The Subtle Art of Interfering: Amazon-Future Retail “Anti-Arbitration” Injunction Saga

India is fast emerging out of the shadow of its checkered history of being an interventionist jurisdiction in the international arbitration space. Numerous steps, judgments and amendments in law have aided in this remarkable journey which can be safely termed as renaissance of arbitration in India. If the legislature has been the Vinciof this revolution, Indian courts have been the Michelangelo. India is thus moving very fast towards achieving its almost “impossible” goal of becoming the hub of international arbitration, but the same has its own challenges and as Miguel de Cervantes said “in order to attain the impossible, one must attempt the absurd”.In the opinion of the authors, absurdity often lead to better clarity and court orders are no different. More on this is for later, for now back to the headlines.

The storied Amazon-Future dispute has reached yet another interesting point. A Division Bench of the Delhi High Court on 5-1-2022in NV Investment Holdings LLC v. Future Coupons (P) Ltd.[1],directed stay of further proceedings before the Arbitral Tribunal[2].

A brief recap of the Saga NV Investment Holdings LLC (Amazon), a direct subsidiary of the global e-commerce giant, Inc., agreed to acquire 49% shareholding in Future Coupons Private Limited (FCPL). In this regard, three agreements were entered into between the parties:

(i) a shareholder agreement between Future Retail Limited (FRL), FCPL, Executive Chairman and Managing Director of FRL, the promoters and shareholders of FRL and group companies of FRL, namely, Future Corporate Resources Pvt. Ltd. and Akar Estate and Finance Pvt. Ltd.(collectively referred to as “the Biyani Group”) granting FCPL certain negative, protective, special and material rights with regard to FRL;

(ii) a shareholder agreement between Amazon, FCPL and the Biyani Group which inter alia listed “restricted persons” with whom FRL, FCPL and the Biyanis could not deal; and

(iii) a share subscription agreement, between Amazon, FCPL and the Biyani Group, which recorded Amazon’s agreement to invest INR 1431 crores in FCPL.

Amazon invested the aforesaid sum in FCPL which flowed down to FRL on the same day. Amazon applied to the Competition Commission of India (CCI) to obtain approval for acquisition of shares in FCPL. The CCI approved the combination on 28-11-2019[3].

A few months after the said investment, the Biyani Group entered into a transaction with the Mukesh Dhirubhai Ambani Group (MDAG)which envisages the amalgamation of FRL with the MDAG, the consequential cessation of FRL as an entity, and the complete disposal of its retail assets in favour of the said group.

Thus, Amazon initiated arbitration proceedings before the Singapore International Arbitration Centre (SIAC).

Amazon filed an application seeking emergency interim relief under the SIAC Rules against the aforesaid transaction between the Biyani Group and MDAG. The emergency arbitrator granted injunctions and passed directions vide order dated 25-10-2020. The award of the emergency arbitrator was held to be enforceable under Section 17(2) of the Arbitration and Conciliation Act, 1996[4] (the Act) by the Supreme Court vide judgment dated 6-8-2021[5].

FRL did not challenge the order of the emergency arbitrator but instead filed a civil suit before the Delhi High Court in which it sought an injunction restraining Amazon from unlawfully interfering with the performance of the transaction between FRL and Reliance/ MDAG, writing to statutory authorities by relying on the emergency arbitrator’s order. Vide judgment dated 21-12-2020[6], a Single Judge of the Delhi High Court declined to grant an interim injunction in favour of FRL and against Amazon.

In the interim FCPL filed an application dated 25-3-2021 before the CCIinter alia stating that Amazon has taken contradictory stands in relation to its investment in FCPL in representations and submissions before CCI, on the one hand and in arbitration proceedings and before courts, on the other.Vide order dated 17-12-2021[7], the CCI noted certain omissions, false statements and misrepresentations and considered it necessary to examine the combination afresh.

In view of the aforesaid, FCPL and FRL filed applications before the Arbitral Tribunal claiming that in view of the CCI order[8], the agreement between Amazon and FCPL which contains the arbitration clause would not survive and hence, the arbitration proceedings ought to be terminated (termination applications).

The current episode

FCPL and FRL urged that the hearing of expert witnesses scheduled for 5-1-2022 to 8-1-2022 be adjourned and instead the said dates be utilised for hearing the termination applications.

