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Why the Delhi High Court declined to interfere in the arbitration proceedings between Future Retail and Amazon

The long-standing dispute between Future Retail and Amazon is before a tribunal that is set to call expert witnesses soon.

The Delhi High Court on January 4 dismissed pleas filed by Future Retail and Future Coupons to stop the arbitration proceedings with Amazon. The Court ruled that the arguments made by Future held no merit and it will not interfere in the proceedings of the Singapore-based Arbitration Tribunal.

The tribunal scheduled hearings of expert witnesses in the Future vs Amazon case between January 5 to January 8, but Future requested the tribunal to adjourn these hearings and instead consider the termination application filed by them in light of the recent order issued by the Competition Commission of India (CCI) suspending the approval it gave for Amazon’s investment in Future Coupons in 2019. Since the tribunal refused to accept these requests, Future had sought the intervention of the Delhi High Court.

Amazon has so far used its investment in Future Coupons to block the sale of Future Retail to Reliance, rendering the CCI order a major setback for the company. Against this backdrop, the Delhi High Court’s ruling will offer a reprieve for the US e-commerce giant as the arbitration proceeding can now take its due course.

Why did the court dismiss Future’s petitions?

In its 21-page order, the court provided the following reasons for dismissing the petitions filed by Future Retail and Future Coupons:

  • The Arbitral Tribunal has been accommodating towards all parties: Based on the evidence submitted and examples cited below, Justice Amit Bansal noted that the Arbitral Tribunal has been accommodating towards all parties:
    • Date of hearing for terminal application has been provided: One of the grievances of Future was that no date has been fixed for a hearing on the termination applications. However, Bansal noted that this grievance stands redressed by a subsequent email dated 1 January 2022 of the Arbitral Tribunal, in which the date of 8 January has been fixed for hearing on the termination applications.
    • An earlier date was provided but Future was unavailable: Bansal also pointed out that the tribunal had initially given January 4 as an option to hear the termination application, but the said hearing could not be scheduled on account of the non-availability of the lead counsel of Future Retail.
    • Tribunal willing to find another date for further submission: Bansal also took into account the tribunal’s readiness to find another date if further oral submissions are required to be made.
  • No prejudice would be caused if expert hearings take place before hearing of termination application: Mukul Rohatgi, senior counsel appearing on behalf of Future Coupons, stated that the termination application “goes to the very root of the matter and therefore, ought to be decided at the outset without further continuing with the arbitration proceedings” because if “the termination applications are allowed, there would be no requirement for proceeding with the hearing of the expert witnesses.” Justice Bansal, however, wrote that he does not find merit in this submission and that no prejudice would be caused if the termination application is heard on January 8. Bansal also noted that the tribunal had “cogent reasons” to choose this date: it will allow the concerned parties to make written submissions in advance of the said hearing.

“Just because the hearing of the termination applications is scheduled for a date after the hearings of the expert witnesses does not mean that the Arbitral Tribunal is not willing to consider the said applications on merits or is discounting the merits of the said applications. It is in the sole discretion of the Arbitral Tribunal to decide whether the termination applications should be heard before or after the hearings of the expert witnesses.”

  • Nothing to suggest that the Arbitral Tribunal has denied equal opportunity to the parties: Harish Salve, senior counsel appearing on behalf of  Future Retail submitted that “the Arbitral Tribunal has consistently violated the principle of equal opportunities.” Future had also argued that one day of hearing provided for the termination application is not enough. Bansal, however, noted that the Arbitral Tribunal has directed the parties to make detailed written submissions in advance and has also provided the opportunity for another oral hearing if more arguments need to be heard. Furthermore, the tribunal mentioned that if Future succeeds in the termination application, they would be entitled to claim costs. In light of this Bansal wrote: “In my prima facie view, there is nothing to suggest that the Arbitral Tribunal has denied equal opportunity to the parties.”
  • Inconvenient and cumbersome to reschedule dates in such hearings: Pointing out that the hearings involve people from different parts of the world, Bansal noted that it would be “very inconvenient and cumbersome” to reschedule. “It is a matter of common knowledge that in international commercial arbitrations involving parties as well as specialist arbitrators from different jurisdictions, it is difficult to schedule dates and therefore, the requests of the parties to adjourn or postpone the dates fixed much in advance are generally not acceded to,” Bansal said.
  • COVID-19 cannot be grounds for postponement:  Future requested an extension stating that some lawyers working on the present matter tested positive for COVID-19. Bansal, however, noted that the same cannot be a ground for postponement of hearings as businesses and courts in the country continue to function. Furthermore, Bansal remarked that “all the parties in the present arbitration proceedings are big corporations and have a battery of lawyers representing them before multiple fora. Even if some of the lawyers have tested positive for COVID-19, it can be duly expected that the parties and their law firms would endeavour to make alternate arrangements.”

“Functioning during the COVID-19 pandemic is a reality that lawyers, judges and arbitrators have had to come to terms with.” — Justice Amit Bansal

  • A very small window of interference available to the court: When considering the Court’s jurisdiction on this matter, the Justice noted that “there is only a very small window for interference with orders passed by the Arbitral Tribunal while exercising jurisdiction under Article 227” and that “this window cannot be used for impugning case management orders passed by the Arbitral Tribunal, which are in the nature of procedural orders.” This judgement was in line with Amazon’s submission that the petitions filed by Future are not maintainable.
  • Violative of autonomy vested in the Arbitral Tribunal: Citing precedents, Bansal noted that the Arbitral Tribunal is not bound by the procedure of the Code of Civil Procedure, 1908 or the Indian Evidence Act, 1872 and this allows it to decide the manner in which the proceedings are to be conducted. “For this Court to interfere in the aforesaid issues would be violative of the autonomy vested in the Arbitral Tribunal,” Bansal stated.
  • The intention of arbitration is to ensure expeditious disposal of disputes: Bansal observed that the intention of the Arbitration and Conciliation Act is to “ensure expeditious disposal of disputes” with “minimum interference by the Courts” and that “if the parties are encouraged to approach the Court at every stage of the arbitration proceedings, the whole purpose of the arbitration would stand frustrated.” Amazon’s lawyers had argued that “the petitions have been filed only to delay the ongoing arbitration proceedings between the parties.”

What’s Amazon’s response to the CCI order?

Amazon is yet to publicly comment on the CCI order that is at the heart of the dispute, but Reuters reported on Monday that Amazon has informed the Singapore arbitrator that CCI’s suspension of the 2019 deal does not mean the transaction is void and that Amazon can reapply for clearances. Amazon also reiterated to the arbitrator that CCI acted beyond its powers and that there are many grounds to challenge the watchdog’s decision.

Recap

In November 2019, Amazon received approval to acquire a 49 percent equity in Future Coupons, the promoter entity of Future Retail, which operates 900 stores in India. Since Future Coupons owned a 7.3 percent stake in Future Retail, the deal gave Amazon a 3.58 percent stake in Future Retail. Then, in August 2020, Reliance announced that it will buy most of Future Group’s retail, wholesale, and logistics business in a deal worth Rs 24,713 crore. Amazon objected to this acquisition saying it had the right of first refusal because of its stake in Future Coupons. Both Amazon and Future have been engaged in a legal battle over this issue since October 2020.

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