Validity of Emergency Arbitration Award

Emergency Arbitrator Award

By agreeing to the application of the SIAC Rules, the arbitral proceedings in the present case can be said to have commenced from the date of receipt of a complete notice of arbitration by the Registrar of the SIAC, which would indicate that arbitral proceedings under the SIAC Rules
commence much before the constitution of an arbitral tribunal under the said Rules. This being the case, when Section 17(1) uses the expression “during the arbitral proceedings”, the said expression would be elastic enough, when read with the provisions of Section 21 of the Act, to include emergency arbitration proceedings, which only commence after receipt of
notice of arbitration by the Registrar under Rule 3.3 of the SIAC Rules as aforesaid.

A conjoint reading of these provisions coupled with 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 Act.

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 ?

On 18th March, 2020, the learned Single Judge passed a detailed judgment giving reasons for an order made under Section 17(2) read with Order XXXIX, Rule 2-A of the Code of Civil Procedure, 1908 [“Code of Civil Procedure”] in which it was held that an Emergency arbitrator’s award is an order under Section 17(1) of the Arbitration Act. Since breaches of the Agreements aforementioned were admitted, the only plea being raised being that the Emergency Arbitrator’s award was a nullity, the learned Single Judge held that such award was enforceable as an order under the Arbitration Act, and further held that the injunctions/directions granted by the said award were deliberately flouted by the Biyani Group. He also found that any so-called violations of Foreign Exchange Management Act, 1999 [“FEMA”] did not render the Emergency Arbitrator’s award a nullity, and therefore, issued a show-cause notice under Order XXXIX, Rule 2-A of the Code of Civil Procedure, after imposing Rs.20 lakh as costs to be deposited with the Prime Minister Relief Fund for being used for providing COVID vaccinations to the Below Poverty Line category of senior citizens of Delhi.

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?

Despite Section 17 being amended by the same Amendment Act, by making Section 17(1) the mirror image of Section 9(1) as to the interim measures that can be made, and by adding Section 17(2) as a consequence thereof, significantly, no change was made in Section 37(2) (b) to bring it in line with Order XLIII, Rule 1(r). The said Section continued to provide appeals only from an order granting or refusing to grant any interim measure under Section 17. There can be no doubt that 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). 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 sub-section (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). What is clear from this is that enforcement proceedings are not covered by the appeal provision.

A literal reading of Section 17 would show that the grant or non-grant of interim measures under Section 37(2) (b) refers only to Section 17(1) of the Act. Also, in the context of Section
37(2)(b), the entirety of Section 17 was referred to when Sections 17 and 37 were first enacted in 1996. It is only by the 2015 Amendment Act that Section 17 was bifurcated into two sub-sections. What is significant in this context is that no corresponding amendment was made to Section 37(2)(b) to include within its scope the amended Section 17, as has been pointed out hereinabove.

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 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. 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.

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. Given the fact that party autonomy is respected by the Act and that there is otherwise no interdict against an Emergency Arbitrator being appointed, as has been held by us hereinabove, 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, as delineated above.

[Source: Amazon Inc. vs. Future Retails , decided by SC on August 6, 2021.]

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