August 7, 2021 4:20:32 am
In a blow to retail pioneer Kishore Biyani’s $-3.4-billion bid to sell the assets of Future Retail Limited (FRL) to Mukesh Ambani’s Reliance Infrastructure Group, the Supreme Court on Friday upheld the October 25, 2020 interim award of the Emergency Arbitrator under the Arbitration Rules of the Singapore International Arbitration Centre (SIAC) restraining FRL from going ahead with the deal.
A Bench of Justices R F Nariman and B R Gavai set aside two judgments of the Delhi High Court Division Bench that had stayed the order of a Single Bench of the HC upholding the Emergency Arbitrator’s order.
Amazon — which had objected to the FRL-Reliance deal alleging breach of its earlier contract with FRL’s promoter firm — had approached the SC against the decisions of the HC Division Bench. Among Future Retail’s brands are the supermarket chain Big Bazaar and the premium food retailer Foodhall.
Ruling in favour of Amazon, the Bench rejected FRL’s argument that the award of an Emergency Arbitrator under the SIAC Rules would not fall under Section 17(1) of the Arbitration and Conciliation Act, 1996.
Section 17 of the Act prescribes the mechanism for parties to an arbitration to seek interim reliefs from the arbitral tribunal during the pendency of the arbitral proceedings.
The court said that “Section 17, as construed in the light of the other provisions of the Act, clearly leads to the position that such emergency award is made under the provisions of Section 17(1) and can be enforced under the provisions of Section 17(2)”.
Appearing for FRL, Senior Advocate Harish Salve had contended that the Law Commission in its 246th Report had advocated the amendment of the Arbitration Act to include a provision for appointment of an Emergency Arbitrator. But Parliament did not adopt the suggestion when it amended the Arbitration Act in 2015, “thereby indicating that such orders would not fall within Section 17(1) of the Arbitration Act”.
But the SC, which relied on an earlier case law, said “the mere fact that a recommendation of a Law Commission Report is not followed by Parliament would not necessarily lead to the conclusion that what has been suggested by the Law Commission cannot form part of the statute as properly interpreted”.
The court pointed out that a High-Level Committee constituted by the Government of India under the chairmanship of Justice B N Srikrishna (retd) to review the institutionalisation of the arbitration mechanism in India and look into the provisions of the Arbitration Act after the 2015 Amendment Act had, in its July 30, 2017 report, said that “given that international practice is in favour of enforcing emergency awards (Singapore, Hong Kong and the United Kingdom all permit enforcement of emergency awards), it is time that India permitted the enforcement of emergency awards in all arbitral proceedings”.
The bench upheld Amazon’s counsel Senior Advocate Ranjit Kumar’s argument that the legislative intent in enacting the Arbitration Act was to decongest courts, and said arbitral awards “are an important step in aid of decongesting the civil courts and affording expeditious interim relief to the parties”.
“An Emergency Arbitrator’s “award”, i.e., order, would undoubtedly be an order which furthers these very objectives, i.e., to decongest the court system and to give the parties urgent interim relief in cases which deserve such relief,” the Bench ruled.
It said that full party autonomy is given by the Arbitration Act to have a dispute decided in accordance with institutional rules which can include Emergency Arbitrators delivering interim orders, described as “awards”, and that such orders are an important step in aid of decongesting the civil courts and affording expeditious interim relief to the parties and as such would fall in the purview of Section 17 of the Arbitration Act.
The court also held that “a party cannot be heard to say, after it participates in an Emergency Award proceeding, having agreed to institutional rules made in that regard, that thereafter it will not be bound by an Emergency Arbitrator’s ruling”.
The SC also said that an order passed under Section 17(2) of the Arbitration Act to enforce the award of an Emergency Arbitrator cannot be appealed against.
As per an Amazon-FRL understanding, the latter was prohibited from encumbering/ transferring/ selling/ divesting/ disposing of its retail assets to “restricted persons” which included the Reliance Group. However, in August 2020, FRL and Reliance struck a deal to sell the former’s assets to the latter following which Amazon approached the Emergency Arbitrator who ruled in its favour.