Amazon Vs Future Retail: Supreme Court Upholds Validity Of Emergency Arbitrator

Supreme Court highlights the importance of party autonomy in arbitration law while upholding the validity of emergency arbitrator.

<div class="paragraphs"><p>A worker assembles a box at an Amazon fulfillment center on Prime Day in U.S. (Photographer: Rachel Jessen/Bloomberg)</p></div>
A worker assembles a box at an Amazon fulfillment center on Prime Day in U.S. (Photographer: Rachel Jessen/Bloomberg)

When parties subject themselves to rules which recognise an emergency arbitrator, then the order of such an arbitrator will be valid in Indian courts, the Supreme Court has held in the Future Retail Ltd. versus NV Holdings LLC case on Friday.

The judgment marks an important development in Indian arbitration law as the top court has given express recognition to emergency arbitrators.

Without going into the arguments on violations or obligations under the contract between Amazon and Future Group, the apex court said that party autonomy is one of the pillars of arbitration in the Arbitration Act.

…no party, after agreeing to be governed by institutional rules, can participate in a proceeding before an emergency arbitrator and, after losing, turn around and say that the award is a nullity or coram non judice when there is nothing in the Arbitration Act which interdicts an emergency arbitrator’s order from being made.
Supreme Court

In saying so, the apex court set aside Future Retail's argument that an emergency arbitrator is alien to Indian law. At the time of Amazon's investment in Future Coupons Pvt., that owns a stake in Future Retail Ltd., the entities had subjected themselves to the Singapore International Arbitration Centre’s Rules which provide for interim relief by an emergency arbitrator.

A year later, Future Retail struck a Rs 27,513-crore deal to combine with Mukesh Ambani-led Reliance Retail. Amazon claimed this deal violated the terms of its agreement with Future group entities and sought relief from the emergency arbitrator. An October 2020 interim order of the emergency arbitrator put the Future Retail - Reliance Retail deal on hold.

A single judge bench of the high court in March had upheld this interim order and found it capable of being enforced. The division bench of the high court had later stayed the single bench order. The dispute then landed in the top court.

Emergency Arbitrator's Order Not A Nullity

At the heart of the arguments before the apex court was Section 17(1) of the Arbitration Act. This allows parties to approach an arbitral tribunal during the arbitration proceeding to seek interim relief.

Future Retail had argued that the term arbitral tribunal only applies to the tribunal which is set up with the consent of the parties and is capable of passing the final orders or award. And not the emergency arbitrator.

The Supreme Court dismissed this argument. It said:

  • As per SIAC rules, an arbitration commences as soon as the notice of arbitration is sent by the registrar.

  • This means arbitration proceedings begin much before the main tribunal is constituted.

  • The phrase “during the arbitral proceedings” in Section 17(1) is elastic enough to include emergency arbitration proceedings.

  • Nothing in the India arbitration law interdicts an emergency arbitrator’s order from being made.

An emergency arbitrator's order is exactly like an order of an arbitral tribunal, the court said while emphasising its importance.

Such orders are an important step in aid of decongesting the civil courts and affording expeditious interim relief to the parties.
Supreme Court

Appeal Against Single Judge Order Not Possible

The apex court's second key finding also comes as a setback for Future Group. No appeal under Section 37 is possible against the single judge's March order, the Supreme Court has said.

The single judge bench of Justice Midha in March had held that Future Group entities and promoter Biyanis had willfully violated the emergency arbitrator’s order. Future Retail had appealed this order under the provisions of the Code of Civil Procedure. The division bench had granted a stay in Future Retail's favour.

Before the apex court, Future Retail argued that Section 17(2) says that an interim order of an arbitral tribunal will be enforced in the same manner as if it was an order of a court under the provisions of the Code Of Civil Procedure. This language was used by it to justify the appeal filed before the division bench.

The top court disagreed.

It noted that an arbitral tribunal cannot enforce its own orders. Therefore, courts have been granted the power to enforce such orders under Section 17(2) of the arbitration law. This amendment was made in 2015 to ease the process of enforcement of interim orders of tribunals.

But the amendment only contemplated enforcement by courts and not entertain appeals against such enforcement orders, the Supreme Court held.

It further added that the Arbitration Act is a self contained exhaustive code on matters of arbitration. This includes Section 37 which is sufficient in dealing with appeals from orders and awards made under the Arbitration Act. Section 37 allows for appeals arising out of interim order of an arbitral tribunal but not a court order that's been granted to enforce it, the apex court concluded.

This interpretation limits Future Retail's legal options. It essentially means that Future Group can now approach the high court to challenge the emergency arbitrator's interim award. But its appeal against the single judge's judgment, which is an enforcement order, will not stand.

Consequently, the apex court has set aside the order of the division bench which had stayed the single judge bench order of Justice Midha.

The focus of this legal battle now shifts to Singapore where the arbitral tribunal will soon decide on pre-arbitration challenges raised by Future Group companies. The arguments on potential contractual violations by Future Group, as alleged by Amazon, are likely to begin later this year.