This article discusses the evolving nature of guerrilla tactics and litigation strategies adopted by recalcitrant parties to disrupt and derail arbitration proceedings seated in India. Suggestions are made on possible approaches that Indian courts and tribunals may adopt to prevent such recalcitrant parties from interdicting the autonomy of arbitral proceedings, and ensuring that arbitrations come to fruition expeditiously.

Introduction

It is not uncommon for recalcitrant parties to resort to guerrilla tactics before, during and after the commencement of arbitration in an attempt to render the arbitration ineffective. These guerrilla tactics include exploiting procedural rules to gain undue advantage, raising unmeritorious and technical objections to derail arbitration proceedings, adopting dilatory tactics to cause inordinate delays and frustrate the arbitration by seeking anti-arbitration injunctions. In this regard, there is no limit to the imagination and ingenuity of these recalcitrant parties. Mindful of their bleak odds of wining on the merits, as soon as an arbitration agreement is invoked against them, these parties begin their lookout for guerrilla tactics and strategies through which they can either avoid or frustrate the arbitration, or render the final award incapable of enforcement. In their endeavour, such parties often seek undue assistance from domestic courts to collaterally challenge the tribunal’s jurisdiction or interfere with the autonomy of tribunals.

If domestic courts fall prey to such guerrilla tactics, and allow recalcitrant parties to abort arbitrations, the effectiveness and legitimacy of arbitration is called into question. Such was the state of affairs in India not very long ago. The tendency of domestic courts to accept refractory pleas for untimed, unwarranted and disruptive interferences in arbitration proceedings was historically seen as significant downside of arbitrating in India. Indian courts were infamous for adopting inconsistent standards to interfere with arbitration proceedings, grant anti-arbitration injunctions, and set aside or deny enforcement to awards. This made parties, particularly foreign investors, wary of choosing India as their seat of arbitration.

Recognising the need to remedy the situation, the Indian Legislature and Indian Courts have engineered a significant change in the Indian arbitration landscape over the last decade. The Arbitration and Conciliation Act, 1996 (Act) has undergone several pro-arbitration amendments,^[1] intentioned at enhancing expediency and efficiency of arbitration and limiting the scope of judicial interference in arbitration proceedings. Indian courts have reciprocated these favourable legislative developments, and steadfastly upheld a rule of priority in favour of arbitrators, requiring parties to an arbitration agreement to strictly honour the undertaking to submit any dispute covered by such an agreement to arbitration.

^[2] In doing so, Indian courts have consistently furthered a ‘hands off’ approach, during the arbitration proceedings as well as in the pre-arbitration and post-arbitration stages.^[3] Indian courts have also adopted a strict approach against anti-arbitration injunctions, being sought by unscrupulous parties to elude or obstruct the agreed arbitration mechanism, and upheld the tribunal’s power to rule on its own jurisdiction in terms of the universally accepted principle of ‘kompetenz-kompetenz’.^[4]

Having said that, despite the pro-arbitration advancements in India, certain recent cases demonstrate that the Indian arbitration framework remains susceptible to an imaginative array of procedural guerrilla tactics and litigation strategies devised to undermine arbitral proceedings and prejudice opposing parties. With anti-arbitration injunctions now facing low chances of success in India, recalcitrant parties seem to have found ways get around it to serve their purpose of rendering the arbitration ineffective. Courts and tribunals in India must effectively deal with such guerrilla tactics to ensure legitimacy of arbitration in India.

Guerrilla warfare in Future-Amazon dispute

An ongoing tussle between Amazon and the Future Group,^[5] both in arbitration as well as before constitutional courts and statutory regulators in India, has become a paradigm case depicting the evolving nature of guerrilla tactics adopted by recalcitrant Indian parties to wriggle out of arbitrations in India.

Amazon initiated arbitration against the Future Group on 5 October 2020 for breach of certain composite agreements entered between them. Since then, both parties have been entangled in proceedings before various forums.^[6] As the saga has unfolded, various guerrilla tactics and litigation strategies to render the arbitration ineffective have come to light.

