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‘Reliance’ on the ‘Future’ of Emergency Arbitration : Indian Panorama

Long running history is an evidence of how the arbitration laws evolved in India and that there have been constant judicial intervention. Courts intervene in various manners like appointment of arbitration enforcement of awards etc. One such way is by granting interim reliefs before the appointment of the tribunal under Section 9 of the Arbitration and Conciliation Act. However due to lack of faith in the courts, extra unnecessary expenses in the litigation and many such factor lead to sliding in of Emergency Arbitration in the Indian arbitral regime and gradually it has become a celebrated method among both arbitrators as well as the parties. It was first given recognition for the first time in the 246th Law Commission Report.[1] This report suggested amendments under Section 2(d) of the Arbitration and Conciliation Act in order to give recognition to this system of emergency arbitration as it was an emerging concept globally. For instance, we can look at this global turn of tide as the Singapore International Arbitration Centre (SIAC)[2], the Stockholm Chamber of Commerce (SCC)[3] the Swiss Chambers Arbitration Institution (SCAI)[4], London Court of International Arbitration (LCIA)[5], and the Hong Kong International Arbitration Centre (HKIAC)[6], etc. All these provide for emergency arbitration. Thus it was proposed to be incorporated in India with the 2015 amendments by amending Section 2(d) as “Section 2(d): “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.“,[7] but the legislature failed to do so. As a result no provision was amended or added to incorporate emergency arbitration. Although India lacks formal statutory recognition in this regard still since Indian arbitration works on party autonomy principle an emergency arbitration is notably and easier way to get interim reliefs and avoid judicial intervention in the arbitral proceedings.

Arbitration institutions have permeated the methods and rules for Emergency Arbitration in their institutional rules directly or indirectly. Although, the Indian arbitration institutions doesn’t seem to be in consensus when it comes to framing statutory rules and in domain of an expressly omitted provision, still if we look at the rules we observe they are very much similar to many foreign institutions rules. For instance Institutions like The Delhi International Arbitration Center, has the provision for “Emergency Arbitration” under its Arbitration Rules. It also includes definition, procedure for appointment powers etc of an Emergency Arbitrator under Section 18 A. Additionally many other institutions like Mumbai Center for International Arbitration, Madras High Court Arbitration Center, International Commercial Arbitration and Court of Arbitration of the International Chambers of Commerce have also enumerated provisions procedures for the same in their institutional rules.

One can only get Interim Reliefs from Emergency Arbitration which are for a particular period of time. It functioning is similar to that of an Ad hoc arbitration and it collapses once the purpose is fulfilled. For a party to be not subjected to emergency arbitration it has to include a special exclusion clause in their agreement in order to opt out of the emergency arbitration provisions that are being permeated in these institutional rules. The functions of arbitrator in case of emergency arbitration are  set up an agenda for consideration of the application for emergency relief with in two days, he must ensure opportunity to both the sides, proceedings can be oral or written, he generally has to give orders merely on the basis of documents and evidences, he must not take more than 8-10 days from the application(tentative as timeline varies under different institutional rules), arbitrator has all the powers that are with the tribunal, he can pass all kinds of interim orders that can be passed by the court any time or the arbitral tribunal after its constitution as per Section 9 and Section 17 of the arbitration and conciliation act respectively. One point at which Section 9 and 17 differ is that reliefs under Section 17 can be granted only after the constitution of the arbitral tribunal however Section 9 reliefs can be taken even before during and after the arbitral proceedings only when parties lack efficacious remedy under Section 17 of the arbitration act. Thus only alternative left with the parties was to resort to courts in case the want urgent stay in the form of interim reliefs before the commencement of the arbitration. Henceforth in order to avoid this intervention of the courts emergency arbitration turns out to be a boon for the parties.

