Enforceability of Emergency Arbitral Award under the Arbitration and Conciliation Act, 1996 with a Special Reference to the Amazon vs Future Retail Case

Enforceability of Emergency Arbitral Award under the Arbitration and Conciliation Act, 1996 with a Special Reference to the Amazon vs Future Retail Case (2021)

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Introduction:

In the context of a sound and systematized International Arbitration, an emergency relief is often described as an “Achille’s Heel”.[1] Emergency Arbitration (EA) in the guise of an emergency relief is a novel concept in the field of Arbitration suitable for those who want to protect their assets and evidence that might otherwise be altered or lost. Such arbitration is usually agreed to and arranged by the parties themselves without recourse to a Tribunal at the first instance. The proceedings either domestic or international are conducted by an Arbitrator as per the agreement between the parties or with the concurrence of the parties.

The Emergency Arbitrator is a sole arbitrator appointed by the Arbitration Institution to consider the Emergency Interim Relief Application in cases where the parties have agreed to arbitrate according to the Rules of that Arbitration Institution which contain provisions relating to Emergency Arbitration. The status of the Emergency Arbitrator is based on party autonomy as the law gives complete freedom to the parties to choose an arbitrator or an Arbitral Institution. The powers of the Emergency Arbitrator are the same of those of a Arbitral Tribunal to decide the interim measures. The order/award of the Emergency Arbitrator is binding on all the parties. However, they do not bind the subsequently constituted Arbitral Tribunal and the Arbitral Tribunal is empowered to reconsider, modify, terminate or annul the order/award of the Emergency Arbitrator.

This novel concept of Emergency Arbitration or an Emergency Arbitral Award has been  a topic of intense discussion and scrutiny in the evolving Indian Arbitration Jurisprudence. Notwithstanding the fact that the term ‘Emergency’ Arbitration or ‘Emergency Arbitral Award’ does not find any express mention the original Arbitration and Conciliation Act,1996 (hereinafter to be referred as “the Act) or the subsequent Amendments in the core act, there has been numerous calls by the legal fraternity  to include it in the Act so that the Act can be brought in consonance with the current global arbitration rich nations.

However, this concern of the legal fraternity was recently addressed by a detailed judgment of the Supreme Court in AMAZON.COM NV INVESTMENT HOLDINGS LLC v. FUTURE RETAIL LIMITED & ORS.[2] rendered by a division bench of RF Nariman and BR Gavai which held that an Emergency arbitral award delivered by an Emergency Arbitrator IN AN India-seated Arbitration is an order under section 17 of the Act and hence constitutes an award for the purposes of the Arbitration and Conciliation Act 1996.

Through this essay, I will delineate the main findings of the Supreme Court pertaining to the abovesaid judgment and will also deal with the relevant provisions of the Arbitration Act to establish that how the Supreme Court came to the conclusion that an award delivered by an Emergency Arbitrator is an order and hence an award for the purposes of the Act.          

Contemporary Evolution of Emergency Arbitration Doctrine

The Emergency Arbitration was first adopted by International Centre for Dispute Resolution of American Arbitration Association (AAA) in 2006, followed by Singapore International Arbitration Centre (SIAC) in 2010; Stockholm Chambers of Commerce (SCC) in 2010; International Chamber of Commerce (ICC) in 2012; and Hong Kong International Arbitration Centre in 2013. Swiss Chambers‘ Arbitration Institution; London Court of International Arbitration (LCIA); International Institute for Conflict Prevention and Resolution; China International Economic and Trade Arbitration Commission; Australian Centre for International Commercial Arbitration; Kigali International Arbitration Centre; Asian International Arbitration Centre and Dubai International Finance Centre have also incorporated the provisions relating to the Emergency Arbitration in their Rules.

In our country, the provisions relating to Emergency Arbitration have been incorporated by Delhi International Arbitration Centre (DIAC); Mumbai Centre for International Arbitration (MCIA); Madras High Court Arbitration Centre (MHCAC); Nani Palkhivala Arbitration Centre; Indian Council of Arbitration; Indian Institute of Arbitration & Mediation; and Bangalore International Mediation, Arbitration and Conciliation Centre.

