Supreme Court on enforceability of Emergency Awards under Arbitration and Conciliation Act, 1996

Supreme Court on enforceability of Emergency Awards under Arbitration and Conciliation Act, 1996

Through this decision, the top court has cemented the concept of emergency arbitration in the Indian Arbitration Act and made it in line with other pro-arbitration jurisdictions which recognize interim relief by emergency arbitrator

On 6th August, 2021 the Supreme Court in the case of Amazon.Com NV Investment Holdings LLC v. Future Retail Limited & Ors. allowed an emergency award passed by an Emergency Arbitrator to be enforced under section 17(2) of the Arbitration and Conciliation Act, 1996 ("Arbitration Act"). The court's decision puts to rest the heavily debated issue of enforceability of emergency award by declaring 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". Such orders are an important step in aid of decongesting the civil courts and affording expeditious interim relief to the parties. Such orders are referable to and are made Under Section 17(1) of the Arbitration Act. Party autonomy emerged triumphed and respected by allowing parties to choose institutional rules which have provisions for emergency tribunal even through it is not explicitly recognised under the arbitration act.

Factual Matrix

Amazon.com NC Investment Holding LLC ("Amazon") and Future Coupons Pvt. Ltd. ("FCPL") entered into a shareholding agreement where Amazon would invest into FCPL's retail business. Under the agreement, the retail assets of FCPL, which are vested in the sole vehicle named Future Retail limited ("FRL"), could not be alienated without Amazon's written consent. Inspite of this, the promoters of the future group transferred and alienated some assets in favour of the Mukesh Ambani Group without the consent of Amazon. Against this backdrop, Amazon invoked an arbitration agreement which provided for institutional arbitration under Singapore International Arbitration Centre ("SIAC") rules, Indian seat and Indian governing law. Before the arbitral tribunal could be formed, Amazon sought for Emergency Interim Relief under Rule 30.2 of SIAC as protective measure to restrain FRL from alienating assets which was granted by the Emergency Arbitrator. Due to non-compliance of the order of the Emergency Arbitrator, Amazon initiated proceedings before Delhi High Court seeking enforcement of the emergency order, which the court granted. Against the order of the single bench, Future Group appealed before the division bench of the Delhi High Court. Against the order of stay by the Division Bench of the Delhi High Court, Amazon filed SLP in the Supreme Court and appealed the order of . Therefore, the present matter.

In this respect, the following two issues were addressed by the Supreme Court:-

1. Whether an "award" delivered by an Emergency Arbitrator under the Arbitration Rules of the Singapore International Arbitration Centre ["SIAC Rules"] can be said to be an order under Section 17(1) of the Arbitration and Conciliation Act, 1996?

2. Whether an order passed under Section 17(2) of the Arbitration Act, 1996 is appealable?

Introduction

Section 17(1) provides that a party may apply to the arbitral tribunal during the arbitral proceedings by an arbitral tribunal for interim measures. To make an interim order of the arbitral tribunal binding upon the parties, section 17(2) was added through the 2015 amendment which provides that interim measures passed by the arbitral tribunal under section 17(1) section shall be deemed to be an order of the Court for all purposes and shall be enforceable under the Code of Civil Procedure, 1908. Emergency Arbitrator are typically appointed by the Arbitral institution under respective rules enables parties to seek interim measures before the constitution of the tribunal which usually takes time. This would also mean that an emergency arbitrator does not finally determine the issues between the parties and it's emergency order can be overruled by the subsequent main arbitral tribunal. The question then arises if the word 'arbitral tribunal' and 'arbitral proceedings' is wide enough to cover emergency order/award given by the Emergency Tribunal constituted before the appointment of arbitrators.

Party Autonomy

The Future group argued that the Arbitration Act did not provide for Emergency Arbitrators and SIAC Rules regarding emergency arbitrator would not apply. Under the SIAC Rules, an Emergency Arbitrator is appointed before the arbitral tribunal is constituted and therefore, 'arbitral tribunal 'does not include an Emergency Arbitrator. The word 'arbitral tribunal' has been defined under section 2(1)(d) as a sole arbitrator or a panel of arbitrators. Further, section 21 of the arbitration act provides that arbitral proceedings commence when the notice of arbitration has been received by the respondent. However, both section 2 and section 21 of arbitration act begins with 'unless the context otherwise requires' and 'Unless otherwise agreed by the parties' which provide scope for parties to derogate away from the standard meaning of arbitral tribunal and decide when an arbitration proceeding commences For instance, under the SIAC rules 'arbitral award' includes an award passed by emergency arbitrator and the arbitration proceedings commences when notice of arbitration has been received by the registrar of the institute.

The recognised that party autonomy has been tightly woven in the fabric of arbitration act. Parties are free to choose their own procedure and also authorise any person including an institutional to determine an issue that arises between the parties. Infact, arbitration rules referred to in an arbitration agreement are considered party of the agreement itself. If the institutional rules agreed by the parties provide for emergency arbitrator and then parties are bound by the ruling of emergency arbitrator.

Objective of 2015 Amendment

After the 2015 Amendment to the Arbitration act, 1996, the power of the tribunal to grant interim award was expanded and given equal powers of the courts to grant interim measures as given under section 9 to court grant interim relief before the initiation of arbitral proceedings. When section 9(3) and section 17(1) are read together, it emerges that once the arbitral proceedings begin, the court will decline to entertain application under interim measures unless the remedy of interim measure before arbitral tribunal would not be efficacious. Effectively, a party can only apply for interim measure before the arbitral tribunal once arbitral proceedings have commenced. The legislative intent behind this is to obtain interim orders from an arbitral tribunal constituted so as to decongest courts and free them from the burdens of Section 9 petitions being filed before them. The court recognised this intent and held that Emergency Arbitrator's "award" is a step in the right direction and would undoubtedly further the objectives of decongesting the court system and to give the parties urgent interim relief.

246th Law Commission Report

It was further argued that the emergency tribunal is not under the scheme of the arbitration act. Under the 246th Law Commission Report, the Law Commission recommended the amendment of Section 2 of the Arbitration Act, to include within sub-section (1)(d) a provision for the appointment of an Emergency Arbitrator. Despite this suggestion being made, the Parliament did not adopt the same when it amended the Arbitration Act by the 2015 Amendment Act. Based on this, the Future Group argued that non-adoption of the suggestion made by the Law Commission shows that intent of the parliament to exclude concept of emergency arbitrator from the scheme of the Indian arbitration act. However, the court rejected the argument holding that merely because the a recommendation of a Law Commission Report is not followed by Parliament, it would not mean that suggestion of the by the Law Commission cannot form part of the statute when properly interpreted. This is line with the case of Centrotrade Minerals & Metal Inc. v. Hindustan Copper Ltd, where the supreme court previously held that unless there is an express bar in the arbitration act, parties have the autonomy to choose different procedure to suit their need.

Conclusion    

The Supreme Court through this decision has cemented the concept of emergency arbitration in Indian Arbitration Act and made it in line with other pro-arbitrations jurisdictions like United Kingdom, Singapore, Hongkong, United States etc which recognises interim relief by emergency arbitrator. The judgement is in line with the public policy of pro-enforcement jurisdiction and with the underlying principle of party autonomy. By holding that emergency arbitrator is an arbitral tribunal for all its intent and purpose, parties can opt for additional expedited recourse under institutional rules and the aggrieved party from the emergency award can be appeal the award under Section 37 of the Arbitration act. The decision also throws a word of caution that if the parties wish not to be bound by the provisions of emergency arbitration under the institutional rules then the parties should expressly exclude applicability of provisions of emergency award.