Amazon Wins In Supreme Court Against Future Retail
The judgment was pronounced by a two judge bench of Justice RF Nariman and Justice BR Gavai
Ruling in favour of Amazon.com Inc., the Supreme Court of India has found the Emergency Arbitrator's interim award to be valid and capable of being enforced under India law.
"This means that all steps relating to the transaction between Future Group and Reliance Retail will need to be put on hold," Promod Nair, founding partner at Arista Chambers, said. As per Singapore International Arbitration Centre Rules, an emergency arbitrator's award is valid until the main arbitral tribunal varies, modifies or recalls it, Nair explained.
The Supreme Court has allowed the enforcement of emergency arbitrator's order under section 17 of the Indian arbitration law. The Arbitration Act allows a party to challenge any interim reliefs granted under Section 17. We'll have to await the Supreme Court's judgment to see if that possibility is open to Future Retail.Promod Nair, Founding Partner, Arista Chambers
Section 17(1) of the Arbitration and Conciliation Act, 1996, allows parties to approach the arbitral tribunal for interim relief. Section 17(2) makes such orders enforceable in the same manner as if they were the orders of a court.
In an emailed statement, Amazon said, "We welcome the verdict of the Hon’ble Supreme Court of India upholding the Emergency Arbitrator’s award. We hope that this will hasten a resolution of this dispute with Future Group."
Future Retail, in a statement to the stock exchange, said it intends to pursue all available avenues to conclude the deal to protect the interests of stakeholders and workforce. ‘’The judgement addresses two limited points related to the enforceability of the Emergency Arbitrator’s order and not the merits of the disputes,’’ said the company, adding that it will exercise the remedies available in law.
In October 2020, the Emergency Arbitrator, constituted under the SIAC Rules, had passed an interim award in favour of Amazon. The Emergency Arbitrator had directed Future Retail Ltd. to put on hold its transaction with Reliance Retail Ltd. on grounds that it violated Amazon’s contractual rights borne out of an agreement to invest Rs 1,431 crore in Future Coupons Pvt.
In March, a single judge bench of the Delhi High Court held this emergency arbitrator’s order to be enforceable. Future Retail appealed against the order at a division bench of the same court, which stayed it.
Post which, the case landed before the apex court.
Key Questions Before Supreme Court
The Supreme Court examined two key issues:
Whether the arbitrator's order is covered by the Arbitration Act, specifically under Section 17(1).
Whether such an order can enforced under Section 17(2) and appeals will be maintainable.
Here are the key arguments by both sides before the apex court-
To Say EA’s Order's Automatically Enforceable Is A Step Too Far: Future Retail
Future Retail said an emergency arbitrator doesn't qualify as an arbitral tribunal.
This section only recognises interim directions of an arbitral tribunal capable of passing final orders. And not that of an emergency arbitrator which is constituted before the tribunal hearing the dispute is constituted, Senior Advocate Harish Salve said while arguing for Future Retail.
Further, Salve said, the Law Commission of India had recommended the inclusion of emergency arbitrator in the Indian law but the parliament hasn't done it yet.
To say it (emergency arbitrator’s order) has the same efficacy as an order under Section 17 would be amending it and that's what Justice Midha has done.Senior Advocate Harish Salve
Salve said if the emergency arbitrator doesn't qualify as an arbitral tribunal under Section 17(1), then its order cannot be enforced under Section 17(2).
Section 17 is not available for SIAC kinds of emergency arbitrator. And if Section 17 is not available for such orders, then these proceedings must end.Senior Advocate Harish Salve
Parties Consented To Emergency Arbitration, Amazon Argued
According to the arbitration agreement, Future Coupons and Amazon had agreed to dispute resolution via arbitration as per the Singapore International Centre Rules. And it was decided that Indian law would govern such arbitration.
Amazon opposed the position taken by Future Retail and based its arguments on the principle of party consent under the Arbitration Act.
Arguing for the U.S. e-commerce company, Senior Advocate Gopal Subramanium pointed to Section 17(1) of the Act to say it includes interim orders of an emergency arbitrator. This provision allows parties to approach the arbitral tribunal to seek any interim relief.
Amazon also said the arbitration process begins once the notice of arbitration is served.
In this case, Subramanium said, the arbitration began in October 2020 and the emergency arbitrator was a valid arbitral tribunal capable of passing an interim order. By subjecting themselves to the SIAC Rules, the parties agreed to the concept of the emergency arbitrator.
The parties consented that till the time the final tribunal is constituted, the emergency arbitrator will be appointed for emergency purposes, Subramanium said.
It's a simple case of interpretation of statutes. If an arbitration institution has institutional rules, then it's implied that the parties have consented to the institutional rules.Senior Advocate Gopal Subramanium
After today’s ruling from the top court the focus shifts back to Singapore where the arbitral tribunal is likely to pronounce its ruling soon.
