Citation: Civil Appeal Nos. 4492-93 of 2021
Court: Supreme Court of India
Coram: Rohinton Nariman & B. R. Gavai, JJ.
Date: 6th August 2021
Keywords: Emergency Arbitration, Emergency Award, Section 17, Section 37, Interim Relief, Enforcement
The landmark judgment passed by the Supreme Court on the 6th August 2021 declared awards passed by Emergency Arbitrators to be interim orders. Therefore, such orders will now be enforceable as an order of the Court under Section 17(2) of the Arbitration and Conciliation Act, 1996 (“the Act”). This judgment effectively restrains the merger between the Future Group Private Limited (“Future Group”) and Mukesh Dhirubhai Ambani Group (“MDAG”) that would have led Amazon.com (“Amazon”) to lose it market share in India.
I. Origins of the Dispute & Findings of the Emergency Arbitrator
Amazon had invested Rs. 1431 crores in Future Group with the covenant that the retail assets of the Future Group would never be alienated without the prior consent of Amazon, and especially never to a “Restricted Person”. The Shareholders Agreement between Amazon and the Future Group included a list of persons who would be eligible to be classified as restricted persons. This list included, among others, the MDAG.
This Agreement also includes within its scope a dispute settlement clause that provides for arbitration in the event of a disagreement between Amazon and Future Group. This clause proved that:
(i) The proper law of the contract would be Indian law;
(ii) That Courts in New Delhi would have exclusive jurisdiction over all matters relating to the Agreement;
(iii) The seat of arbitration would be New Delhi; and
(iv) The Arbitration would be conducted in accordance with the Rules of Singapore International Arbitration Centre (“SIAC”).
The SIAC Rules include within its scope a provision of emergency arbitration. This provision was invoked by Amazon when it alleged that the Future Group violated its contractual obligations by approving the transaction transferring its retails assets to the MDAG. The Emergency Arbitrator appointed under the SIAC Rules issued ab arbitral award dated 25th October 2020 restraining the Future Group from going ahead with the transaction with the MDAG.
II. Progression of the Dispute before Indian Courts
The Award passed by the Emergency Arbitrator was sought to be enforced under Section 17(2) of the Act by Amazon before the Single Judge of the Hon’ble Delhi High Court. The Single Judge via Order dated 8th February 2021 ordered the maintenance of status quo, consequently restraining the Future Group from going ahead with the transaction with MDAG. This order was appealed to the Division Bench of the Hon’ble Delhi High Court by the Future Group.
The Single Judge Bench passed a detailed Judgment dated 18th March 2021 holding that any award passed by an Emergency Arbitrator will be an order under Section 17(2) of the Act read with Order XXXIX Rule 2-A of the Code of Civil Procedure, 1908 (“CPC”).
However, soon after the Single Judge issued this judgment, the Division Bench before whom the matter was still pending adjudication, vide Order dated 22nd March 2020, stayed the detailed judgment until next date of hearing before itself. It is against his order passed by the Division Bench, that Amazon filed a Special Leave Petition before the High Court.
1. Whether an award delivered by an Emergency Arbitrator under SIAC Rules will qualify to be an order under Section 17(1) of the Act?
2. Whether an order passed under Section 17(2) of the Act in the award of an Emergency Arbitrator is appealable?
Analysis & Conclusion
I. Nature of Award issued by Emergency Arbitrators
In regards the first issue, the Court held that an Award by Emergency Arbitrator is an order for the purposes of Section 17 of the Act.
In order to arrive at this finding, the Court relied on the principle of party autonomy and interpretation of the objective of Section 17 of the Act. It held that Section 17 that allows the Arbitral Tribunal to pass interim orders under the Act and legal fiction created under Section 17(2) allows for the enforcement of such interim awards as decree of courts. The Court also drew its analysis from the Amendment to Section 17 introduced via the Arbitration & Conciliation (Amendment) Act, 2015. It asserted that the Amendment not only contributed towards the enhancement in the scope of an Arbitral Tribunal’s jurisdiction in regards providing interim reliefs, but also served as proof of the intention of the legislature to decongest courts by giving parties urgent interim reliefs where they deserve such reliefs.
The Court highlighted that the choice exercised by the parties in their Arbitration Agreement whereby which they agreed to be bound by the SIAC Rules did not bypass any mandatory provision of the Arbitration Act. The Bench also observed that since there is nothing in Section 17(1) when read with other provisions of the Act to interdict the application of rules of arbitral institutions, the scope of “arbitral tribunal” as mentioned under Section 17 will include an Emergency Arbitrator that may be appointed under SIAC Rules. This interpretation was further found to be in consonance with the sacrosanct principle of party autonomy enshrined under Sections 2(8) and 19 of the Act, which gives the parties an arbitration the freedom to choose their arbitrators as well as determine the mechanism and modalities that will be employed in the conduct of their arbitral proceeding.
The Court also observed that a necessary corollary to this freedom of choice vested by principle of party autonomy would be the assertion that parties would necessarily be governed by institutional rules chosen by them. Therefore, in this case, as the parties had explicitly indicated their choice to be bound by the SIAC Rules, they had by necessarily implication also agreed to be bound by proceedings before any Emergency Arbitrator appointed under those rules. The Court ruled that the parties were not eligible to claim that the award rendered by such an Emergency Arbitrator was a nullity.
Therefore, by interpreting Section 17 in light of the principle of party autonomy and conjointly reading it with the SIAC Rules, the Court concluded that awards passed by Emergency Arbitrators are interim orders for the purposes of Section 17.
II. Maintainability of Appeals from Orders passed under Section 17 of the Act
In regards the issue of maintainability, the Court began its analysis with a reference to the 2015 Amendment, which essentially sought to bring a degree of parity between the remedies available to parties under Sections 9 and 17 of the Act.
The Court clarified that Section 9(1) of the Act not only provided parties with a mechanism to seek interim reliefs, but also to enforce them through orders of the Court in the event of any failure to comply by the judgment debtor in the context of a Section 9 Petition via Order XXXIX Rule 2-A of the CPC. Therefore, as Sections 9 and 17 of the Act were essentially pari materia, it logically flows that Arbitral Tribunals, too must have a similar mechanism in place for the enforcement of their interim orders. But, as Arbitral Tribunals were not vested with the power to enforce their orders, they are dependent on the Court for providing the necessary support. The Court held that this support system is envisaged in the form of Section 17(2), which creates a legal fiction that enables the enforcement of interim orders issued by Arbitral Tribunals in the same manner as they would have enforced an interim order of a Court under Section 9(1) of the Act.
But the Court clarified that no appeal lies under Section 37 of the Act against an order of enforcement of an Emergency Arbitrator’s order made under Section 17(2) of the Act. In distinguishing the scope of Section 37 with respect to Section 17(1) and 17(2), the Court held that the phrase “granting or refusing to grant an interim measure under Section 17” under Section 37 only refers to the grant or non-grant of interim measures under Section 17(1)(i) and 17(1)(ii). Further, the Court opined that the opening words under Section 17(2), namely, “subject to any orders passed in under Section 37...” also demonstrated the intention of the legislature to limit the scope of Section 37 only to orders issued under Section 17(1). Therefore, the Court clarified that when an order refusing an injunction is appealed, then Section 17(2) is invoked to enforce the order passed in appeal.