AMAZON NV INVESTMENT HOLDINGS LLC Vs. FUTURE RETAIL LTD. & ORS.
Citation : [CIVIL APPEAL NOS. 4492-4493 OF 2021]
R.F. NARIMAN, J. (TWO JUDGE BENCH) AUGUST 06, 2021
- An Emergency Arbitrator’s orders, would be covered by the Arbitration Act. The Court emphasised that when there is no provision in the Arbitration Act which interdicts such order from being made, the losing party cannot claim that the award has been made sans jurisdiction.
- The Court highlighted the importance of party autonomy enshrined in the Arbitration Act and the freedom to have a dispute decided in accordance with institutional rules which include the provision of Emergency Arbitration.
- An “award” delivered by an Emergency Arbitrator under institutional rules, constitutes as an order under Section 17(1) of the Arbitration Act and is enforceable as such.
- No appeal lies under Section 37 against an order of enforcement of EA Order made under Section 17(2) of the Arbitration Act.
Amazon.com NV Investment Holdings LLC (Amazon) had infused INR 1,431 crore into Future Coupons Pvt Ltd which was to ‘flow down’ to Future Retail Ltd (FRL). Based on mutual understanding, Amazon’s investment in the retail assets of FRL would continue to vest in FRL, due to which FRL could not transfer its retail assets without Amazon’s consent.
Within few months from the date of investment, FRL and 12 other group companies of Future Group entered into a transaction with Mukesh Dhirubhai Ambani Group (Reliance Group). The transaction envisaged amalgamation of FRL with Reliance Group, including transfer of its retail assets to Reliance Group, which led to dispute between FRL and Amazon.
As a result of this transaction, Amazon initiated an arbitration proceeding against Future Group under the Arbitration Rules of the Singapore International Arbitration Centre (SIAC Rules). Amazon filed an application requesting for injunction against the transaction and sought emergency interim relief. On October 25 2020, an Emergency Arbitrator passed an interim award restraining Future Group from taking any steps towards the disputed transaction. However, Future Group went ahead with the transaction, describing the interim award as nullity.
FRL then filed a suit before the Delhi High Court in which it sought to interdict the arbitration proceedings and asked for an interim relief to restrain Amazon from writing to statutory authorities by relying on the Emergency Arbitrator’s award. However, the Delhi High Court refused to grant the interim relief, which was not challenged by FRL.
Separately, Amazon filed a Petition before the Delhi High Court under Section 17(2) of the Arbitration and Conciliation Act, 1996 (Act) for enforcement of Emergency Arbitrators’ interim award. On February 2, 2021, and March 18, 2021, the Delhi High Court restrained Future Group from proceeding with the transaction. However, FRL challenged the order before Division Bench of the Delhi High Court, and the Division Bench stayed the judgment of the Single Bench. Against this order, Special Leave Petition was filed, and the Supreme Court stayed all the proceedings before the Delhi High Court.
- 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 [“Arbitration Act”]
- Whether an order passed under Section 17(2) of the Arbitration Act in the Enforcement of the award of an Emergency Arbitrator by a learned Single Judge of the High Court is appealable
- Section 9, Arbitration Act: Section 9 confers powers on the adjudicating authority or the arbitral tribunal, providing interim measures such as sale of goods or interim custody, as a means of protection. It can not only issue orders to help parties secure disputed sums but the Section confers power on the tribunals to issue a temporary restraining order or appoint a receiver or guardian too.
- Section 17, Arbitration Act: Section 17 of the Act applies when the arbitral tribunal has been formed, and before an award has been issued. Earlier, the tribunals had power to issue any interim measure but after the 2015 amendment, these powers were restricted.
- Section 36, Arbitration Act: Section 36 provides that once the time prescribed for making an application to set aside an award has expired or the application has been refused under Section 34 of this Act, the arbitral award shall be treated as a decree passed by the court.
- Section 37, Arbitration Act: Section 37 states of the provisions regarding appeals under this Act. This Section provides for appeals against orders and not awards.
