In August 2019, Future Retail Limited (“FRL”) signed a deal with global e-commerce giant Amazon India Limited (“Amazon”). As a part of the deal, Amazon acquired a certain stake in Future Coupons Private Limited (“FCPL”), the promoter firm of FRL. FRL would be able to place its products on Amazon’s online marketplace and FRL’s infrastructure would aid Amazon in reducing delivery time.
In August 2020, FRL, a subsidiary of the Future Group (“FG”) entered into an agreement with Reliance Retail Limited (“RRL”), a subsidiary of Reliance Industries Limited (“RIL”) to sell its retail, wholesale, logistics and warehousing to the latter. Amazon then contended that the Reliance-FRL deal was a violation of a non-compete clause in the deal that Amazon had signed with FRL, among other violations. FG contended that they had only sold assets and not stake, thereby not violating any contractual obligations.
This deal also contained a dispute resolution clause wherein the parties would approach the Singapore International Arbitration Centre (“SIAC”) for Emergency Arbitration (“EA”). Within the consequent proceedings, FRL claimed that an EA order given by SIAC lacks jurisdiction and is a nullity as it does not hold legal status under the Arbitration and Conciliation Act, 1996 (“Arbitration Act”). This contention was upheld by the Delhi High Court (“Del. HC”). Consequently, Amazon approached the Hon’ble Supreme Court of India to challenge the decision of the Del. HC.
The following analytical discussion of the judgement is done by considering the relevance of its impact upon the concept of Emergency Arbitration in India. This article also considers the substantial effect that the ruling has upon the concept of enforceability and appealability of Emergency Awards in India. Consecutively, the analysis includes a critique of the judgement, in terms of developments in the field of Emergency Arbitration in Asia, along with its contribution to fields beyond it.
Relevance of the Judgment
As per the judgement, an Emergency Arbitrator’s award, under Section 17 of the Arbitration Act, holds good and an order of a single judge cannot be appealed against under Section 37(2) of the Arbitration Act. The judgement also states that parties have complete autonomy to decide upon an institute to govern the process of resolution of their dispute. The institute itself may lay down relevant rules and regulations, and the dispute must then be resolved in accordance with the said rules. Such institutional rules can allow for Emergency Arbitrators delivering interim orders, described as awards, and the resolution mechanism must then follow the said interim orders.
The judgement puts a restriction on the parties by directing them to adhere to the terms of their contractual agreement. As per the arbitration clause agreed upon by the parties, the Rules of the Singapore International Arbitration Centre (“SIAC Rules”) were to apply to the arbitration proceedings and it was to be conducted in a manner consistent to the said Rules. Paragraph 12 of Schedule 1 of the SIAC Rules states that an Emergency Award cannot be ignored by a party who has contractually agreed to be governed by the SIAC Rules. However it was contended in the case that the Arbitration Act does not provide for such awards and the same should not be adhered to. Consequently, the Supreme Court clarified that an Emergency Arbitrator’s order amounts exactly to an order of an arbitral tribunal, once properly constituted. It would fall within the institutional rules to which the parties have agreed upon, and would consequently be covered by Section 17(1) of the Arbitration Act. A party, who has agreed to be governed by an institution and its rules cannot later state that they will not be bound by the said rules after participating in proceedings in accordance with them. The same principle applies to a party stating that they would not be bound by any EA proceedings after participating in them in accordance with the rules of the institution which provide for such EAs. This judgement, thus, makes such an EA enforceable.
Considering the issue of the appealability of orders being passed under Section 17(2) of the Arbitration Act, the Court held that Section 37 is a “complete code” with respect to appeals resulting from orders and awards made under the Arbitration Act. Enforcement proceedings would not be covered by the appeal provision. The judgement states that “no appeal lies under Section 37 of the Arbitration Act against an order of enforcement of an Emergency Arbitrator’s order made under Section 17(2) of the Arbitration Act”.
It must also be noted that the judgement also highlighted that an Emergency Arbitrator’s orders hold the significance in the process of decongesting the civil courts and affording expeditious interim relief to the parties.
Observations & Criticism
- Recent Development of Emergency Reliefs in Asia
Emergency relief (“ER”) as a concept appears to be a “very new creature” in the sphere of International Arbitration in Asia. The contention that it’s a relatively new concept within the region implies that there is a lack of an established enforcement mechanism for it, which renders this “creature” toothless. Enforcing decisions of an emergency arbitrator remains to be a concern, due to their unclear status within the definition of ‘arbitral tribunals.’ However, recent development suggests that ER may be enforced through the use of various mechanisms. This may be done through the provision of specific mechanisms for ER in national arbitration legislations, as in Hong Kong. Alternatively, Singapore and New Zealand altered the definition of ‘arbitral tribunals’ to include an emergency arbitrator. The concept may also be included through seeking ER in the form of an award, so that it becomes enforceable in the same manner as any other award may be. Further, it may also be done through a seeking a similar order from the court. One route is through expressly changing the legislative provision and the other is through judicial interpretation.
- Autonomy of Alternate Dispute Resolution (“ADR”) Mechanisms in India
This judgement contributes significantly towards granting a higher degree of autonomy to the alternate dispute mechanisms of the country, through an overt statement of recognizing the utility of an emergency award. The judgement states that an Emergency Arbitrator’s “award” would contribute to the decongestion of the court system, granting urgent interim relief. This statement displays the Court’s confidence in the competency of the alternate dispute resolution mechanism of the country, thereby creating a higher degree of trust in it.
- Contract Sanctity
The Supreme Court acknowledges the importance of mutual contract agreements in this judgement. Parties to the case were restricted from attempting to deviate from the terms they had mutually agreed upon particularly the terms pertaining to the arbitration proceedings. This restricted the parties from engaging in proceedings in manners that were not mutually agreed upon, directing them to maintain the sanctity of their contract. This specific direction would also seek to inspire international investor confidence in the Indian business environment due to the legal system diligently enforcing contract sanctity.
- Impact of the Law Commission Report
The mere fact that a Law Commission Report’s recommendation is not followed by the Parliament, does not indicate that the same recommendation cannot be included in the relevant statute through proper judicial interpretation. The adoption of this reasoning by the Supreme Court constitutes a step that may prove to be crucial in the future. Law Commission Reports provide a higher degree of clarity with respect to the legal matters that they cover, which may include specific legislations. The Reports also provide a deeper perspective of what may constitute a legal defect or potential for mischief. The inclusion of these recommendations through judicial interpretation creates an environment that is not restricted to a textualist approach of interpretation, allowing for broader and detailed approaches to be used as well.
The Supreme Court has chosen this case as an opportunity to deliver a significant judgement, validating the existence of Emergency Arbitration in India, and consequent awards through judicial interpretation. The judgement has implications which go beyond discussion on the the scope of EA as well, through an exploration of party autonomy within the Arbitration Act and the accompanying restrictions which apply when such autonomy is exercised. The judgement has reiterated the Supreme Court’s stance on the inclusion of the Law Commission’s recommendations into interpretation of statutes. The wider impact of the judgement remains to be seen in the future, however, it does constitute a step towards a more independent ADR mechanism within the country.