The Future Amazon feud has further taken its step ahead as Hon’ble Supreme Court has pronounced its verdict in the case.
Pursuant to the order of Delhi HC for allowing Amazon’s petition to enforce the Emergency Award as a court order, Future Group had preferred an appeal against the order of the single judge before a division bench of the Delhi HC. On 22 March 2021, the Division Bench stayed the order of single judge till the next date of hearing in the appeal. On the contrary, Amazon had also filed an appeal before the Supreme Court of India against the order of the Division Bench dated 22 March 2021 for putting stay on the order of Delhi HC.
The Supreme Court (appeal against the order of Division Bench of the Delhi High Court) formulated the following issues and concluded as under:
Whether an emergency arbitrator’s award is contemplated under the A&C Act, and whether an emergency arbitrator’s award is an order under Section 17 of the A&C Act?
- The SC noted that the parties have an indefeasible right to exercise party autonomy in respect of choosing institutional rules which can include emergency arbitrators. The Supreme Court further stated that the parties, while exercising such a right to party autonomy, do not bypass any mandatory provision of the A&C Act, as there is nothing under the A&C Act which prohibits parties from agreeing on a set of rules providing for the appointment of an emergency arbitrator.
- The SC noted that the definition of ‘arbitral tribunal’ under Section 2(1)(d) of the A&C Act does not include an “emergency arbitrator”. However, it stated that Section 1 opens with the words “unless the context otherwise requires”. When read with Section 2(1)(a) [that provides for “any” arbitration, whether or not administered by a permanent arbitral institution]and Sections 2(6) and 2(8) [which permit incorporation of rules of arbitral institutions], it is clear that interim orders passed by emergency arbitrators under the rules of an arbitral institution would be included within the ambit and context of orders passed by an ‘arbitral tribunal’ under Section 17(1). Therefore, the SC held that when Section 17(1) is concerned, the “arbitral tribunal” would, when institutional rules apply, include an Emergency Arbitrator, the context of Section 17 “otherwise requiring” – the context being interim measures that are ordered by arbitrators.
- The Supreme Court noted that the mere fact that a recommendation of a Law Commission Report was not followed by the Indian Parliament, would not necessarily lead to the conclusion that the suggestion of the Law Commission can never form part of the interpretation of the statute. Further, reference was made to the Srikrishna Committee Report, wherein it has been stated that it is possible to interpret Section 17(2) of the A&C Act to enforce emergency awards for India seated arbitrations and recommended that the A&C Act be amended so that it comes in line with international practice in favour of recognising and enforcing an emergency award.
- SC referred to Rule 3.3 of the SIAC Rules which provides for the commencement of the arbitration as the date of receipt of the complete ‘Notice of Arbitration’ by the registrar. Taking into account these provisions, the Supreme Court noted that arbitral proceedings commence when a notice of arbitration is issued, which is prior to the constitution of an arbitral tribunal. Since a remedy under Section 17 is available to a party ‘during the arbitral proceedings’, the powers of a tribunal in granting such a remedy would include powers exercisable by an emergency arbitrator soon after arbitral proceedings commence. Further, the Supreme Court also stated that the words ‘arbitral proceedings’ under Section 17 are not limited by any definition and thus encompass proceedings before an emergency arbitrator.
- Considering that party autonomy is respected by the A&C Act and that there is no prohibition under the A&C Act against the appointment of an emergency arbitrator, the Supreme Court concluded that an emergency arbitrator’s award, which is exactly like an order of an arbitral tribunal once constituted, falls within the institutional rules to which the parties have agreed. As a result, the same is validly covered under Section 17(1) of the A&C Act.
Whether an appeal against an order enforcing an emergency arbitrator’s order under Section 17(2) is maintainable under Order 43, Rule 1(r) of the Civil Procedure Code?
- The SC observed that the legal fiction created under Section 17(2) is limited to the purpose of enforcing orders passed by the arbitral tribunal as orders of the court. In this regard, the SC referred to its previous judgments to hold that a legal fiction created under any statute is limited to the purpose for which it is created under law. The SC specifically relied on its judgment in Union of India v. Vedanta Ltd and held that in all other respects, an application to enforce a foreign award remains an application under the A&C Act only. Similarly, the Deeming Fiction under Section 17 cannot be extended to hold that appeals from court orders enforcing an order under Section 17(2) can be appealed in the same manner as a court order enforcing an interim measure under Section 9. The SC referred to Section 37 of the A&C Act, and noted that Section 37 is a complete code so far as appeals from orders and awards made under the A&C Act are concerned. The SC pointed out that Section 37(2)(b) provides the scope of appeal against, inter alia, an order granting (or refusing to grant) interim measures under Section 17(1). There is no scope of appeal, however, against a court order under Section 17(2) enforcing (or refusing to enforce) an interim measure. 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) in which the interim measures are granted, and not under Section 17(2) under which the said measures are enforced.
- The Supreme Court thus concluded an appeal under Section 37 of the A&C Act cannot be maintainable against an order of enforcement of an emergency arbitrator’s order made under Section 17(2).
Post the pronouncement of the judgment, the Future Group has reportedly filed a Special Leave Petition before the Supreme Court against the order of the Single Judge of Delhi High Court.
Conclusion:
The indirect funding made by Amazon, despite being under direct restriction under FEMA law and the structuring for the said funding to protect rights of Amazon, validates such similar arrangement by foreign investors. Further as the Indian courts affirms on the order of Emergency Arbitration, it is a settled position to enforce the order. In effect to these orders, Divestment Transaction would be considered as null and void. It would be interesting to see how Future Group sails through the problem of cash shortage and operation of its business, in addition to dealing with enforcement of order of Enforcement Arbitration. The learnings that this feud gives is that legal documentation is very important and it should not be taken for granted.