The order of the emergency arbitrator that put on hold the transaction between Future Group and Reliance Retail isn’t capable of being enforced in the manner which was done by the Delhi High Court, Future Retail Ltd. told the Supreme Court.
Senior Advocate Harish Salve focused his arguments on this aspect on day three of the hearing in the ongoing legal battle between U.S. e-commerce major Amazon and Future Retail.
The emergency arbitrator, constituted under the Singapore International Arbitration Centre Rules, had in October 2020 passed an interim order in favour of Amazon. It had directed Future Retail to not proceed with its Rs 27,532-crore transaction with Reliance Retail.
This led to the start of a maze of litigation at various forums.
In March, a single judge bench of Justice JR Midha of the Delhi High Court upheld the validity of the emergency arbitrator’s order and held it to be enforceable. This order was appealed by Future Retail in the division bench of the same court which stayed the order.
The top court is now examining two issues arising out of Justice Midha’s order:
Whether an emergency arbitrator can be considered as an arbitral tribunal under the Arbitration Act, specifically under Section 17(1).
Whether such an order can be enforced under Section 17(2) and if an appeal against the enforcement order be maintainable.
To Say EA’s Order’s Automatically Enforceable Is A Step Too Far: Future Retail
Section 17(1) of the Arbitration and Conciliation Act, 1996, allows parties to approach the arbitral tribunal for interim relief. Section 17(2) makes such orders enforceable in the same manner as if they were the orders of a court.
Future Retail has submitted that an emergency arbitrator doesn’t qualify as an arbitral tribunal and consequently, its orders aren’t recognised or enforceable under Section 17.
This section, Salve said, only recognises interim directions of an arbitral tribunal capable of passing final orders. And not that of an emergency arbitrator which is constituted before the tribunal hearing the dispute is constituted.
Salve took the bench through the laws of U.K., New Zealand and Hong Kong to emphasise his point.
The U.K. law loosely defines arbitral tribunal and a broad interpretation of it includes an emergency arbitrator. But New Zealand and Hong Kong, have expressly defined provisions of emergency arbitrator in their laws.
Under Indian law, he said, there’s a need for accommodation of emergency arbitrator under Section 17 for its order to be made enforceable.
Further, the Law Commission of India had recommended the inclusion of emergency arbitrator in the Indian law but the parliament has not done it yet.
Salve said if the emergency arbitrator doesn’t qualify as an arbitral tribunal under Section 17(1), then its order cannot be enforced under Section 17(2).
He also highlighted the impact of the case on the deal between Reliance Retail and Future Retail.
“The deal with Reliance will pay banks. It also includes the arrangement that not a single employee will lose their job,” Salve told the bench.
The arguments before the bench of Justice RF Nariman and Justice BR Gavai will continue tomorrow.
Future Retail Vs Amazon: Story So Far
Amazon.com NV Investment Holdings LLC has alleged that the Rs 27,513-crore deal between Reliance Retail and Future Group violates its contractual rights.
In 2019, Amazon had invested in Future Group by acquiring a 49% stake in Future Coupons Ltd.—a promoter entity of Future Retail. Future Coupons holds 9.82% in Future Retail. At the time, Future Coupons and Future Retail had also entered into a shareholders’ agreement.
Subsequently, Future Retail entered into an agreement with Reliance Retail to sell its retail, wholesale, logistics and warehousing assets.
In October last year, the emergency arbitrator granted an interim award in favour of Amazon. It had directed Future Group to put on hold its transaction with Reliance Retail.
In February, the apex court had agreed to hear the matter after the division bench of the Delhi High Court lifted the status quo on Future-Reliance deal.
The division bench order was passed after Future Retail appealed against the single-judge bench‘s interim order of status quo while hearing Amazon’s enforcement application on the emergency arbitrator’s order.