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Supreme Court rules on Future Retail v Amazon

  • Posted By
    10Pointer
  • Categories
    Polity & Governance
  • Published
    9th Aug, 2021
  • Context

    The Supreme Court upheld the enforcement of an order by Singapore International Arbitration Centre (SIAC)’s emergency arbitrator that puts hold on the Future Group’s deal with Reliance Industries Limited.

  • Background

    What is the issue between Future Retail v Amazon?

    • Future Retail had announced to sell the retail and wholesale business units to Reliance Retail, a unit of Mukesh Ambani-owned Reliance Industries.
    • Amazon objected to it, over a contract it had with Future Coupons, the promoter firm of Future Retail.
    • Through an agreement with Future Coupons, Amazon had given it a “call” option that enabled it to acquire all or part of Future Retail’s shareholding in the company, within three to 10 years of the agreement.
    • Subsequently, Amazon took the matter into emergency arbitration before the SIAC, where an emergency arbitrator stopped the future retail from proceeding with the deal.

    Options

    • Options are the contracts which give the bearer the right, but not the obligation.
    • The contract says to buy or sell an amount of some underlying asset at pre-determined prices on or before the contract expires. 
    • Two types of options:
      • Call Option:  It gives the holder the right to buy stock in future under a contract period.
      • Put Option:  It gives the holder right to sell stock under a contract period.
      • Think of a call option as a downpayment for a future purchase.
    • The developer wouldn’t grant the option for free. The potential buyer or seller needs to contribute a downpayment to lock in that right.
  • What has the Supreme Court ruled now?

    • The First Question: Whether an emergency arbitrator’s award such as SIAC can be said to be within the contemplation of the Arbitration Act?
      • Decision: Such an award can be within the Arbitration Act, as they are “important in aid of decongesting the civil courts” and to provide quick interim relief to parties in the arbitration.
    • The second question: Whether Future Retail’s appeal before a Division Bench of the Delhi High Court was maintainable.
      • Decision: The order of a single Bench of the High Court could not have been appealed before the Division Bench under Section 37(2) of the Arbitration Act.

    Division Bench

    • It is a bench in the judicial system in India in which a case is heard and judged by at least 2 judges.

     

    Emergency Arbitration (EA)

    • Emergency relief is often described as "Achille's Heel".
    • Emergency Arbitration (EA) is the type of emergency relief to protect assets and evidence that might be altered or lost.
    • The objective of EA is to provide urgent pro tem or conservatory measures in case of urgency when no arbitral tribunal is in place.
    • The efficacy of an Emergency Arbitration survives on a chariot of two wheels:
      1. Fumusboniiuris- Reasonable possibility that the requesting party will succeed on merits;
      2. Periculum in mora – if the measure is not granted immediately, the loss would not and could not be compensated by way of damages.
    • An Emergency Arbitration is capable of granting interim measures or conservatory relief only for a stipulated period.
    • It functions similar to an ad hoc tribunalwhich is constituted for a limited purpose and immediately be dissolved, once the purpose is served.
    • An Arbitrator appointed for the purposes of an Emergency is known as an Emergency Arbitrator.
  • What happens to the Future Retail-Reliance Retail deal now?

    • If SIAC holds that the Future Retail-Reliance Retail deal violates the pact that Future Coupons had with Amazon, it would in essence mean the end of the Future-RIL deal.
    • The judgment would serve as a reminder to parties to carefully agree to the terms and conditions of the arbitration.

    Singapore International Arbitration Centre (SIAC)

    • SIAC is a Neutral Arbitral Institution with a Record of Enforcement established in 1991 as an independent and not-for-profit organization.
    • SIAC arbitration awards have been enforced by the courts of Australia, China, Hong Kong SAR, India, Indonesia, Jordan, Thailand, UK, USA, and Vietnam etc.
    • SIAC has been ranked 2nd among the world’s top 5 arbitral institutions.
    • Its case management services are supervised by ‘Court of Arbitration’ which comprises internationally renowned arbitration practitioners
  • Conclusion

    This latest verdict was keenly awaited as it is likely to deal with the legality and enforceability of an award by an Emergency Arbitrator (EA) of the foreign country in India in view of the fact that the term EA is not used in the Indian Arbitration and Conciliation Act.