The Arbitral Tribunal, vide orders dated 29-12-2021, 30-12-2021 and 31-12-2021, declined to adjourn the hearings or to abandon the hearing scheduled for hearing the termination applications. The Tribunal offered to hear the termination applications by adding an extra day on 4-1-2022, but FRL refused on grounds of the non-availability of their counsel. Nonetheless, the Tribunal assured that it has not taken any decision on the implication of the CCI order9 on the arbitration proceedings and that reasonable opportunity would be given to all the parties to present their submissions on the said matter. Pertinently, the Tribunal also observed as under:

(a)The issue as to when to hear the termination applications is an issue of case management and therefore, the Arbitral Tribunal has the full discretion to decide when to hear the said applications.

(b) No prejudice would be caused to FRL and FCPL if the hearing on the termination applications would be conducted after the hearing on the parties’ expert witnesses on damages.

(c) If FRL and FCPL succeeded in their request for termination of arbitration, the option to claim costs would also be available for them.

Subsequently, the Arbitral Tribunal ordered that on the fourth day of the scheduled hearing, i.e. 8-1-2022, arguments on the termination applications shall be heard.

FCPL and FRL filed writ petitions under Article 227 of the Constitution of India10 before the Delhi High Court impugning the said orders dated 29-12-2021, 30-12-2021 and 31-12-2021, seeking a declaration that the continuation of the arbitration proceedings is contrary to law and a direction to the Arbitral Tribunal to decide the termination applications before continuing with the arbitration proceedings.

Arguments of the parties

Before the Single Judge, the Future group companies argued that (a) in view of CCI’s order11, the agreement between Amazon and FCPL no longer survives, which would invalidate the arbitral proceedings and thus must be terminated; (b) the termination applications must be given primacy and be decided before any further steps in the arbitration; (c) the Arbitral Tribunal has consistently violated the principles of fair and equal treatment enshrined in Section 18 of the Act12; (d) several lawyers representing FRL have tested positive for Covid-19 and therefore the Tribunal was requested to defer the expert witness hearings and instead take up the termination applications; and (e) one day fixed by the Tribunal for hearing the termination applications is not sufficient.

Per contra, Amazon submitted that (a) the writ petition, under Article 227 of the Constitution, was not maintainable; (b) the dates for expert witness hearings were fixed as far back as October 2021 and the experts and tribunal will join the proceedings from different parts of the world, rescheduling the hearings would cause unnecessary inconvenience; (c) the date fixed for hearing the termination applications gives sufficient time to the parties to prepare and file written arguments; and (d) the Tribunal has always provided equal opportunity to both parties to put their case.

The Single Judge’s decision

The Single Judge dismissed the writ petitions, vide judgment dated 4-1-202213, having found no grounds for interference.

A. The Judge, relying on Deep Industries Ltd. v. ONGC14 and on Surender Kumar Singhal Arum Kumar Bhalotia15 held that there cannot be a complete bar to the petitions being filed under Article 227, which is a constitutional remedy. However, interference under Articles 226/227 can only be in “exceptional circumstances”. There is “only a very small window” for interference with orders passed by the Arbitral Tribunal, that window becomes even narrower where the orders passed by the Arbitral Tribunal are procedural in nature and that window cannot be used for impugning case management orders passed by the Arbitral Tribunal which are in the nature of procedural orders.

B. The Judge held that case management orders are completely in the domain and discretion of the Arbitral Tribunal. It is in the sole discretion of the Arbitral Tribunal to decide whether the termination applications should be heard before or after the hearings of the expert witnesses. Although, on perusal of records, the Judge found that the Tribunal had given cogent reasons for its decision, the Judge clarified that it is not for the Court to interfere with the scheduling of the arbitration proceedings or the manner and the procedure of carrying out the arbitration proceedings. (Reliance on Telecommunication Consultants India Ltd. B.R. Sukale Construction16.)

The Judge emphasised the need for minimum interference by courts with arbitration proceedings in order to ensure that disputes are expeditiously disposed and the whole purpose of arbitration is not frustrated.

Prima facie, the Judge found that there is nothing to suggest that the Arbitral Tribunal has denied equal opportunity to the parties or that the Arbitral Tribunal has not been accommodating towards requests of FRL and FCPL. The Judge did not find any exceptional circumstances or perversity to have been demonstrated.