 Rule 2.1(c) of the Rules of Delhi International Arbitration Centre (DIAC) defines ‗Arbitral Tribunal‘ to include an Emergency Arbitrator. Rule 14 contains similar provisions for appointment of an Emergency Arbitrator as contained in Rules of SIAC. Rule 14.8 provides that an order or of an award of an Emergency Arbitrator shall be enforceable in the manner as provided in the Act. The Rules of Mumbai Centre for International Arbitration (MCIA) and Madras High Court Arbitration Centre (MHCAC) also contain similar provisions for appointment of an Emergency Arbitrator.

Therefore, it can be gleaned that the Emergency Arbitration is a very effective and expeditious mechanism to deal with the Emergency Interim Relief Application and has added a new dimension to the protection of the rights of the parties.

The advantage of the Emergency Arbitration mechanism is that a litigant is able to get the justice within 15 days, which is not possible in Courts. However, if the order of the Emergency Arbitrator is not enforced, it would make the entire mechanism of Emergency Arbitration redundant.

AIM & ROLE

The objective of EA is to provide urgent pro tem or conservatory measures to a party or parties that cannot await the formation of an Arbitral Tribunal. The efficacy of an Emergency Arbitration, invoked by a party, survives on a chariot of two wheels:

  1. Fumus boni iuris– Reasonable possibility that the requesting party will succeed on merits;
  2. Periculum in mora – if the measure is not granted immediately, the loss would not and could not be compensated by way of damages.

The main role of Emergency Arbitration comes into play in a situation, when there is no arbitral tribunal in place or in a situation where sufficient time would be wasted in setting up one, depending upon the requirements of an arbitration agreement or the institutional rules. EA proliferates as a promise because of various other defects in the system such as lack of confidence in the national courts to grant urgent reliefs, leakage of confidential information, exaggerated litigation cost, etc. Amongst many, two major procedures have to be ineludibly adopted once a party decides to pursue the remedy of EA:

  1. Filing of proof of service of such application upon the opposite parties.
  2. Payment of the decided fee schedule depending upon the schedule for each center, where such arbitration is to be carried out with an implicit understanding that the application of EA would be limited to signatories to the Arbitration agreement or their successors.

POWERS VESTED

An Emergency Arbitration is capable of granting interim measures or conservatory relief only for a stipulated period of time. For all purposes, it exercises similar if not same functions as that of an ad hoc tribunal which has been constituted for a limited purpose and would immediately be dissolved, once the purpose is served or the said time frame in which such issues have to be decided, lapses. Most Arbitration Rules across nations follow an ‘opt-out’ policy with respect to emergency which means that only if the agreement between the parties specifically excludes “Emergency Arbitrator Provisions“ would these provisions not apply in toto.

An Arbitrator appointed for the purposes of an Emergency Arbitration is known as an Emergency Arbitrator. The Emergency Arbitrator exercises the following functions and becomes functus officio after the Interim Order is made:

  1. The Emergency Arbitrator shall, as soon as possible but in any event within two business days of appointment, establish a schedule for consideration of the application for emergency relief.
  2. Such schedule shall provide a reasonable opportunity to all parties to be heard. It may provide for proceedings by way of telephonic conference or on written submissions as alternatives to a formal hearing.
  3. Due to strict time-lines, the emergency arbitrator may never actually hear or consult with the parties apart from certain major clarifications and simply give his order on the basis of the documents and written submissions placed before him.
  4. Timelines do vary under various International Arbitration rules, but a typical emergency arbitration takes around eight to ten days from the date of application to the date of award.
  5. The Emergency Arbitrator shall have the powers vested in the Arbitral Tribunal pursuant to these Rules, including the authority to rule on his own jurisdiction, and may order any party to take such interim measure of protection, as the arbitrator may consider necessary considering the subject matter of the dispute.
  6. The nature of the interim orders include asset freezing orders, both prohibitive and mandatory injunctions, orders for the preservation and inspection of evidence, preventive orders to avoid misuse of intellectual property or confidential information as well as anti-suit injunctions.

