Enforcement of Emergency Arbitration Awards in India - An Issue Yet to be Resolved

INTRODUCTION

Recently in the month of August, we saw that in a Singapore International Arbitration Centre (“SIAC”) arbitration matter between Reliance Retail Ventures Limited ("Reliance"), Future Retail Limited ("Future") and Amazon.com Inc (“Amazon”), an emergency arbitrator was appointed who passed an interim order or “emergency order” which halted the transaction between Reliance and Future company with regard to the acquisition of the Future Group's business.

After the order was passed by the SIAC emergency arbitrator, the question arose regarding the enforcement of ‘emergency order’ in India. This is because, there is no mention regarding the recognition of interim awards passed in an emergency arbitration in the Indian Arbitration Act. Thus, it becomes important to analyze and understand the legal position regarding the recognition of emergency awards in India.

FACTS AND RATIO

Reliance had entered into an agreement with Future company, in which Reliance intends to acquire the business of Future company for an amount of $3.38 billion. But this deal was objected by Amazon. They alleged that the transaction was violation of Amazon shareholders’ agreement with the promoters of the Future Group. In light of this allegation, Amazon initiated the arbitration proceedings against this transaction before the Singapore International Arbitration Centre (SIAC). While Amazon had already filed for an arbitration proceeding, it also went ahead to sought an interim relief from an Emergency Arbitrator. Under SIAC rules, an emergency arbitrator was appointed. Schedule 1 of the SIAC Rules states that on the receipt of request with relevant fees from the parties, an emergency arbitrator is appointed within one day. The application for interim order sought is usually considered within 14 days. In the interim order, the arbitrator put on hold the transaction between the two parties. It was ruled by the arbitrator that that Future breached its shareholder agreement, which barred the company from selling retail assets to third-parties entities included in the "restricted persons", which included Reliance.

EMERGENCY ARBITRATION AND ITS LEGAL POSITION IN INDIA

If we take a look at the Indian Arbitration and Conciliation Act, Section 2(1)(c) defined the term ‘arbitral award’ which also included ‘interim award’. But the section failed to provide for the term interim order or measure within its definition. In Section 2(1)(d) of the act, it defines ‘arbitral tribunal’. But one of the problems with this section is that it is not clear whether an “arbitral tribunal” recognizes a tribunal consisting of an emergency arbitrator under this act. In the year of 2014, the 246th Law Commission of India had suggested to amend the section 2(1)(d) of the act. It was stated that the ‘arbitral tribunal’ definition should be broadened in such a way that it includes the emergency arbitrator tribunal statutory recognition (similar to the law in Singapore). A High-Level Committee to Review the Institutionalization of Arbitration Mechanism in India was also set up by the government which had taken the same stance as the Law Commission and reiterated that there was a need for recognizing Emergency Arbitration. The Committee also recommended that the definition of an ‘arbitral award’ award must include the definition of an “Emergency Award”.[1]But the same was not incorporated when the 2015 or 2019 amendments were enforced.

Section 9 of the act allowed the court to pass interim arbitral awards. After the amendment in the year 2015, section 9 was made applicable to foreign seated arbitration too, until and unless there was an agreement to the contrary. However, as this section covers ‘interim measures by Court’, therefore if we see the literal interpretation, any interim order or award passed by a foreign seated arbitral tribunal may not to be enforceable under Section 9 of the Act. The courts also need to be cautious regarding when did the arbitration proceedings take place. There is a term known as the Bhatia-BALCO dichotomy. In BALCO case, the Supreme Court had ruled that Part I of the Arbitration Act would not be applicable to international commercial arbitration. But this stand was overruled by the Supreme Court in the case of Bhatia International v. Bulk Trading S.A. Therefore, the applicability of section 9 shall be dependent whether arbitration agreements were executed before Bhatia case.

As per Section 9(3) of the act, a court can grant interim relief even after constitution of an arbitral tribunal. Also, if any interim order is passed by the court, it shall be binding only on the parties who are party to the arbitration proceedings. But if third party is to be bound by the interim award, an application needs to be filed along with the proper and reasonable reasons.

