Emergency arbitration awards are enforceable in India: Supreme Court rules in Amazon vs Future Group dispute

On 06 August 2021, the Supreme Court of India passed an order in Amazon.com NV Investment Holdings LLC v. Future Retail Limited and Others (“Judgment”) holding that an award by an emergency arbitrator in an India-seated arbitration constitutes an order under the Arbitration and Conciliation Act, 1996 (“Arbitration Act”) and will be enforceable in India. The Judgment is expected to finally put an end to the conundrum of enforcement of emergency arbitration in India. The concept of an emergency arbitrator involves a mechanism by which a party to an arbitration agreement seeking urgent protective measure may apply for appointment of an emergency arbitrator for deciding on interim reliefs even before the constitution of the Arbitral Tribunal. The enforceability of awards passed by an emergency arbitrator in India was shrouded in uncertainty due to conflicting judgements of various High Courts. We have in our earlier article discussed the judgment of a Single Judge of the Delhi High Court in the Amazon Inc. versus Future Group dispute and its likely implications on the arbitration regime in India (available here).  Factual summary The entire dispute revolved around three key agreements described below: a.             Future Retail Limited (“FRL”) Shareholder Agreement dated 12 August 2019 between the Biyani Group (the promoters of FRL and Future Coupons Private Limited) wherein Future Coupons Private Limited (“FCPL”) was accorded protective, special, and material rights with regards to FRL including its retail assets. b.             FCPL Shareholder Agreement dated 22 August 2019 between Amazon Inc., FCPL and Biyani Group, wherein it was agreed that the rights granted to FCPL under the FRL Shareholder Agreement would be exercised for Amazon Inc.’s benefit.c.             Share Subscription Agreement dated 22 August 2019 between Amazon Inc., FCPL and Biyani Group to record the investment of INR 1.4 billion made by Amazon Inc. in FCPL.As per the terms of the above agreements, Amazon Inc.’s investment in FCPL would flow down to FRL. Also, FRL was barred from transferring its retail assets without FCPL’s consent which would require Amazon Inc.’s consent. Further, FRL was prohibited from encumbering/ transferring/ selling/ divesting/ disposing of its retail assets to “restricted persons”, the list of which included Mukesh Dhirubhai Ambani Group (“Ambani Group”). However, post execution of the agreement and infusion of the investment by Amazon Inc., Biyani Group entered into a transaction with Ambani Group which intended to amalgamate FRL with Ambani Group. This  would lead to cessation of FRL as an entity and complete disposal of its retail assets in favor of Ambani Group. This resulted in Amazon Inc. commencing arbitration proceedings seated in Delhi, India, under the Singapore International Arbitration Centre (“SIAC”) Rules seeking emergency interim relief. The emergency arbitrator passed an interim award injuncting FRL, FCPL and Biyani Group from taking any steps to complete the transaction with the Ambani Group and from transferring FRL’s retail assets to Ambani Group. Amazon sought enforcement of the Award by filing an application under Section 17(2) of the Arbitration Act, which was allowed by the order of the Single Judge of the Delhi High Court. In a groundbreaking judgment,  the Single Judge had recognized the emergency arbitrator’s award as an order under Section 17(2) of the Arbitration Act. However, a Division Bench of the Delhi High Court stayed the order of the Single Judge on 22 March 2021. Eventually, the matter reached the Supreme Court of India where one of the main issues the Supreme Court had to decide was whether the award of the emergency arbitrator is recognized under the Arbitration Act and whether it is enforceable under Indian law. Findings of the Supreme Court The Supreme Court noted that the Arbitration Act confers autonomy to parties to decide disputes through arbitration in accordance with institutional rules, including through emergency arbitrators passing interim orders. Parties are also free to agree on the procedure to be followed by an arbitral tribunal in conducting its proceedings. The Supreme Court reiterated its previous judgments that party autonomy is the guiding spirit in arbitration. Therefore, Amazon Inc.’s and FCPL’s action of agreeing to SIAC Rules and consequently, the jurisdiction of the emergency arbitrator is not in breach of any provision of the Arbitration Act. The Court delved into the provisions and the intentions of the Arbitration Act to note that nothing prohibits contracting parties from agreeing to a provision providing for an award being made by an emergency arbitrator. On the contrary, the Arbitration Act endorses the parties to choose governing institutional rules. The Supreme Court explained that the definition of ‘arbitration’ under Section 2(1)(a) of the Arbitration Act means any arbitration, whether or not administered by a permanent arbitral institution, which when read with Sections 2(6) and 2(8) of the Arbitration Act, would make it clear that even interim orders that are passed by emergency arbitrators under the rules of a permanent arbitral institution would be included. Under the SIAC Rules, the emergency arbitrator has equivalent powers as that of an arbitral tribunal which includes authority to rule on its own jurisdiction, power to order interim reliefs as may be necessary, to give summary reasons for its decision in writing, etc.The Supreme Court further delved into Section 17(1) of the Arbitration Act which provides for interim reliefs by the arbitral tribunal “during the arbitral proceedings.” As per Section 21, arbitral proceedings commence on the date on which a request for that dispute to be referred to arbitration is received by the respondent. The Supreme Court also noted that Rule 3.3 of the SIAC Rules stipulates 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 Supreme Court held the expression “during the arbitral proceedings” would include emergency arbitration proceedings, which only commence after receipt of notice of arbitration by the Registrar and therefore, an emergency arbitrator’s award, if provided for under institutional rules, would be covered by the Arbitration Act . It was argued by Biyani Group that the Parliament had not implemented the recommendation of the 246th Law Commission to enable implementation of emergency arbitration decisions in India. However, the Supreme Court considered that non-implementation of the Law Commission Report would not necessarily lead to the conclusion that emergency arbitrator’s decisions are not enforceable in India on a proper interpretation of the Arbitration Act. The Judgment also took into consideration the role of arbitration in decongesting Indian courts and affording expeditious interim relief to the parties.Our thoughtsThe Judgment is very significant as it emphasizes the doctrine of party autonomy as one of the pillars of arbitration. The Supreme Court noted that by incorporating SIAC Rules into the arbitration agreement, Amazon Inc. and Future Group had also agreed to the provisions relating to emergency arbitration under SIAC Rules. Therefore, after having agreed to institutional rules providing for emergency arbitration and participating in an emergency arbitration proceeding, Future Group was now estopped from subsequently contending that it could not be bound by an award passed by the emergency arbitrator. The Judgment recognizes that the current scheme of the Arbitration Act is sufficient to include emergency arbitration under the definition of arbitration, and there was no necessity for an amendment in this regard.However, the Judgment is only applicable to emergency arbitration awards in an India-seated arbitration. By virtue of the Judgment, such India-seated emergency arbitration awards can be enforced by Indian courts in the same way as if it were a decree of an Indian court. The Supreme Court had also noted that the order for enforcement of such emergency award would be final and non-appealable. This translates to efficacious and efficient enforcement of awards. Emergency arbitration can help India strengthen its arbitration landscape and minimize judicial intervention in the arbitration mechanism to a major extent. This can make India a global arbitration hub by giving rise to India-seated arbitrations.The information contained in this article is not legal advice or legal opinion. The contents recorded in the said article are for informational purposes only and should not be used for commercial purposes. Acuity Law LLP disclaims all liability to any person for any loss or damage caused by errors or omissions, whether arising from negligence, accident or any other cause.