Although the emergency arbitrator’s order is not binding on the arbitral tribunal with respect to any question, issue or dispute determined, yet, the interim order has to be definitely varied, discharged or revoked, in whole or in part, by a subsequent order or award made by the Arbitral Tribunal upon application by any party or upon its own initiative.

Recommendations of Srikrishna Committee Report with regard to the 246th Law Commission Report[3]

“16. Enforcement of emergency awards

There is significant uncertainty in the law regarding the enforceability of emergency awards in arbitrations seated in India. The LCI in its 246th Report had recommended recognising the concept of emergency arbitrator by widening the definition of arbitral tribunal under section 2(d) of the ACA to include emergency arbitrator. However, this recommendation was not incorporated in the 2015 Amendment Act. While one could possibly rely on section 17(2) of the ACA to enforce emergency awards for arbitrations seated in India, the Delhi High Court decision in Raffles Design International India Pvt. Ltd.& Anr. v. Educomp Professional Education Ltd. & Ors., (2016) 234 DLT 349 held that an emergency award in an arbitration seated outside India is not enforceable in India. India’s approach differs from that of developed arbitration jurisdictions such as Singapore and Hong Kong which have recognised the enforceability of orders given by an emergency arbitrator. Singapore amended the IAA in 2012 to broaden the definition of ‘arbitral tribunal’ in section 2(1) to include emergency arbitrator(s). Hong Kong amended the AO in 2013 to include Part 3A which deals with the enforcement of emergency relief. Section 22B provides that emergency relief granted by an emergency arbitrator shall with the leave of the

Court of First Instance of the High Court be enforceable in the same manner as an order or direction of the Court. Given that international practice is in favour of enforcing emergency awards (Singapore, Hong Kong and the United Kingdom all permit enforcement of emergency awards), it is time that India permitted the enforcement of emergency awards in all arbitral proceedings. This would also provide legislative support to rules of arbitral institutions that presently provide for emergency arbitrators (See Dennis Nolan and Roger Abrams, ‘Arbitral Immunity’, Berkeley Journal of Employment and Labour Law, Vol. 11 Issue 2 (1989), pp.228–266). For this purpose, the recommendation made by the LCI in its 246th Report may be adopted.”

Factual Background of the Case in Question i.e AMAZON.COM NV INVESTMENT HOLDINGS LLC v. FUTURE RETAIL LIMITED & ORS.[4]

The Supreme court delineated the factual background as under :

“Proceedings were initiated by the Appellant, Amazon.com NV Investment Holdings LLC [“Amazon”] before the High Court of Delhi under Section 17(2) of the Arbitration Act to enforce the award/order dated 25th October, 2020 of an Emergency Arbitrator, Mr. V.K. Rajah, SC. This order was passed in arbitration proceedings being SIAC Arbitration No. 960 of 2020 commenced by Amazon against Respondents No. 1 to 13, who are described as under:

(i) Respondent No.1 – Future Retail Limited, India’s second-largest offline retailer [“FRL”]

(ii) Respondent No.2 – Future Coupons Pvt. Ltd., a company that holds 9.82% shareholding in FRL and is controlled and majority-owned by Respondents No. 3 to 11 [“FCPL”]

(iii) Respondent No.3 – Mr. Kishore Biyani, Executive Chairman and Group CEO of FRL

(iv) Respondent No.8 – Mr. Rakesh Biyani, Managing Director of FRL

(v) Respondents No. 4 to 7 and 9 to 11 – other members of the Biyani family, namely, Ms. Ashni Kishore Biyani, Mr. Anil Biyani, Mr. Gopikishan Biyani, Mr. Laxminarayan Biyani, Mr. Sunil Biyani, Mr. Vijay Biyani, and Mr. Vivek Biyani, who are promoters and shareholders of FRL

(vi) Respondents No. 12 and 13 – Future Corporate Resources Pvt. Ltd. and Akar Estate and Finance Pvt. Ltd., group companies of FRL Respondents No. 1 to 13 are hereinafter collectively referred to as the “Biyani Group”.

