In a keenly awaited verdict, the Supreme Court held that Singapore’s Emergency Arbitrator (EA) award was enforceable in a plea filed by e-commerce giant Amazon against the Rs 24,731 crore merger deal of Future Retail Ltd (FRL) with Reliance Retail. A Bench of Justices RF Nariman and BR Gavai had reserved its judgement on July 29 after hearing an array of lawyers, including senior advocates Harish Salve and Gopal Subramanium, appearing for FRL and Amazon, respectively.

The verdict was keenly awaited as it was dealing with the legality and enforceability of an award by an EA of a foreign country in India, in view of the fact that the term “EA” is not used in the Indian Arbitration and Conciliation Act. Amazon.com NV Investment Holdings LLC and FRL are embroiled in a bitter legal fight over the deal and the US-based firm has sought in the apex court that the EA award was valid and enforceable.

The dispute revolves around the allegation by Amazon.com NV Investment Holdings LLC that the Rs 27,513-crore deal between Reliance Retail and Future Group violates its contractual rights. In 2019, Amazon had invested in Future Group by acquiring a 49 percent stake in Future Coupons—a promoter entity of Future Retail that holds 9.82 percent in Future Retail. At that time, Future Coupons and Future Retail had also entered into a shareholders’ agreement. Subsequently, Future Retail entered into an agreement with Reliance Retail to sell its retail, wholesale, logistics and warehousing assets.

In October last year, the EA granted an interim award in favour of Amazon. It had directed Future Group to put on hold its transaction with Reliance Retail.

On behalf of Amazon, it was argued in the apex court that the order of the division bench of the Delhi High Court suffered from the non-application of mind and errors on face of record. The apex court was going through the provisions of the Arbitration Act, including Sections 2(1)(a), 2(1)(c), 2(1)(d), and 19(2) to argue that the foundation of Arbitration Act was “party autonomy”. It stated that the principle of “party autonomy” was respected by the aforementioned provisions and delineated in several judgments of the top court. It was further argued that an appeal under Section 37(2)(b) of the Arbitration Act was restricted to granting an interim measure under Section 17(1) and not Section 17(2). It was submitted that the Arbitration Act was a complete code in itself and if an appeal did not fall within the four corners of Section 37, then it would be incompetent of being heard.

It was also argued that EA’s award could never be characterised as a nullity and ignored in entirety. Section 17(2) was once again referred to argue that enforcement orders were made under the Arbitration Act and not under the Code of Civil Procedure, as a result of which the appeal filed under Order XLIII, Rule 1(r) would not be maintainable. Lastly, the senior counsel for Amazon argued that the legislative object of allowing arbitral tribunal to pass interim orders under Section 17 was to decongest courts and free them from the burden of Section 9 petition under the Arbitration Act. When viewed from this perspective, the emergency award served the same purposes.

Countering all this, the legal counsel for FRL argued that an EA award could not be said to fall under Section 17(1) of the Arbitration Act. Reliance was placed on the 246th Law Commission Report in which the Law Commission advocated the amendment of Section 2 of the Arbitration Act to include within sub-section (1)(d) a provision for the appointment of an EA. Despite the recommendations of the Law Commission, Parliament did not adopt the same when the Arbitration Act was amended in 2015. According to FRL, the lack of parliamentary sanction to the Law Commission’s recommendations indicated that emergency arbitral orders would not fall under Section 17(1) of the Arbitration Act.

It was also argued on behalf of FRL that the scheme of Section 17(1) made it clear that a party may during arbitral proceedings apply to the arbitral tribunal. However, it was contended that under the Singapore International Arbitration Centre (SIAC) rules, an emergency arbitrator was appointed prior to the arbitral tribunal was constituted. Hence, EA in the instant matter was not appointed during arbitral proceedings and fell outside the ambit of Section 17(1). On Section 17(2), it was argued that the words “as if” contained a legal fiction which when taken to its logical conclusion would necessarily mean that enforcement proceedings would be outside the pale of Arbitration Act and in confines of Code of Civil Procedure, 1908.

Delivering its verdict, the Supreme Court referred to provisions of the Arbitration Act to observe that a proceeding could be administered by a permanent arbitral institution. Importantly, Section 2(6) made it clear that parties are free to authorise any person, including an institution to determine issues that arose between the parties. Also, under Section 2(8), the apex court noted that party autonomy went to the extent of including an agreement to be governed by the arbitration rules of an institution. Likewise, under Section 19(2), parties are free on the procedure to be followed by an arbitral tribunal in conducting its proceedings.

The Supreme Court then referred to a number of judgments which highlighted the importance of “party autonomy” as being one of the pillars of arbitration in the Arbitration Act. It was concluded that by agreeing to the SIAC Rules, the parties in the instant matter had not bypassed any mandatory provision of the Arbitration Act. There is nothing in the Arbitration Act that prohibits contracting parties from agreeing to a provision providing for an award being made by an EA. On the contrary, the apex court held that when properly read, various sections of the Arbitration Act, which speak of “party autonomy” in choosing to be governed by institutional rules, would make it clear that the said rules would apply to govern the rights between the parties.