Having suffered an unfavourable emergency award on 25 October 2020 under the SIAC Rules, the Future Group adopted the strategy of not recognising the emergency award as having any legal sanctity under Indian law.^[7] Before various domestic courts and regulators, the Future Group made self-styled declarations that the emergency award was a nullity or coram non judice under Indian law.^[8] The issue was finally settled on 6 August 2021, wherein the Supreme Court emphatically held emergency awards to be legal, valid, and enforceable under the Act.^[9] Deprecating the conduct of the Future Group, the Supreme Court noted that —

“[N]o party, after agreeing to be governed by institutional rules, can participate in a proceeding before an Emergency Arbitrator and, after losing, turn around and say that the award is a nullity or coram non judice when there is nothing in the Arbitration Act which interdicts an Emergency Arbitrator’s order from being made.”^[10]

Sanctity accorded to orders passed in arbitration proceedings is the hallmark of any arbitration friendly jurisdiction. The guerrilla tactic of treating the emergency award as a nullity under Indian law was an extreme measure, contrary to rule of law, and was correctly rejected by the Supreme Court.

Collateral challenge to arbitral orders

Despite significant efforts to limit judicial intervention in arbitrations to only specified instances prescribed under the Act, recalcitrant parties continue to find innovative ways to challenge arbitral orders in collateral proceedings. The example of the Amazon-Future Group saga serves well in this regard as well.  Based on its strategy of labelling the emergency award a nullity, the Future Group filed a suit for tortuous interference against Amazon before the Delhi High Court to mount a collateral challenge to the emergency award.^[11]

The Future Group argued that Amazon was erroneously relying on the emergency award to interfere with its transaction with the Mukesh Dhirubhai Ambani Group (this transaction was found to be in prima facie breach of Amazon’s rights under the agreements entered between the parties, and was injunted by the emergency award).^[12] In doing so, the Future Group collaterally challenged the merits of the emergency award and secured certain favourable prima facie observations from the Delhi High Court in its order dated 21 December 2020,^[13] which it then relied upon to represent to courts and statutory authorities that the emergency award had been vitiated.^[14]

To strengthen its pro-arbitration perception, it is essential that Indian courts keep up with, and practice strict resistance against, such camouflaged and innovative guerrilla tactics to collaterally challenge orders passed in arbitration proceedings. Courts must examine the underlying intention and objective of the parties filling such suits, and if the underlying nature of the suit is anti-arbitration, such suits must be dismissed at the threshold.

Attacking the underlying contract

An old but still relevant guerrilla tactic adopted by recalcitrant parties in India is to argue that the underlying contract is void or vitiated by fraud, and therefore the arbitration agreement is incapable of performance. Recently, in Devas Multimedia Private Limited (Devas) v Antrix Corporation (Antrix), the Supreme Court upheld an order passed by the national company law tribunal for winding up of Devas on the basis of a petition filed by Antrix, which is the commercial arm of the Indian Space Research Organisation.^[15] Antrix had moved a petition for winding up of Devas on 18 January 2021, alleging fraud in the formation and the conduct of the affairs of Devas.^[16]

Interestingly, Antrix had moved this petition after having suffered an adverse award in ICC arbitration, initiated by Devas against Antrix, for wrongful termination of an agreement entered between the parties on 28 January 2005. The ICC award was rendered on 14 September 2015, whereby Antrix was directed to pay Devas a sum of USD 562.5 million with simple interest at the rate of 18% per annum.^[17] The Government of India also suffered similar awards in two investment treaty arbitrations instituted by Mauritian and German investors of Devas.^[18]

The Supreme Court rejected the argument that the motive behind Antrix seeking winding up of Devas was to deprive Devas of the benefits of the ICC award passed in its favour, and that such attempts on the part of a corporate entity wholly owned by the Government of India would send a wrong message to international investors. In doing so, the Supreme Court held—