2.2. The seat of the arbitral proceedings is New Delhi, and as per the arbitration clause agreed upon by the parties, SIAC Rules apply.

2.3. Three agreements were entered into between the parties. A Shareholders’ Agreement dated 12th August, 2019, was entered into amongst the Biyani Group, i.e., Respondents No. 1 to 13 [“FRL Shareholders’ Agreement”]. Under this Shareholders’ Agreement, FCPL was accorded negative, protective, special, and material rights with regard to FRL including, in particular, FRL’s retail stores [“retail assets”].

The rights granted to FCPL under this Shareholders’ Agreement were to be exercised for Amazon’s benefit and thus were mirrored in a Shareholders’

Agreement dated 22nd August, 2019 entered into between Amazon, FCPL, and Respondents No. 3 to 13 [“FCPL Shareholders’ Agreement”]. Amazon agreed to invest a sum of Rs.1431 crore in FCPL based on the rights granted to FCPL under the FRL Shareholders’ Agreement and the FCPL Shareholders’ Agreement. This investment was recorded in the Share Subscription Agreement dated 22nd August, 2019 entered into between Amazon, FCPL, and Respondents No. 3 to 13 [“Share Subscription Agreement”].

It was expressly stipulated that this investment in FCPL would “flow down” to FRL. It appears that the basic understanding between the parties was that Amazon’s investment in the retail assets of FRL would continue to vest in FRL, as a result of which FRL could not transfer its retail assets without FCPL’s consent which, in turn, could not be granted unless Amazon had provided its consent. Also, FRL was prohibited from encumbering/transferring/selling/divesting/disposing of its retail assets to “restricted persons”, being prohibited entities, with whom FRL, FCPL, and the Biyanis could not deal. A list of such restricted persons was then set out in Schedule III of the FCPL Shareholders’ Agreement and also under the FRL Shareholders’ Agreement vide letter dated 19th December, 2019. There is no doubt that the Mukesh Dhirubhai Ambani group (Reliance Industries group) is a “restricted person” under both these Shareholders’ Agreements.

2.4. On 26th December, 2019, Amazon invested the aforesaid sum of Rs.1431 crore in FCPL which “flowed down” to FRL on the very same day. The bone of contention between the parties is that within a few months from the date of this investment, i.e., on 29th August, 2020, Respondents No. 1 to 13 entered into a transaction with the Mukesh Dhirubhai Ambani group which envisages the amalgamation of FRL with the Mukesh Dhirubhai Ambani group, the consequential cessation of FRL as an entity, and the complete disposal of its retail assets in favour of the said group.

2.5. Amazon initiated arbitration proceedings and filed an application on 5th October, 2020 seeking emergency interim relief under the SIAC Rules, asking for injunctions against the aforesaid transaction. Mr. V.K. Rajah, SC was appointed as the Emergency Arbitrator and heard detailed oral submissions from all parties and then passed an “interim award” dated 25th October, 2020, in which the learned Arbitrator issued the following injunctions/directions:

“B. Dispositive Orders/Directions

285. In the result, I award, direct, and order as follows:

(a) the Respondents are injuncted from taking any steps in furtherance or in aid of the Board Resolution made by the Board of Directors of FRL on 29 August 2020 in relation to the Disputed Transaction, including but not limited to filing or pursuing any application before any person, including regulatory bodies or agencies in India, or requesting for approval at any company meeting;

(b) the Respondents are injuncted from taking any steps to complete the Disputed Transaction with entities that are part of the MDA Group;

(c) without prejudice to the rights of any current Promoter Lenders, the Respondents are injuncted from directly or indirectly taking any steps to transfer/ dispose/ alienate/ encumber FRL’s Retail Assets or the shares held in FRL by the Promoters in any manner without the prior written consent of the Claimant;

