Updated: August 7, 2021 8:41:33 am
The Supreme Court on Friday upheld the enforcement of an order by the Singapore International Arbitration Centre (SIAC)’s emergency arbitrator that puts on hold the Future Group’s deal with Reliance Industries Limited. An emergency arbitrator of the SIAC had, after listening to verbal arguments from Future Retail and Amazon, ruled that the former should “not to take any steps in furtherance to the Board Resolution of August 29”.
What is the tussle all about?
In August last year, Future Retail had announced that it would “sell by way of a slump sale the retail and wholesale business” of its supermarket chain Big Bazaar, premium food supply unit Foodhall, and fashion and clothes supermart Brand Factory’s retail and wholesale units to Reliance Retail, a unit of Mukesh Ambani-owned Reliance Industries.
Before the deal could be executed, Amazon objected to it, alleging a breach of contract it had with Future Coupons, the promoter firm of Future Retail. Amazon had also said that its agreement with Future Coupons had given it a “call” option, which enabled it to exercise the option of acquiring all or part of Future Retail’s shareholding in the company, within three to 10 years of the agreement.
Subsequently, Amazon took Future Retail into emergency arbitration before the SIAC, where an emergency arbitrator barred the latter from proceeding with the deal.
What has the Supreme Court ruled now?
In its judgment, the Supreme Court said it had framed two important questions and tried to answer them.
The first, a two-judge Bench of Justices Rohinton Fali Nariman and B R Gavai said, was to determine whether an emergency arbitrator’s award can be said to be within the contemplation of the Arbitration Act. Holding that such as award can be within the Arbitration Act, the court said such orders were an “important step in aid of decongesting the civil courts” and providing quick interim relief to parties in the arbitration.
The second question that the Supreme Court framed and answered is whether Future Retail’s appeal before a Division Bench of the Delhi High Court was maintainable. The two-judge Bench said the order of a single Bench of the High Court could not have been appealed before the Division Bench under Section 37(2) of the Arbitration Act.
What happens to the Future Retail-Reliance Retail deal now?
The Future Retail-Reliance Retail deal has been on hold pending adjudication before the Supreme Court. Although Future Retail had been preparing the groundwork for the sale by approaching various regulators and seeking their clearance, the Supreme Court ruling that the emergency arbitrator’s ruling holds good in India would put a temporary stop to all deals in India. Both parties have already approached the permanent bench of the SIAC and are now likely to press for an early resolution.
If the SIAC holds that the Future Retail-Reliance Retail deal is indeed in violation of the pact that Future Coupons had with Amazon, it would in essence mean the end of the Future-RIL deal, according to legal experts.
Other experts say the judgment would serve as a reminder to the parties to carefully agree to the terms and conditions of the arbitration. “The pronouncement appears to be fair and is a reminder that ‘party autonomy reigns supreme’ when it comes to arbitration. After all, the parties here had consented to arbitration governed by SIAC while being subject to Indian law. By so doing, the parties consciously agreed to an emergency arbitration till the constitution of an arbitral tribunal,” said Faisal Sherwani, Partner at L&L Partners.
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