The Approach of Indian Courts to Emergency Arbitrations in the Light of the Judgment in Amazon Vs Future Group

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Table of Contents

  1. What is Emergency Arbitration
  2. 1.1. Reliefs possible in an emergency arbitration
  3. Emergency Arbitration: Position under Indian Law
  4. Enforceability of Emergency Arbitration Awards in India
  5. 3.1. Situation pre 2015 Amendment of the Arbitration and Conciliation Act
    3.2. Situation post 2015 Amendment of the Arbitration and Conciliation Act
  6. What changes with Amazon.com NV Investment Holdings LLC v Future Retail Limited & Others (Civil Appeal Nos. 4492–4493 of 2021)
  7. 4.1. Factual Matrix of the Case with Timeline
    4.2. Detailed Order of the Hon’ble High Court of Delhi in Amazon’s appeal
    4.2.1. Applicability of Group of Companies doctrine and other facts considered by the High Court of Delhi
    4.3. Issues in the Appeal before the Hon’ble Supreme Court
    4.4. Key Highlights
  8. Future Implications
  9. References

What is Emergency Arbitration

Emergency arbitration is a mechanism which allows a disputing party to apply for urgent interim relief before an arbitration tribunal has been formally constituted.

An emergency arbitrator is an arbitrator that gets appointed urgently by an arbitral institution in response to an application for interim relief that cannot wait for the constitution of the arbitral tribunal that shall adjudicate the substantive dispute between the parties.

Reliefs possible in an emergency arbitration

  • Restraining the respondent, in the interim, from committing a violative action.
  • Relief of status-quo pending dispute resolution.
  • Securing monetary claims by praying for freezing orders, deposits of money in an escrow account, and interim payment orders.
  • Preserve evidence that may be material and relevant to the resolution of the dispute.
  • Act or refrain from taking an action that is likely to cause harm or prejudice to the arbitral process itself.

Emergency Arbitration: Position under Indian Law

The terms ‘Emergency Arbitration’, surprisingly, has no definition under the Indian Arbitration and Conciliation Act, considering the growing prevalence and popularity of international commercial arbitration, coupled with the fact that foreign investment in India is becoming a primary driver of growth in the corporate economy. To alleviate this situation and bring recognition to the orders passed by a foreign seated emergency arbitrator, the 246th Law Commission report and the B.N. Srikrishna Report had recommended inclusion of the definition of the term “Emergency Arbitrator” under the definition of the arbitral tribunal in Section 2(d) of the Indian Arbitration and Conciliation Act. That apart, they had further suggested incorporating the term “emergency award” under the definition of “arbitral award” which currently only includes the “interim award” under Section 2(1)(c) of the Indian Arbitration and Conciliation Act. However, the said recommendations were ignored both in 2015 Amendment Act and the 2019 Amendment Act. This has created lacunas and compelled the pro-arbitration judiciary of India, through its High courts and its apex Supreme Court, to pass judgments that acknowledge and provide legal force to emergency arbitration awards, thereby set precedents that shall fill up the lacunas that await attention of the legislature.

Enforceability of Emergency Arbitration Awards in India

Situation pre 2015 Amendment of the Arbitration and Conciliation Act

A mere mention, explicit or implied, of a foreign seat was enough for the Hon’ble Courts to decide that arbitration laws of India would not be applicable. Emergency Arbitrators in foreign seated arbitration have no recognition or acknowledgment in the Arbitration and Conciliation Act of India and they were considered alien by courts of Law in India. This made it nearly impossible to get enforced any foreign-seated Emergency Arbitration orders or awards in India.

In several cases the Indian courts refused to recognize the orders and awards of emergency arbitrators (particularly foreign seated ones), for example in: –