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In India enforcement of the award has always been a hard row to hoe. Since enforcement is only covered under Part II of the act enforcement in India become quite difficult. The Apex court is of the view that the powers of Indian courts are potentially incapable of granting interim relief in case of any foreign seated arbitrations.[8] It has been a matter of dispute that whether the orders passed by Emergency Arbitrators will be considered valid in India. Although precedents pertaining to enforceability of emergency awards are very less in number, some landmark cases HSBC v. Avite[9], Raffles Design International India Private Limited & Ors. v. Educomp Professional Education Limited & Ors.,[10] in these cases the decision was in line with the awards given by the arbitrators in an emergency arbitration.

In the case of HSBC v. Avitel[11] parties agreed to go for emergency arbitration seat for which was selected to be Singapore. The award of the emergency arbitrator was upheld by the Bombay High Court and observed that as the party was not seeking direct enforcement of interim relief thus has not breached any mandatory conditions of enforcement. Also because the agreement was entered prior to BALCO judgement the ratio of that judgement shall not apply. Similarly the Delhi high court in the case of Raffles Design International India Private Limited & Ors. v. Educomp Professional Education Limited & Ors.,[12] it was a Singapore seated arbitration. Later the party in whose favour the award was passed tries seeking interim relief as per Section 9 as the opposing party was acting in contrary to the award. The Delhi High Court allowed the application for the grant of interim orders pointing out the amendments under Section 2(2) of the act which now enables the Indian courts to grant interim relieves in case of  international commercial arbitrations as well, even in a foreign seated matters.

The recent landmark case of Future Retail Ltd. V. Amazon.com Inc.,[13] has put an halt to the burning debate pertaining to the validity of emergency awards in India. The case is very recent facts of the case are that a shareholders agreement was signed between Future Retail Ltd (FRL) and Future Coupon Ltd (FCL). Later Future Coupon limited signed an agreement with Amazon with informing FRL under which all the rights of FCL under the agreement between FRL & FCL were transferred to Amazon. Under the influence of these right transferred amazon has the option to acquire FRL after three years and within ten years of the agreement. Also if future group carry on any sale it has to bring this to the notice of Amazon.

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However, due to Covid-19 and shut down of business Future Retail had faced severe loss which compelled them to sell off its assets worth about 25 thousand Crore to Reliance Retail Ventures (RRV). Amazon objected this third party sale of assets. As it is right to object was infringed and also the deal was inconsistent with the shareholders agreement. It invoked arbitration proceedings at the Singapore International Arbitration Centre (SIAC) and filled for interim reliefs as well under the SIAC Rules. On October 25th an interim order was passed by the appointed Emergency Arbitrator under the SIAC rules favouring Amazon. Amazon put an application at SEBI, BSE and NSE and alleged the deal of Future and Reliance group of insider trading. Future Group requested the Delhi High Court to prohibit Amazon from applying before statutory bodies.

Justice Mukta Gupta, Delhi High Court, pronounced favoring Amazon that SIAC order was correct and did not grant any relief to the future group. It held that definition of ‘Arbitral Tribunal’ under Section 2(1)(d) of the Arbitration and conciliation Act is inclusive in nature and therefore it included ‘Emergency Arbitration’. only the legal status of the orders of the EA was looked into by the courts and not the merits of the same. It was contended that looking into the intent of the legislature, we can conclude that there is no statutory inclusion of Emergency arbitration as Parliament had not accepted the suggestion made by the 246th Law Commission Report and 2015 amendments did not include any such amendments hence the award cannot be enforced. This was countered by Amazon by arguing that parties voluntarily opted for SIAC which enables parties to approach an Emergency Arbitrator for interim relief.

