Shreyas Sinha

This article examines the current status of emergency arbitrators and emergency arbitral proceedings in India in the context of the ongoing Amazon – Future Retail dispute. To that end, it charts out the background of the principal dispute, the challenges of creating a new class of arbitrators in India, and the indirect recognition of emergency arbitrator awards by Indian courts – to demonstrate that it is high time for emergency arbitrators to be formally recognized in Indian law.

The Background

In August, 2020, prominent Indian tycoon Kishore Biyani’s Future Group entered into an agreement with Reliance Retail, a subsidiary of Reliance Industries Ltd., for the sale of Future Group’s retail, wholesale, logistics and storage assets. Under the agreement, Future Retail (‘FRL’), a subsidiary of the Future Group, was to sell Big Bazaar (its supermarket chain), Foodhall (its premium food supply unit) and Brand Factory (its fashion and clothes brand), along with multiple wholesale units, to Reliance Retail.

The sale agreement was necessitated by Future Group’s precarious debt situation and pressure from a consortium of lenders led by the State Bank of India. Furthermore, FRL’s business had taken a devastating hit due to coronavirus-related lockdown restrictions imposed by the Government of India and multiple State Governments. The Future-Reliance deal was essentially an attempt by Future Group to cut down its debt.

The deal with Reliance Retail wouldn’t have precipitated a controversy had it not been for an agreement Future Coupons Pvt. Ltd. (‘FCPL’), the promoter of FRL, had signed in late-2019 with Amazon. Under the terms of that agreement, Amazon had acquired a 49% stake in FCPL. According to court filings, the agreement contained a non-compete clause which specifically barred FRL from contracting with Reliance for any sale of assets.

In October, 2020, Amazon alleged that FRL’s agreement with Reliance Retail was in violation of the non-compete clause contained in Amazon’s agreement with FCPL and initiated arbitration proceedings at the Singapore International Arbitration Centre (‘SIAC’). Under SIAC rules, an emergency arbitrator was appointed for the matter. The emergency arbitrator ruled in favor of Amazon and ordered an interim injunction on FRL’s sale to Reliance pending adjudication of the issue before an arbitral tribunal. FRL, however, alleged that the emergency arbitrator’s order was legally unenforceable in India and sought to go ahead with the sale anyway. In January, 2021, Amazon filed a suit for enforcement of the emergency arbitrator’s order before the Delhi High Court. A single-judge bench ruled in Amazon’s favor and granted an interim injunction on the sale of FRL assets to Reliance Retail pending a decision on the merits of the case. FRL appealed the interim order and in February, 2021, a division-bench of the Delhi High Court vacated the stay. Amazon appealed the division-bench order to the Supreme Court of India which effectively stayed the Future – Reliance deal till all legal issues were sorted out. 

Meanwhile, as the saga of appeals and counter-appeals played out, the single-judge bench of the Delhi High Court proceeded to hear substantive arguments on the case’s merits. On 18th March, 2021, the court ruled decisively in Amazon’s favor and upheld the emergency arbitrator’s order. However, with FRL having appealed the judgement, the dispute is far from over.

The Emergency Arbitrator in Future v. Amazon

Arguably, one of the principal points of contention between FRL and Amazon is the legality of the emergency arbitrator and the order dated 25th October, 2020 (‘EA order’). FRL’s primary argument purports that the EA order is a nullity as Indian law, i.e., the Arbitration and Conciliation Act, 1996 (‘the Act’), does not explicitly recognize an emergency arbitrator and as such the EA order is not in compliance with Section 17(1) of the Act, rendering it unenforceable under Section 17(2) of the same.

This viewpoint, however, has been litigated before the Delhi High Court in two different but interrelated cases involving FRL/FCPL and Amazon. In its judgements in Future Retail v Amazon and Amazon v Future Coupons, the court engaged substantively with the questions surrounding the legal status of an emergency arbitrator under Indian law and, consequently, the validity or invalidity of an interim order/award made by such an arbitrator. In both cases, the Delhi High Court ruled in favor of recognizing emergency arbitrators as legitimate arbitrators under Indian law. 