  • Harmony Innovation Shipping Ltd. v. Gupta Coal India Ltd., (2015) 9 SCC 172 – as seat is London, Part-I of the Indian Arbitration and Conciliation Act is impliedly excluded.
  • Yograj Infrastructure Ltd. vs. Ssangyong Engineering Construction Co. Ltd., – since the arbitral proceedings were conducted under Singapore International Arbitration Centre (SIAC), and Rule 32 of SIAC Rules provides that where the seat of arbitration was Singapore, the law governing the arbitration under SIAC Rules would be the International Arbitration Act of Singapore and not Indian law. {stark contrast to stand taken by the Hon’ble Supreme Court in Amazon.com NV Investment Holdings LLC v Future Retail Limited & Others}
  • Hardy Oil and Gas Limited vs. Hindustan Oil Exploration Company Limited and Ors., (2006) 1 GLR 658 – An agreement where the parties had agreed that the law of the arbitration would be the English law, fell within the purview of the rule of ‘implied exclusion’ laid in Bhatia International. Accordingly, the Gujarat High Court held that an Indian Court did not have the jurisdiction to try the petition filed under Section 9 of the Indian Arbitration and Conciliation Act.
  • Raffles Design v. Educomp Professional Education – The High Court of Delhi in this case held that an emergency award passed by a foreign-seated arbitration tribunal was unenforceable under the Indian Arbitration and Conciliation Act. The Court held that the party that has obtained a foreign-seated emergency award would have to file a fresh civil suit and seek interim orders from the domestic court in terms of the emergency award. This approach defeats the very purpose of an arbitration clause and the concepts of party autonomy and competence – competence.

Situation post 2015 Amendment of the Arbitration and Conciliation Act

  • After the 2015 amendment to the Arbitration and Conciliation Act, Section 27 of the said act became applicable to foreign seated arbitrations (vide the amendment to proviso in Section 2(2)). Section 27(5) of the Arbitration and Conciliation Act is now available to be used for enforcement of emergency awards of foreign seated arbitration tribunals, just as Section 27 (5) is applied for enforcing interim orders of domestic arbitration tribunals.
  • To elucidate the above point with judgments related to interim awards passed by domestic arbitration tribunals in India, it may be noted that in Sri Krishan v. Anand the High Court of Delhi held that under Section 27(5) of the Arbitration and Conciliation Act, it had the authority to punish a party for contempt at behest of the arbitral tribunal if a party breached the interim orders passed by the arbitral tribunal. This interpretation was upheld by the Hon’ble Supreme Court in Alka Chandewar v. Shamshul Ishrar Khan where the apex Court held that “the orders of the arbitral tribunal cannot be rendered a dead letter”.
  • Now the 2015 amendment (supra) makes it possible to start contempt of court proceedings even for foreign seated emergency arbitration awards.
  • Section 43(2) empowers the Court to put persons guilty of contempt of the arbitration tribunal to the same penalties and punishments as offences in suits tried before the Court. This provision has now been incorporated in section 27(5) of the Arbitration and Conciliation Act by way of legislative amendment.
  • A foreign seated emergency arbitration award also falls within the wide scope of the definition of a ‘foreign award’ under Section 44 of the Arbitration and Conciliation Act, depending on the nature of the relief granted by the emergency tribunal. This is again possible by the 2015 Amendment to Section 2(2) of the act.
  • In dealing with a Singapore International Arbitration Centre (SIAC) emergency arbitration order, the High Court of Maharashtra seated in Mumbai, in HSBC vs. Avitel came to characterise the Emergency Arbitrator’s decision as an award and the same was upheld by the Hon’ble Supreme Court.
  • It is paramount to note that merely having a foreign seat and foreign venue in the arbitration agreement, is no longer going to be construed as an intention to exclude Part-I of the Arbitration and Conciliation Act.

Section 2(2) of the Arbitration and Conciliation Act, (as amended in 2015) is extracted below for better appreciation: –

(2) This Part shall apply where the place of arbitration is in India:

[Provided that subject to an agreement to the contrary, the provisions of sections 9, 27 and clause (a) of sub-section (1) and sub-section (3) of section 37 shall also apply to international commercial arbitration, even if the place of arbitration is outside India, and an arbitral award made or to be made in such place is enforceable and recognised under the provisions of Part II of this Act.]

  • An award made by an emergency arbitrator still is not directly enforceable in India, but the same may be enforced indirectly by: –
    • approaching a Court under Section 9 of the Arbitration and Conciliation Act, which provides the Court the authority to grant interim measures; (or)
    • approaching an Indian Court to initiate contempt proceedings against the defaulting party under Section 27(5) of the Arbitration and Conciliation Act. This works only with respect to interim measures or orders by the arbitration tribunal not in the form of an interim award, considering that ‘interim award’ is expressly included in the definition of the ‘award’ under the Arbitration and Conciliation Act.

