Timely Delhi HC reminder to foreign arbitrals on respect of sovereign bodies protecting domestic public policy

Parallel to the developments before the CCI, the on-going Singapore International Arbitration Centre (‘SIAC’) administered arbitral proceedings generated traction. In the aftermath of the Revocation Order passed by the CCI, Future Retail & Future Coupons – the Respondents in the said arbitral proceedings (‘collectively referred to as Future’) were each quick to prefer two applications for Termination (‘Termination Application’) of the arbitral proceedings under Section 32(2)(c) of the Arbitration & Conciliation Act, 1996 (‘the A&C Act’).

The said Termination Application were predicated primarily on the findings
made by the CCI in its Revocation Order, more particularly with regard to
Amazon’s fraudulent representations. Further, it was contended by Future, that in view of the CCI’s findings against Amazon, it became evident that Amazon could not assert its right over Future Coupons. Resultantly, the failure to close Future Coupon’s Share Subscription Agreement (‘SSA’) and the Shareholders Agreement (‘SHA’) and the corresponding failure to execute the “single integrated bargain” rendered the on-going arbitral proceedings “impossible” within the meaning of Section 32(2)(c) of the A&C Act.

Thereafter, the Arbitral Tribunal (‘Tribunal’) decided that it should proceed with a hearing on the substantive and evidentiary aspects of the matter before hearing the Termination Applications. Aggrieved by the Tribunal’s decision, Future persistently urged the Tribunal to hear the Termination Applications before the evidentiary hearings in the light of the effect that the Revocation Order had cast on the arbitral proceedings. However, despite repeated assertions by Future, the Tribunal vide its procedural Orders dated 29th December 2021, 30th December, 2021 & 31st December, 2021 (‘impugned orders’) declined to accede to any of Future’s requests.

It is needless to say, that Future were aggrieved by the Tribunal’s refusal to hear the Termination Application prior to the evidentiary hearings. Therefore, Future were quick to invoke their constitutional remedies under Article 226 & 227 of the Constitution of India before the Hon’ble Delhi High Court challenging the impugned orders. Accordingly, Future Retail and Future Coupons each preferred two Petitions before the Hon’ble Delhi High Court.

THE JUDGMENT OF THE LD. SINGLE JUDGE

The Ld. Single Judge of the Hon’ble Delhi High Court was confronted with the question of whether he should exercise his jurisdiction under Article 226 & 227 of the Constitution of India and thereby grant the relief sought by Future Retail and Future Coupons in their respective Petitions. As both Petitions arose from the same arbitral proceedings and owing to the commonality of the impugned orders, the Ld. Single Judge proceeded to hear and decide both Petitions by passing a common judgment.

Before opining on whether the Court should arbitrarily exercise its constitutional power under Article 226 & 227 by interfering with the impugned orders of the Tribunal, the Court laid down its opinion with regard to facts on record and the Tribunal’s conduct in refusing to postpone the hearing of expert witness. It is pertinent to mention here, that from the documents on record the Court noted that the hearing from the 5th to 7th of January, 2022 were dedicated to the Expert Hearing whereas the hearing on the 8th of January, 2022 was to be for oral submissions on the Termination Application. In view of the factual position, the Court rejected the Future’s contention that the Tribunal had not scheduled a day of receiving oral submissions on the Termination Application. The Ld. Single Judge proceeded to reason by making the observation that the Tribunal had been
more than accommodating to both the parties.

Furthermore, it was contended by Future that the hearing of the Termination Application should have taken priority over the hearing of the expert witness. It was contended that the Termination Applications go to the very root of the matter and the if the said Applications were allowed, the arbitral proceedings would not survive. Rejecting these contentions, the Court held that there was no merit in the submission that just because the hearing of the expert witnesses proceeded the hearing for the Termination Applications that the Tribunal was not willing to consider or discounted the merit of the Termination Applications.

Consolidating its opinion, the Ld. Single Judge reiterated that the administration of the arbitral process lies with the arbitrator and that such contentions did not warrant any interference from Court. Furthermore, the Court laid emphasis and concurred with the reasoning employed by the Tribunal in its decision to schedule one day for hearing the Termination Application. The Ld. Single Judge concluded finding that there was no infirmity in the decision of the Tribunal in refusing to postpone the hearings of the expert witnesses. The Court observed that acceding
to such a request for adjournment would nonetheless derail arbitration
proceedings. In order to further augment its reasoning, observations regarding the difficulties in scheduling fresh dates for modern-day arbitrations were made, as most often the concerned parties find it difficult to come to a consensus. Lastly, the Court rejected all the contentions put forth by Future pertaining to difficulties that arose owing to the Covid-19 Pandemic.

