{"id":245822,"date":"2021-03-19T17:04:39","date_gmt":"2021-03-19T11:34:39","guid":{"rendered":"https:\/\/www.scconline.com\/blog\/?p=245822"},"modified":"2021-03-26T11:25:55","modified_gmt":"2021-03-26T05:55:55","slug":"amazon-v-future-retail","status":"publish","type":"post","link":"https:\/\/www.scconline.com\/blog\/post\/2021\/03\/19\/amazon-v-future-retail\/","title":{"rendered":"[Amazon v. Future Retail] From Emergency Arbitrator to Group of Companies Doctrine \u2013 Delhi HC covers all while restraining Future Group from proceeding further with Disputed transaction"},"content":{"rendered":"

Delhi High Court:<\/strong> In the notable ruling of Amazon v. Future Retail, J.R. Midha, J. of Delhi High Court considered three crucial questions:<\/p>\n

\u2666 What is the legal status of an Emergency Arbitrator?<\/p>\n

\u2666 Whether the Emergency Arbitrator misapplied the Group of Companies doctrine which applies only to proceedings under Section 8 of the Arbitration and Conciliation Act?<\/p>\n

\u2666 Whether the interim order of Emergency Arbitrator is Nullity?<\/p>\n

Amazon.com invested Rs 1431 Crore in Future Coupons Private Limited (FCPL) based on certain special, material protective\/negative rights available to FCPL in Future Retail Limited (FRL), namely, that the Retail Assets of FRL would not be alienated without the prior written consent of Amazon.com (Petitioner), and never to a Restricted Person<\/em>. Further, an agreement was attained wherein it was stated FRL would be the sole vehicle for the conduct of FCPL and FRL\u2019s conduct of business, resulting in benefit of the entire investment to FRL.<\/p>\n

Within months of investment it was noted that the Biyanis <\/em>which controls FRL breached the agreements by violating the contractual obligations, approved transaction relating to the transfer of its retail assets to Mukesh Dhirubhai Ambani Group (MDA) which is a Restricted Person <\/em>as per Shareholders\u2019 Agreement between petitioner and respondents (FCPL-SHA) [Disputed Transaction].<\/strong><\/p>\n

Timeline of Events:<\/strong><\/span><\/h3>\n\n\n\n\n\n\n\n\n
05-10-2020<\/td>\n\n
    \n
  • Arbitration Proceedings initiated.<\/li>\n
  • Application filed to seek an \u2018Emergency Interim Relief to restrain respondents from pursuing Disputed Transaction.<\/li>\n<\/ul>\n<\/td>\n<\/tr>\n
06-10-2020<\/td>\n\n
    \n
  • Respondent 2 raised an objection with respect to Emergency Arbitrator\u2019s jurisdiction.<\/li>\n<\/ul>\n<\/td>\n<\/tr>\n
09-10-2020<\/td>\n\n
    \n
  • Petitioner requested for status quo to be maintained, however, respondents declined to give any assurance during the pendency of proceedings before the Emergency Arbitrator.<\/li>\n<\/ul>\n<\/td>\n<\/tr>\n
13-10-2020<\/td>\n\n

Emergency Arbitrator called upon both the parties to submit their response pertaining to the following 4 Supreme Court Judgments:<\/p>\n

16-10-2020<\/td>\nArbitrator heard all the parties.<\/td>\n<\/tr>\n
25-10-2020<\/td>\n\n

Emergency Arbitrator passed an interim order and held that:<\/p>\n

\u201cthe Emergency Arbitrator is an Arbitral Tribunal for all intents and purposes. The Emergency Arbitrator further noted that the Emergency Arbitrators are recognized under the Indian Arbitration framework.<\/em><\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

Arbitrator observed that the petitioner made out a strong prima facie case <\/em>that respondents were in breach of the contractual obligations. Further, the arbitrator added that the petitioner would suffer irreparable injury if the interim injunction was not granted.<\/p>\n

Conclusion of Emergency Arbitrator<\/u><\/strong><\/span><\/h3>\n

Petitioner has a strong prima facie case on the merits of the dispute, the petitioner\u2019s rights under the FCPL-SHA, the SSA, and the FRL-SHA (insofar as it has been incorporated into the FCPL SHA) have been apparently compromised by the Respondents and the Respondents have given no good legal reasons for effecting the sale of FRL\u2019s Retail Assets to the Restricted Person behind the petitioner\u2019s back.<\/p>\n

Point-Wise Analysis of the crucial questions raised in the present matter:<\/u><\/strong><\/span><\/h3>\n

Legal Status<\/strong><\/span><\/p>\n

\u00a0<\/strong>Status of an Emergency Arbitrator is solely based on the party autonomy and the powers of such an arbitrator are similar to Arbitral Tribunal to decide an interim measure. Though Arbitral Tribunal is empowered to reconsider, modify, terminate or annul the order\/award of the Emergency Arbitrator.<\/p>\n

\n

Emergency Arbitration is a very effective and expeditious mechanism to deal with the Emergency Interim Relief Application and has added a new dimension to the protection of the rights of the parties.<\/strong><\/span><\/p>\n<\/blockquote>\n

With this mechanism, a litigant gets justice within 15 days, though if the order of Emergency Arbitrator is not enforced, it would make the entire mechanism redundant.<\/p>\n

In the present matter, by agreeing to incorporate the Rules of SIAC into the arbitration agreement, parties agreed to the provisions relating to Emergency Arbitration.<\/p>\n

Current legal framework is sufficient to recognize the Emergency Arbitration and no amendment in this regard was required.<\/p>\n

Section 2(1)(d) defines \u201carbitral tribunal\u201d to mean a sole arbitrator or a panel of arbitrators, it is wide enough to include Emergency Arbitrator.<\/p>\n

Under Section 17(1) of the Arbitration and Conciliation Act, the Arbitral Tribunal has the same powers to make interim order, as the Court has, and Section 17(2) makes such interim order enforceable in the same manner as if it was an order of the Court. The Interim Order is appealable under Section 37 of the Arbitration and Conciliation Act.<\/em><\/p>\n

Whether Doctrine of Group of Companies applies only to proceedings under Section 8 of the Arbitration and Conciliation Act?<\/strong>\u00a0<\/strong><\/span><\/p>\n

Law relating to the Group of Companies doctrine<\/em> is well settled by the Supreme Court in Chloro Controls India Private Limited v. Sever N Trent Water Purification Inc.,<\/em> (2013) 1 SCC 641<\/a>, Cheran Properties Limited v. Kasturi and Sons Limited<\/em>, (2018) 16 SCC 413<\/a> and MTNL v. Canara Bank<\/em>, (2020) 12 SCC 767<\/a>.<\/p>\n

\n

Group of Companies doctrine<\/em> binds the non-signatory entity where the multiple agreements reflect a clear intention of the parties to bind both the signatory and non-signatory entities within the same Group.<\/strong><\/span><\/p>\n<\/blockquote>\n

\u00a0<\/strong>Supreme Court has laid down various tests for invoking the said doctrine.<\/p>\n

Following are the Tests:<\/p>\n