Therefore, despite the 2015 amendment to the Arbitration and Conciliation Act, an emergency arbitrator is not yet recognised under Indian law and the aforementioned ‘round-about’ ways need to be followed to enforce the emergency award of a foreign seated arbitration tribunal. This situation is likely to remain until the recommendation (supra) of the 246th Law Commission of India Report, 2014, is given effect by the legislature.

What changes with Amazon.com NV Investment Holdings LLC v Future Retail Limited & Others (Civil Appeal Nos. 4492–4493 of 2021)

Factual Matrix of the Case with Timeline

S.No.

Date

Particulars

1

August 2019

  • Amazon entered into three shareholder agreements with Future Retail Limited, Future Coupons Pvt. Ltd., and its promoters, directors (collectively referred to as “Biyani Group” or “Future Group”)
  • The Shareholders’ Agreement dated 12th August 2019 was in relation to the Future Retail Limited where in Future Coupons Pvt Ltd was accorded negative, protective, special, and material rights regarding Future Retail Limited more particularly, Future Retail Limited’s retail stores.
  • The rights granted to Future Coupons Pvt Ltd under the said Shareholders’ Agreement were for the purpose of being exercised for Amazon’s benefit and thus were reflected in a Shareholders’ Agreement dated 22nd August 2019 executed between Amazon, Future Coupons Pvt Ltd and the Future Group. Amazon agreed to invest a sum of Rs.1431 crores only (international: Rupees Fourteen Billion Three Hundred and Ten Million Only), in Future Coupons Pvt Ltd to buy 49% stake in it based on the rights obtained by Future Coupons Pvt Ltd under previous Shareholders’ Agreements. Future Coupons Pvt Ltd holds a 7.3% stake in Future Retail Limited, effectively giving Amazon an indirect stake of 3.58% in Future Retail Limited because of the said transaction.
  • Future Retail Limited could not transfer its retail assets without Future Coupons Private Limited’s explicit consent which, in turn, could not be granted unless Amazon had consented to it.
  • Future Retail Limited and Biyani family were also prohibited from dealing with a ‘restricted persons’ regarding the sale or encumbrance of assets of Future Retail Limited. Mukesh Dhirubhai Ambani Group (“Reliance Group”) was one such restricted person.
  • This Shareholder’s Agreement dated 22nd August 2019, had a dispute resolution clause where in any disputes were agreed to be resolved by arbitration under SIAC Rules and seated in Singapore.

2

December 2019

Future Coupons Pvt Ltd receives a payment of INR 1,431 Crores only, from Amazon and starts injecting it in Future Retail Limited.

3

29th August 2020

Future Retail Limited, Future Coupons Pvt. Ltd., and its promoters / directors entered a transaction with Reliance Retail (part of the Mukesh Dhirubhai Ambani Group or “Reliance Group”) which envisions the amalgamation of Future Retail Limited with Reliance Group, the resultant cessation of Future Retail Limited as an entity, and the complete disposal/transfer of its retail assets in favour of the said group

4

5th October 2020

Amazon, aggrieved by the events of 29th August 2020, initiated arbitration proceedings and also sought emergency interim relief from an emergency arbitrator appointed under the SIAC Rules in the form of injunction against the aforesaid transaction.

5

25th October 2020

The emergency arbitrator of SIAC passed an award in favour of Amazon. The Future Group however went ahead with the disputed transaction, describing the award as a nullity and the emergency arbitrator as coram non judice.

6

7th November 2020

Future Retail Limited moves High Court of Delhi against Amazon by filing a civil suit before the High Court of Delhi in C.S. No. 493 of 2020, in which Future Retail Limited sought to prohibit the arbitration proceedings and asked for interim relief to restrain Amazon from writing to statutory authorities by relying on the emergency arbitrator’s award, calling it a tortious interference with its civil rights.

7

20th November 2020

Deal dated 29th August 2020, between Future Group and Mukesh Dhirubhai Ambani Group gets the nod from Competition Commission of India.

8

November 2020

Amazon pressed an application filed under Section 17(2) of the Indian Arbitration and Conciliation Act which was heard and disposed of by a learned single Judge bench of the High Court of Delhi.

9

21st December 2020

In C.S. No. 493 of 2020, Single-judge bench of Delhi HC refuses to stay the disputed deal (as prayed by Amazon), upholds the August 29th board resolution or Future Retail Limited, but allows Amazon to write to regulators.

