If Amazon Wins, It Will Get Rs 1400 Crores, But 26,000 Employees Of Future Retail Might Lose Jobs : Salve In Supreme Court
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"This matter is about 1,400 crores invested by Amazon versus 26,000 employees losing their jobs and 8-10,000 crores of banks going bust. If Amazon wins, it will get its 1,400 crores, but one of our terms with Reliance is that not even a single employee will lose his job and the banks will be paid", Senior Advocate Harish Salve, for Future Retail, told the Supreme Court on Tuesday.The Bench...
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"This matter is about 1,400 crores invested by Amazon versus 26,000 employees losing their jobs and 8-10,000 crores of banks going bust. If Amazon wins, it will get its 1,400 crores, but one of our terms with Reliance is that not even a single employee will lose his job and the banks will be paid", Senior Advocate Harish Salve, for Future Retail, told the Supreme Court on Tuesday.
The Bench of Justices Rohinton Nariman and B. R. Gavai was hearing Amazon's challenge to an order dated March 22 passed by a Division Bench of the Delhi High Court staying a Single-Judge order which had upheld the Emergency Award passed by a Singapore Tribunal halting the Reliance-Future deal worth Rs. 24,713 crores. Amazon contends that it had invested Rs.1431 Crore in Future Coupons based on certain special, material protective/negative rights available to FCPL in FRL (namely, that the Retail Assets of FRL would not be alienated without Amazon's prior written consent, and never to a Restricted Person, and that FRL would remain the sole vehicle for conduct of its retail business), and the entire investment was invested by FCPL into FRL.
Mr. Salve took the bench through the aforesaid order of the Single Judge, Justice J. S. Midha,arguing how it was erroneous in law."When I am saying that the order of the Emergency Arbitrator is null and void for two reasons – one, that there is no notion of any emergency arbitrator under Indian law, and two, that there is no arbitration agreement in any case between Amazon and myself, the executing court cannot blindly say because the Emergency Arbitrator has said something, I will execute it! The Single Judge heard all our arguments and then says you have not argued nullity?! This is what happens when we rush execution! It should be expeditious, but not at others' cost!", advanced the Senior Advocate.
Mr. Salve indicated the decision of another Single Bench, Justice Mukta Gupta, of the Delhi High Court in a suit filed by FRL on the ground that Amazon was interfering with a lawful transaction between FRL and Mukesh Dhirubhai Ambani group, where FRL also sought interim relief seeking to restrain Amazon from writing to regulators. He advanced that it has been his client's case all along that they have no privity of contract, forget arbitration agreement, with Amazon. "Amazon did not tell then what they are telling the court today that I paid 1400 crores basically to prevent the Biyanis (promoters of FRL) from doing business. You can't pay money to block a company! But we argued before the Single Judge and the suit was that I have no contract with you. I have a contract with FCPL under which, for certain transactions, I need their written consent, which I have obtained! And Amazon is representing before statutory authorities like the CCI, SEBI that I am acting in breach of the contract? Amazon trying to prevent my entering into an agreement with Reliance suffered from a tort of unlawful interference! The Single Judge took the view that it cannot be said that the order of the emergency arbitrator is void, but opined that prima facie, in making those representations, Amazon was indeed acting in breach, but said that on the balance of convenience, I will not grant injunction. The Single Judge asked us to make a representation and to file replies and let the authorities decide. That order continues to be in force!"
He continued to advance that section 16 of the 1996 Arbitration Act provides that once the arbitrator decides that it has the jurisdiction, the respondent who challenges that has 2 options- he can join proceedings and fight the case and then take to section 34(1) of the Act for setting aside the award on the ground that there was no jurisdiction, or he can stay outside the arbitration. "When the award comes for execution, surely I can argue before the Indian court that it was without jurisdiction. I cannot argue that the Emergency Arbitrator's order is wrong, that the finding that I have breached the contract is wrong, I cannot argue on the construction of the contract, I cannot argue on the relief granted, but what I can say is that this order is not worth the paper it is written on! This is a plea which is always open in execution!", argued Mr. Salve.
He submitted that he had assisted Justice Midha on the provisions of the Arbitration Act and a lot of time was spent on arguing that an EA is not a tribunal as recognised in the Act, but the fundamental point of section 17(2) of the Act not being applicable to the EA was ignored.