“If as a matter of fact, fraud as projected by Antrix, stands established, the motive behind the victim of fraud, coming up with a petition for winding up, is of no relevance…We do not know if the action of Antrix in seeking the winding up of Devas may send a wrong message, to the community of investors. But allowing Devas and its shareholders to reap the benefits of their fraudulent action, may nevertheless send another wrong message namely that by adopting fraudulent means and by bringing into India an investment in a sum of INR 579 crores, the investors can hope to get tens of thousands of crores of rupees, even after siphoning off INR 488 crores.”^[19]

Without delving into the correctness of the judgment of the Supreme Court, it is curious that no allegations pertaining to fraud were raised against Devas before the tribunal in the arbitration proceedings. The fraud allegations were raised for the first time only after adverse awards were passed against Antrix and the Government of India. This is despite the fact that state agencies had initiated investigations against Devas when the arbitration proceedings were ongoing.^[20] It is likely that Antrix and the Government of India will now rely on the Supreme Court’s decision to challenge the enforcement proceedings, which are pending before various courts in several jurisdictions.

It is imperative that disguised and motivated attacks on the underlying contract to either wriggle out of arbitrations or binding awards should not be countenanced by domestic courts or tribunals. In fact, when state parties are involved, regulatory investigations subsequent to initiation of arbitrations or passing of adverse awards to unravel the underlying transactions are detrimental to India’s attractiveness as an arbitration friendly jurisdiction. Further, the universally accepted principle of severability, which provides that the arbitration agreement is independent of the main contract, must be strictly enforced and any objections pertaining to illegality of the main contract must be decided by the tribunal itself.

Filing complaints before statutory authorities

In the Amazon-Future Group dispute, in the midst of the arbitration proceedings, the Future Group filed a complaint before the Indian antitrust regulator, i.e., the Competition Commission of India (CCI) on 25 March 2021, seeking revocation of the approval that was granted to Amazon for its investment in the Future Group on 28 November 2019.^[21] In its complaint, relying on certain documents disclosed by Amazon in discovery during the arbitration proceedings, the Future Group alleged that Amazon had misrepresented the nature of its investment in its filings before the CCI for seeking approval for its investment in the Future Group.^[22] In this regard, it is curious whether such a high-stakes filing for approval before the CCI would have been undertaken by Amazon without the involvement/assistance of the Future Group. In fact, the Future Group, being the counter-party in the transaction, approached the CCI to revoke the approval given to the transaction, at a time when arbitration proceedings for the alleged breach of the very transaction by the Future Group were underway.

Despite the questionable timing of the complaint, Future Group was successful in its endeavour before the CCI. On 17 December 2021, the CCI passed an order keeping the approval granted to Amazon for its investment in abeyance, and directing Amazon to re-apply for the approval based on fresh filings within 60 days.^[23] Thereafter, on the basis of the order passed by the CCI, Future Group moved applications for termination of the arbitration proceedings under Section 32(2)(c) of the Act before the tribunal.^[24] The basis for the application was that in the absence of an existing CCI approval, the underlying agreements, which are the subject matter of the arbitration proceedings, are rendered incapable of performance under Indian law.^[25] As discussed in the next section, the applications have not been decided yet on account of a stay on the arbitration proceedings granted by the Delhi High Court.

Without delving into the correctness of the order passed by the CCI, against which an appeal is presently pending, it is important to state that statutory authorities should examine the underlying motivation of the complainant when faced with such complaints. Depending on the factual matrix, statutory authorities may consider whether such complaints against a transaction ought to be barred by estoppel, when the complainant has not only participated and benefited from the transaction but is also facing arbitration proceedings for the breach of the transaction. Unless statutory authorities deal with such complaints with utmost caution and seriously examine the motivation of the complainant, it will open the floodgates for recalcitrant and motivated requests for investigations into the subject matter of arbitration proceedings, with the intention of derailing or nullifying the arbitration proceedings. This will be disruptive for the legitimacy of arbitration in India.