(d) the Respondents are injuncted from issuing securities of FRL or obtaining/securing any financing, directly or indirectly, from any Restricted Person that will be in any manner contrary to Section 13.3.1 of the FCPL SHA;

(e) the orders in (a) to (d) above are to take effect immediately and will remain in place until further order from the Tribunal, when constituted; and

(f) the Claimant is to provide within 7 days from the date hereof a cross-undertaking in damages to the Respondents. If the Parties are unable to agree on its terms, they are to refer their differences to me qua EA for resolution; and

(g) the costs of this Application be part of the costs of this

Arbitration.”

2.6. The Biyani Group thereafter went ahead with the impugned transaction, describing the award as a nullity and the Emergency Arbitrator as coram non judice in order to press forward for permissions before statutory authorities/regulatory bodies. FRL, consistent with this stand, did not challenge the Emergency Arbitrator’s award under Section 37 of the Arbitration Act, but instead chose to file a civil suit before the Delhi High Court being C.S. No. 493 of 2020, in which it sought to interdict the arbitration proceedings and asked for interim relief to restrain Amazon from writing to statutory authorities by relying on the Emergency Arbitrator’s order, calling it a “tortious interference” with its civil rights. A learned Single Judge of the Delhi High Court, after finding a prima facie case of tortious interference but then refused to grant any interim injunction due to the lack of balance of convenience point.

No appeal against this order has been filed by the Biyani Group. On the other hand, Amazon has filed an appeal against certain observations made in the order. This appeal is pending.

2.7. Meanwhile, Amazon went ahead with an application filed under Section 17(2) of the Arbitration Act which was heard and disposed of by a learned Single Judge of the Delhi High Court. On 2nd February, 2021, the learned Single Judge passed a status-quo order in which he restrained the Biyani Group from going ahead with the impugned transaction, stating that

reasons and a detailed order will follow. An appeal against this was filed by FRL, in which a Division Bench, vide order dated 8th February, 2021, after setting out the facts of this case and after reaching certain prima facie findings, stayed the operation, implementation, and execution of the Single Judge order dated 2nd February, 2021 till the next date of hearing, and listed the appeal for further hearing on 26th February, 2021. Meanwhile, on 22nd  February, 2021, the Supreme Court allowed the amalgamation proceedings pending before the National Company Law Tribunal to continue, but not to culminate in any final order of sanction of scheme of amalgamation.

2.8. On 18th March, 2020, the learned Single Judge passed a detailed judgment giving reasons for an order made under Section 17(2) read with Order XXXIX, Rule 2-A of the Code of Civil Procedure, 1908 [“Code of Civil Procedure”] in which it was held that an Emergency Arbitrator’s award is an order under Section 17(1) of the Arbitration Act. Since breaches of the Agreements aforementioned were admitted, the only plea being raised being that the Emergency Arbitrator’s award was a nullity, the learned Single Judge held that such award was enforceable as an order under the Arbitration Act, and further held that the injunctions/directions granted by the said award were deliberately flouted by the Biyani Group. He also found that any so-called violations of Foreign Exchange Management Act, 1999 [“FEMA”] did not render the Emergency Arbitrator’s award a nullity, and therefore, issued a show-cause notice under Order XXXIX, Rule 2-A of the Code of Civil Procedure, after imposing Rs.20 lakh as costs to be deposited with the Prime Minister Relief Fund for being used for providing COVID vaccinations to the Below Poverty Line category of senior citizens of Delhi.

Against this detailed judgment, FAO No. 51 of 2021 was filed by FRL. By the second impugned judgment in this case dated 22nd March, 2021, a Division Bench of the Delhi High Court referred to its earlier order dated 8th February, 2021 and stayed the learned Single Judge’s detailed judgment and order for the same reasons given by the earlier order till the next date of hearing, which was 30th April, 2021. Against the said order, Special Leave Petitions were filed before this Court, and this Court by its order dated 19th April, 2021 stayed further proceedings before the learned Single Judge as well as the Division Bench of the Delhi High Court, and set the matter down for final disposal before this Court.”

