8 October 2021
The Supreme Court of India (the “Court“) has recently handed down a significant judgment in Amazon.com NV Investment Holdings LLC v. Future Retail Ltd. & Ors. confirming that an award rendered by an emergency arbitrator (“EA“) in an arbitration seated in India is enforceable in the Indian courts. The Court’s judgment provides welcome clarity for parties seeking urgent interim relief in India-seated arbitrations. The judgment, however, does not address the enforceability of foreign-seated EA awards in the Indian courts.
Background
In August 2019, Amazon NV Investment Holdings LLC (“Amazon“) entered into a suite of agreements with, amongst others, Future Coupons Pvt Ltd (“FCPL“), a 10% shareholder in Future Retail Limited (“FRL“), a leading Indian retailer. Through these agreements, Amazon benefited from specific rights in relation to FRL’s retail assets. It was agreed by the parties that FRL would be prohibited from transferring its retail assets without the consent of Amazon and FCPL, including any transfer to a list of specified ‘restricted persons’ which included the Reliance Group, a major Indian conglomerate. These agreements included a dispute resolution clause providing for arbitration under the SIAC Rules, with its seat in New Delhi and governed by Indian law.
In August 2020, FRL and FCPL, amongst others, entered into a transaction with the Reliance Group intended to transfer the retail assets of FRL to the Reliance Group. As a result, Amazon initiated EA proceedings seeking an urgent injunction restraining the proposed transfer. The EA duly issued an award to this effect in October 2020 (the “EA Award“). Amazon sought to enforce the EA Award in the Delhi High Court by filing an application under section 17 of the Arbitration and Conciliation Act 1996 (the “Act“).
Section 17(1) of the Act provides that a party may, during the arbitral proceedings, apply to the tribunal for interim measures and that the tribunal shall have the same power to make orders as an Indian court. Section 17(2) of the Act provides that any order issued by an arbitral tribunal shall be deemed to be enforceable as an order passed by the Indian courts. Importantly, section 17 only applies to India-seated arbitrations and not to foreign-seated arbitrations.
The Delhi High Court held that the EA Award was enforceable under section 17 of the Act. However, this order was subsequently stayed by a Division Bench of the Delhi High Court. The Division Bench’s order was the subject of an appeal to the Court.
The Judgment
The key question for the Court to consider was whether an EA award in an India-seated arbitration can be said to be an “order” under section 17(1) of the Act and therefore enforceable. FRL argued that it could not because the Act is silent on emergency arbitrations and therefore EA awards could not fall within the scope of section 17. In particular, FRL argued that the 2015 amendments to the Act failed to incorporate a suggestion from the Law Commission that emergency arbitrations should be categorised as an “arbitral proceeding” for the purposes of the Act.
The Court rejected these arguments and held that the Act grants parties full autonomy to have a dispute decided in accordance with institutional rules which can include the delivery of interim orders by EAs. The Court therefore applied a purposive interpretation to the Act and held that the lack of specific reference to EA awards in the Act did not indicate that such awards should fall outside its scope. The Court also noted that given FRL had already consented to arbitration governed by the SIAC Rules in the transaction agreements, it was not now open to it to challenge the enforceability of an EA award issued under those same rules.
In a significant observation, the Court noted that EA awards are “an important step in aid of decongesting the civil courts and affording expeditious interim relief to the parties“.
The Court also considered the additional question of whether an order passed under section 17(2) of the Act by a court in enforcement of an EA award is appealable under section 37 of the Act. The Court held that, whilst orders granting or refusing to grant interim measures under section 17(1) of the Act would be subject to appeal, enforcement proceedings under section 17(2) are not covered by that appeal provision. A possible consequence of this finding is that EA awards – which the Court treated as equivalent to any arbitral award or order of the courts – will now be subject to a non-derogable right of appeal in the Indian courts under section 37 (irrespective of whether the relevant institutional rules, if any, provide for the waiver of any such right, as the SIAC Rules did here).
Comment
By upholding the enforceability of EA awards in India (albeit in the context of India-seated arbitration proceedings only), the Court has re-confirmed the pro-arbitration attitude of the Indian judiciary.
The Court’s judgment also provides much needed clarification to parties seeking a fast-track route to obtaining interim relief in India-seated arbitration proceedings without having to resort to the domestic courts, and the potential delays that that may entail. In making its decision, the Court emphasised the benefits of arbitration as a dispute resolution mechanism by observing that, from a public policy perspective, the enforceability of EA awards is an important step in granting expeditious interim relief to parties whilst reducing the strain on the local courts.
The pro-arbitration message in the judgment is somewhat diluted by the Court’s indication that EA awards in India-seated arbitrations may be subject to appeal in the Indian courts even if the relevant institutional rules provide otherwise. It remains to be seen how this aspect of the Court’s judgment will apply in practice and, in particular, how it reconciles with the Court’s observation that emergency arbitrations play an important role in decongesting the civil courts.
As noted above, the judgment was not concerned with the enforceability of foreign-seated EA awards in the Indian courts. There is currently no provision similar to section 17 of the Act applicable to foreign-seated EA proceedings with the result that, as things stand, foreign-seated EA awards are unlikely to be directly enforceable in the Indian courts. Following the recent line of pro-arbitration decisions issued by the Court, which has included the significant judgment in PASL Wind Solutions Private Limited v. GE Power Conversion India Private Limited (which we covered here), it is to be hoped that the Court will provide further clarity on this important issue sooner rather than later.
For further information, please contact:
Andrew Cannon, Partner, Herbert Smith Freehills
Andrew.Cannon@hsf.com