Also, it upholds Future Retail’s claim of alleged torturous interference by Amazon.

10

January 2021

SIAC constitutes a 3-member arbitration panel to pass the final verdict.

11

13th January 2021

Notice is issued to Future Group by the High Court of Delhi’s division bench, on Amazon’s plea against 21st December 2020 order.

12

20th January 2021

SEBI gives nod to Future Group – Reliance Group deal.

13

2nd February 2021

A single Judge bench of the High Court of Delhi passed an order of status quo restraining the Future Group from going ahead with the impugned transaction.

14

3rd February 2021

Future Group disputes the status-quo order before two-judge bench before the High Court of Delhi.

15

8th February 2021

The operation of both the above orders of learned single Judge is stayed by a Division Bench of the High Court of Delhi vide two separate orders passed on Future Group’s appeal.

16

11th February 2021

Amazon moves the Supreme Court to challenge revoking of “status-quo” orders by a division bench of High Court of Delhi.

17

12th February 2021

NCLT hears and reserves order on the plea by Future Group calling for a shareholder meeting to approve deal with Reliance Group.

18

22nd February 2021

Supreme Court allows Future Group to proceed with a plea for a nod before NCLT but restrains NCLT from passing final orders approving the Future Group’s amalgamation scheme.

The apex court issues notice to Future Group on Amazon plea seeking status quo.

19

18th March 2021

The order of 2nd February 2021 by the learned single Judge bench of the High Court of Delhi is followed by a detailed judgment where in the single Judge held that the interim award made by the Emergency Arbitrator was enforceable under the Arbitration Act. The Court states that Future Retail Limited, Kishore Biyani and other promoters, directors of Future Group deliberately and wilfully disobeyed the order of the Court, liable to face action under the Code of Civil Procedure. It directs that the assets of Kishore Biyani, other Future Group Promoters, Directors be attached. Asks Future Retail Limited, Future Coupons Pvt Ltd to approach all regulators to recall grant of deal approval.

20

20th March 2021

Future Group challenges order directing stay on the deal, attachment of assets of Kishore Biyani and other Future Group Promoters/ Directors.

21

22nd March 2021

High Court of Delhi stays single-Judge bench order granting status quo, stays order that directed attachment of Biyani Group assets.

22

17th April 2021

Future Retail Limited’s board approves a resolution plan to restructure a secured financial debt under the circular of RBI dated 6th August 2020.

23

19th May 2021

Reliance Group moves NCLT, seeks nod to call for a shareholder meeting.

24

22nd June 2021

NCLT reserves order on Reliance Group’s plea to call a shareholder meeting.

25

20th July 2021

The Supreme Court resumes hearing of Amazon plea seeking a stay on Future Retail Limited – Reliance Retail deal.

26

29th July 2021

The Supreme Court reserves judgment in the Amazon plea seeking to stay the sale of Future Retail Limited.

27

06th August 2021

The Supreme Court held that Singapore’s Emergency Arbitrator award is enforceable.

Detailed Order of the Hon’ble High Court of Delhi in Amazon’s appeal

Amazon had filed a petition under Section 17(2) of the Arbitration and Conciliation Act which was heard and disposed by a learned single Judge of the High Court of Delhi. On 2nd February 2021, the learned single Judge passed a status-quo order restraining Future Group from going ahead with the disputed transaction with Reliance Group, stating that reasons and a detailed order will follow.

On 18th March 2021, the said learned single Judge passed a detailed judgment giving his reasons for an order made under Section 17(2) of Arbitration and Conciliation Act read with Order XXXIX Rule 2-A of the Code of Civil Procedure, in which it was held that an Emergency Arbitrator’s award is an order under Section 17(1) of the Arbitration and Conciliation Act.

“Conclusion

188.

The Emergency Arbitrator is an Arbitrator for all intents and purposes; order of the Emergency Arbitrator is an order under Section 17(1) and enforceable as an order of this Court under Section 17(2) of the Arbitration and Conciliation Act.

189.

Respondent No.2 is a proper party to the arbitration proceedings and the Emergency Arbitrator has rightly invoked the Group of Companies doctrine by applying the well settled principles laid down by the Supreme Court in Chloro Controls (supra), Cheran Properties (supra) and MTNL (supra). The respondents have raised a plea contrary to the well settled law relating to Group of Companies doctrine laid down by the Supreme Court.

