Emergency Arbitrator’s order would fall within the institutional rules, and would consequently be covered by Section 17(1) of Arbitration Act: Supreme Court

The SC on August 06, 2021 {AMAZON.COM NV INVESTMENT HOLDINGS LLC vs. FUTURE RETAIL LIMITED & ORS.} held that there being no interdict, either express or by necessary implication, against an Emergency Arbitrator would show that an Emergency Arbitrator’s orders, if provided for under institutional rules, would be covered by the Arbitration and Conciliation Act, 1996.

It was also held by the Bench, comprising of Justice R. F. Nariman and Justice B.R. Gavai that a reading of the provisions would show that an arbitration proceeding can be administered by a permanent arbitral institution. It was held that importantly, Section 2(6) makes it clear that parties are free to authorise any person including an institution to determine issues that arise between the parties. It was also held, under Section 2(8), party autonomy goes to the extent of an agreement which includes being governed by arbitration rules referred to in the present agreements. Likewise, under Section 19(2), parties are free to agree on the procedure to be followed by an arbitral tribunal in conducting its proceedings.

The SC held that the parties to the contract, in the present case, by agreeing to the SIAC Rules and the award of the Emergency Arbitrator, have not bypassed any mandatory provision of the Arbitration Act. It was held that 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, it was held that when properly read, 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. 

It was held that a reading of the Rules indicates that even before an Arbitral Tribunal is constituted under the Rules, urgent interim reliefs can be granted by what is termed as an “Emergency Arbitrator”. It was held that an Emergency Arbitrator’s “award”, i.e., order, would undoubtedly be an order which furthers these very objectives, i.e., to decongest the court system and to give the parties urgent interim relief in cases which deserve such relief. It was also held that given the fact that party autonomy is respected by the Act and that there is otherwise no interdict against an Emergency Arbitrator being appointed, it is clear that an Emergency Arbitrator’s order, which is exactly like an order of an arbitral tribunal once properly constituted, in that parties have to be heard and reasons are to be given, would fall within the institutional rules to which the parties have agreed, and would consequently be covered by Section 17(1), when read with the other provisions of the Act.

It was held that a party 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 Emergency Arbitrator’s ruling. It was held that it is incongruous that after agreeing to be governed by institutional rules, can participate in a proceeding before an Emergency Arbitrator and, after losing, turn around and say that the award is a nullity or coram non judice when there is nothing in the Arbitration Act which interdicts an Emergency Arbitrator’s order from being made. It was held that Section 17, as construed in the light of the other provisions of the Act, clearly leads to the position that such emergency award is made under the provisions of Section 17(1) and can be enforced under the provisions of Section 17(2).

The SC held that there is no doubt that Section 17(2) creates a legal fiction. It was held that this fiction is created only for the purpose of enforceability of interim orders made by the arbitral tribunal. It was held that to extend it to appeals being filed under the Code of Civil Procedure would be a big leap not envisaged by the legislature at all in enacting the said fiction; to extend this fiction to encompass appeals from such orders is to go beyond the clear intention of the legislature.

It was also held that as far as Section 17 is concerned, the scheme qua interim orders passed by an arbitral tribunal mirrors the scheme qua interim orders passed by civil courts under Section 9. It was held that this vital difference between the provisions of Section 17 read with Section 9 and as contrasted with Section 36 puts paid to the argument of the respondents.

It was held that the Arbitration Act is a self-contained code on matters pertaining to arbitration, which is exhaustive in nature. It was held that the appeal provision carries a negative import that only such matters as are mentioned in the Section are permissible, and matters not mentioned therein cannot be brought in.

In the present case before the SC, two important questions arise in these appeals – first, as to whether an “award” delivered by an Emergency Arbitrator under the Arbitration Rules of the Singapore International Arbitration Centre [“SIAC Rules”] can be said to be an order under Section 17(1) of the Arbitration and Conciliation Act, 1996 [“Arbitration Act”]; and second, as to whether an order passed under Section 17(2) of the Arbitration Act in enforcement of the award of an Emergency Arbitrator by a learned Single Judge of the High Court is appealable.

The SC answered that the first question by declaring that 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”. It was held that such orders are an important step in aid of decongesting the civil courts and affording expeditious interim relief to the parties. It was held that such orders are referable to and are made under Section 17(1) of the Arbitration Act.

Further, the second question posed was thus answered by the SC declaring 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. It was held by the SC that as a result, all interim orders of this Court stand vacated. The impugned judgments of the Division Bench, dated 8th February, 2021 and 22nd March, 2021, were set aside by the SC. The appeals were disposed of accordingly.