From UPSC perspective, the following things are important :
Prelims level : Emergency award
Mains level : Paper 3- Improving the arbitration in India
The judgment delivered by the Supreme Court in the legal tussle between Amazon and the Future Group has laid the foundation for recognition and enforcement of emergency awards under the Indian arbitration law.
What is an emergency award?
- It is an award rendered by an emergency arbitrator, appointed prior to the formal constitution of an arbitral tribunal by an arbitral institution.
- It is a recent mechanism introduced by arbitral institutions to encourage parties to seek urgent interim relief from an arbitral institution rather than from a court.
- Many leading arbitral institutions such as SIAC, ICC, and LCIA have provisions for the appointment of an emergency arbitrator.
- As far as India is concerned, the 246th Law Commission Report had recommended an amendment in the Arbitration and Conciliation Act, 1996 (‘Indian Arbitration Act’) to grant statutory recognition to an emergency award.
- Some of the indigenous arbitral institutions though, such as the Delhi International Arbitration Centre, have made provisions for emergency arbitration.
What is the tussle between Amazon and Future Group about?
- In August 2020, Biyani Group and the Reliance Industries Group decided to amalgamate Future Retail Ltd. (FRL) with Reliance Industries and complete disposal of its retail assets in favor of the Group.
- However, prior to the said transaction, Amazon had invested an amount of Rs 1,431 crores in Future Coupons Pvt. Ltd. (FCPL) based on rights granted to FCPL with regard to FRL.
- So, Amazon initiated arbitration against the Biyani Group, including FRL, under Singapore International Arbitration Centre (SIAC) Rules.
- Amazon made an application seeking urgent interim reliefs under SIAC rules and the appointment of an emergency arbitrator.
- The emergency arbitrator appointed, made an award in favor of Amazon in October 2020, restricting the Biyani Group from proceeding ahead with the disputed transaction.
- However, the Biyani Group proceeded with the disputed transaction, construing the emergency award as a nullity.
Issue of enforcement of the emergency award in India
- Amazon filed an application before the Delhi High Court for enforcement of the award.
- The court had the task of answering two novel legal questions —
- 1) Whether the emergency award is an interim order under section 17(1) of the Indian Arbitration Act,
- 2) Whether it can be enforced under section 17(2).
- The Delhi High Court gave judgment in March 2021 against the Biyani Group.
- The case eventually reached the Supreme Court.
- Party autonomy: The Supreme Court judgment emphasized party autonomy in arbitration, which includes the right of the parties to choose institutional rules as the governing rules of arbitration.
- Once chosen, the parties are bound by such rules.
- The Supreme Court also held that the Indian Arbitration Act does not prohibit the parties from agreeing to a provision providing for an emergency arbitrator.
- The Supreme Court also held that the term “during the arbitral proceedings” is wide enough to encompass emergency arbitration proceedings.
- The Court ultimately held the emergency award to be an interim order under section 17(1) of the Indian Arbitration Act and enforceable under section 17(2).
Significance of the judgment for arbitration in India
- This judgment has contributed to the development of Indian arbitration law.
- In the broader scheme of things, it is a victory for Indian arbitration and a sigh of relief for arbitral institutions.
The judgment is a reaffirmation of the fact that India is gradually stepping towards being an “arbitration-friendly” jurisdiction.