 Using constitutional powers of the High Court to derail arbitration proceedings

Article 227 of the Constitution of India inter alia empowers High Courts to exercise supervisory jurisdiction over arbitral tribunals in India. Through a consistent line of decisions, the Supreme Court has held that High Courts must exercise this jurisdiction in extremely exceptional circumstances, i.e., only when orders are passed by arbitral tribunals with patent lack of inherent jurisdiction going to the root of the matter.^[26] However, recalcitrant parties still habitually file petitions under Article 227 against orders passed by arbitral tribunals in the hope of obtaining some relief or beneficial observations from the court. Often, the sole purpose of filing such petitions is to delay the arbitration proceedings, which is achieved even when the petitions are dismissed.

Again, the example of the Amazon-Future saga shows how the constitutional powers of the High Court can be misused to disrupt arbitration proceedings. As mentioned above, the Future Group filed applications to terminate the arbitration proceedings before the arbitral tribunal. Having filed the said applications, Future Group sought that the tribunal suspend the quantum evidentiary hearing, which was scheduled in advance between 5 January 2022 and 8 January 2022.^[27] Instead, Future Group urged the tribunal to utilise the dates to take up their request to terminate the arbitration based on the findings of the CCI.^[28]

After several case management correspondences, the tribunal decided to continue with the quantum evidentiary hearing between 5 January 2022 and 7 January 2022, and hear the termination applications filed by the Future Group thereafter on 8 January 2022.^[29] Aggrieved by the tribunal’s decision not to suspend the quantum evidentiary hearing and conclude the arbitration proceedings expeditiously, the Future Group impugned the tribunal’s case management orders before the Delhi High Court under Article 227 of the Constitution of India. On 4 January 2022, a single judge of the Delhi High Court passed an order rejecting to intervene with the procedural orders passed by the tribunal.^[30] However, on appeal, a division bench of the Delhi High Court overturned the single judge’s decision and directed a stay on the arbitration proceedings on the basis of the findings of the CCI.^[31] The decision of the division bench was questionable on several levels, including on the ground that the division bench did not accord due deference to the discretion accorded to tribunals in relation to procedural and case management matters.

While a certain degree of judicial oversight is essential in the arbitration framework, judicial intervention must not be contrary to the basic tenets of arbitration law and practice. This can be ensured by articulating a paradigm where judicial intervention is confined to specific, restricted circumstances, which are carefully defined and spelt out in the Act. The discretionary constitutional powers to interfere with arbitration proceedings must be exercised with extreme circumspection, i.e., only when perversity of the order stares one in the face.

Combating guerrilla tactics adopted before tribunals

Guerrilla tactics adopted by recalcitrant parties are not limited to proceedings before domestic courts or authorities. These tactics are regularly adopted before tribunals with the intention to delay dealing with certain issues or simply to disconcert the tribunal on the merits of the case. Recalcitrant parties often attempt to capitalise on the ‘due process paranoia’ of tribunals, which has been defined as the perceived reluctance by tribunals to act decisively in certain situations for fear of the final award being challenged.^[32] These parties also seek to use Section 18 of the Act to their undue advantage, which provides that parties must be provided a full and equal opportunity to present their case. Relying on this provision, recalcitrant parties often practice dilatory tactics such as seeking extensive extensions for submissions, producing new pleas and evidences at belated stages, requesting for cancellation of hearings and meetings at the last moment, filing repeated or belated challenges against arbitrators, seeking unnecessarily broad disclosures in discovery, making tactical or unfitting procedural requests, among others.

Finding a balance between efficiency, expediency and due process is of utmost importance. There is no gainsaying that due process cannot be compromised. However, it is essential that Section 18 of the Act is not given an overly broad interpretation to enable recalcitrant parties to put into effect guerrilla strategies that are detrimental for the efficiency of the proceedings. While there may be situations which cause tension between efficiency and due process, the tribunal must exercise its discretion to find a right balance between the parties’ positions to allow the arbitration to proceed in an efficacious manner.

Tribunals may utilise case management conferences to a greater extent to reach agreements on procedural and administrative aspects between the parties. Case management conferences allow the tribunals to avoid encountering unexpected housekeeping matters before the actual hearing commences. Without giving in to guerrilla tactics adopted by recalcitrant parties, tribunals should look to offer solutions to the competing demands of the parties, which meet in substance the concerns raised by both sides. The tribunal’s decision should be guided by the need to manage the case effectively, so that all disputes can be resolved efficiently.

