THE CONUNDRUM OF EMERGENCY ARBITRATION IN INDIA

[Mehak Mehra is a final year law student at University Institute of Legal Studies, Panjab University, Chandigarh]


The growing disenchantment towards the existing justice system has paved the way for the inevitable rise in the Alternate Dispute Resolution Mechanism, making Arbitration one of the most preferred methods for settling disputes between the parties. Expeditious disposal of cases, party autonomy, facilitating ease of doing business, and minimizing judicial intervention in the arbitral process are the primary objects of the Arbitration and Conciliation Act, 1996 (“Act"). Emergency Arbitration ("EA") is one emerging concept in the field of Arbitration that helps parties to seek interim relief with regard to matters that cannot wait for the constitution of an Arbitral Tribunal (“AT”). An emergency arbitral tribunal (“ETA”) like an ad-hoc tribunal is formed for a limited purpose and gets dissolved after the purpose for which it was constituted is served. The emergency arbitrator has the power to pass orders that preserve the status-quo, conserve assets, evidence, or any other conservatory relief in respect of matters specifically referred to it. For securing relief in an EA, the parties must show, firstly, the existence of ‘reasonable possibility to succeed on merits and, secondly, the possibility of facing losses that cannot be compensated by way of damages. This order of the arbitrator remains in force until an AT is formed as provided for in the arbitration agreement.


EVOLUTION OF EMERGENCY ARBITRATION IN THE INTERNATIONAL ARENA


EA owes its genesis to the International Chamber of Commerce when it formed rules for a pre-arbitral referee procedure that provided for interim reliefs in 1990. Unfortunately, these rules did not achieve the intended goal behind their enactment. In 1999, the International Centre for Dispute Resolution made rules for EA which required parties to give their consent to be governed by such rules. In 2006, it revised the rules that resulted in the application of emergency provisions to the arbitral proceedings between the parties automatically. Further, the inclusion of provisions relating to interim measures to the UNCITRAL Model Law empowered the ATs to grant interim reliefs. Many other leading arbitral institutions like the Singapore International Arbitration Centre (SIAC), and the London Court of Arbitration started to adopt rules and procedures of the EA. In India, Delhi International Arbitration Centre and Mumbai Centre for International Arbitration followed the footsteps of the major international arbitration centres to include provisions relating to EA. However, the lack of requisite legislation with regard to recognition and enforcement of emergency awards is a huge roadblock for EA in India.


EMERGENCY ARBITRATION THROUGH THE INDIAN PRISM


In the past, Indian Courts have dealt with only a handful of cases dealing with enforcement of EA awards. In all these cases, the courts never had the opportunity to decide upon the legal status of EA in India. The major question in all these disputes pertained to the maintainability of an application under Section 9 of the Act to seek court-ordered interim reliefs upon matters already referred to an emergency arbitrator. In HSBC PI Holdings (Mauritius) Ltd. v. Avitel Post Studioz Ltd. & Ors., the Bombay High Court allowed the application seeking interim relief under Section 9 on the pretext that this section applies to a foreign-seated arbitration. The court granted similar reliefs as was granted by the emergency arbitrator, but such a decision was independent of the EA's order. Similarly, in Raffles Design International v. Educomp Professional Education, the Delhi High Court allowed the applicant to file a petition under Section 9 in a Singapore seated arbitration even when the same issue was brought before the Emergency Arbitrator. The court reiterated the importance of party autonomy in Arbitration and ruled that the parties by their own free will consented to be governed by the SIAC rules that do not restrict India's judicial authority to entertain an application under Section 9, thus, allowing the party to approach it. The court observed that mere choice of a foreign seat would not exclude the application of Section 9 under Part I of the Act by express or necessary implication. However, the court rejected the application under the same section in Ashwani Minda & Anr. v. U-Shin Ltd. & Anr because the parties chose to be governed by the Japan Commercial Arbitration Association rules that restricted the interference of the courts in matters dealt with by the EA, thereby excluding the application of Part I.