Delhi High Court, upholding the arguments put forth by amazon stated that seat of the arbitration was SIAC and for the procedural conduct rules of the seat will only be applicable.[14] Court said the AMAZON was well within the legal boundaries and did not violate any rule by opting for emergency arbitration as they were eligible to do it under SIAC rules. Court cited the apex court Judgement Avitel Post Studioz Ltd. & Ors. v. HSBC PI Holdings (Mauritius) Ltd.[15] And held that there is no reason to not include the definition of Emergency arbitrator under the act. Merely because legislature failed to do so by not accepting the law commission’s suggestion is very much frivolous as a reason to be given for non inclusion. The Court with this decision legalizes Emergency Arbitrator in India. This landmark judgement also gave leverage to the parties of ICA with seat as India to denigrate from the provisions of Section 9 of the Act. Although not included in the statute but the emergency arbitration is now valid and well recognized in Indian arbitral regime. This has completely twisted the global setting when it comes to granting of injunctions and its enforcement and validity in any Indian or foreign seated arbitration proceedings. India still lacks proper recognition when it comes to emergency awards. Indian judiciary as well as legislature aims at creating an arbitration-friendly hub at India so that parties won’t hesitate to choose India as a seat in future. Emergency arbitration has a significant role to play under various foreign institution rules. The validity of the award rendered by an emergency arbitrator was still the burning academic debate. Conflicting precedents on the same adds on the ambiguity and raises more the doubt. However this recent landmark judgement of the Delhi High Court becomes the torch bearer. It put a halt to the debate and held the award to be valid. Hence it’s an step in promoting institutional arbitration in India and with this India can compete with other popular jurisdictions and rather outshine them in the near future.

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[1] The Law Commission’s 246th Report dated 05.08.2014.

[2] Singapore International Arbitration Center (SIAC) included the provision for Emergency Arbitration only in July 2010. The International Chamber of Commerce (ICC) included Emergency Arbitration Provisions in the 2012 Rules via Article 29 and Appendix V

[3] SCC Rules (2010), Expedited Rules and Appendix II.

[4] Swiss Rules (2012),Articles 42–43

[5] London Court of International Arbitration (LCIA) amended its Rules of 1988 in 2014 to create a provision for Emergency Arbitration (Article 9).These rules are applicable to agreements concluded on or after 01.10.2014, unless the parties opt-in

[6] HKIAC Administered Arbitration Rules (2008) Article.38.

[7] by Venancio D’Costa and Astha Ojha, Status of emergency arbitration in India from the perspective of domestic arbitrations, Mondaq (14 August 2020), https://www.mondaq.com/india/arbitration-dispute-resolution/976170/status-of-emergency-arbitration-in-india-from-the-perspective-of-domestic-arbitrations.

[8] BALCO Kaiser Aluminum Technical Services (2012) 9 SCC 552 (India).

[9] HSBC PI Holdings (Mauritius) Ltd. v. Avitel Post Studioz Ltd & Ors., Arbitration Petition No. 1062/2012 dated January 22nd, 2014.

[10] Raffles Design International India Private Limited & Ors. v. Educomp Professional Education Limited & Ors, O.M.P (I) (Comm.) 23/2015, CCP(O) 59/2016 and IA Nos. 25949/2015, 2179/2016 dated October 7th, 2016.

[11] Supra 3.

[12] Supra 4.

[13] Future Retail Ltd. V. Amazon.com Inc.,CS (COMM) 493/2020 (Del. H.C.).

[14] National Thermal Power Corporation v Singer Company & Ors 1992 (3) SCC 551 (India).

[15] Avitel Post Studioz Ltd & Ors v HSBC PI Holdings (Mauritius) Ltd 2020 SCC OnLine 656 (India).


Cite this article (The Bluebook 20th ed.)-

Harshita Khare and Abhinav Silakari, ‘Reliance’ on the ‘Future’ of Emergency Arbitration : Indian Panorama, Ex Gratia Law Journal, (April 10, 2021), https://exgratialawjournal.in/blawg/adr/reliance-on-the-future-of-emergency-arbitration-indian-panorama/.


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Author

Harshita Khare
Student - Nirma University
Abhinav Silakari
Student - Nirma University