Further, Mr. Salve indicated that Amazon had initiated the arbitration proceedings on the basis of the arbitration agreement contained in Clause 25.2.1 of the 'FCPL-Shareholders Agreement' which provides for resolution of disputes between the parties according to the Rules of Singapore International Arbitration Centre (SIAC). Clause 25.1 provides that the agreement shall be governed by and construed in accordance with Laws of India. "My submission before Justice Midha was that if I have signed an agreement saying that the governing law is that of India, then the interim orders are limited, under the governing law in India, to orders of the arbitral tribunal as contemplated under section 17! The SIAC Rules have to be seen as subject to adaptation to the Indian law! And the Indian law has expressly not recognised Emergency Arbitrators! But the question of the caveat of governing law, which would rule out the EA, was not addressed!", he contended.
Mr. Salve asserted that while it would be open to him to argue that in the instant case, there could have been no agreement as to emergency arbitrators at all, but today he need go that far because his work is done if the bench sees the language of section 17(1) which speaks of parties applying to the arbitral tribunal for an interim order "during the arbitration proceedings". "17 is not available for the kind of emergency arbitrators which the SIAC Rules envisage to be there before the arbitral tribunal is constituted. The attempt to have the EA's order executed before Justice Midha was a misadventure", he advanced.
He urged the bench to hold that in the light of section 17(2) (which makes orders of the tribunal enforceable as those of the courts), section 17(1) should be strictly construed. "Because to expand this to say that we will confer the power of the State to someone who is not an arbitral tribunal as agreed between the parties would be a step too far", he said.
Mr. Salve submitted that to say that the EA's order has the same legal efficacy as the order under section 17 would be to amend the Indian law by construction."That is what Justice Midha has done and that is what is in appeal before the Division Bench. The Division Bench is yet to decide this issue. If Your Lordships are inclined to decide it, then I will assist you fully. In my submission, if an appeal is pending, then it should go there. In any case, nothing is happening as Your Lordships passed the interim order (barring the NCLT from sanctioning scheme of merger of Reliance-Future companies)", he advanced.
Justice Nariman observed that the bench is considering only 2 issues- one, whether EA's awards fall under section 17(1), and two, whether the EA's award can be enforced under section 17(2), the adjunct being that if it is enforceable under section 17(2), then whether an appeal is maintainable or not therefrom.
To read in an EA as arbitral tribunal would be to go back to 'fork in road' where party may move court under section 9 or the EA- Mr. Salve
On Tuesday, Mr. Salve addressed the question of law whether the award of an emergency arbitrator can be enforced under section 17.
He advanced that under the 1996 Act, we understand that an arbitral tribunal is one which passes interim orders, final orders and proceeds to an award and continues till the point it reaches the terminus of the arbitration. He indicated section 17(1), in as much as it says that a party may, "during the arbitral proceedings", apply to the arbitral tribunal for an interim measure. It was his submission that there cannot be an arbitral proceeding unless the tribunal is first constituted, which tribunal is competent to make an award. "If it was that a party may apply to an arbitral tribunal, we could have given it a wider meaning as including emergency arbitration proceedings. But there is a second limitation and 17 says 'during arbitral proceedings' and it is settled law that you cannot have commencement of arbitral proceedings unless there is a tribunal. And a tribunal is the tribunal which pronounces the award!", advanced Mr. Salve.
He contrasted this with the provisions of section 9(1) of the Arbitration Act which states that a party may, "before, or during arbitral proceedings" or at any time after the making of the arbitral award but before it is enforced, apply to a court for interim measures etc. He advanced that it is very important to see what was added in 2015 by way of section 9(2), that where before the commencement of arbitral proceedings, a court passes an order for interim protection, the arbitral proceedings shall be commenced within a period of 90 days. He also showed that under the SIAC Rules, the order of the emergency arbitrator has a shelf life of 90 days or it continues till such time the issue is dealt with by the tribunal. And if the arbitral tribunal is not constituted within 90 days, the EA's order dies. "The whole idea behind section 9 was you start your arbitration, don't grab an order under section 9 and drag your feet over the constitution of a tribunal and adjudication of your disputes. This echoes that an emergency arbitrators' order is also valid only for 90 days as it is also before commencement of arbitral proceedings", he explained.
"If you see the SIAC rules, the emergency arbitrator cannot only not decide the merits of the case, but the person who functions as emergency arbitrator suffers in that unless the parties agree to it, he cannot even be made an arbitrator. Party autonomy could be such that parties sign into a set of rules which provide for emergency arbitration – You move an application for emergency relief. They appoint a person, he decides the application and the appointment is over. If you come up in a second application for emergency relief, they will appoint a second emergency arbitrator. Emergency arbitrator is not someone who continues till the arbitral tribunal is appointed. In fact, because the original arbitration proceedings have not commenced and urgent relief is necessary, that is why you have an emergency. So, in 17, we cannot excise the words 'during arbitral proceedings'. It may be a very healthy development in the law of arbitration, but this has not been placed in our Act. We could either have special provisions for enforcement of emergency arbitral orders as some statutes do, or we could treat this as an order which would be the basis of an order under section 9. But to take the next step to say that this is the tribunal the order of which will be automatically enforceable under section 17 is a step too far", continued Mr. Salve.