It was against this backdrop that Supreme Court came to hear this case for the final disposal and made two important issues for determination namely:

a) whether an “award” delivered by an Emergency Arbitrator under the Arbitration Rules of the Singapore International Arbitration Centre [“SIAC Rules”] can be said to be an order under Section 17(1) of the Arbitration and Conciliation Act, 1996 [“Arbitration Act”];

b) whether an order passed under Section 17(2) of the Arbitration Act in enforcement of the award of an Emergency Arbitrator by a learned Single Judge of the High Court is appealable.

For the purposes of this essay, I will be only dealing with first issue.

Findings of the Court

The Act endorses party autonomy and rules of arbitral institutions

▪ The Supreme Court observed that under sections 2(6) and 19(2) of the Act, parties are free to authorize an institution to determine disputes arising between them and to agree on the procedure followed by an arbitral tribunal in conducting its proceedings. As per section 2(8) of the Act, party autonomy extends to agreements governed by arbitration rules.

The expression “arbitral tribunal” under Section 17(1) includes an emergency arbitrator appointed under institutional rules.

▪ Section 2(1)(d) defines “arbitral tribunal” as “a sole arbitrator or panel of arbitrators”. The “arbitral tribunal” as defined in Section 2(1)(d) refers to an arbitral tribunal constituted between the parties and which can grant interim and final relief. However, the Supreme Court observed that the definition only applies “unless the context otherwise requires”.

▪ “Arbitration” as defined in Section 2(1)(a), “means any arbitration, whether or not administered by a permanent arbitral institution”. Upon reading Sections 2(6) and 2(8), the Supreme Court observed that interim orders that arepassed by emergency arbitrators under the rules of a permanent arbitral institution would therefore be includedwithin Section 17(1) of the Act.

▪ With respect to the question of whether the definition of “arbitral tribunal” under Section 2(1)(d) constricts Section 17(1) to apply only to an arbitral tribunal that can give final reliefs by way of an interim or final award, the Supreme Court held that:

  • Section 17(1) read with the Act does not bar the applicability of rules of arbitral institutions.
  • The “arbitral tribunal” under Section 17(1) would include an emergency arbitrator when institutional rules apply;
  • The “arbitral tribunal” under section 9 (3) would not be the “arbitral tribunal” as defined under section 2(1) (d).Since Section 9(3)[5]and Section 17 are one scheme, the “arbitral tribunal” under Section 9(3) would be akin to the “arbitral tribunal” under Section 17(1), which includes an emergency arbitrator appointed under institutional rules.

▪ In Project Director, National Highways[6]., the Supreme Court held that since the power to modify an award was expressly not been granted by the legislature, section 34 of the Act does not provide the court with the power to modify an award. Thus, in the present case, the question arose as to whether the Supreme Court could read into section 17 of the Act to incorporate “emergency arbitrator”, given its decision in National Highways. Relying upon Centrotrade[7], the Supreme Court observed that – by agreeing to SIAC Rules and the award of the emergency arbitrator, the parties did not bypass any mandatory provision of the Act. Provisions of the Act which provide for party autonomy in choosing to be governed by institutional rules clarify that the said rules would govern the rights between the parties and therefore, the Act does not prohibit the same.

The expression “during the arbitral proceedings” under section 17 (1) of the Act includes emergency arbitration

proceedings

▪ The Supreme Court observed that the words “arbitral proceedings” are not limited by any definition and encompass proceedings before an emergency arbitrator. Upon perusing Rule 3 of the SIAC Rules, the Supreme Court construed the arbitral proceedings to have commenced from the date of receipt of a notice of arbitration by SIAC’s Registrar, which would indicate that arbitral proceedings under the SIAC Rules commence much before the constitution of an arbitral tribunal.

