Round One: Win for Amazon as Supreme Court stalls Future-Reliance Retail deal

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August 07, 2021 4:30 AM

The SC said the EA order is an order within Section 17(1) and can be enforced under Section 17(2) of the Arbitration and Conciliation Act. It further held that such award cannot be appealed under Section 17(2) of the Act.

The EA award was passed in October 2020 following which Amazon had sought its enforceability by restraining FRL from going ahead with the transaction.The EA award was passed in October 2020 following which Amazon had sought its enforceability by restraining FRL from going ahead with the transaction.

E-commerce major Amazon scored a major victory on Friday with the Supreme Court upholding the Singapore International Arbitration Centre’s emergency arbitrator (EA) award restraining Future Retail (FRL) from going ahead with its Rs 24,713-crore merger deal with Reliance Retail.

A bench led by Justice RF Nariman held that an award of an EA is enforceable under the Indian Arbitration and Conciliation Act, thus dismissing the argument put forward by FRL that an EA is not an arbitrator under the Indian law as the term does not find any mention in the statute.

The SC said the EA order is an order within Section 17(1) and can be enforced under Section 17(2) of the Arbitration and Conciliation Act. It further held that such award cannot be appealed under Section 17(2) of the Act.

The apex court declared that full-party autonomy is given by the Arbitration Act to have a dispute decided in accordance with institutional rules which can include EAs delivering interim orders, described as “awards”. “Such orders are an important step in aid of decongesting the civil courts and affording expeditious interim relief to the parties. Such orders are referable to and are made under Section 17(1) of the Arbitration Act,” the court ruled. The judges said that it is “wholly incorrect to say that Section 17(1) of the Act would exclude an EA’s orders.

Rejecting FRL’s stand that the EA’s order is a “nullity” in absence of an arbitration agreement, the SC order said “a party (FRL) cannot be heard to say, after it participates in an Emergency Award proceeding, having agreed to institutional rules made in that regard, that thereafter it will not be bound by an EA’s ruling”.

In doing so, the SC agreed with the February 2 order of the single judge of the Delhi High Court which had restrained FRL from going ahead with the deal. The single judge had stated in his order that the EA had rightly passed the award and the same was enforceable in the same manner as that of an arbitrator’s order. It had said that it was of a clear view that the EA rightly proceeded against FRL and its award was not a nullity. The single judge’s order was subsequently stayed by the division bench following which Amazon had appealed in the SC.

The EA award was passed in October 2020 following which Amazon had sought its enforceability by restraining FRL from going ahead with the transaction.

Though SC’s Friday order was on the limited issue of the enforceability of the EA’s order and not on the merits of the case, nevertheless it is a huge setback for FRL as it effectively stalls the final approval to the FRL-Reliance Retail merger by the Mumbai bench of the National Company Law Tribunal. The SC had allowed the bench to go ahead with the hearings but restrained it from passing a final order till it disposed the matter.

FRL will now have to wait for the final order of the SIAC which concluded the hearings last month. Once SIAC’s final order comes, all the cases arising from the EA’s order will become infructuous.

Further, FRL said it would be availing all legal remedies available before it. Legal experts said now that the SC has held that no appeal would lie to division bench of the HC under Section 37 of the Arbitration Act against an order of enforcement of an EA’s order (single judge), FRL may approach the SC and seek stay on the single judge’s order that stalled the FRL-Reliance Retail deal.

The fight between Future Group and Amazon has been going on since October 25, 2020, when the Singapore’s Emergency Arbitrator passed an interim order restraining FRL from going ahead with its deal with Reliance Retail. Amazon, which acquired an indirect minority stake in Future Group in 2019, has alleged that Future’s sale of its retail, wholesale, logistics and warehousing businesses to Reliance Retail breached its pre-existing contract, which included a right of the first offer and a non-compete clause.

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