Emergency Arbitration Awards Enforceable in India

In a significant step towards firmly entrenching the will of the parties as a fundamental cornerstone of the Indian arbitration law, the Supreme Court, on August 06, 2021, ruled in the matter of Amazon.com NV Investment Holdings LLC v/S Future Retail Limited and Others 1(“Judgment”), and held that an emergency arbitration award was enforceable in India. In this article, we take a look at the factual matrix leading to the judgment and the rationale of the Court in reaching the aforesaid conclusion.

This Judgment comes in the wake of the Amazon-Future Retail dispute, which we have previously talked about here. The case has attracted considerable media attention and every order, judgment and award has been heavily dissected.

The entire matter rests on three agreements entered into between Amazon.com NV Investment Holdings LLC (“Amazon”) and Future Retail Limited (“FRL”), and Future Coupons Private Limited (“FCPL”) respectively. FRL and FCPL entered into a shareholders’ agreement to accord negative, protective, special and material rights with regard to FRL, including in particular, FRL’S retails stores.  The rights granted to FCPL under the above agreement were to be exercised for Amazon’s benefit and were hence mirrored in a shareholders’ agreement executed between Amazon, FCPL and the key personnel of FRL/FCPL. Based on the above, Amazon invested a sum of Rs. 1431 Crores in FCPL vide a share subscription agreement. An express stipulation accompanying the investment was that this investment in FCPL would ‘flow down’ to FRL. The understanding therefore was that Amazon’s ultimate investment in FRL’s retail assets would continue to vest in FRL, owing to which, FRL could not transfer its retail business without FCPL’s consent, consent which could not be granted unless Amazon had provided its consent. Furthermore, FRL could not, in any manner, divest of its retail assets to ‘restricted persons’, and Reliance Industries Limited (“RIL”) was front and centre on that list.

However, a few months after the above transaction, FRL, FCPL and RIL entered into a deal seeking to amalgamate FRL with the Mukesh Dhirubhai Ambani group, the dissolution of FRL as an entity, and the transfer of FRL’s retail assets to the Mukesh Dhirubhai Ambani group (“Disputed Transaction”). Essentially, the anatomy of this deal envisaged all the elements that the previous transaction forbade it from indulging in. Amazon thought likewise, and initiated proceedings by filing an application on October 05, 2020, asking for interim relief under the Singapore International Arbitration Centre Rules, 2016 (“SIAC Rules”), looking towards the institution to grant an injunction against the Disputed Transaction. An interim award was granted by the Emergency Arbitrator on October 25, 2020 (“Award”) in favour of Amazon, restricting FRL and FCPL from taking any steps in furtherance or aid of the Disputed Transaction. FRL and FCPL petitioned the Delhi High Court to restrain Amazon from approaching statutory authorities in the matter of the Disputed Transaction by relying on the Award. In the meantime, proceedings were filed by Amazon before the Delhi High Court under Section 17(2)2 of the Indian Arbitration and Conciliation Act, 1996 (“Act”) to enforce the Award. After various appeals and special leave petitions, the matter finally reached the Supreme Court for final disposal.

The Court first reiterated certain relevant provisions of the Act. It laid great emphasis on the fact of party autonomy as contained in the Act. It held that Section 2(6)3 of the Act made it clear that the parties are free to authorise any person, including an institution, to determine issues that arise between the parties. Also, under Section 2(8)4, party autonomy goes to the extent of an agreement which includes being governed by arbitration rules referred to in the aforesaid agreements. Likewise, under Section 19(2), parties are free to agree on the procedure to be followed by an arbitral tribunal in conducting its proceedings. Then, the Court ruminated upon the interpretation of Section 21 which states that arbitral proceedings commence on the date on which a request for that dispute to be referred to arbitration is received by the respondent, which section is subject to the agreement of the Parties. In view of the same, the Court turned its attention to Rule 3.3 of the SIAC Rules which stipulate that “the date of receipt of the complete Notice of Arbitration by the Registrar shall be deemed to be the date of commencement of the arbitration”. Thus, the Court held that the arbitral proceedings in the present case were said to have commenced from the date of receipt of a complete Notice of Arbitration by the SIAC Registrar, which would indicate that arbitral proceedings under the SIAC Rules commence much before the constitution of an arbitral tribunal under the said Rules. The Judgment therefore affirmed that an Emergency Arbitrator’s orders, if provided under institutional rules, would be covered by the Act.

The Court explained in the Judgment that the instant case was similar to the line of case law established by Centrotrade Minerals & Metal Inc. V/s Hindustan Copper Limited5 where due significance was bequeathed upon party autonomy and the Court was confirmed that the parties, by agreeing to the SIAC Rules, had not bypassed any mandatory provisions of the Act. Significantly, the Judgment expressly mentioned that “there is nothing in the Act which prohibits contracting parties from agreeing to a provision providing for an award being made by an Emergency Arbitrator”6. Contemplating on the scope of Section 17(1) of the Act, which provides for an arbitral tribunal to grant interim measures of protection in the matters listed under Section 17(1)(ii), the Court held that “in so far as Section 17(1) was concerned, the ‘arbitral tribunal’ would, when institutional rules apply, include an Emergency Arbitrator”7.

Pertinently, the Court noted that a party could not say, after participating in an Emergency Award proceeding, and having agreed to the rules of the institution, that it would thereafter not be bound by the Emergency Arbitrator’s ruling. It further dismissed FRL’s contention that the Award was a nullity by the same principle.

1 Civil Appeal Nos. 4492-4493 of 2021

2 Section 17(2) stipulates that any interim order passed by an arbitral tribunal in the matters listed in Section 17(1) would be deemed to be an order of the Court for all purposes and shall be enforceable under the Code of Civil Procedure.

3 Section 2(6) states that where [Part I], leaves the parties free to determine a certain issue, that freedom shall include the right of the parties to authorise any person including an institution, to determine that issue.

4 Section 2(8) provides that where [Part I] (a) refers to the fact that the parties may have agreed or that they may agree, or,(b) in any other way refers to the agreement of the parties, that agreement shall include any arbitration rules referred to in that agreement.

5 (2017) 2 SCC 228

6 Paragraph 17, Civil Appeal Nos. 4492-4493 of 2021

7 Paragraph 20, ibid