Stay order in LPAs

FRL and FCPL challenged the said judgment by filing letters patent appeals (LPAs) before the Delhi High Court. Vide order dated 5-1-202217, the Division Bench not only issued notice to the respondents in the LPAs but also directed stay of further proceedings before the Arbitral Tribunal until the next date of hearing. The reasons stated for grant of such stay is as under:

Having perused the order of CCI, the impugned orders passed by the Arbitral Tribunal and the judgment of the Single Judge dated 4-1-202218, in our view, appellants have made out a prima facie case for grant of interim relief and the balance of convenience also lies in favour of the appellants. If the interim relief prayed for is not granted, it would cause irreparable loss to the appellants.

The Division Bench noted the objections regarding the maintainability of the appeals but did not decide or express any view regarding the said objections prior to granting stay.

More questions than answers

The relationship between national courts and Arbitral Tribunals is dynamic and ever-evolving arbitration thrives on positive support from national courts as they alone can rescue the system when one party seeks to sabotage it19. Lord Mustill puts it succinctly in S.A. Coppée Lavalin NV v. Ken-Ren Chemicals and Fertilisers Ltd.20 stating that: … there is plainly a tension here. On the one hand the concept of arbitration as a consensual process reinforced by the idea of transnationalism leans against the involvement of the mechanisms of State through the medium of a municipal court. On the other side there is the plain fact, palatable or not,that it is only a court possessing coercive powers which could rescue the arbitration if it is in danger of foundering….

The order of the Division Bench raises several questions.

Firstly, Indian courts and legislature have, over the last few decades, made a conscious move towards a pro-arbitration approach minimising interference by civil courts in arbitration proceedings. The legislative changes as well as the development of the Indian jurisprudence is reflective of the appreciation of the principles of kompetenz-kompetenz and autonomy of arbitrators. In this regard, it is also relevant to note that the Arbitration and Conciliation (Amendment) Act, 201921 was aimed at not only further restricting interference of civil courts in arbitration proceedings but also encouraging institutional arbitrations.

The need to discourage judicial interference in the arbitral process is the central theme of order of the Single Judge. Given the objectives and intent of the Act, the pro-arbitration approach adopted by Indian courts and the basic principles of kompetenz-kompetenz and autonomy of arbitrators, should the Division Bench have interfered with the arbitration proceeding, particularly at the stage of issuing notice and without considering the question of maintainability.

Secondly, the Division Bench simply applied the three basic principles for grant of interim injunction i.e. prima facie case, balance of convenience and irreparable injury. Aside from the fact that the order does not elaborate on the reasons for the said three principles having been satisfied, did the Division Bench fall into error by applying the said principles while considering the question of grant of stay of arbitral proceedings.

In contrast to the aforesaid approach of the Division Bench, the Single Judge held that interference with arbitral proceedings under Articles 226/227 can only be in “exceptional circumstances” or where the impugned order is perverse and is patently lacking in inherent jurisdiction. The said standards are consistent with the standard of interference in anti-arbitration injunction suits.

(i) In Bharti Televentures Ltd. v. DSS Enterprises (P) Ltd.22, the Court held that “Unless it is indubitably clear that the substratum of the arbitration agreement has disintegrated, and if the only conclusion that can be drawn is that the foreign arbitration is motivated to harass and thereby coerce the other parties into a settlement, courts should not interference in the commencement, conduct and continuance of proceedings, before the arbitrators.”

(ii) In McDonald’s India (P) Ltd.v. Vikram Bakshi23 the Delhi High Court held that the power to grant anti-arbitration injunctions must be exercised rarely and only on principles analogous to those found in Sections 824 and 4525 of the Act.

(iii) In Surender Kumar Singhal26, the Court clarified that it is not prudent to exercise jurisdiction under Articles 226/227 and that efficiency of the arbitral process ought not to be allowed to diminish and hence, interdicting the arbitral process should be completely avoided.

Thirdly, the proceedings in question emanate from procedural orders whereby the Tribunal merely determined the schedule of proceedings. The Arbitral Tribunal did not dismiss the termination applications or decline to adjudicate the same but merely scheduled them for hearing on a date after the hearing of the expert witnesses. Does such an order warrant interference under Article 227, particularly when Section 19 of the Act27 expressly grants the Arbitral Tribunal to determine its own procedure.

Fourthly, Section 37 of the Act28 makes certain orders of the Arbitral Tribunal appealable. An order of the Tribunal declining FRL’s request to adjourn/abandon the scheduled hearings for expert witness, for hearing its termination applications, is not an appealable order under Section 37. The Delhi High Court in SAIL v. Indian Council of Arbitration29 following the ratio of SBP & Co. v. Patel Engg. Ltd.30 has held that a writ petition under Articles 226/227 does not lie against non-appealable orders passed by the arbitrator during arbitral proceedings.

