Nov 11, 202011 min
Amazon has accused Future Retail of insider trading and wrote a letter to SEBI that Future Retail revealed price sensitive information to Reliance regarding the Singapore arbitrator’s order of the injunction granted to the global e-commerce giant.
The Delhi High Court today heard the present suit concerning its deal with Reliance, which was recently stalled by an Emergency Arbitrator of the Singapore International Arbitration Centre (SIAC) in favour of Amazon.
A plea was filed in the Delhi High Court by Kishore Biyani led Future Retail Ltd (FRL) alleging that Amazon was interfering in its deal with Reliance Retail on the basis of an interim order by a Singapore arbitrator. Justice Mukta Gupta while issuing summons to Amazon, Future Coupons Pvt Ltd (FCPL) and Reliance Retail Ltd (RRL) on the "FRL suit", asked them to file their written statements within 30 days. The court had also said that the issue of maintainability of the suit, raised by Amazon, would be kept open.
Justice Mukta Gupta heard the matter today.
Submissions in the matter were made yesterday with Senior Advocate Harish Salve appearing for Future Retail and Senior Advocates Mukul Rohatgi and Vikram Nankani appearing for the promoters, Senior Advocate Abhishek Manu Singhvi appeared for Reliance. Senior Advocate Gopal Subramanium appeared for Amazon.
Senior Advocate Gopal Subramanium continued his submissions on behalf of Amazon.
I want to deal with a point the court discussed before closing the hearing yesterday. What is the cognizablity of the award. They have not challenged the award for whatever reasons : Subramanium
Court: Who is there for Plaintiff?
Mr Salve, Mr Khambata: Senior Advocate Rajiv Nayar
If I can't go into the legality or illegality of the award, can a person be restrained from making a representation? What do you say Mr Singhvi?
Court:You are the main party
Senior Advocate Abhishek Manu Singhvi (for Reliance)
It is not an appeal from an award. It is to tell the Court about the general status of an emergency award. The content of the award is not required to be challenged:
It is the minimalist approach of the Plaintiff
Court : This is the core issue in the matter. You say you are not challenging the award. Other believes it is legal. Everyone is working on their beliefs
Mr. Subramanium Swamy:
I'm disregarding their claim on not challenging the award. My position is recognised under Part I
Submissions by Mr Swamy:
Under 1940 Act, an award is not waste paper. It is final and binding under first schedule. You cannot have a second reference on the same issue even if it is not a decree.
In the 1996 Act, it was done away with. The Act makes an award a decree of the Court. Party autonomy is given primacy
It is upto the parties how they want to frame their arbitration. Arbitration clauses are to be given supremacy
He refers to the Antrix case.
Delhi has Delhi International Arbitration Centre. This has a rule for emergency Arbitration. This is part I Arbitration, purely domestic. The emergency award is enforceable under the Act:
Mumbai, Madras Arbitration Centers have similar Rules on emergency Arbitration. It is inspired from SIAC Rules. There is no incompatibility between emergency Arbitration and Part I
What does their argument hinge on then? The Law Commission Report
He refers to a judgement.
Supreme Court said that merely because Parliament did not act on the Law Commission, it is no bar, the Court will interpret the provision clearly
It does not suggest that Parliament wanted otherwise and wanted status quo to prevail
When institutional rules are adopted, parties agreed to SIAC Rules. Jurisdiction of Delhi courts was subject to arbitration
There is an arbitration clause. The suit is not maintainable
Courts will enforce the arbitration agreement and not adjudicate. A formal application under section 8 is also not necessary
All points were urged before the emergency Arbitrator because it was under the scope of the arbitration
If it is an order by Emergency Arbitrator, section 17 says order passed by a Tribunal. It includes emergency arbitration by virtue of SIAC Rules
The parties are bound by the directions of the emergency Tribunal. The Biyanis are common in all this. They are parties to the arbitration agreement
Amazon repeatedly asked FRL to see what are the ways
We brought in Samara. All this is noted by Arbitrator. The breach became evident and they finally swung to the other side
Rights and obligations of parties shall remain in force pending the arbitration. Arbitrator has followed the spirit. After finding a prima facie case, he passed the directions
Even something is in order of the court, there is a procedure. A man cannot unilaterally say that the award is bad
Where is quorum non judice? He was appointed as per the arbitration agreement. 4k+ pages were argued and then 285 para award was passed
Even in relation to awards, an award is final and binding unless you take steps to step it aside. Section 17 equates it with the order of the court
Before Emergency Arbitrator they (promoters) say that they are going to appoint an Arbitrator. So you hold back
Even without emergency award, my client could go to the statutory authorities. Why was there the need of an emergency award? We wanted to go by the letter of the arbitration agreement
Mr. Subramanium reads the SIAC Rules. He refers to Rule 30. The Rule pertains to Interim and emergency interim relief.