What is also worth noting is that Section 17 gives powers to the tribunal to grant or allow to pass any interim measures. Now this section incorporates the words ‘order’ or ‘interim measures’ and not ‘arbitral award’ or ‘interim award’. But the drawback is that section 17 is applicable only for arbitrations that are seated in India. So, any emergency award passed for a domestically seated arbitration can be enforced. In the case of foreign seated arbitrations, Part II of the act is applicable. As there was no amendment made similar to part I regarding the enforcement of interim orders passed by an arbitral tribunal which is foreign seated, therefore such orders cannot be enforced in India. Also, Part II of the act is silent regarding the interim orders or awards that are passed by the any foreign seated arbitral tribunal or emergency tribunal. In part II, recourse under the New York Convention is an option available to enforce a foreign seated award. The convention states that the award passed shall be ‘binding’ on all the parties so that the award can be enforced. In the absence of the word ‘final’, it can be argued that interim reliefs can also be covered, which is subject to the fact that it can be modified by the tribunal.

So, what is noticed that even though the Indian arbitration law has undergone several amendments over the period of time, still there are a lot of lacunae with regard to recognition of emergency arbitrators and orders passed by them. But the Indian arbitration institutions are trying to absorb the term "Emergency Arbitration" in their rules and are making simultaneous procedures thereof. They have framed rules which provide for emergency arbitration and emergency arbitrator like the Delhi Arbitration Center,[2] Court of Arbitration of the International Chambers of Commerce-India,[3]International Commercial Arbitration,[4] Madras High Court Arbitration Center[5]and Mumbai Center for International Arbitration.[6]

ENFORCEMENT OF FOREIGN SEATED EMERGENCY AWARDS IN INDIA

In the case of HSBCPI Holdings (Mauritius) Ltd v. AvitelPost Studioz Ltd, an arbitration agreement was entered into by the parties wherein they reserved their right to seek interim reliefs before the courts in India. The parties in this case had kept their Emergency Arbitration seated at Singapore under SIAC rules. The emergency tribunal in the case gave a favorable order to the plaintiff who sought to enforce the order in India under section 9 of the Arbitration act. The Hon’ble High Court in this case allowed the award to be enforced and granted the interim relief. The court stated that “In so far as judgment of this court in case of Jindal Drugs (supra) relied upon by Mr. Rohatgi, learned senior counsel that unless petitioner files an application for enforcement of foreign award in this court, respondents cannot challenge the validity of such award is concerned, in my view, since present application filed under section 9 of the Arbitration Act by the petitioner is not for enforcement of the interim award or jurisdictional award rendered by the arbitral tribunal but the petitioner seeks interim measures against the respondents, independently, parties by agreement having excluded the applicability of part I of the arbitration Act except section 9, the petitioner is thus entitled to invoke section 9 for interim measures. In my view petitioner has not bypassed any mandatory conditions of enforceability required by section 48 of the Act. “In other words, the Court have impliedly recognized that petitioner could have enforced the emergency award under section 48 rather than filing an application under Section 9 of the Act. It is also important to know that this decision was passed before the judgement of BALCO case.

After the decision of BALCO, The High Court of Delhi, in the case of Raffles Design International India Pvt. Ltd. v. Educomp Professional Education Ltd, gave a completely opposite view. In this case, the party in whose favor the order was passed by the emergency arbitrator had filed an application under section 9 wherein they seek interim relief as it alleged that the other party was contravening the order. The emergency arbitrator was appointed under SIAC rules. The arbitration agreement was in accordance to and governed by the laws of Singapore. The emergency order was also enforced by the High Court of Singapore. The Delhi High Court in its decision said that the emergency award which was passed by the emergency arbitrator could not be enforced under the Indian Arbitration Act. It was also stated by the Hon’ble Court that the parties are open to approach the court under Section 9 of the Arbitration Act to seek interim reliefs wherein the court may or may not grant interim reliefs to the party while not even considering or giving importance to the order passed by the emergency arbitrator.