Similarly, when domestic courts are faced with challenges on the ground of lack of due process, they must examine whether the tribunal was prepared and tried to accommodate the concerns of each party to the extent possible. This guiding approach should continue to define the approach of Indian Courts in the context of judicial interference with arbitration proceedings in order to protect the sanctity of the arbitration framework in India.

Footnotes:
^[1]Arbitration and Conciliation (Amendment Act), 2015; Arbitration and Conciliation (Amendment) Act, 2019; Arbitration and Conciliation (Amendment) Act, 2021.

^[2] Vidya Drolia v Durga Trading Corporation, (2021) 2 SCC 1.

^[3] International Commercial Arbitration, Law and Recent Developments in India (2021), p. 1, available at  https://www.nishithdesai.com/fileadmin/user_upload/pdfs/Research_Papers/International_Commercial_Arbitration.pdf

^[4] Nalco Ltd. v. Subhash Infra Engineers Pvt. Ltd., (2020) 15 SCC 557.

^[5] Amazon NV Investment holdings LLC (Amazon) initiated arbitration against Future Retail Ltd. (FRL) and Future Coupons Pvt. Ltd. (FCPL), which are two companies in the Future group of companies in India. The promoters of the Future group are also parties to the arbitration. FRL, FCPL and their promoters are collectively as well as interchangeably referred to as Future Group in this article. The authors are representing Amazon in this dispute.

^[6] Amazon vs Future: Here’s the lowdown on India’s biggest legal case right now, available at https://www.moneycontrol.com/news/trends/legal-trends/amazon-vs-future-heres-the-lowdown-on-indias-biggest-legal-case-right-now-7988041.html

^[7]  Amazon.com Investment Holdings LLC v Future Retail Ltd., 2022 1 SCC 2019, para. 2.7.

^[8] ibid.

^[9] ibid, para. 46.

^[10] ibid, para. 45.

^[11] Future Retail Ltd. v Amazon.com NV Investment Holdings LLC, 2020 SCC OnLine Del 1636.

^[12] ibid, para. 4.

^[13] ibid, para. 167.

^[14] Future Coupons Pvt. Ltd. v Amazon.com NV Investment Holdings LLC, Civil Appeal Nos. 859-860 of 2022; paras. 7 and 42; Amazon.com NV Investment Holdings LLC v Future Coupons Pvt. Ltd., 2021 SCC OnLine Del 1279, paras. 55 and 174.

^[15] Devas Multimedia Pvt. Ltd. v Antrix Corporation Ltd., Civil Appeal No. 5766 of 2021.

^[16] ibid, para. 3.14.

^[17] ibid, para. 3.11.

^[18] ibid.

^[19] ibid, para. 13.5.

^[20] ibid, paras. 3.13; see also Will the SC Order on Antrix-Devas Help India Fend off Attempts to Seize the Country’s Assets?, available at https://thewire.in/political-economy/will-the-sc-order-on-antrix-devas-help-india-fend-off-attempts-to-seize-the-countrys-assets

^[21] Proceedings against Amazon.com NV Investment Holdings LLC under Sections 43A, 44 and 45 of the Competition Act, 2002, Competition Commission of India (17 December 2021), para. 10.

^[22] ibid.

^[23] ibid, para. 80.

^[24] Future Retail Ltd. v Amazon.com NV Investment Holdings LLC, CM(M) 2/2022 & CM No.176/2022, para. 6.

^[25] ibid, para. 14.

^[26] Bhaven Construction v Sardar Sarovar Narmada Nigam Ltd., (2022) 1 SCC 75.

^[27] Future Retail Ltd. v Amazon.com NV Investment Holdings LLC, CM(M) 2/2022 & CM No.176/2022

^[28] ibid.

^[29] ibid.

^[30] ibid.

^[31] Future Retail Ltd. v Amazon.com NV Investment Holdings LLC, LPA 6/2022.

^[32]2015 Improvements and Innovations in International Arbitration, available at https://arbitration.qmul.ac.uk/research/2015/