It is our opinion, that the reasoning employed by the Ld. Single Judge on this issue is cogent and demonstrates sufficient application of mind with respect to the evidence on record. However, it would not be out of place to note that the Court has erred by failing to take cognizance of the ground on which the Termination Applications were predicated i.e the Revocation Order. As rightfully put forward by Future, that the CCI’s Revocation of Amazon’s Combination would go to the very root of the maintainability of the arbitral proceedings. It is also pertinent to note that in the event that the Tribunal finds merit in the grounds of the Termination Application, the entire arbitral process would be rendered infructuous. It is our opinion that such an outcome would nonetheless have resulted in huge waste of costs incurred by both parties in pursuing the arbitral proceedings pending the disposal of the Termination Applications. It is also our opinion, that the Ld. Single Judge has erred by failing to take cognizance of the findings made by the country’s apex anti-trust regulatory body and the resultant ramifications in the Revocation Order. After laying sufficient emphasis on the factual particulars and the Tribunal’s conduct in refusing to postpone the evidential hearings, the Court was confronted with the question of whether it could exercise its jurisdiction under Article 226 &
227 of the Constitution of India and thereby interfere with the impugned orders.

The Ld. Single Judge proceeded to discuss the settled position of law by relying  on the judgment of the Hon’ble Apex Court in Deep Industries v ONGC 2 (‘Deep Industries’). The Supreme Court in Deep Industries settled the question that the non-obstante embodied in Section 5 of the A&C Act does not bar a party from assailing the order of an Arbitral Tribunal before the Constitutional Courts under Article 226 & 227. The Supreme Court in Deep Industries, while keeping in mind the doctrine of minimal judicial interference, imposed fetters on the powers of the Courts by connoting that the High Court’s must be circumspect in exercising their extraordinary powers and must strictly invoke them when the resultant orders are
“patently lacking in inherent jurisdiction”3. In view of the aforesaid ruling of the Apex Court in Deep Industries, the Ld. Single Judge was constrained to accede to the position that Court could exercise jurisdiction under Article 227 and thereby interfere with orders passed by Arbitral Tribunals.

However, the Ld. Single Judge held that there was a small window for interference with orders passed by arbitral tribunals and more particularly when the orders are procedural in nature. Moreover, it was clearly enunciated in Surender Kumar Singhal v Arun Kumar Bhalotia 4 (Surender Kumar Singhal) that the powers envisaged by Article 226 & 227 can be exercised against orders of the arbitral tribunals in “exceptional circumstances”. Applying this criterion to the present case, the Ld. Single Judge refused to exercise the jurisdiction vested in it and thereby upheld the impugned orders. It is our opinion, that the exceptional circumstances envisaged in Deep Industries and Surender Kumar Singhal warranted application to the facts of the present case in view of Amazon’s fraudulent conduct. However, the Ld. Single Judge has erred in applying the dictum of the Apex Court in Deep Industries.

THE ORDER OF THE DIVISION BENCH

Resultantly, the judgment of the Ld. Single Judge was challenged by Future before the Division Bench of the Delhi High Court. The Division Bench was quick to note the observations made by the CCI in the Revocation Order. The Division Bench observed that the earlier Approval Order was now kept in abeyance and concurred with Future’s contention that the SSA & SHA between Amazon and Future Coupons became unenforceable. Resultantly, the arbitration agreement was rendered unenforceable. The Division Bench laid further emphasis on the scathing observations made by the CCI against Amazon’s conduct and thereby held that opinion that the Tribunal ought to have considered hearing the Termination Applications before the evidential hearings. Accordingly, the judgment of the Ld. Single Judge and the arbitral proceedings were stayed.

It is our opinion that the Division Bench correctly paid heed to the observations made by the CCI with regard to Amazon’s deceitful and fraudulent conduct and resultant ramifications of the Revocation Order and accordingly set-aside the judgment of the Ld. Single Judge.

CONCLUSION

It is our opinion that the order of the Division Bench rightly set-aside the judgment of the Ld. Single Judge in the Petition filed by Future against the Tribunal’s impugned orders. It is also our opinion that the order of the Division Bench has exemplified an approach that can guide Courts when they are confronted with tricky situations on whether to exercise their extraordinary powers under Article 226 & 227 of the Constitution. It is true that the on-going arbitral proceedings between Amazon and the Future Group are being adjudicated by an international tribunal administered under the SIAC Rules, but in essence the arbitration still remains a domestic arbitration seated in New Delhi. In view of the above, it is imperative that the orders passed by top-regulatory bodies such as the CCI must be afforded adequate consideration by international arbitral tribunals, so that India’s domestic public policy and the India’s anti-trust framework is not thwarted for want of consideration by foreign arbitral tribunals. It is our opinion that order of the Division Bench has not cast any eclipse on the sacrosanct concepts of “ease of doing business” and “investor confidence” in India. The Division Bench’s approach is in fact a welcome-step in reminding international arbitral tribunals of their duty to pay adequate heed to the orders of sovereign bodies and to protect India’s domestic public policy.

(Hiroo Advani is an authority on arbitration law and one of only two Indian lawyers ever listed in the International Who’s Who of Commercial Arbitrators)