Ruling by the Hon’ble Supreme Court:
A. An “award” delivered by an Emergency Arbitrator (‘EA’) under the Arbitration Rules of the SIAC Rules is an order under Section 17(1) of the
B. An order passed under Section 17(2) of the Arbitration Act, 1996 by the High Court in enforcement of the award of an EA is not appealable.
Brief Background:2019 Amazon entered into three agreements with Future group of Companies (‘Future Group’) in the form of Shareholder’s Agreement and Share Subscription Agreement. Amazon invested sum of INR 1431 crore in FCPL (a Future Group Company) which “flowed down” to FRL (a Future Group Company) on the very same day. Aug, 20 Future Group entered into a transaction with the Mukesh Dhirubhai Ambani group (MDA Group) which envisages the amalgamation of FRL with the MDA Group, the consequential cessation of FRL as an entity, and the complete disposal of its retail assets in favour of the said group.
2020 Arbitration proceedings commenced by Amazon against Future Group on several grounds, including, that Future Group was prohibited from encumbering/ transferring/ selling/ divesting/ disposing of its retail assets to “restricted persons” and MDA Group is a restricted persons. Seat under the arbitration agreement is New Delhi and Rules are as per SIAC Rules.
Oct, 20 EA appointed under SIAC Rules passed an interim award injuncting Future Group from taking any steps to complete the Disputed Transaction with entities that are part of the MDA Group.
Jan, 21 Amazon filed an application under Section 17 (2) of the Arbitration Act before the High Court of Delhi seeking enforcement of the interim award dated 25.10.2020.
Mar, 21 Delhi High Court (Single Bench) passed a detailed judgment and held that award passed by the EA is an order under Section 17(1) of the Arbitration Act and is enforceable as an order of the High Court under Section 17(2) of the Arbitration and Conciliation Act.
Apr 21 In a Special Leave Petition filed by Amazon, Supreme Court stayed the proceedings before the High Court and decided to hear and decide the matter.
Reasoning in brief:
- An EA appointed, in this case, as per SIAC Rules is an arbitrator under Section 17 (1) of the Arbitration Act and an interim award passed by the EA would fall within the meaning of an order passed under Section 17 (1) of the Arbitration Act since Section 17 (1) uses the expression “during the arbitral proceedings” in its opening lines.
- Party autonomy: Section 2(6) of the Arbitration Act makes it clear that parties are free to authorise any person including an institution to determine issues that arise between the parties. Under SIAC Rules, the arbitral proceedings commence from the date of receipt of a complete notice of arbitration by the Registrar of the SIAC and an EA is appointed subsequent thereto.
- Legislative intent: The mere fact that a recommendation of a Law Commission Report is not followed by Parliament, would not necessarily lead to the conclusion that what has been suggested by the Law Commission cannot form part of the statute as properly interpreted.
- Coram sub-judice: No party, after agreeing to be governed by institutional rules, can participate in a proceeding before an EA 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 EA’s order from being made.
- No appeal from order passed U/S 17 (2): The use of opening words of Section 17(2), namely, “subject to any orders passed in appeal under Section 37…” demonstrates the legislature’s understanding that orders that are passed in an appeal under Section 37 are relatable only to Section 17(1) and not 17 (2) of the Arbitration Act.
- Section 37 is a complete code so far as appeals from orders and awards made under the Arbitration Act are concerned. This has further been strengthened by the addition of the non-obstante clause in Section 37 by the Arbitration and Conciliation (Amendment) Act, 2019.