In Future Retail v. Amazon, the court, at the outset, recognized the arbitration between FCPL and Amazon as an ‘international commercial arbitration’ seated in New Delhi, India. Therefore, the court held that Part I of the Act would govern the arbitration process. However, noting that the FCPL shareholders’ agreement explicitly provided for recourse to arbitration proceedings governed by SIAC rules, the court held:

“[…]The SIAC rules will apply to the arbitration conducted in terms of Clause 25 of the FCPL SHA to the extent they are not contrary to: (i) public policy of India and/or (ii) mandatory requirements of the law under the A & C Act, 1996 […] In the present case, the parties have expressly chosen the SIAC rules as the curial law governing the conduct of arbitration proceedings. The said rules are self-sufficient to govern the proceedings under arbitration at every stage. The courts in such cases would uphold the express choice of the parties subject to the public policy of India and the mandatory provisions of the A & C Act, 1996.”

This particular holding was referred to and reiterated by the court in its judgement in Amazon v. Future Coupons wherein it concurred with the emergency arbitrator’s reasoning on the question of jurisdiction and held that:

“Section 2(6) of the Arbitration and Conciliation Act, 1996 gives complete freedom to the parties to authorize any person including an institution to determine the disputes between the parties. Section 2(8) of the Arbitration and Conciliation Act, 1996 provides that where the parties have authorized an institution, the agreement shall include the rules of that institution. Section 19(2) of the Arbitration and Conciliation Act, 1996 gives complete freedom to the parties to agree on the procedure to be followed by the arbitral tribunal in conducting its proceedings.”

These particular holdings are essentially reiterative of Indian courts’ doctrine of general non-interference with regards to contractual autonomy. Furthermore, the proposition that autonomous parties can – by contract – agree to conduct arbitration proceedings in accordance with a specific set of rules (e.g., SIAC rules) is not particularly novel. It finds support in the Supreme Court’s ruling in NTPC v. Singer. In that case, the apex court held that where the parties to an arbitration agreement have agreed to conduct the arbitration proceedings in accordance with some institutional rules, they will be bound thereto except where the rules are in “conflict with the mandatory requirements of the proper law of arbitration.”

Relying on this holding in Future Retail v. Amazon, the Delhi High Court reasoned that autonomous parties explicitly agreeing to conduct arbitration proceedings under a different set of procedural rules (in this case, SIAC rules) would necessarily be assumed to be aware and in acceptance of the various provisions of the chosen rules, including provisions for interim or emergency relief (in this case, Rule 30 of the SIAC Rules, 2016). This would necessarily preclude parties from attempting to wriggle out of their contractual obligations.

The Delhi High Court, in Amazon v. Future Coupons, reasoned on similar lines and, in no uncertain terms, ruled that by agreeing to conduct arbitration proceedings under SIAC rules, the parties would be assumed to have consented to provisions relating to emergency arbitration. This holding is legally sound for it finds support in the Supreme Court’s observations in Centrotrade v. Hindustan Copper Ltd. wherein the apex court remarked that a party “cannot wriggle out of a solemn commitment made by it voluntarily, deliberately and with eyes wide open.” 

Based on the principle of contractual autonomy, precedent and finding no conflict and/or inconsistency between the provisions of the Arbitration and Conciliation Act, 1996 and the SIAC Rules, 2016, the Delhi High Court – in both cases – ruled that the emergency arbitrator had jurisdiction and that the consequent EA order was not invalid on jurisdictional grounds. While the court’s judgement in Future Retail v. Amazon did not adjudicate upon the merits of the EA order due to the case primarily being about Amazon’s ‘tortious interference’ with the FRL-Reliance deal, the court’s verdict in Amazon v. Future Coupons (i.e., the judgement dated 18th March, 2021) comprehensively settled the points of law as to the merits of the EA order. The court recognized the emergency arbitrator as an ‘arbitrator’ under Section 2(1)(d) of the Act and upheld the entirety of the order as valid and enforceable under Sections 17(1) and 17(2).

The Case for Emergency Arbitrators

Now, from a strictly textualist perspective, one could argue that the concept of emergency arbitration is not explicitly recognized under the Arbitration and Conciliation Act, 1996, that contractual autonomy cannot be extended by a court to the point where it effectively legislates the recognition of a new category of arbitrators into existence and that the Delhi High Court’s judgements are bad law. This argument finds some support if one considers the legislative inaction on the Law Commission’s report on this issue. In its 246th report, the Law Commission of India had recommended inter alia that the definition of ‘arbitral tribunal’ under Section 2(1)(d) of the Arbitration and Conciliation Act, 1996 be broadened to recognize emergency arbitrators via an amendment. This recommendation, however, was not adopted by Parliament in either the 2015 or 2019 or 2021 amendments to the Act. The argument, then, goes that Parliament’s refusal to amend the Act in accordance with the Law Commission’s advice is an implicit refutation of the purported need to recognize emergency arbitration under Indian law. 

