Court upholds emergency award in Amazon dispute


The Supreme Court, in the recent case of NV Investment Holdings LLC v Future Retail Ltd & Ors, answered two important questions. First, it held that an award by an emergency arbitrator appointed under the Arbitration Rules of the Singapore International Arbitration Centre was an order made in accordance with section 17(1) of the Arbitration and Conciliation Act, 1996, and therefore enforceable in accordance with section 17(2) as if it were an order made by a civil court. Second, it held that an order under section 17(2) for enforcement of an emergency award is not appealable under section 37 of the act.

In December 2019, Amazon invested more than INR14 billion (USD190 million) in Future Coupons Private Ltd (FCPL), a subsidiary of Future Retail Ltd (FRL), India’s second-largest offline retailer. Future Retail is owned by Kishore Biyani, the founder of Future Group.

It was agreed that the investment in FCPL would flow to Future Retail, but that Future Retail could not transfer its retail assets without the consent of FCPL. This, in turn, would not be granted without Amazon’s agreement. It was also agreed that Future Retail would not create any charge or encumbrance in favour of restricted persons, a category that included Reliance Industries Ltd (RIL).

In August 2020, Future Retail’s board resolved to amalgamate with RIL. Future Retail would cease to exist and its assets would pass to RIL.

Alleging breach of the agreement, Amazon invoked arbitration in October 2020 and applied to an emergency arbitrator for a stay of the amalgamation. The emergency arbitrator ordered Future Group not to enter into any transaction or amalgamation with RIL until the conclusion of the arbitration.

Future Group described the emergency order as a nullity and pursued the transaction with RIL. Future Group also unsuccessfully applied to Delhi High Court for an anti-arbitration injunction. Amazon applied to the same court under section 17(2) of the act to enforce the emergency award. In March 2021, the high court eventually decided that the emergency arbitration order was one that could be enforced under section 17(2). The case then moved to the Supreme Court, which stayed all orders until its final decision.

The Supreme Court held that section 17 of the act contemplates that interim measures are only made during arbitration proceedings. Section 21 of the act, read with rule 3.3 of the SIAC rules, coupled with the fact that notice of arbitration was served on the registrar of the SIAC before the emergency award was passed, meant that the award was passed during arbitration proceedings. The award could therefore be dealt with under section 17.

The court also held that the definition of an arbitral tribunal in section 2(1)(d) of the act is not restricted to one appointed by the parties. The definition of arbitration under section 2(1)(a) includes any arbitration, whether or not administered by a permanent institution. Giving a broad construction to the concept of party autonomy, the court held that where parties have agreed an institution, in this case the SIAC, an emergency arbitrator’s award is as valid as any order or award passed by an arbitral tribunal for the purpose of according it recognition as an order under section 17.

Future Group argued that, in the absence of specific provisions allowing emergency arbitration, as in the laws of Hong Kong, England and elsewhere, an emergency award ought not to be recognised. This argument was rejected by the Supreme Court.

The court held that even the 246th Law Commission Report did not rule out the possibility of an emergency award being enforced, following the 2015 and 2019 amendments to the act. This was despite the fact that neither of the amendments specifically provided for the enforcement of the awards of an emergency arbitrator.

On the second question regarding appeals under section 37 of the act against orders under section 17(2), the Supreme Court held that the wording of section 37(2)(b) clearly envisages that there will be appeals only under section 17(1) of the act. The drafters did not amend section 37(2)(b) when adding section 17(2) in the 2015 amendment. This reflects a clear intention that an order for enforcement of interim orders is not appealable under the act.

The judgment marked a red-letter day for arbitration in India. It recognised the concept of emergency arbitration by making an emergency award enforceable under the act. This judgment reaffirms that party autonomy is the basis of and guiding spirit behind arbitration proceedings, and must be respected. It can be said to be one of the most significant strides taken since the passage of the 1996 act in India’s journey to becoming an arbitration-savvy jurisdiction.

The dispute digest is compiled by Numen Law Offices, a multidisciplinary law firm based in New Delhi & Mumbai.

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Readers should not act on the basis of this information without seeking professional legal advice.