'Party Autonomy One Of The Pillars Of Arbitration' : Key Takeaways From Amazon- Future Retail Judgment Of Supreme Court

The Supreme Court in its judgment in Amazon.com NV Investment Holdings LLC vs. Future Retail Limited held that an award/order by an Emergency Arbitrator would be covered by Section 17 of the Arbitration and Conciliation Act and it can be enforced under the provisions of Section 17(2). It also held that no appeal lies under Section 37 of the Arbitration Act against an order of enforcement of an Emergency Arbitrator's order made under Section 17(2) of the Act.

The following are key takeaways from the judgment:

1. There is no interdict, either express or by necessary implication, against an Emergency Arbitrator- An Emergency Arbitrator's orders, if provided for under institutional rules, would be covered by the Arbitration Act. (Para 13)
   
2. Party autonomy is one of the pillars of arbitration in the Arbitration Act. (Para 14)
   
3. There is nothing in the Arbitration Act that prohibits contracting parties from agreeing to a provision providing for an award being made by an Emergency Arbitrator. On the contrary, various Sections of the Act which speak of party autonomy in choosing to be governed by institutional rules would make it clear that the said rules would apply to govern the rights between the parties, a position which, far from being prohibited by the Arbitration Act, is specifically endorsed by it. (Para 17)
   
4. Even interim orders that are passed by Emergency Arbitrators under the rules of a permanent arbitral institution would be included within the ambit of Section 17(1)- The words "arbitral proceedings" are not limited by any definition and thus encompass proceedings before an Emergency Arbitration. (Para 19)
   
5. Section 9(3) and Section 17 form part of one scheme- An "arbitral tribunal" as defined under Section 2(1)(d) would not apply and the arbitral tribunal spoken of in Section 9(3) would be like the "arbitral tribunal" spoken of in Section 17(1) which would include an Emergency Arbitrator appointed under institutional rules. (Para 20)
   
6. Mere fact that a recommendation of a Law Commission Report is not followed by Parliament, would not necessarily lead to the conclusion that what has been suggested by the Law Commission cannot form part of the statute as properly interpreted.
   
7. The introduction of Sections 9(2) and 9(3) would show that the objective was to avoid courts being flooded with Section 9 petitions when an arbitral tribunal is constituted for two good reasons – (i) that the clogged court system ought to be decongested, and (ii) that an arbitral tribunal, once constituted, would be able to grant interim relief in a timely and efficacious manner. (Para 32)
8. A party cannot be heard to say, after it participates in an Emergency Award proceeding, having regard to institutional rules made in that regard, that thereafter it will not be bound by Emergency Arbitrator's ruling.
   
9. Full party autonomy is given by the Arbitration Act to have a dispute decided in accordance with institutional rules which can include Emergency Arbitrators 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. (Para 41)
   
10. There is a vast difference between enforcement of orders passed under Order XXXIX, Rules 1 and 2 and orders made in contempt of court. Orders which are in contempt of court are made primarily to punish the offender by imposing a fine or a jail sentence or both. On the other hand, Order XXXIX, Rule 2-A is primarily intended to enforce orders passed under Order XXXIX, Rules 1 and 2, and for that purpose, civil courts are given vast powers which include the power to attach property, apart from passing orders of imprisonment, which are punitive in nature. (Para 50)
    
