Supreme Court Recognizes Validity of Emergency Arbitration

In the ongoing dispute between Amazon and the Future Group, which has been under constant public gaze, the Supreme Court of India in its landmark judgment dated August 6, 2021 in Amazon.com NV Investment Holdings LLC v. Future Retail Limited has upheld the validity of Emergency Arbitration and granted an Emergency Arbitrator the status of an Arbitral Tribunal under Section 17 of the Indian Arbitration Act, 1996.

1.     Issues before the Court

The Court framed the following two issues:

•      Whether an “award” (‘EA Award’) delivered by an emergency arbitrator (‘EA’) under the Arbitration Rules of the Singapore International Arbitration Centre, 2016 (‘SIAC Rules’), in an arbitration governed by Part I of the Indian Arbitration Act, 1996 (‘Act’), can be said to be an order under Section 17(1) of the Act; and

     Whether an order passed under Section 17(2) of the Act in enforcement of an EA Award is appealable.

2.     The Court held that an EA Award is an order of an Arbitral Tribunal under Section 17(1), and is enforceable under Section 17(2) of the Act

•     Section 17(1) of the Act allows parties to approach the Arbitral Tribunal and seek interim measures during the arbitral proceedings, while Section 17(2) provides for enforcement of such orders under the Code of Civil Procedure, 1908 (‘CPC’) as if it were an order of the Court.

     The Court held that an EA was an Arbitral Tribunal and orders passed by an EA constituted interim measures of an Arbitral Tribunal under Section 17(1). The Court emphasized the importance of party autonomy in arbitration proceedings and held that as parties consented to the incorporation of institutional rules in their arbitration agreement, the remedy to approach an EA being provided for in the institutional rules would be covered by the Act.

     The Court noted that the SIAC Rules are in no manner inconsistent with the provisions of the Act.

•     The Court also noted that the objective of the Act, being demonstrated through the amendments to Section 9(2) and Section 9(3), was to reduce the docket of Courts in relation to petitions filed under Section 9, which provides for parties to approach the Court for interim measures. Consequently, orders passed by an emergency arbitrator were an important step in aid of decongesting the civil Courts and affording expeditious interim relief to the parties.

3.     The Court held that an appeal to an order under Section 17(2) of the Act is not maintainable

•      The Court held that orders passed under Section 17(2) of the Act are properly referable only to the Act even if such orders refer to provisions of the CPC for enforcement/ execution (including reference to non-compliance with orders of injunctions under Order XXXIX, Rule 2A of CPC).

     Section 17(2) of the Act creates a deeming fiction by virtue of which it treats an order of an Arbitral Tribunal to be an order of the Court for the purposes of enforcement. Thus, in this judgment, the Supreme Court limited this legal fiction created by Section 17(2) only for the purposes of enforcing an interim order as an order of the Court using machinery provisions of the CPC, which would not make the substantive appellate provisions of the CPC applicable.

•     The Court further held that the Act is a self-contained code and the substantive provisions of appeal as provided under the Act, specifically Section 37 in this case, would prevail over the general provisions of appeal (like in the CPC). Pertinently, Section 37, which strictly lists the orders passed under the Act which are appealable does not provide a right to appeal of an order under Section 17(2) of the Act. Therefore, there being no right to appeal of an order under Section 17(2) in the Act, the appeal provisions of CPC cannot be incorporated and relied upon.

4.     Key Takeaways

•      This judgment is possibly one of the most significant in recent years in relation to the growth and development of arbitration in India.

•      This judgment is a feather in the cap of party autonomy, which forms the basic norm of arbitration.

•      By rejecting the right to appeal of an order under Section 17(2) of the Act under the CPC, coupled with the strict construction of Section 37 of the Act, the Court reaffirmed the Act to be a self-contained code, thereby, restricting the interference of Courts in an arbitration proceeding to the bare minimum. This is an important step to declutter the docket of Courts, which is increasingly burdened with petitions filed under Section 9 of the Act.

•     The judgment, thus, significantly increases India’s standing as an arbitration friendly jurisdiction. Parties will now be encouraged to not only opt for institutional arbitration, but also institutional arbitration seated in India as Part I of the Act allows for and recognizes orders passed by emergency arbitrators.

Date: August 11, 2021