SC rules in Amazon's favour, holds Singapore EA award against FRL-Reliance Retail merger enforceable

In a major victory for US-based e-commerce giant Amazon, the Supreme Court Friday held that Singapore's Emergency Arbitrator (EA) award, restraining the Rs 24,731 crore merger deal of Future Retail Ltd (FRL) with Reliance Retail, is valid and enforceable under Indian arbitration laws.

The apex court also set aside the two orders of February 8 and March 22 of the division bench of Delhi High Court order which lifted the single judge's orders staying the FRL-RRL merger.

Amazon.com NV Investment Holdings LLC and FRL are embroiled in a bitter legal fight over the deal and the US-based firm has sought in the apex court that the EA award was valid and enforceable.

A bench of justices R F Nariman and B R Gavai decided two important questions in the judgement -- whether an 'award' by an EA under the Arbitration Rules of the Singapore International Arbitration Centre (SIAC) can be said to be an award under Arbitration and Conciliation Act.

The second question was “whether an order passed under Section 17(2) of the Arbitration Act in enforcement of the award of an Emergency Arbitrator by a Single Judge of the High Court is appealable.” Justice Nariman, in the 103-page judgement said: "We...answer the first question by declaring that full party autonomy is given by the Arbitration Act to have a dispute decided in accordance with institutional rules which can include Emergency Arbitrators delivering interim orders, described as 'awards'."

"Such orders are an important step in aid of 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".

The apex court referred to provisions of the Indian law on arbitration and SIAC Rules and said that a conjoint reading of these provisions coupled with there being no interdict, either express or by necessary implication, against an EA would show that an EA's orders, if provided for under institutional rules, would be covered by the Arbitration Act.

Answering the second question, the top court said no appeal lies against an order made by a court for ensuring the enforcement of the EA's award as done by FRL in this case against the single-judge order restraining it from going ahead with the merger deal with RRL.

"The second question posed is thus answered declaring that no appeal lies under Section 37 of the Arbitration Act against an order of enforcement of an Emergency Arbitrator's order made under Section 17(2) of the Act. As a result, all interim orders of this Court stand vacated. The impugned judgments of the Division Bench, dated 8th February, 2021 and 22nd March, 2021, are set aside. The appeals are disposed of accordingly," the judgment said.

"There can be no doubt that the legal fiction created under Section 17(2) for enforcement of interim orders is created only for the limited purpose of enforcement as a decree of the court. To extend this fiction to encompass appeals from such orders is to go beyond the clear intention of the legislature," it held.

The two provisions, analysed extensively by the apex court in the verdict, deal with the interim measures ordered by an arbitral tribunal and section 17 (1) says:"Unless otherwise agreed by the parties, the arbitral tribunal may, at the request of a party, order a party to take any interim measure of protection as the arbitral tribunal may consider necessary in respect of the subject-matter of the dispute."

Section 17 (2) provides that the arbitral tribunal may require a party to provide appropriate security in connection with an interim measure ordered.

The verdict, which also referred to the recommendations of the law commission, said an EA's 'award' would undoubtedly be an order which furthers these very objectives -- to decongest the court system and to give the parties urgent interim relief in cases which deserve such relief.

"Given the fact that party autonomy is respected by the Act and that there is otherwise no interdict against an Emergency Arbitrator being appointed...and would consequently be covered by Section 17(1)..," it held.

While the two companies did not immediately comment on the judgment, a legal expert who did not wish to be named, said that FRL is expected to file a review plea.

The judgment, he said, does not deal with the merits of the dispute between FRL and Amazon. It has dealt with the questions of law which are academic in nature.

Kishore Biyani and 15 others including FRL and Future Coupon Pvt Ltd (FCPL) have been made parties by Amazon in a batch of pleas challenging the Delhi High Court order of the division bench which paved the way for the deal.

On February 8 and March 22, the division bench had granted relief to FRL by staying the single-judge direction to FRL and various statutory authorities to maintain the status quo on the mega deal.

The directions were passed on FRL's appeals challenging the two orders of the single judge who had ruled in favour of the US firm saying that the EA award was valid and enforceable.

Amazon had first filed a plea before the high court (single judge) for enforcement of the October 25, 2020, EA award by SIAC restraining FRL from going ahead with the deal with Reliance Retail.

The high court division bench had however said that it was staying the single-judge order as FRL was not a party to the share subscription agreement (SSA) between Amazon and FCPL and the US firm was not a party to the FRL-Reliance deal.

FRL, in its appeal, had claimed that if the February 2 order was not stayed it "would be an absolute disaster" for it as the proceedings before the NCLT for approving the amalgamation scheme have been put on hold.

It had contended that the single judge's status quo order will effectively derail the entire scheme which has been approved by statutory authorities in accordance with the law.

In August last year, the Future group had reached an agreement to sell its retail, wholesale, logistics, and warehousing units to Reliance.

Subsequently, Amazon took FRL into EA before the SIAC over alleged breach of contract by the Future group.