Pertinently, it was also observed that:

  1. In any case, even if it is held that a writ petition against a non-appealable order of the arbitrator is maintainable, considering the legislative intent, as expressed in Section 5 of the Act31, which provides that no judicial authority shall intervene in matters governed by PartI except to the extent provided in the said Part and acknowledging that interference with the arbitral proceedings, in exercise of writ jurisdiction of the court, is bound to delay the conclusion of such proceedings, thereby defeating one of the main objectives behind preferring arbitration over litigation, the Court would be well advised in not interfering with such an order in exercise of its writ jurisdiction.32

Therefore, Division Bench’s reluctance to have given a finding on maintainability before passing any other effective order raises more questions.

From a perusal of the order, it appears that the order of the CCI weighed considerably with the Division Bench. In our opinion, not only is it within the jurisdiction of the Arbitral Tribunal to determine when to decide to the termination applications, it is also within the Tribunal’s jurisdiction to determine the implication of the CCI order on the proceedings before it. In such a scenario, was the Division Bench justified in granting stay of the arbitral proceedings, without even expressing a prima facie view on the maintainability of the LPAs before it. A Single Judge of the Delhi High Court referred to the reluctance of Court to“denude itself of jurisdiction”33. The order of the Division Bench may be an example of such reluctance and use of coercive powers not vested in it. However, this may be just another episode of this new season of Amazon -FRL series where the season finale may come from the  Supreme Court deciding whether the view of the Division Bench is a possible view and whether the view of the Single Judge is a plausible view.

*Counsel, specialising in commercial dispute resolution.

**Advocate, Delhi High Court.

[1]2022 SCC OnLine Del 67

[2]SIAC Arbitration No. 960 of 2020

[3] NV Investment Holdings LLC v. Future Coupons (P) Ltd., 2019 SCC OnLine CCI 43

[4] Arbitration and Conciliation Act, 1996, S. 17(2).

[5] NV Investment Holdings LLC v. Future Retail Ltd., 2021 SCC OnLine SC 557.

[6] Future Retail Ltd. v. NV Investment Holdings LLC, 2020 SCC OnLine Del 1636.

[7] NV Investment Holdings LLC v. Future Coupons (P) Ltd., 2021 SCC OnLine CCI 63

[8] NV Investment Holdings LLC v. Future Coupons (P) Ltd., 2021 SCC OnLine CCI 63

9 NV Investment Holdings LLC v. Future Coupons (P) Ltd., 2021 SCC OnLine CCI 63

10 Constitution of India, Art. 227.

11 NV Investment Holdings LLC v. Future Coupons (P) Ltd., 2021 SCC OnLine CCI 63

12 Arbitration and Conciliation Act, 1996, S. 18.

13 Future Retail Ltd. v. Amazon. Com NV Investment Holdings LLC, 2022 SCC OnLine Del 13.

14 (2020) 15 SCC 706.

15 2021 SCC OnLine Del 3708.

16 2021 SCC OnLine Del 4863.

17 NV Investment Holdings LLC v. Future Coupons (P) Ltd.,SIAC Arbitration No. 960 of 2020.

18 Future Retail Ltd. v. Amazon. Com NV Investment Holdings LLC, 2022 SCC OnLine Del 13.

19 Redfern and Hunter, International Arbitration,(6thEdn., Oxford University Press).

20 (1995) 1 AC 38 :(1994) 2 WLR 631 :(1994) 2 Lloyd’s Rep 109 , HL(E).

21 Arbitration and Conciliation (Amendment) Act, 2019.

22 2005 SCC OnLine Del 862, para 24.

23 2016 SCC OnLine Del 3949.

24 Arbitration and Conciliation Act, 1996, S. 8.

25 Arbitration and Conciliation Act, 1996, S. 45

26 2021 SCC OnLine Del 3708.

27 Arbitration and Conciliation Act, 1996, S. 19.

28 Arbitration and Conciliation Act, 1996, S. 37.

29 2013 SCC OnLine Del 4490.

30 (2005) 8 SCC 618.

31 Arbitration and Conciliation Act, 1996, S. 5.

32 SAIL v. Indian Council of Arbitration, 2013 SCC OnLine Del 4490.

33 Bina Modi v. Lalit Modi, 2020 SCC OnLine Del 901.

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