Parties can choose any set of Institutional rules. Once they choose it, courts say that you are bound by it
Our DIAC Rules have a similar pattern:
Emergency Arbitrator held it by way of zoom. Award is deemed to be rendered in seat i.e. Delhi. First and last page of the award says "as rendered" in Delhi
The Emergency Arbitrator said he would give everyone proper time and asked if the status quo would be maintained. They were hesitant. There is a transcript to show how proceedings were held. Full hearing was held
They undertake to comply with it. When there is statutory right to appeal, you cannot waive it
When you subscribe to the Rules of such centres (Delhi, Madras, Mumbai), you can have an
emergency arbitration even for domestic arbitration
How can it be argued that Part 1 prohibits it?
While reading Rule 14 of DIAC Rules. "This is a best practice procedure now"
Rule 14 refers to emergency Arbitration. It is not ex facie illegal. To call something a nullity means there is an inherent lack of jurisdiction
Mr Swamy continues reading the Rule and says it is identical to the SIAC rule on emergency Arbitration.
There is no escape when parties agree to such procedure. Although for a limited duration, he is still an arbitrator whose order is capable of being enforced under Arbitration Act
He then reads the Mumbai International Arbitration Centre (MCIA) Rule. It is also Rule 14. Interim and Emergency Relief
Very similar to SIAC and Delhi Rules
Subramanium reads the Madras High Court Rules. It is Rule 19
Is this not an agreement of the parties? The moment you sigh an agreement with SIAC rules, you are bound by stipulation that when there is an award my emergency Arbitrator you are bound by it
Even without going through process of law, you say it is "non est"
Senior Advocate Rajiv Nayar supplements
Idea of the Institutional Rules is to relieve the courts from section 9 Petitions. Don't clog up the courts as you are before the tribunal
Mr. Subramanium Counsel requests "I will not take more than an hour" that Senior Adv Harish Salve's rejoinder may be taken up tomorrow as he is engaged in another matter.
Court breaks for lunch. Hearing to resume at 2.20 pm.
Hearing resumes
Mr Swamy continues:
Now section 58 itself provides.. you can have contracts which prohibit transfer of security
Emergency Arbitrator accepted our cross undertaking
Undertaking was given by the parties and directions were passed
How an award is enforced is stage two. How is it enforced has nothing to do with its binding nature
The suit itself is not maintainable because all these are matter of reference and are covered by arbitration. There cannot be re-agitation of these points
Until impeached, an award which is on the face of it is regular is binding even though not formally enforced.
You cannot keep on challenging over and over again. Mr Salve says waste paper. Please see, Justice Sikri says it is not waste paper: Mr. Subramanium continues to read.
Mr. Swamy: In 1996 Act, an award is a decree of the court and an interim award is an order of the court
He continues to read a judgment.
"An award is binding unless set aside by a court of competent jurisdiction"
When award is not enforced, it is not a waste paper .. there is error on behalf of what is contended by the Plaintiff. If I want to enforce it, I can move an application under section 17. If I want to. But it is not a test of its legality
Party autonomy is the back bone of arbitration. This court has held it in many cases
He reads a judgment.
There is no doubt that SIAC rules govern the arbitration, they are the expression of party autonomy in this case. So an emergency Arbitrator is as good as an Arbitrator.
Then reads Antrix case. When you choose any institutional rule, you have to follow the regime prescribed under the rules
He refers to Raffles judgement.
UNCITRAL comes in part II and does not refer to Part I
Emergency awards are per se recognised by Delhi HC and Surpreme Court. There is nothing wrong as such
Mr. Swamy reiterates that when something recommended by Law Commission is not accepted by Parliament by way of an amendment, it doesn't mean that the old law continues.
Sometimes Parliament may decide that it (the recommendation) is already there and the court may interpret
He refers to the full transcript of the Emergency Arbitration.
Then reads a portion of the transcript. The Arbitrator recognised that Amazon can always go before the statutory authorities
What is the question of frustrating the arbitration here? Everyone except FRL, Mr Rohatgi's client appointed an arbitrator on November 4
After this award is passed, I only say that there is an award. I am entitled to say that. FRL is bound by it unless they take steps to challenge it
The court asked if FRL SHA was in contemplation. Please see the answer. "This is from Trilegal who acts on behalf of all Companies", he refers to a document
All agreements (FRL SHA, FCPL SHA, and Share Subscription Agreement) are on the plate together
Argument is that FRL did not amend its Articles.. FCPL amended its Articles
He reads the definition of control under takeover code. It is the same as under the Companies Act. I don't have any control in FCPL. My voting rights are only 25%:
Protection that I have is that don't transfer the business or keep it within the company. This is not controlled
He now refers to the ArcelorMittal case on investors having protective rights.
