The emergency award restrained the respondents from taking any action toward effecting the sale of assets of an Indian company, Future Retail Limited (FRL), to another Indian corporate group. Amazon had claimed that such a transaction would be a breach of its right of first refusal over those assets.
This is an important decision of India’s highest court as it further reinforces the SCI’s pro-arbitration stance, solemnizes the utility of emergency arbitration awards, and gives continued confidence to overseas parties in India as a jurisdiction.
The key facts
In August 2019, the petitioner, Amazon, entered into the shareholders agreement wording with the respondents. Amazon invested in Future Coupons Private Limited (FCPL), which owned a 9.82 percent shareholding in FRL, on the covenant that “the negative, protective, special, and material rights” with regard to FRL would be exercised to the advantage of Amazon. Amazon’s investment in FRL was non-transferable without Amazon’s consent. FRL was restrained from transferring its retail assets to “restricted persons” as identified in the two signed shareholders’ agreements. Pertinently, the Mukesh Dhirubhai Ambani Group (MDAG) was also identified as a “restricted person” in the agreements.
In August 2020, the respondents entered into a transaction with MDAG involving the cessation of FRL as an entity and a complete disposal of its assets to MDAG.
In October 2020, Amazon initiated SIAC arbitration proceedings to injunct the respondents from taking any steps toward completion of the transaction with MDAG, and secured an emergency award under the SIAC Rules to that effect.
In enforcement proceedings before the High Court of Delhi, the court issued a ruling enforcing the emergency award. However, the ruling was later stayed by a division bench of the same High Court. Amazon filed a special leave petition before the SCI which stayed the Delhi proceedings and led to the recent hearing before the SCI.
What issues were before the SCI?
- Is an award of an emergency arbitrator covered within the Indian Arbitration Act?
- Is such an award covered under section 17(1)2 of the Arbitration Act?
- Is a court order enforcing such an award appealable?
The answer to the first two questions was “yes” and the answer to the third was “no.” The SCI’s reasoning can be summarized as follows.
a. Party autonomy
The parties had agreed to SIAC arbitration for the settlement of disputes, and the SCI reiterated the principle of party autonomy (as has been upheld in several recent decisions).3 The Arbitration Act contains an “endorsement” for the choice of institutional rules for dispute resolution, and there is no restriction on the parties from choosing institutional rules that provide for emergency arbitration or for the provision of an award by an emergency arbitrator.
b. Arbitral tribunal includes an emergency arbitrator
The respondents argued that section 2(1)(d) of the Arbitration Act meant that only a tribunal that can offer interim and final relief qualified as an arbitral tribunal. The SCI noted that section 2 contained the wording “unless the context otherwise requires” to give context to the defined terms in the Arbitration Act. There was therefore no bar on an emergency arbitrator being an arbitral tribunal under sections 94 and 17.
c. Relevance of emergency arbitrator’s award
The SCI observed that an emergency award which furthers the legislative intent of relieving the courts and, where required, ensuring interim protection and is an order of an arbitral tribunal that is properly formed, follows due process, and renders a reasoned award, in line with institutional arbitration rules. The emergency award fell within the ambit of section 17(1) of the Arbitration Act when read with other provisions. It also followed that a party that has participated in emergency proceedings under the agreed-to institutional rules is bound by the award so made.
d. Appeal to an order of enforcement
The SCI found that no appeal lies under section 375 to an order of enforcement of an emergency arbitrator’s award made under section 17(2).