedings’ in Sections 9(1) and 17(1) of the Act are comprehensive in nature and wide enough to include in its ambit enforcement proceedings. It also held that if a party flouts an order passed under Section 9 of the Act, the same can be enforced, and such power to enforce orders can be traced to Section 9(1) of the Act, which in turn refers to Order XXXIX Rule 2A of the CPC. Therefore, while the arbitral tribunal cannot enforce its order, the court enforcing an order under Section 17(2) of the Act acts in the same manner as it does when enforcing an order under Section 9(1) of the Act.
The Supreme Court of India held that the Act is a complete code on matters pertaining to arbitration, and Section 37 of the Act is exhaustive insofar as it relates to appeals from orders and awards under the Act. The amendment to the Act in 2015 amended Section 37 of the Act. However, despite Section 17 of the Act being amended, the amendment in 2015, while making orders refusing or granting interim reliefs appealable, did not contemplate an appeal against an order enforcing an interim order made under section 17 of the Act.
In view of the above, the Supreme Court of India vacated all interim orders passed by the Appeal Court of the Delhi High Court and held that no appeal lies under Section 37 of the Act against an order of enforcement of an Emergency Arbitrator’s order made under Section 17(2) of the Act.
This important judgment has now laid to rest the controversy in relation to emergency awards passed by emergency arbitrators in a domestic arbitration in India, and regarding an appeal against an order passed by a civil court in India to enforce an Arbitrator’s order made under Section 17(2) of the Act.
Authors:
Mr. Nirav Shah, Partner and Mr. Ryan D’souza, Senior Associate
[1] Civil Appeal Nos. 4492-4493 OF 2021