Contributed by: Samvad Partners
The High Court of Delhi, in the matter of Amazon.com NV Investment Holdings LLC v. Future Coupons Pvt. Ltd.[O.M.P. (Enf.)(Comm) 17 of 2021] has delivered a significant judgment on 18.03.2021 by which it has held that an emergency arbitrator is an Arbitrator for all intent and purposes recognized under the current legal framework of the Arbitration and Conciliation Act, 1996 (hereinafter the “Act”). In holding so, the Delhi High Court has laid down in clear terms that an order passed by an emergency arbitrator is not a nullity under the Indian law, and that the order is binding and enforceable on the parties to the dispute.
The status of an order passed by an emergency arbitrator has been a matter of debate over the past few years. There is no provision in the Act which expressly recognizes an emergency arbitrator and makes the orders passed by it directly enforceable under the Indian law. In the 246th Law Commission Report published in August, 2014 an attempt was made to include an emergency arbitrator within the definition of an “Arbitral Tribunal” given under section 2(1)(d) of the Act. This would have given a statutory recognition to proceedings conducted before an emergency arbitrator appointed as per the rules of the institution which provides for such an emergency arbitrator. However, the proposed amendment did not see the light of the day and hence the present position is that the Act does not expressly recognize proceedings before an emergency arbitrator.
In the absence of express statutory recognition, a trend had developed where the successful party in an emergency arbitration, would invoke the jurisdiction of the national courts under section 9 of the Act to obtain an interim measure similar to the one obtained from the emergency arbitrator. Section 9 provides for interim measures by court which can be made either before, during or after an arbitral award is made, but before it is enforced. The order of the emergency arbitrator would be cited as a strong reason for grant of interim measures in the section 9 proceedings. Faced with many such petitions, the Delhi High Court has been at the forefront of developing the law relating to validity of an award passed by an emergency arbitrator.
In the matter of Raffles Design International India Pvt. Ltd. & Anr. v. Educomp Professional Education Ltd. & Ors.[(2016) 234 DLT 349] the Delhi High Court considered the question whether the petitioner can approach the court for an interim relief under section 9 of the Act given that it had already approached the emergency arbitrator and had also obtained a judgment in terms of the interim order from a competent judicial authority, which in that case was the High Court of Singapore. After considering the arguments made by both sides, the Delhi High Court came to a finding that in the absence of a provision in the Indian Arbitration and Conciliation Act, the interim award passed by an emergency arbitrator cannot be directly enforced in India and the only way for enforcing the same would be for the petitioner to file a suit. However, though not enforceable, the court held that a party cannot be precluded from seeking interim measures under section 9 of the Act, only for the reason that it has obtained a similar order from the emergency arbitrator. Thus, it held that while recourse to section 9 of the Act is not available for the purpose of directly enforcing the orders of the emergency arbitrator, that would not restrain the court from independently applying its mind and grant interim relief in cases where it is warranted.
More recently in May 2020, the Delhi High Court passed the judgment in Ashwani Minda & Anr. v. U-Shin Ltd. & Anr.. This case is significant because the court gave a clear signal that in a petition under section 9 of the Act, the court cannot sit in appeal against an award passed by an emergency arbitrator. It also held that once the parties have agreed to be governed by the rules of an institution which provides for appointment of an emergency arbitrator, and having invoked the same, the said rules would be binding on the parties. The unsuccessful party cannot take a second bite of the cherry by invoking the jurisdiction of the national court under section 9 of the Act.
The pro-emergency arbitration trend has continued. In the ongoing dispute between Amazon and Future Retail, the Delhi High Court considered a challenge to an order passed by an emergency arbitrator appointed under the rules of Singapore International Arbitration Centre (hereinafter “SIAC”). In its judgment dated 21.12.2020[Future Retail Ltd. v. Amazon.com Investment Holdings LLC & Ors. C.S. (Comm) 493 of 2020], a single judge of the Delhi High Court concluded that once a party has agreed to arbitrate before an emergency arbitrator, its authority cannot be invalidated merely because it does not strictly fall within the definition of an “Arbitral Tribunal” under section 2(1)(d) of the Act. The Court held that an arbitrator’s authority to act is implied from the agreement to arbitrate between the parties and there is nothing in the Act which prohibited the contracting parties from obtaining emergency relief from an emergency arbitrator appointed as per rules agreed to between the parties. Thus, the court held that the emergency arbitrator prima facie is not a coram non judice and the interim order is not invalid on this count. However, this still left open the question of enforceability of such orders, which has been addressed by another judgment dated 18.03.2021 of a single judge of the Delhi High Court in the proceedings initiated by Amazon for enforcement of the interim award passed by the emergency arbitrator.
In the judgment dated 18.03.2021, the Delhi High Court has held that section 2(1)(d) of the Act which defines an “Arbitral Tribunal” is wide enough to include an emergency arbitrator. It also held that section 2(8) of the Act expressly provides that a reference to “agreement of the parties” shall include the arbitration rules referred to in that agreement. Therefore, where the parties have chosen to arbitrate their disputes under an institution which provides for appointment of an emergency arbitrator, the parties shall be bound by such rules and the awards/ order passed in such proceedings. The High Court has also placed reliance on section 2(6) and section 19(2) of the Act to hold that the Act gives complete freedom to parties to authorize an institution to determine the disputes between them and also agree on the procedure to be followed by the arbitral tribunal in conducting the proceedings. Further, it also observed that section 2(1)(a) which defines “arbitration” is an inclusive definition which includes ad hoc as well as institutional arbitration and section 2(1)(c) defines “arbitral award” to include an interim award.
On a conjoint reading of the aforesaid provisions along with the rules of the arbitral institution (which in this case was SIAC), the High Court is of the view that an emergency arbitrator is an arbitrator for all intents and purposes and under section 17(1) of the Act, it has the same power to make interim orders, as the court has. Further, such interim order is enforceable under section 17(2) of the Act in the same manner as if it was an order of the court. Consequently, the interim order would also be appealable under section 37 of the Act.
This judgment of the Delhi High Court will give a much-needed boost to the concept of emergency arbitration in India. It will also act as an assurance to the world community that Indian judiciary is pro-arbitration and is taking demonstrable steps to honour and enforce the orders passed in international arbitrations by arbitral tribunals appointed under different institutions. The effectiveness of emergency arbitration has also been acknowledged by the single judge in its judgment where he has observed that emergency arbitration is an effective and expeditious mechanism to deal with emergency interim relief applications and if orders of an emergency arbitrator are not enforced, it would make the entire mechanism redundant. Given that the Future Group has passed an appeal to the Division Bench of the High Court against the order dated 18.03.2021, it is safe to conclude that the issue of enforceability of an interim award passed by an emergency arbitrator is far from being settled. Nevertheless, the law laid down by the judgment is a big step towards development of the arbitration law framework in the country and bringing it at par with the international best practices.
Contributed by Samvad Partners
The above article has been authored by Mr. Sumit Srivastava(Senior Associate).