India: Battle Of The Retail Giants And The Need For Emergency Arbitration In India

"The supreme art of war is to subdue the enemy without fighting."

This quote from Sun Tsu's Art of War could not be more apt in the context of commercial disputes, where half the battle is won before the fight. As in litigation, interim relief is a vital tool in arbitration proceedings. In India-seated arbitrations, parties seeking urgent interim relief prior to commencement of arbitration usually need to approach the local court having jurisdiction over the dispute under Section 9 of the Indian Arbitration and Conciliation Act, 1996 (Act).

Securing a favourable relief before a court requires time.  In India, where the local courts have an overwhelming pendency of cases, a time-lag in grant of interim relief is expected. Further, approaching a court may not always be the ideal option for a party unfamiliar with the local court having jurisdiction over the dispute, or a party desirous of keeping its dispute out of the public knowledge and the newspapers. In order to combat this impediment, international arbitral situations like the SIAC¹, ICC², LCIA³ and others have introduced the concept of emergency arbitration. It gives effect to parties' intent of resolving their disputes through arbitration and eliminate the need to resort to court for such adjudication, even before the constitution of an arbitral tribunal. Many such jurisdictions have also adopted legislation for the enforceability of such awards and orders⁴.

In India, while the Act does not expressly provide for recognition and enforcement of emergency arbitration awards, Section 17, which provides for interim measures that can be granted by an arbitral tribunal, can be extended to apply to emergency arbitral tribunal as well. In the absence of any coordinate provision in Part II of the Act, there is a lack of clarity regarding enforcement of such emergency arbitration awards for foreign seated arbitrations.

The question of enforceability of emergency arbitration awards has most recently come up before the Delhi High Court while dealing with Amazon's dispute with Future Retail concerning the sale of the latter's assets to Reliance Retail. Amazon invoked the arbitration clause under its agreement with Future Coupons (Future Retail's subsidiary) and obtained an emergency injunction award from SIAC restraining Future Group from proceeding with the sale to Reliance. Amazon has filed a suit under Section 17(2) of the Act before the Delhi High Court to enforce the emergency arbitral award. Future Group has contended that the emergency arbitral award does not amount to an order passed under Section 17 of the Act. Whether or not such a contention will hold water is difficult to ascertain, given that Indian jurisprudence on enforceability of emergency awards is inconsistent.

On the one hand, the Bombay High Court has, in HSBC Pl Holdings (Mauritius) Ltd. v. Avitel Post Studioz Ltd.⁵ held that the order of a SIAC emergency arbitrator granting an injunction fell under Section 17 of the Act, so as to form an order by an arbitral tribunal, and hence was enforceable. However, the Delhi High Court held to the contrary in the case of Raffles Design International India Pvt. Ltd. & Anr. v. Educomp Professional Education Ltd. & Ors.⁶ ruling that an emergency arbitration award is not enforceable under the Act, but the applicant was not precluded from applying for court ordered 'interim measures' under Section 9 of the Act. Interestingly, the aforesaid decision in Raffles Design has not been followed by a coordinate bench of the Delhi High Court in Ashwani Minda and Anr. v. U-Shin Ltd. & Anr. where the court dismissed the application for court-ordered 'interim relief' under Section 9 of the Act filed by a party to a Japan-seated arbitration, following the applicant's failure to obtain similar relief from an emergency arbitrator.

It is noteworthy that the Law Commission of India has, in its 246th Report⁷, recommended that provisions validating the application of emergency arbitrator provisions of arbitral institutions ought to be brought within the purview of the Act⁸. While it is concerning that the provision is applicable only to emergency arbitrators appointed by arbitration institutions, considering that an institutional arbitration regime is currently absent in India, the outlook for emergency arbitration looks hopeful in light of the enactment of the New Delhi International Arbitration Centre Act, 2019 (NDIAC Act). The NDIAC Act aims to set up institutional arbitration in India. The aforesaid recommendations and the NDIAC Act, when implemented, would make India the first jurisdiction to give statutory recognition to emergency arbitrators, which would instantly boost India's position as a hub of international arbitration.

 Footnotes

1 Rule 30, SIAC Rules, 2016, Singapore International Arbitration Centre, Accessed online at https://www.siac.org.sg/our-rules/rules/siac-rules-2016

2 Article 29, 2021 Arbitration Rules, International Chamber of Commerce, Accessed Online at https://iccwbo.org/dispute-resolution-services/arbitration/rules-of-arbitration/

3 Article 9B, LCIA Rules 2014, London Court of International Arbitration, Accessed online at https://www.lcia.org/Dispute_Resolution_Services/lcia-arbitration-rules-2014.aspx

4 Justice B.N. Srikrishna, Report of the High Level Committee to Review the Institutionalisation of Arbitration Mechanism in India, August 3, 2017

5 2014 SCC Online Bom 102

6 MANU/DE/2754/2016

7 Report No. 246, Law Commission of India, Amendments to the Arbitration and Conciliation Act, 1996, August 2014, Accessed online at https://lawcommissionofindia.nic.in/reports/Report246.pdf

8 The Law Commission has also recommended that Section 2(1)(d) of the Act be amended so as to include the clause: "...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", such that the new Section 2(1)(d) would read:

"'arbitral tribunal' means a sole  arbitrator  or a panel of arbitrators 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."

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