Emergency Arbitration in India: Recent Trends
Gunjan Chhabra & Utsav Saxena[i]
The concept of Emergency Arbitration has attained popularity among parties to arbitration and has found a pivotal space in the rules of institutional arbitration. Myriad countries such as Singapore, Hong Kong, the United Kingdom, etc. have acknowledged and introduced ‘Emergency Arbitration’ in their legal regime, enabling the parties to enforce the award so passed. However, India has still not introduced the concept of ‘Emergency Arbitration’ in Part I of the Arbitration and Conciliation Act, 1996 (hereinafter the ‘A&C Act’), although the Law Commission had recommended it in its 246th Report. The question which arises in this context is whether a mere failure to expressly mention emergency arbitration in the A&C Act, leads to the conclusion that India would refuse to recognize emergency arbitration?
Here, the Supreme Court of India, in August 2021 has come to the rescue The Apex Court, in Amazon.com NV Investment Holdings LLC v. Future Retail Limited & Ors., (2021 SCC OnLine SC 557) (hereinafter the ‘Amazon v. Future) interpreted Section 17 of the A&C Act and clarified the legal standpoint of Emergency Arbitration in India.
Before diving into the recent judgment of the Supreme Court, it’s important to note, an important case of the Delhi High Court which nominally touched upon this aspect. The Delhi High Court, in Raffles Design International Private Limited & Anr. v. Educomp Professional Education Limited & Ors. (hereinafter the ‘Raffles Case’) was faced with a situation, where an emergency award had already been passed by an arbitral tribunal situated outside India (Singapore), but the Respondents were still not complying with it. Section 9 of the A&C Act, deals with the powers of Courts to grant interim measures in both, Indian seated as well as foreign seated arbitration. As a result, the petitioner in this case had approached the Hon’ble Court for an interim relief under section 9 of the A&C Act, seeking the same relief which had already been granted to the Petitioners via emergency award passed by the emergency arbitrator seated outside India. The Court was faced with a question whether the Petitioner could approach the Court for an interim relief considering it had already approached the emergency arbitrator in Singapore and thereafter, obtained a judgment in terms of the interim order from the Singapore High Court.
The Delhi High Court then went on to analyse various provisions of the A&C Act, and observed that while Article 17H of the UNCITRAL Model Law contains express provisions for enforcement of interim measures, the A&C Act does not contain a similar provision. Therefore, the Court, held that the emergency award passed by the emergency arbitrator could not be enforced under the A&C Act and that only method would be for the petitioner to file a separate suit for enforcement.
In the Raffles case however, the Court did find an ingenious way to come around the situation. The Court observed that just because a party had obtained a similar order from an arbitral tribunal, it did not mean that the same party would be precluded from seeking the same relief under Section 9 of the A&C Act. So therefore, although recourse to Section 9 was not available for the purpose of enforcing orders of the arbitral tribunal, it did not preclude the Court from applying its independent mind and granting the same interim relief wherever warranted, and in doing so it would be unfettered by the findings or the view of the Arbitral Tribunal.
Although in the Raffles Case the Court did touch upon the enforceability aspect of a foreign emergency award and answered the same in the negative, the Court did not quite say or touch on the validity or recognition of an emergency award in India, there being no statutory regime for the same.
Emergency Arbitration: The Way Forward
The Amazon v. Future case clarifies the legal issue regarding the validity of an emergency award in an arbitration proceeding seated in India and the enforcement of the same. In this case, Amazon had initiated emergency proceedings under the Rules of Singapore International Arbitration Centre (hereinafter the “SIAC Rules”), and had obtained an emergency award in an India seated arbitration (Arbitration was seated at New Delhi, India).
Thereafter, some of the Respondents in the arbitration had described the emergency award as a nullity and the emergency arbitrator as “coram non judice”, thus refusing to recognize the effect of the emergency award. In the meanwhile, Amazon had initiated proceedings before the Delhi High Court under Section 17(2) of the A&C Act to enforce the emergency award passed in a Singapore seated arbitration under the SIAC Rules. In this case, the Delhi High Court had passed a status quo order restraining the non-adherent Respondents from going ahead with the impugned transaction. This order was vacated in an appeal filed before the division bench of the Delhi High Court (filed under the Code of Civil Procedure as the other party described the emergency award to be a nullity). While there were several other proceedings and cross-proceedings going on between the parties, what is relevant to point out, are the two issues framed by the Supreme Court in this case, which are discussed hereafter.
The two questions were:
(1) Whether an “award” delivered by an Emergency Arbitrator under SIAC Rules can be said to be within the contemplation of the A&C Act, and whether it can further be said to be an order under Section 17(1) of the A&C Act;
(2) Whether an order passed under Section 17(2) of the Arbitration Act for the enforcement of the award of an Emergency Arbitrator by the learned Single Judge of the High Court is appealable.
For the first question, the Supreme Court first analysed the conspectus of the A&C Act and observed that the A&C act provides for arbitration to be administered by an institution, and that ‘Party Autonomy’ was key. In this case, the parties had agreed to be governed by the SIAC rules.
The Court also noted, Rule 3 of the SIAC Rules regarding notice of arbitration, which stated that the date of receipt of complete Notice of Arbitration by the Registrar would be deemed to be the starting point for the commencement of arbitration. Therefore, the Court concluded that a combined reading of Rule 3 and of Section 21 of the A&C Act, in relation to commencement of arbitration proceedings under the SIAC rules made it evident, that arbitration proceedings could have said to have been commenced much prior to the constitution of the Arbitral Tribunal, that is, when the complete notice was received by the Registrar. In fact, the parties had consented to such a commencement. Thus, the parties had consented to the commencement of the arbitration proceedings when any party wrote to the Registrar for emergency arbitration.