He explained that section 9 continues till such point when the tribunal is constituted and section 17 becomes available, and reading in an emergency arbitrator would be to go back to the "fork in the road" in as much as the party can then go on to the emergency arbitrator or the party can go under section 9. He indicated that section 9(3) provides that once the arbitral tribunal has been constituted, the Court 'shall not' entertain an application for interim measures etc. "How does 9(3) square with an emergency arbitrator? Then we would have two provisions running side-by-side, which was the mystery sought to be resolved by 9(3). The Parliament decided to do away with the fork in the road and to make it a linear, single track road. If an EA deemed to be an arbitral tribunal makes an interim order, then the court is out! But we have not gone that far in 9(3). We do not have any self-dissolving provision under 9", he argued.
He submitted that in enacting section 17, the Parliament felt that once a tribunal is constituted, which is in seisin of merits of the case, and one goes to the tribunal and says that in the meantime, an interim relief is needed, and the tribunal makes an order to that effect, then that order should be executed as an order of the court. It was his case that it is "a leap of faith" to say that if there is an emergency arbitrator before the commencement of arbitral proceedings, by some force of construction, the same result must be achieved.
For emergency arbitrators to be 'tribunal' for the purpose of 1996 Act, the exercise is to be done by the Parliament, and not by the courts by construction- Mr. Salve
Mr. Salve indicated that even though the Law Commission had invited Parliament to include the provision of emergency arbitration, the Parliament did not do so "for whatever reasons"- "Whatever may be the effect of signing up under a set of rules which create an institution of emergency arbitrator, as salutary as it may be, for some reason the Parliament chose not to accept the Law Commission's recommendation and alter this provision. If somebody has to accommodate emergency arbitrators, you have to decide where to feed them in. And this is an exercise which the Parliament may have to do"
He explained why this exercise cannot be done by the process of construction, showing how section 23(1) of the 1996 Act expressly allows the arbitral tribunal to decide the procedural timetable for the proceedings. He pointed out that if an EA is deemed to be an arbitral tribunal, then suppose an emergency arbitrator asks for some evidence to be provided within seven days and that evidence is not provided, or it requires somebody to be produced and that person is not produced, then such person would become liable under section 27(5) for the like disadvantages, penalties and punishments as they would incur for the like offences in suits tried before the Court.
"Today, clearly the arbitral tribunal has the power of the court under 27(5), and to execute its orders, it does not have to go to the court anymore. In the language of the Arbitration Act, the phrase 'arbitral tribunal' is expressly defined under Indian law and we limit it to the tribunal which has been constituted under the agreement between the parties as the arbitral tribunal which will proceed to pass the award. These are special tribunals constituted by a statute; they are tribunals of the State. So if the Parliament wanted an outside institution to be brought within the purview of the Act, it would have to be done by the law. If the legislature recognises a party-constituted body to be a court for all practical purposes, whose orders would be enforced, the degree to which such a body would be treated as a court would be a matter of legislative policy", he pressed.
Mr. Salve elaborated that when Parliaments and legislatures across the world have made provisions for emergency arbitrators, they have either made the law much less detailed than our law, like the English law, or have made specific provisions. "There is the UK model of law, which is agnostic; it does not define arbitral tribunal and very loosely uses the word arbitration – either we have this model. They don't have anything like our section 11. Or we have something like the New Zealand law, the Hong Kong law and the Singapore law where express provisions are made for emergency arbitration. In all these cases where emergency arbitration is concerned, the orders are enforceable with the leave of the court and not automatically. That accommodation would have to be made in our law for this to be an order!", he advanced.
Mr. Salve submitted that he does not intend to go so far as to say that suppose the parties agree to an emergency arbitration proceedings, then that order is void. It was his submission that if parties have agreed to a set of rules which provide for an emergency arbitrator, and the emergency arbitrator makes an order which is not carried out, then recourse can be taken to section 9, and in an appropriate case under section 9, that order can be enforced by a court making a similar order.
"They can ask the parties 'You agreed to it and this is an order of the EA. Why should I not enforce it?'".
The hearing will continue tomorrow.