190.

The respondents have raised a vague plea of Nullity without substantiating the same. The interim order of the Emergency Arbitrator is not a Nullity as alleged by respondent No.2.

191.

Combining/treating all the agreements as a single integrated transaction does not amount to control of the petitioner over FRL and therefore, the petitioner’s investment does not violate any law.

192.

All the objections raised by the respondents are hereby rejected with 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. The cost be deposited within a period of two weeks and the receipt be placed on record within one week of the deposit.

193.

The respondents have deliberately and willfully violated the interim order dated 25th October, 2020 and are liable for the consequences enumerated in Order XXXIX Rule 2A of the Code of Civil Procedure.

194.

In exercise of power under Order XXXIX Rule 2A(1) of the Code of Civil Procedure, the assets of respondents No.1 to 13 are hereby attached. Respondents No.1 to 13 are directed to file an affidavit of their assets as on today in Form 16A, Appendix E under Order XXI Rule 41(2) of the Code of Civil Procedure within 30 days. Respondent No.1, 2, 12 and 13 are directed to file an additional affidavit in the format of Annexure B-1 and respondents No.3 to 11 are directed to file an additional affidavit in the format of Annexure A-1 to the judgment of M/s Bhandari Engineers & Builders Pvt. Ltd. v. M/s Maharia Raj Joint Venture, (supra) along with the documents mentioned therein within 30 days.

195.

Show cause notice is hereby issued to respondents No.3 to 13 to show cause why they be not detained in civil prison for a term not exceeding three months under Order XXXIX Rule 2A(1) of the Code of Civil Procedure for violation of the order dated 25th October, 2020. Reply to the show cause notice be filed within two weeks. Rejoinder within two weeks thereafter.

196.

The respondents are directed not to take any further action in violation of the interim order dated 25th October 2020. The respondents are further directed to approach all the competent authorities for recall of the orders passed on their applications in violation of the interim order dated 25th October 2020 within two weeks. The respondents are directed to file an affidavit to place on record the actions taken by them after 25th October 2020 and the present status of all those actions at least three days before the next date of hearing.”

A review of the language in the conclusion portion (reproduced above) of the said order is valuable in understanding how the learned Single Judge interpreted the Arbitration and Conciliation Act, thus laying the foundation for the judgment to be passed later by the Hon’ble Supreme Court, which came to be regarded as a landmark decision.

Applicability of Group of Companies doctrine and other facts considered by the High Court of Delhi

The court considered the Emergency Arbitrator’s order alongside the following factual grounds:

  • Future Coupons Pvt Ltd and Future Retail Limited belong to the same Group of Companies.
  • The conduct of the parties i.e., Amazon and Future Coupons Pvt ltd reflects the clear intention to bind Future Retail Limited.
  • Concurrent negotiations of the agreements and common negotiating and legal team represented Future Coupons Pvt Ltd and Future Retail Limited.
  • Direct relationship of the Future Retail Limited to Future Coupons Pvt Ltd, evident harmony of the subject matter.
  • Composite nature and structure of transaction between the parties makes it apparent that neither the Future Coupons Pvt Limited Shareholders’ Agreement nor the Future Retail Limited Shareholders’ Agreement would take place without the others.
  • Funds received by Future Coupons Pvt Ltd have been used to financially support Future Retail Limited.
  • The multitude of agreements are intermingled and only their composite performance shall discharge the parties of their respective obligations under the said agreements.
  • Presence of similar ‘dispute resolution clauses’ in both, Future Coupons Pvt Ltd’s Shareholders’ Agreement, and the Future Retail Limited’s Shareholders’ Agreement, reflects common intention of all the parties, both signatory and non-signatory, to resolve their disputes by arbitration.

Issues in the Appeal before the Hon’ble Supreme Court

Whether an “award” delivered by an Emergency Arbitrator appointed under Schedule 1 of the SIAC Rules can be said to be an order under Section 17(1) of the Act?