The apex court observed that Section 21 provides that arbitral proceedings under the Arbitration Act commence upon the date on which request for referring the dispute to arbitration is received by respondent. Similar was the position for emergency arbitrations under SIAC Rules. This being the case, it was held that when Section 17(1) used the expression “during the arbitral proceedings”, the expression would be elastic enough when read with Section 21 of the Arbitration Act to include EA proceedings instituted in the instant matter.

The  Supreme Court then turned to the argument on behalf of FRL that an arbitral tribunal as defined under Section 2(1)(d) spoke only of an arbitral tribunal that was constituted between the parties and which could give interim and final relief. The apex court clarified that like every other definition section, the definition contained under Section 2(1)(d) only applied unless the context otherwise required. The definition of an arbitration meant any arbitration whether or not administered by a permanent arbitral institution. This, when read with Section 2(6) and 2(8) would make it clear that an emergency arbitrator would also be included within the am­bit of Section 2(1)(d) of the Arbitration Act.

The Supreme Court held that there was no doubt that Parliament did not adopt the recommendation of the 246th Law Commission Report which provided for the insertion of an EA’s order into Section 2(1)(d) of the Arbitration Act. However, the apex court relied upon the decision in Avitel Post Studioz & Ors. vs HSBC PI Holding (Mauritius) Ltd. to hold that the mere fact that a recommendation of a Law Commission Report is not followed by Parliament, would not necessarily lead to the conclusion that what was suggested by the Law Commission could not be a part of the statute.

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The Supreme Court noted that the object of introducing Sections 9(2) and 9(3) in the Arbitration Act was to decongest the clogged court system. Accordingly, the apex court opined that an emergency order would undoubtedly be an order which furthers the very object to decongest the court system. It also held that there could be no doubt that the legal fiction created under Section 17(2) of the Arbitration Act for enforcement of interim orders was created only for the limited purpose of enforcement as a decree of the court. To extend this fiction to encompass appeals from such orders is to go beyond the clear intention of the Legislature.

Further, the apex court relied upon the decision in BGS SGS SOMA JV vs NHPC which specifically rules out appeals under Order XLIII Rule 1 of the Code of Civil Procedure when it comes to orders being made under the Arbitration Act.

Thus, the Supreme Court concluded that there lies no appeal under Section 37 against an order of enforcement of EA’s order made under Section 17(2) of the Arbitration Act. 

—By Abhinav Verma and India Legal News Service

The Delhi High Court was informed on Friday by e-retail giant Amazon Inc. that “it is committed to help Kishore Biyani led Future Group from sinking”.

Representing Amazon before a division bench of Chief Justice D.N. Patel and Justice Jyoti Singh, senior advocate Gopal Subramanium argued,

“We are constantly committed to help FRL. It’s not that we can’t find a solution, we ourselves don’t want the company to sink.”

It was also argued by Subramanium while referring to various judgments that If section 17 (2) of the Arbitration Act is the solution and nothing has happened to the Emergency then the same is enforceable.

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“If the Emergency Arbitrator is an Arbitral tribunal, it has to be under the same section 17(2),” he added.

“It was found by the single judge (Justice Mukta Gupa) that my interference had lawful justification,” Amazon told the court through Subramanium.

The arguments which continued for over two hours were addressed while the court was heafing an appeal filed by Amazon against an order of the single judge order directing it to maintain status quo on its Rs 24,713-crore deal with Reliance that has been earlier objected by Amazon.

The court has now kept the matter for further hearing on Monday.

On Thursday, Senior advocate Harish Salve appearing for Future argued that Amazon entered into an agreement with Future Coupons limited running the business of loyalty coupons. To develop the business, developing the business of Future Coupons.

Senior Advocate Rajiv Nayar appearing for the respondents submitted, “If Your Lordship hears the matter on maintainability, Your Lordship may save time.”

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Salve further submitted, “On behalf of FRL we argued, we had an agreement with FCPL and Biyanis. I don’t have any agreement with Amazon, that is why there is no arbitration. Amazon says I have an agreement with FCPL, FCPL has an agreement with FRL.” Whereas the single judge bench observed that these are single economic transactions I’ll consider all of them together, it becomes a single integrated transaction.

The Delhi High Court has today held that the regulators will take the decision on the Future Group and Reliance Deal in accordance with the law, whereas, Amazon can object on the deal and ask regulators to restrict.

A single judge bench of Justice Mukta Gupta held while pronouncing the judgment through video conferencing noted that the “Authorities/regulators are directed to take the decision on the applications/objections in accordance with the law”.

Future Retail had alleged that the company in the e-commerce sector was allegedly interfering in the deal worth Rs 24,713 crore based on an interim order by the International Tribunal of Singapore. Amazon said that it is a binding order. The FRL had appealed to the High Court to stop the American e-commerce company from writing letters to SEBI, CCI and other regulators regarding the SIAC order. It said it would interfere with its agreement with Reliance Industries.

