On February 1, Kishore Biyani’s distressed Future group got a reprieve in its legal tussle with American e-commerce major Amazon after the Supreme Court decided to set aside three orders passed by the Delhi High Court concerning awards passed by the arbitral tribunal under the Singapore International Arbitration Centre’s (SIAC) rules.
The Delhi High Court orders were not only critical of the Biyanis and other management personnel of Future group firms but had also held them to be in contempt and imposed punitive actions against them.
To recap, in October 2020, an emergency arbitrator (EA) had injuncted Future Retail from proceeding with its Rs 25,000 crore asset-sale deal with Reliance Industries. Under SIAC rules, EA awards are interim in nature and remain in force till they are either affirmed or set aside by a duly constituted arbitral tribunal. In this case, the injunction order of the EA was affirmed by the duly set up arbitration tribunal in October 2021. Both these developments became the subject of litigation before the Delhi High Court.
Two of the three high court orders set aside had been passed by Justice JR Midha – an interim one in February and a final one in March 2021. Justice Midha has since retired. The primary direction of the orders passed by Justice Midha was for enforcement of the award passed by the EA under SIAC rules. Justice Midha also directed the Future Group to ensure that all regulatory approvals received for the transaction were reversed and recalled.
The third order set aside by the top court on February 1 had been pronounced by Justice Suresh Kumar Kait in October 2021. Justice Kait’s court had refused to interfere with the award of the arbitration tribunal, which had affirmed and confirmed the injunction order of the EA.
The Supreme Court said that the challenge to the tribunal order confirming the EA’s order needed to be looked at afresh.
The top court’s intervention does not mean that the Future-Reliance deal can go through. It has, however, has set the clock back by a few months in this long-drawn legal battle.
Here is why the top court set aside the Delhi High Court orders.
“Natural justice is the sworn enemy of unfairness” – Supreme Court
While deciding whether the two orders — interim and final — passed by Justice Midha were valid in law, the court noted a procedural anomaly. The high court had held the Future group and its managerial personnel to be guilty of wilful disobedience and imposed punitive action against them. However, the Supreme Court underlined that this was done without affording sufficient opportunity to the Future group to present its defence.
This procedural error, according to the Supreme Court, goes against the principles of natural justice.
“Natural justice is an important facet of a judicial review. Providing effective natural justice to affected parties, before a decision is taken, is necessary to maintain rule of law,” the Supreme Court said in its judgment.
The principles of natural justice are tied into procedures of the court and these have to be “followed meticulously to ensure that highest standards of fairness are afforded to the parties,” the court said, finding this lacking.
Was it “wilful” disobedience by Future group?
For an action to be called wilful disobedience, the disobedience has to be conscious, the Supreme Court said, while citing precedents on this interpretation.
While Justice Midha found the Future group’s managerial personnel to be in wilful disobedience of the EA’s award because they proceeded to approach regulators for the Future-Reliance deal, the Supreme Court factored in another point of consideration.
In the first round of litigation before an Indian court in December 2020, a single-judge bench of Justice Mukta Gupta of the Delhi High Court had allowed both Amazon and Future group to proceed with their pursuits before various regulators. Future group companies were seeking approvals for the asset sale deal and Amazon was trying to block the approvals by informing the regulators of the EA award.
This order of the high court was challenged but never stayed.
The Supreme Court took note of this order passed by Justice Mukta Gupta as well as previous orders passed by the Supreme Court, which allowed the National Company Law Tribunal (NCLT) to continue hearings concerning the Future-Reliance deal but barred it from passing any final order on the scheme of amalgamation.
This led the top court to set aside Justice Midha’s orders.
What was remanded to the high court and why?
Justice Kait’s order was the third to be set aside on February 1.
The question for consideration before Justice Kait pertained to the award passed by the duly constituted arbitration tribunal which, in October 2021, affirmed the injunction against Future group in an EA award. The high court refused to interfere with this order when Future group challenged it.
While noting that the challenge to the arbitral award brings up important questions of law that need to be decided, the Supreme Court also pointed out that the high court was never barred from ruling on this aspect.
The top court as such remanded the issue to the high court and asked it to decide on the issue afresh “on its own merit.”
What happens next?
A single-judge bench of the Delhi High Court will in due course hear afresh Future group’s plea challenging the arbitral award that had refused to lift the injunctions passed by the EA.
The enforcement of the EA award was set aside by the Supreme Court in this judgment. However, to be clear, the injunctions passed by the EA award still remain in force since the arbitral tribunal affirmed those in October 2021, giving them legal force.
This means that the injunctions against Future group remain, as of now.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