  • The Hon’ble Supreme Court held that emergency arbitration was within the purview of the Arbitration and Conciliation Act and the definition of an arbitration tribunal, included within its scope an Emergency Arbitration.
  • The Hon’ble Supreme Court held that vide the 2015 Amendment to the Arbitration and Conciliation Act, the Section 17(2) was inserted to provide for creation of a legal fiction that any order issued by an arbitral tribunal (seated in India) shall be considered as an order of the Court and shall be enforceable as such. Therefore, since the arbitral tribunal in Amazon v. Future Group was India seated, it was able to enforce the award under this provision.
  • The Hon’ble Supreme Court observed that Section 2(1)(d) of the Arbitration & Conciliation Act defines ‘arbitral tribunal’ to encompass an arbitrator or a panel of arbitrators. The Supreme Court observed that the definition of ‘arbitral tribunal’ under the said Section 2(1)(d) does not include an “emergency arbitrator”. However, it stated that Section 1 of the Arbitration & Conciliation Act, opens with the words “unless the context otherwise requires”. When the said Section 1 is read together with Section 2(1)(a) of the Arbitration & Conciliation Act (that provides for “any” arbitration, whether or not administered by an arbitral institution) and Section 2(6) and Section 2(8) of the Arbitration & Conciliation Act (which permit incorporation of rules of arbitral institutions), it becomes apparent that interim orders passed by an emergency arbitrator under the rules of an arbitration institution are included within the purview of orders passed by an arbitral tribunal under Section 17(1) of the Arbitration & Conciliation Act.
  • The Hon’ble Supreme Court referred to the report of the Srikrishna Committee and stated that it is valid to interpret Section 17(2) of the Arbitration & Conciliation Act to enforce emergency awards for India-seated arbitrations and the said report had recommended that the Arbitration & Conciliation Act be amended such that it comes abreast with international practice of recognising and enforcing an emergency award.
  • The Hon’ble Supreme Court held that a party after having agreed to institutional rules (in this case the SIAC Rules) providing for emergency arbitration and participating in an Emergency Arbitration proceeding, would be estopped by its acts and deeds, from subsequently contending that it could not be bound by the order of the Emergency Arbitrator.
  • With reference to the dispute raised stating that an emergency arbitration occurring prior to arbitral proceedings or prior to the constitution of the arbitral tribunal, is not covered by Section 17 of the Arbitration & Conciliation Act, the Hon’ble Supreme Court dismissed the said contention and held that Section 21 of the Arbitration & Conciliation Act, provides that arbitration proceedings with respect to a dispute commence from the date on which a request for that matter to be referred to arbitration is received by the other side. Also, Rule 3.3 of the SIAC Rules provides that the date of commencement of the arbitration is the date of receipt of the Notice of arbitration by the registrar as per SIAC Rules. Therefore, the Supreme Court inferred that the arbitral proceedings commence when a notice of arbitration is issued, which is preceding the constitution of an arbitral tribunal and the contentions of Future Group fail.

Whether an order passed under Section 17(2) of the Act in enforcement of the award of an Emergency Arbitrator by a learned Single Judge of the High Court is appealable?

  • The Supreme Court observed that “the legal fiction created under Section 17(2) is limited to the purpose of enforcing orders passed by the arbitral tribunal as orders of the court”. The Supreme Court relied on the judgment in Union of India v. Vedanta Ltd, where in the Court had observed that an application to enforce a foreign award remains an application under the Arbitration and Conciliation Act. The legal fiction created under Section 17 cannot be extended to hold that appeals from court orders enforcing an order under Section 17(2) can be made in the same manner as a court order enforcing an interim measure under Section 9 of the Arbitration and Conciliation Act.
  • The Supreme Court noted that appeals from orders made under Arbitration and Conciliation Act are to be made within the bounds of Section 37 of the Arbitration and Conciliation Act. It was stated that there can be no doubt that Section 37 is a complete code so far as appeals from orders and awards made under the Arbitration and Conciliation Act are concerned. This has further been strengthened by the addition of the non-obstante clause by the Arbitration and Conciliation (Amendment) Act, 2019.
  • The Hon’ble Supreme Court referred to Section 37 of the Arbitration and Conciliation Act which deals with appeals and to Section 17(2) of the same act. The Supreme Court concluded that enforcement proceedings are not covered by the appeal provision and hence no appeal would be possible against the order of emergency awards under section 37 of the Arbitration and Conciliation Act.