The Senior Advocate Harish Salve appearing for the Future Group submitted that “I’m not seeking any anti-arbitration injunction or any anti-suit injunction but only an interim restraint on Amazon to not interfere before the authorities such as SEBI etc. in relation to the lawful ‘transaction’ between FRL (Future Retail Ltd.) and Amazon pending consideration before the Regulators and statutory authorities.”

However, on the basis of the arguments, considering the issue “Whether FRL is entitled to an interim injunction?”, the bench held that “the trinity of the principles for grant of interim injunction i.e. prima facie case, irreparable loss and balance of convenience are required to be tested in terms of principles as noted above. Since this Court has held that prima facie the representation of Amazon based on the plea that the resolution dated 29th August, 2020 of FRL is void and that on conflation of the FCPL SHA and FRL SHA, the ‘control’ that is sought to be asserted by Amazon on FRL is not permitted under the FEMA FDI Rules, without the governmental approvals, this Court finds that FRL has made out a prima facie case in its favour for grant of interim injunction.”

The bench further noted that “However, the main tests in the present case are in respect of “balance of convenience” and “irreparable loss”. Even if a prima facie case is made out by FRL, the balance of convenience lies both in favour of FRL and Amazon. If the case of FRL is that the representation by Amazon to the statutory authorities /regulators is based on illegal premise, Amazon has also based its representation on the alleged breach of FCPL SHA and FRL SHA, as also the directions in the EA order. Hence it cannot be said that the balance of convenience lies in favour of FRL and not in favour of Amazon. It would be a matter of trial after parties have led their evidence or if decided by any other competent forum.”

Raising another reason for rejecting the interim injunction sought, the bench said that both FRL and Amazon have already made their representations to the authorities/regulators and it is now for them to decide over the issue.

Singapore’s International Arbitration Centre (SIAC), in an interim order, passed on October 25, prohibited FRL’s sale of its assets. Amazon then wrote to the Securities and Exchange Board of India (SEBI), the stock exchanges and the Competition Commission of India (CCI), seeking consideration of the Singapore arbitration’s interim order.

New Delhi (ILNS): The Delhi High Court has sought a response from Amazon on the plea made by the Kishore Biyani-led Future Retail Ltd. (FRL) not to interfere in the Reliance deal.

Future Retail has alleged that the company in the e-commerce sector was allegedly interfering in the deal worth Rs 24,713 crore based on an interim order by the International Tribunal of Singapore.

Justice Mukta Gupta on the petition of FRL, has summoned Amazon, Future Coupons Pvt. (FCPL) and Reliance Retail Ltd. and asked them give written replies within 30 days.

The court also said that Amazon has raised questions on the basis of this lawsuit. This matter will be kept open. The court gave this order after hearing the arguments of FRL, Reliance and Amazon during the day-long trial.

Singapore’s International Arbitration Centre (SIAC), in an interim order passed on October 25, prohibited FRL’s sale of its assets. Amazon then wrote to the Securities and Exchange Board of India (SEBI), the stock exchanges and the Competition Commission of India (CCI), seeking consideration of the Singapore arbitration’s interim order.

Amazon said that it is a binding order. The FRL has appealed to the High Court to stop the American e-commerce company from writing letters to SEBI, CCI and other regulators regarding the SIAC order. It said it would interfere with its agreement with Reliance Industries.

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FRS counsel Harish Salve told the court that his client is not challenging the Emergency Arbitration (EA) decision under the AIAC rules as it is not recognized under Indian laws. He said that there is no concept of EA (Emergency Arbitration) in the Indian Arbitration Act and he only wants Amazon to get Reliance Retail and Reliance Retail & Fashion Ltd. to be prevented from interfering with the Rs 24,713 crore deal.

New Delhi (ILNS): The Singapore International Arbitration Tribunal on October 25 restrained Future Retail from selling its retail business to Reliance Industries for Rs 24,713 crore.

Justice V. K. Rajah passed this order on a plea by Amazon Inc. Amazon had approached the Tribunal invoking the provision for Interim and Emergency Relief provided for under Rule 30 of the Singapore International Arbitration Centre Rules, 2016.

Amazon last year bought a 49 per cent stake in one of Future’s unlisted firms, Future Coupons, with the right to buy into Future Retail for a period ranging from three years to 10 years. Future Coupons owns a 7.3 per cent stake in Future Retail. On August 29, 2020, the Future group announced the sale of its retail, wholesale and logistic businesses to Reliance Retail Ventures Limited, the retail arm of Reliance Industries.

The RIL-Future Group deal is a violation of a non-compete clause and a right-of-first-refusal pact, claimed Amazon.

Senior Advocate Harish Salve, on behalf of the Future Group, claimed that it was merely selling its assets and not any stake to Reliance and therefore it has not violated any terms of the contract.

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Reliance Retail Ventures Limited (RRVL) said it has been informed about the interim order passed by the emergency Arbitrator in the arbitration proceedings and intends to complete the transaction with Future group without any delay.

Justice Rajah said in his order that the parties will have to wait for further orders from the tribunal when constituted.