▪ The Supreme Court concluded that “when Section 17(1) uses the expression ‘during the arbitral proceedings’, the said expression would be elastic enough, when read with the provisions of Section 21 of the Act, to include emergency arbitration proceedings, which only commence after receipt of notice of arbitration by the Registrar under Rule 3.3 of the SIAC Rules”[8].

The subject arbitration clause envisaged an emergency arbitrator

▪ Rule 1.3[9] of the SIAC Rules indicates that an award of an emergency arbitrator is included within the ambit of an ‘award’, and emergency arbitrator means an arbitrator appointed in accordance with Schedule 1. Pursuant to Schedule 1 to the SIAC Rules, the emergency arbitrator has all the powers vested in the arbitral tribunal. Hence, “arbitration” mentioned in section 25.2 of the FCPL Shareholders’ Agreement would include an arbitrator appointed in accordance with the SIAC Rules which, in turn, would include an emergency arbitrator[10].

EA Decision is enforceable under section 17 (2) and is not a nullity

▪ Upon examining the amendments to sections 9 and 17 by the Arbitration and Conciliation (Amendment) Act, 2015 (2015 Amendment Act), the Supreme Court inferred as follows:

  • SIAC Rules and the other institutional rules are reflected in Sections 9(2)[11] and 9(3) with respect to interim orders passed by courts.
  • The aim of sections 9(2) and 9(3) was to avoid courts being flooded with petitions under section 9 when an arbitral tribunal is constituted since (i) the clogged court system ought to be decongested, and (ii) the arbitral tribunal, once constituted, would be able to grant interim relief efficaciously. Therefore, an arbitral tribunal is fully clothed with the same power as a court to provide for interim relief.
  • Section 17(2)[12] was added so as to provide for enforceability of such orders, again, as if they were orders passed by a court, thereby bringing Section 17 on par with Section 9.
  • An emergency arbitrator’s “award”, i.e., order, furthers the same objectives as section 9. Given the fact that party autonomy is endorsed by the Act and that there is otherwise no ban against an emergency arbitrator being appointed, an emergency arbitrator’s order is exactly like an order of an arbitral tribunal once properly constituted. Therefore, such an order would fall within the institutional rules agreed by the parties and would consequently be covered by Section 17(1).

▪ The Supreme Court concluded that full party autonomy is envisaged under the Act to have a dispute decided in accordance with institutional rules, “which includes emergency arbitrators delivering interim orders, described as “awards”. The Supreme Court recognized that such orders aid in decongesting the civil courts and affording expeditious interim relief to the parties. Such orders are referable to and are made under Section 17(1) of the Arbitration Act.

▪ Section 17, as construed in the light of the other provisions of the Act, concludes that such emergency award is made under the provisions of Section 17(1) and can be enforced under the provisions of Section 17(2).

▪ Relying upon Tayabbhai M. Bagasarwalla[13], the Supreme Court observed that even if an order is set aside as it was passed without jurisdiction, for the period of its subsistence, it is an order that must be obeyed. The Supreme Court observed that after agreeing to be bound by SIAC Rules and participating in the emergency award proceedings, a party cannot turn around and content that the EA Decision is a nullity.

Conclusion:

The need to provide for an enforcement of emergency arbitration was recognized by  the 246th Law Commission Report and thereafter the Justice B.N. Srikrishna (Retd.) Report[14]. However, these recommendations were not given any statutory presence in any subsequent amendments by the Parliament. Upon examining the Report, the Supreme Court observed that the said Report laid down that it is possible to interpret Section 17(2) of the Act to enforce emergency awards for arbitrations seated in India, and recommended that the Act be amended and brought at par with the international practice of enforcing an emergency award. Relying upon Avitel Post[15], the Supreme Court held that parliament not following a recommendation of a Law Commission Report “does not necessarily conclude that what has been suggested by the Law Commission cannot form part of the statute as properly interpreted”.