Having analysed this, the Court then went on to analyse section 17 of the A&C Act, which used the words “during the arbitral proceedings”. Therefore, as observed above, the proceedings had “commenced” within the meaning of Section 21 of the A&C Act read with SIAC rules, even at the stage when the emergency award was passed, as the emergency award was passed only after the notice had already been received by the registrar. Since the emergency award was passed after the “commencement”, it would be covered in the period “during arbitral proceedings” and thus, can be covered under Section 17 of the A&C Act.
The Court therefore observed that the orders of Emergency Arbitrators would be covered within the ambit of the A&C Act, owing to the fact that:
i) There was no interdict, either express or implied, against an emergency arbitrator in the A&C Act,
ii) And rather, an emergency award could be said to be an award passed “during the arbitral proceedings” within the meaning of Section 17 of the A&C Act.
The Hon’ble Court also stressed on the concept of ‘party autonomy’ by referring to its judgment in Centrotrade Minerals & Metal Inc. v. Hindustan Copper Ltd. 2020 SCC OnLine SC 479, and observed that the mere fact that the parties under the SIAC rules agreed to participate in an emergency arbitral proceedings does not violate any mandatory provisions of the A&C Act. There is no such provision under the A&C Act, which prohibits the parties from entering into such agreements. Moreover, the provisions under the A&C Act which advocates ‘party autonomy’ states that when the party refers the matter to institutional arbitration then such rules would apply to govern the rights between the parties. Thus, when the parties agreed to the SIAC rules, they gave consent to ‘emergency arbitration’ due to which the award passed by the emergency arbitrator is valid and recognized as an interim award under Section 17(1) of the A&C Act. Resultantly, emergency awards can be enforced under Section 17(2) of the A&C Act.
The Court then went on to analyse the second question.
The Court first analysed whether an Order under Section 17(2) could be appealed as an appealable order under Order XLIII of the Code of Civil Procedure. The Supreme Court observed the nature of the provision under Section 17(2) of the A&C Act, which makes interim awards of tribunal enforceable in the likeness of decrees of civil courts. It creates a legal fiction, which has the purpose of creating the enforceability of interim orders made by arbitral tribunals and is restricted to that purpose alone. An application for enforcement of an award is an application under the A&C Act, and not under Order XXI of the Code of Civil Procedure, 1908. (Reliance placed on Union of India v. Vedanta Ltd., (2020) 10 SCC 1, corollary drawn from the same proposition for Section 49 of the A&C Act). Therefore, the Court observed that Orders passed for enforcement of interim awards under Section 17(2) of the A&C Act could not be appealed under Order XLIII of the Code of Civil Procedure.
The court then went on to assess, whether an appeal under section 37 of the A&C Act, could be filed against enforcement orders passed by Court under Section 17(2). The Court observed that Section 37 of the A&C Act is limited to orders under Section 17(1) of the A&C Act and does not include an order passed by the Court under Section 17(2) of the A&C Act. As seen above, the award passed by an emergency arbitrator falls under the purview of Section 17(1) due to which a Court’s order under Section 17(2) regarding the enforcement of the said emergency award cannot be appealed.
The Court held that an emergency arbitrator constituted under the valid arbitration agreement falls under the definition of ‘tribunal’ under section 2(1)(d) of the A&C Act. Additionally, the Court also held that interim order passed by an arbitral tribunal under Section 17(1) shall also include orders passed by an emergency arbitral tribunal and the same shall be eligible to be enforced under Section 17(2) of the A&C Act.
The judgment is said to be a landmark judgment as it clarified the dilemma of enforceability of emergency awards in India and is a step towards making India more arbitration friendly. However, the approach followed by the Court in arriving at the conclusion could have been different from the one adopted. The Court based its judgment mainly on the concept of ‘party autonomy’ and its interpretation of the legislature’s objective behind enacting Section 17 of the A&C Act.
The advocates for the respondent argued that parliamentary intention regarding emergency arbitration was crystal clear as they did not introduce the concept of ‘emergency arbitration’ in the 2015 amendment of the A&C Act even when the law commission expressly mentioned the requirement of introducing the concept in the Indian legal regime. However, the Court while rejecting the argument, refereed to the judgment of Avitel Post Stuidoz Ltd. V. HSBC PI Holdings (Mauritius) Ltd. (2021) 4 SCC 713, and held that the mere fact that the parliament did not follow law commission’s recommendation would not necessarily lead to the sole conclusion that the said suggestion cannot be interpreted in the statue. The Court’s interpretation that the mere failure of parliament to carry out the amendment could not imply non-recognition of emergency arbitration is questionable.
Further, as far as the future of emergency arbitration in India is concerned, it still remains a grey area. This is because although, the judgment clarified the standpoint of emergency arbitration in India but only in relation to domestic arbitration having seat in India as the Court interpreted Section 17 which solely applies to domestic arbitration. There still lies a dilemma as to the enforceability of emergency award in arbitration where the seat is outside India.
Therefore, as of now the onus is on the parliament to take into consideration the future of emergency arbitration in relation to seat outside India and must clarify the legal regime through an amendment.
Gunjan Chhabra: Working with Adwitya Legal LLP as Partner, Arbitration and Dispute Resolution, e-mail: firstname.lastname@example.org; Utsav Saxena: Utsav Saxena is a Penultimate year law student at Maharashtra National Law University, Mumbai. He is currently working as a Managing Editor of the Arbitration and Corporate Law Review. For any discussion related to the article, he can be contacted via mail at email@example.com