Amazon wins battle over Future Retail — SC says Foreign Emergency Arbitrator award is enforceable in India

Read Judgement: Amazon.com Nv Investment Holdings Llc v. Future Retail Limited & Ors

Pankaj Bajpai

New Delhi, August 7, 2021: The Supreme Court on Friday ruled that the award delivered by the Foreign Emergency Arbitrator under the Arbitration Rules of the Singapore International Arbitration Centre (SIAC), restraining Future Retail from proceeding with its merger deal with Mukesh Ambani’s Reliance Retail, can be said to be an enforceable order u/s 17(1) of Arbitration and Conciliation Act, 1996. 

A Division Bench of Justice R F Nariman and Justice B R Gavai allowed the appeal filed by the multinational giant Amazon against a Delhi High Court order staying attachment of properties of Future Group companies and Kishore Biyani in relation to the Future-Reliance deal.  

The Apex Court further said that order passed u/s 17(2) of the Arbitration Act in enforcement of the award of an Emergency Arbitrator by a Single Judge of the High Court would not be appealable to division bench of the High Court u/s 37(2) of the Arbitration Act. 

The Top Court also made it clear 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. 

Going by the background of the case, Amazon agreed to invest Rs 1,431 crore in Future Coupons Pvt Ltd (FCPL) based on the rights granted to FCPL under the Future Retail Limited (FRL) Shareholders’ Agreement and the FCPL Shareholders’ Agreement. This investment was recorded in the Share Subscription Agreement entered into between Amazon, FCPL, and Biyani Group. 

The basic understanding between the parties was that Amazon’s investment in the retail assets of FRL would continue to vest in FRL, as a result of which FRL could not transfer its retail assets without FCPL’s consent which, in turn, could not be granted unless Amazon had provided its consent. Also, FRL was prohibited from encumbering/transferring/selling/divesting/disposing of its retail assets to “restricted persons”, being prohibited entities, with whom FRL, FCPL, and the Biyanis could not deal. 

The bone of contention between the parties was that within a few months from the date of this investment, Biyani Group entered into a transaction with the Mukesh Dhirubhai Ambani group which envisages the amalgamation of FRL with the Mukesh Dhirubhai Ambani group, the consequential cessation of FRL as an entity, and the complete disposal of its retail assets in favour of this group. 

Amazon, thereafter, initiated arbitration proceedings and filed an application seeking emergency interim relief under the Singapore International Arbitration Centre (SIAC) Rules, asking for injunctions against the transaction. The Emergency Arbitrator then issued the direction that the Biyani Group (Respondents) were injuncted from taking any steps in furtherance or in aid of the Board Resolution made by the Board of Directors of FRL on 29 August 2020 in relation to the Disputed Transaction. 

The Biyani Group, however, went ahead with the impugned transaction, describing the award as a nullity and the Emergency Arbitrator as coram non judice in order to press forward for permissions before statutory authorities/regulatory bodies. 

FRL, consistent with this stand, did not challenge the Emergency Arbitrator’s award u/s 37 of the Arbitration Act, but instead chose to file a civil suit before the Delhi High Court and asked for interim relief to restrain Amazon from writing to statutory authorities by relying on the Emergency Arbitrator’s order, calling it a “tortious interference” with its civil rights. 

A Single Judge of the Delhi High Court, after finding a prima facie case of tortious interference, then refused to grant any interim injunction. 

Meanwhile, Amazon went ahead with an application filed u/s 17(2) of the Arbitration Act, in which the Single Judge passed a status-quo order in which he restrained the Biyani Group from going ahead with the impugned transaction. An appeal against this was filed by FRL, in which a Division Bench of the Delhi High Court stayed the Single Judge’s detailed judgment. Against this order, SLP came to be filed before the Apex Court.

After considering the arguments and relevant provisions, the Apex Court said that an Emergency Arbitrator’s “award” would undoubtedly be an order which furthers these very objectives, to decongest the court system and to give the parties urgent interim relief in cases which deserve such relief. 

 “Given the fact that party autonomy is respected by the Act and that there is otherwise no interdict against an Emergency Arbitrator being appointed, as has been held by us hereinabove, it is clear that an Emergency Arbitrators order, which is exactly like an order of an arbitral tribunal once properly constituted, in that parties have to be heard and reasons are to be given, would fall within the institutional rules to which the parties have agreed, and would consequently be covered by Section 17(1), when read with the other provisions of the Act, as delineated above,” Justice Nariman added. 

The Division Bench reiterated that it is wholly incorrect to say that Section 17(1) of the Act would exclude an Emergency Arbitrator’s orders. This being the case, even if section 25.2 of the FCPL Shareholders’ Agreement (pari materia with section 15.2 of the FRL Shareholders’ Agreement) makes the SIAC Rules subject to the Arbitration Act, the said Act, properly construed, would include an Emergency Arbitrator’s awards/orders, there being nothing inconsistent in the SIAC Rules when read with the Act. 

Unlike the language of Section 34, a literal reading of Section 17 would show that the grant or non-grant of interim measures under Section 37(2) (b) refers only to Section 17(1) of the Act. Also, in the context of Section 37(2)(b), the entirety of Section 17 was referred to when Sections 17 and 37 were first enacted in 1996. It is only by the 2015 Amendment Act that Section 17 was bifurcated into two sub-sections. What is significant in this context is that no corresponding amendment was made to Section 37(2)(b) to include within its scope the amended Section 17, added Justice Nariman. 

Hence, the Top Court declared that no appeal lies u/s 37 of the Arbitration Act against an order of enforcement of an Emergency Arbitrator’s order made u/s 17(2) of the Act.