11. When an order for permanent injunction is to be enforced, Order XXI, Rule 32 provides for attachment and/or detention in a civil prison. Orders that are passed under Order XXI, Rule 32 are primarily intended to enforce injunction decrees by methods similar to those contained in Order XXXIX, Rule 2-A. This also shows the object of Order XXXIX, Rule 2A is primarily to enforce orders of interim injunction. (Para 50)
12. It is one thing to say that the power exercised by a court under Order XXXIX, Rule 2-A is punitive in nature and akin to the power to punish for civil contempt under the Contempt of Courts Act, 1971. It is quite another thing to say that Order XXXIX, Rule 2-A requires not "mere disobedience" but "wilful disobedience". We are prima facie of the view that the latter judgment [U.C. Surendranath v. Mambally's Bakery, (2019) 20 SCC 666 ] in adding the word "wilful" into Order XXXIX, Rule 2-A is not quite correct and may require to be reviewed by a larger Bench. (Para 50)
13. The expression "in relation to", which occurs in both Section 9(1) and Section 17(1), is an expression which is comprehensive in nature, having both a direct as well as an indirect significance- The expression "any proceedings", occurring in Section 9(1) and Section 17(1), would also be an expression comprehensive enough to take in enforcement proceedings. (Para 51, 53)
    
14. The expressions "in relation to" and "any proceedings" would include the power to enforce orders that are made under Section 9(1), and are not limited to incidental powers to make interim orders (Para 54)
    
15. If an order under Section 9(1) is flouted by any party, proceedings for enforcement of the same are available to the court making such orders under Section 9(1). These powers are, therefore, traceable directly to Section 9(1) of the Act – which then takes us to the Code of Civil Procedure. Thus, an order made under Order XXXIX Rule 2-A, in enforcement of an order made under Section 9, would also be referable to Section 9(1) of the Arbitration Act. (Para 54)
    
16. It would be anomalous to hold that if an interim order was passed by the tribunal and then enforced by the court with reference to Order XXXIX Rule 2-A of the Code of Civil Procedure, such order would not be referable to Section 17. (Para 55)
    
17. The arbitral tribunal cannot itself enforce its orders, which can only be done by a court with reference to the Code of Civil Procedure. But the court, when it acts under Section 17(2), acts in the same manner as it acts to enforce a court order made under Section 9(1). If this is so, then what is clear is that the arbitral tribunal's order gets enforced under Section 17(2) read with the Code of Civil Procedure. (Para 56)
    
18. Section 17(2) creates a legal fiction. This fiction is created only for the purpose of enforceability of interim orders made by the arbitral tribunal- Legal fiction is created only for the limited purpose of enforcement as a decree of the court. To extend this fiction to encompass appeals from such orders is to go beyond the clear intention of the legislature- A limited fiction for the purpose of enforcement cannot be elevated to the level of a genie which has been released from a statutory provision and which would encompass matters never in the contemplation of the legislature. (Para 57-59)
    
19. Section 36 which, contains a scheme different from that contained for enforcement of interim orders under Section 17. (Para 68)
    
20. Section 37 is a complete code so far as appeals from orders and awards made under the Arbitration Act are concerned. This has further been strengthened by the addition of the non-obstante clause by the Arbitration and Conciliation (Amendment) Act, 2019. (Para 69)
21. Enforcement proceedings are not covered by the appeal provision- The phrase "granting or refusing to grant any interim measure under Section 17" would only refer to the grant or non-grant of interim measures under Section 17(1)(i) and 17(1) (ii). (Para 74)
22. In fact, the opening words of Section 17(2), namely, "subject to any orders passed in appeal under Section 37…" also demonstrates the legislature's understanding that orders that are passed in an appeal under Section 37 are relatable only to Section 17(1). For example, an appeal against an order refusing an injunction may be allowed, in which case subsection (2) of Section 17 then kicks in to enforce the order passed in appeal. Also, the legislature made no amendment to the granting or refusing to grant any measure under Section 9 to bring it in line with Order XLIII, Rule 1(r), under Section 37(1)(b). (Para 74)

Case: Amazon.com NV Investment Holdings LLC vs. Future Retail Limited ; CA 4492-4493 OF 2021

Coram:  Justices RF Nariman and BR Gavai 

Counsel: Sr. Adv Gopal Subramanium,  Sr. Adv Ranjit Kumar for Appellant, Sr. Adv Harish Salve, Sr. Adv . K.V. Viswanathan, Sr. Adv Vikram Nankani for respondent

Citation: LL 2021 SC 357

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