Although the Supreme Court distinguished National Highways [16], it is relevant that the Supreme Court therein held that the power of the court under section 34 of the Act does not include the power to modify the award since the legislature had not provided for the same. Therefore, the Supreme Court followed the strict construction of the Act. Given that the legislature had two opportunities to import provisions in relation to emergency arbitrators and yet opted out, it remains to be seen if the Supreme Court extended its interpretation beyond the intent of the Act by stringing together various provisions of the Act to recognize the EA Decision.

The present decision is in context of an arbitration seated in India. Hence, in an India seated arbitration, an emergency arbitrator’s order under rules of an arbitral institution would be enforceable under section 17 (2) of the Act read with Order XXXIX Rule 2-A of the CPC. However, if the emergency arbitrator’s order was passed in an arbitration seated outside India, the law under consideration and the route for enforcement of such order would be different. Therefore, it remains to be seen whether parliament will introduce an amendment to incorporate the suggestions made under the 246th Law Commission Report and the Justice B.N. Srikrishna (Retd.) Report.

While the EA decision was enforced under section 17 (2) read with provisions of the CPC i.e. Order XXXIX Rule 2-A, at the outset, it appears that the applicant should have recourse to the next round of appeal under CPC as well i.e. Order XLIII. However, by rendering the appeals before the Division Bench non-maintainable, the Supreme Court has endorsed the objective of minimal court intervention and has recognized the Act as a self-contained statute

Emergency arbitration can help India strengthen its arbitration landscape and minimize judicial intervention in the arbitration mechanism to a major extent. This can make India a global arbitration hub by giving rise to India-seated arbitrations.

References:

[1] An Achilles’ heel is a weakness in spite of overall strength, which can actually or potentially lead to downfall. In Greek mythology, when Achilles was a baby, it was foretold that he would die young. To prevent his death, his mother took Achilles to the River Styx, which was supposed to offer powers of invulnerability, and dipped his body into the water; however, as Thetis held Achilles by the heel, his heel was not washed over by the water of the magical river. Achilles grew up to be a man of war but, One day, a poisonous arrow shot at him was lodged in his heel, killing him shortly afterwards.

[2] CIVIL APPEAL NOs. 4492-4493 OF 2021 delivered on August 6,2021.

[3] Dated 30th July,2017

[4] Supra note 2

[5] “9 (3) Once the arbitral tribunal has been constituted, the court shall not entertain an application under sub-section (1), unless the court finds that

circumstances exist which may not render the remedy provided under Section 17 efficacious”.

[6] National Highways Authority of India v. M. Hakeem, 2021 SCC OnLine SC 473

[7] Centrotrade Minerals & Metal Inc. v. Hindustan Copper Ltd., (2017) 2 SCC 228

[8] Para 12 of the Judgment

[9] “1.3 In these Rules: “Award” includes a partial, interim or final award and an award of an Emergency Arbitrator”

[10] Para 23 of the Judgment

[11] “9(2) Where, before the commencement of the arbitral proceedings, a court passes an order for any interim measure of protection under sub-section

(1), the arbitral proceedings shall be commenced within a period of ninety days from the date of such order or within such further time as the court may

determine”.

[12] “17 (2) Subject to any orders passed in an appeal under Section 37, any order issued by the arbitral tribunal under this section shall be deemed to be

an order of the court for all purposes and shall be enforceable under the Code of Civil Procedure, 1908 (5 of 1908), in the same manner as if it were an

order of the court.”

[13] Tayabbhai M. Bagasarwalla v. Hind Rubber Industries (P) Ltd., (1997) 3 SCC 443

[14] High-Level Committee constituted by the Government of India under the chairmanship of Justice B.N. Srikrishna (Retd.) submitted a report on 30th July, 2017 which suggested that “..Given that international practice is in favour of enforcing emergency awards (Singapore, Hong Kong and the United Kingdom all permit enforcement of emergency awards), it is time that India permitted the enforcement of emergency awards in all arbitral proceedings..”

[15] Avitel Post Studioz Ltd. & Ors. v. HSBC PI Holdings (Mauritius) Ltd., (2021) 4 SCC 713

[16] National Highways Authority of India v. M. Hakeem, 2021 SCC OnLine SC 473