Author : Ayush Singh Negi , Student , National Law University, Delhi
Introduction:
The recent judgment of Delhi High Court in the case of Future Retail (FRL) v Amazon Inc. on the issue of enforceability of emergency arbitration order has once again sparked the debate on emergency arbitration in India. Although ‘emergency arbitration’ does not find any explicit statutory support under Arbitration and Conciliation Act (Act), the Delhi High Court in its major ruling has recognized the emergency arbitration within the Act.
Amazon attempted to prevent the ongoing transaction between Reliance and FRL and filed for emergency arbitration before the Singapore International Arbitration Centre (SIAC). Amazon successfully got an order issued in its favour restricting the further agreement until the final decision is reached. FRL before Delhi High Court primarily contended the reliance of Amazon on the award issued under the emergency arbitration by SIAC does not find any place in the Act. However, the Court ruled in favour of Amazon by ruling the compatibility of emergency arbitration with the Act. The High Court’s decision signifies Amazon’s ability to approach regulatory authorities on the basis of emergency arbitration order obtained.
Factual matrix of the case :
In a fierce competition to control India’s retail market, the dispute arose between Amazon and Future Retail Ltd (FRL) because of the ongoing deal between Reliance and FRL. Amazon currently holds 49 % stakes in FRL, therefore giving a right to Amazon to be informed of FRL’s dealing with third parties. Amazon contested that ongoing deal between Reliance and FRL is in contravention of the agreement signed between Amazon and FRL. Consequently, Amazon started thwarting the ongoing business deal between FRL and Reliance before regulatory bodies on the basis of such emergency award.
FRL subsequently filed the petition before the Delhi High Court alleging that such efforts of Amazon to obstruct the deal wit the Reliance amounts to tortious interference. FRL vehemently opposed the reading of emergency arbitration in the Act and put forth several bolstering arguments in its support like the rejection of the recommendations of the Srikrishna Committee which suggested for the inclusion of the emergency arbitration in the Act. It was also argued by FRL that the absence of emergency arbitration in the Act showcases legislative intent and the only remedy left before Amazon was to approach the court under section 9 of the Act. Amazon on the other hand primarily asserted the ‘principle of party autonomy’ and highlighted that the parties were free to opt SIAC rules and the emergency order passed was in the nature of interim relief therefore enforceable under section 17 of the Act.
Decision of the Court:
The Court favoured the Amazon and ruled that mere absence of ‘emergency arbitrator’ under section 2(1)(d) of the Act cannot be equated to its impermissibility under the Act. Court further emphasizing on section 9 affirmed that several arbitral institutions (Indian and International) recognize emergency arbitration in their rules to adjudicate upon interim reliefs on the urgent basis before the constitution of the arbitral tribunal. Also relying on HSBC PI Holdings (Mauritus) v Avitel Post Studioz Limited &Ors, the Court observed that absence of emergency arbitration provision by the legislature is not a testament of its intent.
The decision of the Court can be articulated in three crucial points. Firstly, the Court was of the opinion that proviso to section 2(2) and other provisions of the Act and section 9 could be excluded by the agreement. Thus section 9 is not mandatory in nature and can be derogated as per the agreement. Secondly, the Court observed that the law chosen by the parties would be followed contingent upon two conditions that the law chosen is not contrary to the public policy and it is not in derogation with the requirements of the law in where the arbitration is held. Thirdly, SIAC rules chosen by the parties is compatible with the provisions of emergency arbitration.
Analysis and the way ahead:
Recognition of emergency arbitration in India is a welcome step but the current framework of Arbitration law in India is not suitable to adopt the provisions of emergency arbitration. Although the legislature with 2015 inserted section 17 enabling parties to obtain interim reliefs but the same is not adequate to clarify the enforceability of emergency arbitral orders in India as section 17 is provided under Part 1 of the Act, which is applicable only on arbitrations taking place in India [section 2(2)].
The 246th Law Commission report by B.N. Srikrishna Committee which recommended the inclusion of ‘emergency arbitral award’ under section 2(1) (c) of the Act that currently includes ‘interim award’ was neither incorporated in the 2015 Amendment nor in 2019 Amendment thus showing unwillingness of legislature to statutorily recognize emergency arbitration in India.
It is also pertinent to observe certain important precedents related to the enforceability of emergency arbitral award delivered on previous occasions. In Raffles Design International India P. Limited v Educomp Professional Education Limited, it was held by Delhi High Court that emergency arbitral award does not find any place under the Act but the parties are free to approach courts under section 9 for interim relief. The Court noted that section 17 cannot be applied to foreign seated arbitrations due to section 2(2) and therefore parties cannot approach court to enforce an emergency arbitration award under section 9 however parties may institute a sperate suit to gauge the independent opinion of the court regarding the enforceability of emergency arbitration.
However, in Ashwani Minda v U-Shin Limited, Delhi High Court deviated from its previous ruling in Raffles and denied the interim relief under section 9 of the Act. In this case, Ashwani Minda (Indian Company) invoked emergency arbitration under the Japan Commercial Arbitration Association rules (JCAA) to seek interim relief in relation to restrain U-Shin Limited from purchasing shares in excess of its existing 26% shares in the Joint Venture. But the emergency arbitrator refused to grant such relief thus Ashwani Minda (Appellant) approached the Delhi High Court to grant interim relief as per section 9. The Court observed that parties by opting JCAA rules had excluded the jurisdiction and interference of Indian Courts. It was also ruled that after being failed to obtain relief in emergency arbitration, the parties cannot appeal before the court for such emergency arbitral judgment.
The reason for different approaches adopted by Delhi High Court in the above two cases was mainly due to different institutional rules chosen by the parties. While Raffles case enabled the parties to seek interim measures under section 9 despite non-enforceability of emergency arbitral award, but Ahshwani Minda made the grant of the interim measure under section 9 dependent upon arbitration agreement and the law chosen by the parties. This highlights the shortcomings in the law and judicial treatment of emergency arbitration and its enforceability in India.
Recent amendments in the Act aims at expanding and promoting the scope of arbitration in India. In this backdrop, the recognition of Emergency Arbitration as per the global scenario is indispensable. But the prevailing context in the country signals towards the practical hurdles in enforcing emergency arbitral awards in consonance with the provisions of the Act. Section 17 of the Act does not provide for enforcing emergency arbitral award passed in foreign seated arbitration. The courts too hesitate to enforce the emergency arbitral award and have changed their stance regarding the enforceability of the emergency award. As per Raffels, the court cannot enforce the emergency arbitral award but if the rules chosen by the party invites interference of courts, then the party may approach the court under section 9 to seek interim relief. The Ashwani Minda case has further aggravated the complexity of the issue by making enforceability dependent upon agreement and the law chosen by the parties.
Such inconsistencies regarding emergency arbitration call for the need for statutory recognition and clear law on emergency arbitration. There is an imminent need for recognition of emergency arbitration and as recommended by law commission in its 246th report, there is a need to include ‘emergency arbitration’ under ‘arbitral tribunal’ in order to save time, money and resources of the parties as well as court and to bring Indian arbitration at par with global standards.
.jpeg)