- Order XXXIX, Rule 2A, the Code of Civil Procedure, 1908: The Rule 2A provides for the procedure against a person whenever there is a case of disobedience of any injunction made or any breach of such injunction.
- Order XLIII, Rule 1(r), the Code of Civil Procedure, 1908: Order XLIII, CPC, states all the orders that are appealable, hence, Rule 1(r) states that any order under Rule 1, Rule 2, Rule 2A, Rule 4 or Rule 10 of Order XXXIX are appealable.
OBSERVATIONS OF HON’BLE SUPREME COURT
INTERPRETATION OF SECTION 17(1) OF ARBITRATION ACT
The Supreme Court observed that the heart of Section 17(1) is the application by a party for interim reliefs. There is nothing in Section 17(1), when read with other provisions of the Act to interdict the application of rules of arbitral institutions that the parties may have agreed to. This being the position, at least insofar as Section 17(1) is concerned, the arbitral tribunal would, when institutional rules apply, include an Emergency Arbitrator, the context of Section 17 “otherwise requiring” – the context being interim measures that are ordered by arbitrators.
RELATION BETWEEN SECTION 9(3) & SECTION 17
Since Section 9(3) and Section 17 form part of one scheme, an ‘arbitral tribunal’ as defined under Section 2(1)(d) would not apply and the ‘arbitral tribunal’ spoken of in Section 9(3) would be like the ‘arbitral tribunal’ spoken of in Section 17(1) which, would include an Emergency Arbitrator appointed under institutional rules.
The same object and context would apply even to Section 9(3) which makes it clear that the Court shall not entertain an application for interim relief once an arbitral tribunal is constituted, unless the Court finds that circumstances exist which may not render the remedy under Section 17 efficacious.
EMERGENCY ARBITRATOR’S AWARD TO BE AN ORDER
Based on the 246th Law Commission Report and Sri krishna Report dated July 30, 2017, the Supreme Court expressed the view that “an Emergency Arbitrator’s award, would undoubtedly be an order which furthers these very objectives to decongest the court system and to give the parties urgent interim relief in cases which deserve such relief. Given the fact that party autonomy is respected by the Act and there is no interdict against an Emergency Arbitrator being appointed, it is clear that an Emergency Arbitrator’s order, which is exactly like an order of an arbitral tribunal once properly constituted, in that parties have to be heard and reasons are to be given, would fall within the institutional rules to which the parties have agreed, and would consequently be covered by Section 17(1), when read with the other provisions of the Act.
EMERGENCY ARBITRATOR’S AWARD NOT A NULLITY
The Supreme Court maintained that having agreed to paragraph 12 of Schedule 1 to 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, without delay.
ENFORCEMENT ORDER UNDER 17(2) IS NOT APPELLABLE
the Supreme Court observed that despite Section 17 being amended by the same Amendment Act, by making Section 17(1) the mirror image of Section 9(1) as to the interim measures that can be made, and by adding Section 17(2) consequently thereof, significantly, no change was made in Section 37(2) (b) to bring it in line with Order XLIII, Rule 1(r). The said Section continued to provide appeals only from an order granting or refusing to grant any interim measure under Section 17. There can be no doubt that granting or refusing to grant any interim measure under Section 17 would only refer to the grant or non-grant of interim measures under Section 17(1)(i) and 17(1)(ii).
In fact, the opening words of Section 17(2), namely, ‘subject to any orders passed in appeal under Section 37’ also demonstrate the legislature’s understanding that orders that are passed in an appeal under Section 37 are relatable only to Section 17(1). For example, an appeal against an order refusing an injunction may be allowed, in which case sub-Section (2) of Section 17 then kicks in to enforce the order passed in appeal. Also, the legislature made no amendment to the granting or refusing to grant any measure under Section 9 to bring it in line with Order XLIII, Rule 1(r), under Section 37(1)(b). What is clear from this is that enforcement proceedings are not covered by the appeal provision.
The Court finally 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.
DECISION- The interim orders passed by the Court must stay vacated. The Court opined that the orders made under Section 17 play an important role in aiding the civil courts and providing interim relief to the parties. The Court also added that Section 34 is complete as long as appeals and orders are considered.