Neither FCPL nor FRL, I'm not controlling their day to day affairs
Control is proactive and not reactive power. Am I in the driving seat? That is the question: Mr. Subramanium continues to read the judgment
Emergency Arbitrator says I accept the claimant's submissions that these are just investor rights
The purported consent in the case is not produced. The emergency Arbitrator records that there is nothing to show that there was consent for the August Resolution
Even when it comes to tort of interference in contracts, the contract itself has to be legal. The sanctity of contracts is to be preserved
Primary recondition is that FRL must have an untainted lawful agreement with Reliance. But where is the agreement?
It is a product of breach. Bypasses an award
It is in the domain of the arbitrator but it is being argued here
Subramanium refers to Justice Gupta's decision in GMR case. Non signatories in India are bound by awards, there's no problem
Section 5, section 8 are attracted in this case. A suit cannot be entertained to stall the emergency Arbitrator's award without taking the remedies under the Arbitration Act
Even an administrative order is valid and you cannot proceed by assuming it to be void unless you challenge it
Merely because it is not to your favour, you say it is nullity, non est.. an order is an order
He refers to judgements.
There cannot be a collateral wishing away of an order
Mandatory injunctions are never granted.. this is a non-maintainable suit
It seeks everything in contradiction of the award
You cannot restrain a person from going to a court. My friend says don't go to statutory authorities. I am going because there is an award in my favour. It is not a great sin
There cannot be a restraint on going for legal remedies. The remedy in this case is in the Arbitration Act and not elsewhere
In the award, the Arbitrator has considered everything upto end of August 2020
He reads portion of award on promoters driving and causing FRL to enter into a disputed transaction.
FRL was aware that Amazon's consent was needed in case of sale or retail assets particularly to a restricted person : Mr. Swamy reads the Award
The Arbitrator takes note that there is interconnectivity of agreements
He refers to more documents/letters to regulators.
Then reads the award, states that the emergency Arbitrator held that prima facie FRL breached the terms of contract.
What is the cause of action for the suit? They say it arose when Amazon wrote to the Plaintiff on October 3. The suit is filed well after the award. The frame of the suit is anti Arbitration
"When there is an Arbitration clause, how can these be the cause of action", he reads the portion of the plaint on cause of action.
The emergency arbitrator, out of maximum transparency, asked for papers and clarification. How can that be cause of action?
He doesn't challenge the award. But they say that the cause of action arose when the Arbitrator "issued a document titled emergency award"
Can the law restrain a person from taking advantage of an award passed in his favour?: Subramanium
Money has gone into the company from me.. how can he now say that there is an agreement with another company
How can there be an injunction against me? This is all within the province of Arbitration..I will just give paragraph numbers. The CCI filings disclose two agreements
All the points before the court were urged before the Arbitrator. The plaintiff is the beneficiary of the monies invested by Amazon. How can it now say that violation of FDI policy
We introduced Samara as problem solver for FRL
This suit is very doubtful.. it is not maintainable at all. It seeks to stall an existing sacred arbitration agreement, a process which is already underway
Section 5 and 8 are the general principles that guide this court.. the Arbitration has commenced and the Plaintiff has participated. Why should it not follow the rigour then
If the emergency award was not in my favour, would the plaintiff still say that the emergency award was not binding
Nothing prevented the plaintiff (FRL) from coming earlier. Party autonomy must be respected in this case
Arbitration agreement itself says that pending award, the parties will maintain the obligations under the agreement
Validity of the Arbitration clause has not been assailed
There is no scope in the suit or the application that anything should be said about the award
The plaintiff side steps the Arbitration Act and says I want a simple order that you don't write to statutory authorities.. It is a legal and binding award. A party cannot denude itself of its obligations under the award
We were not going to let FRL go down. But he hooked on to the restricted person and acted in breach
The case is not that we were unwilling to help. We were exploring possibilities acceptable in law
I would be happy to answer any question that the court may have: Court That's all, Mr Subramanium
"Ship of Arbitration has sailed" He said
"I want to add a line of gratitude": Mr. Subramanium thanks his colleagues for "coaching" him.
"I want to thank my colleagues on the other side"
Senior Advocate Rajiv Nayar supplements the submissions made by Subramanium.
Mr. Nayar: After participating in the arbitration proceedings willingly, the plaintiff is asking that the arbitration be abandoned
Senior Adv. Amit Sibal points out that FRL /Future Group said that they would apoint an Arbitrator and thus no order should be passed.
Court: They waited for five weeks before coming to the court. They can surely wait for another five weeks. The Arbitration Tribunal is on the cusp of formation
Mr.Sibal: They signed the Arbitration clause on adoption of SIAC Rules. The suit is an afterthought and not a genuine reaction
Mr.Sibal: They say there is a caveat to SIAC Rules qua the Indian Arbitration Act. But there is no reference to the Indian Arbitration Act. There is no inconsistency between SIAC Rules and Indian Law
Court: So Mr. Salve will rejoin tomorrow?
Yes
Court: counsel File written submissions by day after tomorrow
Court adjourns hearing. Matter to be heard tomorrow.