Future Group vs Amazon: Clash of the titans

The interim relief granted by the Singapore International Arbitration Centre to Amazon with regard to a Rs 24,713-crore deal between Future Group and RIL is likely to be challenged.

By Shaheen Parween

According to reports, Kishore Biyani’s Future Group has hinted that it may challenge the Singapore International Arbitration Centre’s (SIAC) award which hindered its Rs 24,713-crore deal with billionaire Mukesh Ambani’s Reliance Industries Ltd (RIL).

Granting interim relief to global e-commerce giant Amazon Inc, SIAC recently restrained Future Group from entering into a deal with RIL to sell its retail, wholesale, logistics and warehousing units to Reliance Retail and Fashion Lifestyle Ltd (RRFLL).

The order was passed by VK Rajah, former Attorney General of Singapore, on a plea by Amazon invoking Rule 30 of the Singapore International Arbitration Centre Rules, 2016, seeking interim and emergency relief against the agreement. The award restrained Future Group from proceeding with the August 29, 2020, board resolution and carrying out any transaction with RIL. The arbitrator also restrained Future Group from approaching any authority with respect to the board resolution until a final decision was taken in the matter.

The board resolution of Future Group said that it could

“sell by way of a slump sale, the retail and wholesale business that includes key formats such as Big Bazaar, fbb, Foodhall, Easyday, Nilgiris, Central and Brand Factory to RRFLL, a wholly owned subsidiary of Reliance Retail Ventures Limited (RRVL). It will also sell the logistics and warehouse business to RRVL by way of a slump sale. RRFLL and RRVL will take over certain borrowings and current liabilities related to the business and discharge the balance consideration by way of cash”.

Passing the order in favour of Amazon, the Tribunal said:

“The majority respondents (Future Group) have asserted that the ‘horse has bolted’ and that, consequently, the claimant no longer has any legitimate interests meriting protection. This is incorrect. The horse has not bolted, even though the respondents have opened the stable door. Even assuming that the ‘horse has bolted’, it is apparent that the respondents are contractually obliged to work with the claimant to cajole the ‘unruly horse’ to return to its stable.”

According to Amazon, it had entered into an agreement with Future Retail in 2019 to purchase 49 percent of Future Coupons with the right to buy into flagship Future Retail Ltd after a period of three years to ten years. Amazon further argued that before entering into any agreement with third parties, Future Group was required to seek consent from it since it had the first right for any stake sale. However, Future Group announced its deal with Reliance on August 29, which Amazon argued was a violation of non-compete clause and a right of first refusal pact. Moreover, RIL’s name was clearly mentioned in the list of 30 “prohibited entities” of the 2019 agreement.

Future Group, however, argued that it had not violated the terms of the agreement since it had entered into a pact with RIL only to sell its assets and not its stake.

Then Amazon approached SIAC, seeking interim and emergency relief, which says: “The Tribunal may, at the request of a party, issue an order or an Award granting an injunction or any other interim relief it deems appropriate. The Tribunal may order the party requesting interim relief to provide appropriate security in connection with the relief sought.” SIAC offers an alternative method of dispute resolution in matters where disputes arise from cross border transactions.

The next step is the appointment of an arbitration tribunal where both parties appoint one member each in case of a three-member tribunal and the third is appointed by nominees of both the parties. In case they fail to agree, the member is appointed by the SIAC itself.

As this procedure takes time, in case a party wants to seek an emergency relief, the SIAC can be approached to appoint an emergency arbitrator while the process of appointment of the arbitration tribunal is in progress. Accordingly, SIAC appointed VK Rajah as the emergency arbitrator after a request was made by Amazon. The issue will now be decided within 90 days by the three- member arbitration tribunal, where one member each would be appointed by Future Group and Amazon and a third member with the consent of both the parties.

Though Future Group has shown its inclination towards challenging the award of SIAC, it can do so only by way of applying before the emergency arbitrator, seeking vacation or modification of the order. Or else it may wait for the constitution of the three-member arbitration tribunal which will hear the issue at length.

In case the parties do not agree to abide by the award of SIAC and Amazon files a plea before a High Court in India under Section 9 of the Arbitration and Conciliation Act, 1996, seeking similar relief as granted by the emergency arbitrator, Future Group can file its objections on the interim injunction granted by the emergency arbitrator.

The Arbitration and Conciliation (Amendment) Act, 2015 does not incorporate provisions in relation to emergency arbitration provisions. However, arbitration institutions in India such as the Delhi International Arbitration Centre, Court of Arbitration of the International Chambers of Commerce India, International Commercial Arbitration, Madras High Court Arbitration Centre and Mumbai Centre for International Arbitration have incorporated the emergency arbitration provisions.

The Indian position on the enforcement of interim relief passed by emergency arbitrators in an international arbitration case is still unclear owing to a handful of judicial decisions regarding interim orders of emergency arbitrators. The issue of emergency arbitration has been dealt with by the Bombay and Delhi High Courts in two judgments.

In HSBC PI Holdings (Mauritius) limited vs Avitel Post Studioz Limited and ors, pursuant to an arbitration dispute, the parties filed an emergency arbitration plea before the emergency arbitrator in Singapore. After the emergency arbitrator awarded a favourable order, the party in whose favour the award was passed, filed a petition before the High Court of Bombay under Section 9 of the Arbitration and Conciliation Act, 1996, seeking enforcement of the interim relief awarded by the emergency arbitrator.

The High Court, upholding the award of the emergency arbitrator granting interim relief observed that the “petitioner has not bypassed any mandatory conditions of enforceability' since it was not trying to obtain a direct enforcement of the interim award”.

In Raffles Design International India Private limited & ors. vs Educomp Professional Education Limited & ors, where an emergency arbitrator of SIAC granted interim relief to one of the parties and the other party acted in contravention of the award, a petition was filed before the Delhi High Court under Section 9 of the Act seeking enforcement of the award. But the High Court held that the award cannot be enforced under the Act.

The Court, however, threw light on the scope of Section 2(2) of the Act where it observed:

“The proviso to Section 2(2) of the amended act has widened the ambit of the powers invested in the court to grant interim reliefs, as Section 9 shall now apply to international commercial arbitrations, even if the place of arbitration is outside India.”

It is important to note that Section 9 of the Act which allows a party to approach the Court “before or during arbitral proceedings or at any time after the making of the arbitral award but before it is enforced” is an essential remedy in arbitration proceedings.

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Moreover, at a time when the entire world is facing the challenge posed by Covid-19 and with courts functioning virtually, the importance of emergency arbitration can no longer be given a back seat. An attempt should be made by the legislature to incorporate the provisions of emergency arbitration in domestic legislation.