Key Highlights

The Court observed that “a conjoint reading of these provisions (Section 17(1), Section 17(2) of the Arbitration and Conciliation Act, and Rule 3.3 of SIAC Rules) coupled with there being no prohibition, either express or by necessary implication, against an Emergency Arbitrator would show that an Emergency Arbitrator’s orders, if provided for under institutional rules, would be covered by the Arbitration and Conciliation Act.”

Future Group argued that the emergency arbitrator was appointed before the arbitral tribunal was constituted therefore the emergency arbitrator would not fall under the realm of Section 17 (1) of the Indian Arbitration and Conciliation Act. The Supreme Court rejected this argument and held that Section 17(1) is “elastic enough” to capture emergency arbitration proceedings.

The Court observed that “there is nothing in the Arbitration and Conciliation Act that prohibits contracting parties from agreeing to a provision providing for an award being made by an Emergency Arbitrator. On the contrary, when properly read, various Sections of the Act which speak of party autonomy in choosing to be governed by institutional rules would make it clear that the said rules would apply to govern the rights between the parties, a position which, far from being prohibited by the Arbitration Act, is specifically endorsed by it.

The Court stated that “the introduction of Sections 9(2) and 9(3) would show that the objective was to avoid courts being flooded with Section 9 petitions when an arbitral tribunal is constituted for two good reasons – (i) that the clogged court system ought to be decongested, and (ii) that an arbitral tribunal, once constituted, would be able to grant interim relief in a timely and efficacious manner.”

The Court observed that “the parties having agreed to paragraph 12 of Schedule 1 contained in the SIAC Rules, it cannot lie in the mouth of a party to ignore an Emergency Arbitrator’s award by stating that it is a nullity when such party expressly agrees to the binding nature of such award from the date it is made and further undertakes to carry out the said interim order immediately and without delay.” (estoppel)

Following the law laid down in BGS SGS SOMA JV v. NHPC, the Court observed that “this judgment is determinative of the issue before us as it specifically ruled out appeals under Order XLIII Rule 1 of the Code of Civil Procedure when it comes to orders being made under the Arbitration Act.”

The issue in question pertains to an India-seated arbitration with venue as Singapore and rules of conduct of arbitration being SIAC Rules. Clarity is still needed on matters where the arbitration is seated abroad (out of India).

Future Implications

The judgment of the Hon’ble Supreme Court in the case of Amazon vs Future Retail Limited and Others provides support to emergency arbitration provisions contained in the institutional rules of various arbitration institutions in India and around the world. Parties can be expected to resort to institutional arbitration to avail benefits of emergency arbitration without worrying much about the enforcement.

The said judgment encourages contracting parties to choose the seat of arbitration as India.

The said judgment leaves much to be desired for those who want to choose a seat of arbitration other that India, and the legal fraternity shall await clarity regarding enforcement (in India) of foreign seated emergency awards.

—- End of Article—-

Latest NEWS (at the time of writing this article) regarding this matter may be accessed here.

References

  1. Mundi, J. (2021, August 2). “Jus Mundi: Wiki Notes for Investment Law & Arbitration”. Jus Mundi. Retrieved November 3, 2021, from https://jusmundi.com/en/document/wiki/en-emergency-arbitration
  2. Sahai, R. (2009, August 18). “Sri Krishan vs Anand”. Indian Kanoon. https://indiankanoon.org/doc/155719426/
  3. Kaul, K., & Nariman, F. (2017, July 6). “Alka Chandewar vs Shamshul Ishrar Khan”. Indian Kanoon. https://indiankanoon.org/doc/53620809/
  4. Virmani, A., Nick Papadimos (Assistant Editor for Australia, New Zealand, and the Pacific Islands), & Scherer, M. (2021, October 2). “Rekindling the Debate on Enforcement of Foreign Seated Emergency Awards in India”. Kluwer Arbitration Blog. http://arbitrationblog.kluwerarbitration.com/2021/10/03/rekindling-the-debate-on-enforcement-of-foreign-seated-emergency-awards-in-india/
  5. Deshmukh, I. (2020, August 28). “Avitel v. HSBC – Finality on the Question of Arbitrability when Allegations of Fraud are Raised SMM”. India Corporate Law. https://corporate.cyrilamarchandblogs.com/2020/08/avitel-v-hsbc-finality-on-the-question-of-arbitrability-when-allegations-of-fraud-are-raised-smm/
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