However, the textualist argument is not conclusive per se. The purported absence of legislative provision shouldn’t necessarily preclude the recognition of emergency arbitrators in India. For India-seated arbitrations, it can be contended that the definition of ‘arbitral tribunal’, as given in the Act, is wide enough to include emergency arbitrators. Consequently, an order issued by an emergency arbitrator could be deemed to be equivalent to that of a court under Section 17 and since ‘arbitral award’ in Section 2(c) includes an interim award, the emergency arbitrator’s order could be construed to be enforceable under Section 36. Furthermore, Parliament’s inaction with regards to the Law Commission’s report doesn’t necessarily mean that Parliament doesn’t intend for emergency arbitrators to be recognized in India; it may just be that Parliament considers the definition of ‘arbitral tribunal’ in the Act to be wide enough to cover emergency arbitrators or that it intends for the courts to leverage the generality of the provision to include emergency arbitrators within it. 

On the issue of emergency arbitrators’ orders’ enforceability under Indian law in the case of foreign-seated arbitrations, the approach is different. An order by an emergency arbitrator in such an arbitration isn’t directly enforceable in India. However, Indian courts could allow the enforcement of such orders by allowing Section 9 applications. This isn’t without precedent. In two prominent cases, HSBC v. Avitel and Raffles Design v. Educomp, the Bombay and Delhi High Courts circuitously enforced the decisions of the emergency arbitrators. 

HSBC v. Avitel revolved around an arbitration agreement that granted parties the right to move Indian courts for interim relief despite the arbitration process itself being governed by Singaporean law and conducted under SIAC rules. In that case, the petitioner filed a Section 9 petition seeking enforcement of interim measures ordered by the emergency arbitrator. The Bombay High Court decreed independent interim relief on the basis of the emergency arbitrator’s order, holding that the petitioner wasn’t attempting to have the emergency arbitrator’s order enforced directly but simply sought ‘independent’ interim relief against the respondent. The case is a prominent example of indirect enforcement of orders issued by emergency arbitrators. 

Raffles Design v. Educomp had a similar factual matrix as the Bombay High Court case. In this dispute, the Delhi High Court decreed interim relief measures under Section 9 despite the fact that a foreign-seated emergency arbitrator’s award couldn’t be enforced directly under the Act. The Delhi High Court held: “Recourse to Section 9 of the Act is not available for the purpose of enforcing the orders of the arbitral tribunal; but that doesn’t mean that the court cannot independently apply its mind and grant interim relief in cases where it is warranted.”

Nonetheless, the aforementioned case law does not settle the issues surrounding the status of emergency arbitration in India, conclusively. While the Delhi High Court’s judgements in the Amazon-Future dispute are ground-breaking in that they explicitly recognize the validity of emergency arbitrators in Indian arbitration jurisprudence; with the Future Group having appealed 18th March judgement, the dispute is likely to land before the Supreme Court, eventually, for final exposition of the law.

Conclusion

Today, multiple prominent arbitral institutions like the International Chamber of Commerce, the International Centre for Dispute Resolution, the Singapore International Arbitration Centre, the Arbitration Institute of the Stockholm Chamber of Commerce and the London Court of International Arbitration provide for emergency arbitrator mechanisms. Even Indian arbitral institutions like the Delhi International Arbitration Centre, the Court of Arbitration of the International Chambers of Commerce, India, and the Madras High Court Arbitration Centre have adopted rules that recognize emergency arbitrators. 

Emergency arbitration is an effective mechanism which allows parties to protect their commercial interests expeditiously, something which is not possible in traditional litigation, due to long procedural delays. The recognition of emergency arbitration in India, either via judicial interpretation or legislative enactment, will ensure that investors, especially international ones, are secure in their commercial transactions in India. Presently, as the Amazon-FRL saga unfolds before the Delhi HC – investors patiently await a judgment that speaks to to India’s nascent reputation as an arbitration-friendly jurisdiction, and emulates international best practices in this regard.

The author is a first-year student at the National Law School of India University.