Thus, all these cases were only an indirect way of the parties seeking interim reliefs to get the emergency awards executed under the force of law. Recently, the Hon’ble Supreme Court of India has settled the air around EA in India in the long standing dispute between Amazon and Future Retail Limited (“FRL”) in Amazon.com NV Investment v. Future Retail Limited & Ors. Amazon had agreed to invest INR 1431 crores in Future Coupons Private Limited (“FCPL”) based on certain rights granted to FCPL in FRL. Eventually, the investment in FCPL had to flow to FRL and according to the agreement between the parties; FRL could not alienate its retail assets without the consent of Amazon. Subsequently, Amazon entered into a transaction with Reliance Industries for selling its retail assets, in contravention of the aforesaid agreement. This lead to certain disputes between the parties and Amazon invoked EA as agreed by the parties in the arbitration agreement. The emergency tribunal, formed according to the SIAC rules, gave an interim order in favor of Amazon restraining FRL from applying to any regulatory authority to execute the transaction with Reliance. However, FRL filed a petition challenging the award before a single judge bench who sided with Amazon and recognized the concept of EA in India. This decision was stayed by the division bench of the Delhi High Court. Finally, Amazon filed Special Leave Petition in the Supreme Court for final decision on the matter.

Two questions came to be considered before the Apex Court, first, whether EA award can be considered to be an order under Section 17(1) of the Act and, second, whether an order made under Section 17(2) for enforcement of an EA award is appealable or not. The court made the following observations after careful perusal of the arguments from both the sides:

1. The Hon’ble Supreme Court widely interpreted Section 2(1)(a) to include within its ambit the concept of EA. An arbitral institution providing for certain institutional rules like provisions for EA will fall under the expression ‘permanent arbitral institution’ in section 2(1)(a) of the Act. In construing such a position, the court relied upon Section 2(6), 2(8) and 19(1) that sets the tone for party autonomy which gives parties the right choose a procedure out of their own free consent.

2. The definition of AT under Section 2(1)(d) should not be read in a manner to constrict Section 17(1), making it applicable only to an AT that gives final reliefs by way of an interim relief or final award. A perusal of Section 21 read with SIAC rules will make it clear that the expression ‘during arbitral proceedings’ includes EA proceedings as arbitral proceedings commence when the request for arbitration is communicated to the respondent.

3. Section 9(3) and Section 17 form part of the same scheme i.e., the AT under Section 9(3) would be like the one spoken in Section 17(1), which includes an EA appointed under the institutional rules.

4. Once the parties have consented to the institutional rules providing for EA, FRL cannot state the Emergency Arbitrator’s award as a nullity.

5. The expressions ‘in relation to’ and ‘any proceedings’ in Section 9(1) of the Act means the power to enforce orders that are made under Section 9(1) and this power is not limited to making of interim orders. If any party flouts the order under this provision, the court has the power to make any order under Order 39 Rule 2A for enforcement of such an order, which would be referable to Section 9(1) of the Act.

6. Since, the AT under Section 17(1) has the same powers as the court under Section 9, the enforcement of an order under this section by the court by way of Order 39 Rule 2A will be referable to Section 17. Thus, the AT’s order will get enforced under Section 17(2) read with CPC and this order would not be appealable under the code.

7. Section 37 is a complete code so far as appeals from orders and awards under the act are concerned. The court, further, relied upon the decisions in BGS SGS Soma JV v. NHPC, Kandla Export Enterprises v. OCI Corporation, etc. to observe that appeals under Order 43 Rule 1 of CPC cannot be invoked for enforcement of orders under the act.

8. The grant or non-grant of interim measures under Section 37(2)(b) refers only to Section 17(1) of the Act and not to Section 17(2). After the amendment of 2015, the section 17 was bifurcated into two and there was no further amendment made to Section 37(2)(b) to include within its scope the amended Section 17.


Thus, the court held that the EA award will be considered to be an order under Section 17(1) and no appeal will lie under Section 37 against an order of enforcement of EA award made under Section 17(2) of the Act.


CONCLUSION


The issues surrounding the concept of EA, lack of adequate statutory provisions and precedents in India, for long, have been a topic of discourse amongst arbitration enthusiasts. This judgment is highly purposive and contextual and has sent a clarion call of the pro-arbitration stance of the Indian Judiciary. This decision is an important precedent recognizing the concept of EA, having its seat in India, and its enforcement mechanism, however, the question of enforcement of an emergency award passed in a foreign seated arbitration looms large in the present scenario. It may be argued that such awards are enforceable under Section 9 of the Act as has been the case in various other precedents mentioned in this article. Secondly, the judgment has brought the EA order under the ambit of Section 17(1) that provides for the interim reliefs. Thus, grant or refusal to grant an interim relief by the Emergency arbitrator (which is considered to be an AT) may be appealed as per Section 17(2) under Section 37(2)(b) of the Act. Though, the legal experts have welcomed the decision of the court with open arms, it remains to be seen whether this interpretation would go in favour of the parties or rather decongest the courts with appeals from emergency awards under Section 37 of the Act.

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