In May 2020, the Delhi High Court dealt with the case of Ashwani Minda v. U-Shin Ltd., wherein the appellant (Indian company) and the respondent(Japanese company) were in a Joint Venture(JV). Thereafter a dispute arose with regard to the JV between both the parties after which the appellant invoked the emergency arbitration as provided under the Japan Commercial Arbitration Association Rules (JCAA rules) wherein it sought interim relief against the respondents wherein they are restrained from acting upon an open offer to purchase shares in excess of its existing 26% shares in the Joint Venture. But this plea was rejected by the Emergency Arbitrator. Later, the appellant approached the Delhi Court under section 9 of Indian Arbitration Act for seeking interim relief. The court in its ruling stated that the appellant had already invoked the jurisdiction of approaching the emergency arbitrator. But the attempt was unsuccessful already. Further, it was also highlighted by the court that there was no change in circumstances since the unsuccessful attempt. Hence, the application was dismissed. It was observed in this case that, unlike the judgement passed in the Raffles case, the court has given consideration to the dismissal by the emergency arbitrator and recognized its persuasive value.

ANALYSIS

From the above paragraphs, it has been understood that certain points need to be kept in mind while enforcing emergency arbitration awards. When section 9 of the act has not been excluded by the parties, then a petition may be filed for seeking interim measures. In the case, where Section 9 has been expressly excluded, either party may file a civil suit under the Code of Civil Procedure, 1908, so as to seek the same reliefs which have been dealt by the emergency arbitrator while passing of the award. This is because as interim order would not be enforceable by directly filing an execution petition, as interim reliefs would not fall within the definition of “judgment” or “decree”, as defined in sections 13 and 44A of the Code of Civil Procedure, 1908 of India respectively. If we look at the option available for enforcing emergency awards, the parties can file a fresh suit for recovery of money which has been awarded wherein the right has been created via a foreign interim emergency award. But the process can be time consuming. Another recourse can be to use section 27 of the act. After 2015 amendment section 27 has been made applicable to international arbitration proceedings too. Section 27(5) states that persons can be charged guilty of contempt similar to that of a court proceeding. So, by relying on this section, the award creditor may approach the arbitral tribunal, wherein award creditor can request tribunal to penalize the other party for violating the award passed by the emergency arbitrator.[7]

CONCLUSION

It is felt that there is an urgent need to address the dilemma regarding the enforcement of award passed in an emergency arbitration. Many other countries have addressed this situation by bringing in relevant amendments in their laws. Similarly, Indian Arbitration Act needs to address this issue by suggesting amendments and make the legislation pro- arbitration. In the light of several arbitration institutions both national and international having the provisions for emergency arbitration, it is an urgent requirement that Indian lawmakers recognize emergency arbitration awards.

Endnotes

[1] Recommendations 1. Clause (c) of sub-section (1) of section 2 of the ACA may be amended to add the words “an emergency award” after the words “an interim award”. 2. Clause (d) of sub-section (1) of section 2 of the ACA may be amended to add the words “and, in the case of an arbitration conducted under the rules of an institution providing for appointment of an emergency arbitrator, includes such emergency arbitrator;” after the words “…panel of arbitrators”. 3. An emergency award may be defined as “an award made by an emergency arbitrator”.

[2]Delhi High Court in Part III of its Arbitration Rules includes "Emergency Arbitration". Further Section 18A enumerates 'Emergency Arbitrator' and further explains the appointment, procedure, time period and powers of an Emergency Arbitrator.

[3]Article 29 of the 'Arbitration and ADR Rules' r/w Appendix V enumerate the provisions of EA and Emergency Arbitrator.

[4]Section 33 r/w Section 36(3) w.e.f 01.01.2014, enumerates the provisions of EA and Emergency Arbitrator.

[5]Rules, 2014, under Part IV, Section 20 r/w Schedule A and Schedule D enumerate the provisions of EA and Emergency Arbitrator.

[6]Under Section 3 w.e.f 15.June.2016 enumerates the provisions of EA and Emergency Arbitrator.

[7]Alka Chandewar vs. Shamshul Ishrar Khan, CDJ 2017 SC 792