Bombay High Court Reaffirms Binding Nature Of Emergency Arbitrator's Decision, Grants Interim Relief U/S 9 Of Arbitration Act

The Bombay High Court bench of Justice Arif S. Doctor has observed that the object and intent of section 9 of the Arbitration Act is to support Arbitration and not defeat and/or permit parties to detract from the very process of arbitration. Therefore, party autonomy being the bedrock of arbitration, this would necessarily apply from the agreement to the rendering of the final arbitral award. The court reiterated that once a party agrees to institutional rules and participates in an emergency arbitration proceeding, it cannot later claim that the Emergency Arbitrator's ruling is non-binding or invalid. The court held that the petitioners were entitled to interim relief under section 9 of the Arbitration and Conciliation Act, 1996 as the Emergency Arbitrator's decision was an “order” and not a “final award”. It noted that the obstructionist conduct of the party would be a material fact to consider while granting interim relief in an application filed under section 9 of the Act. Brief Facts: By a Shareholders Agreement (SHA) dated 12.05.2017, the Respondents had agreed to purchase Petitioner's shares in Respondent No. 4. The SHA contained an arbitration clause that provided for arbitration under the Singapore International Arbitration Chamber (SIAC) rules. Disputes arose when the petitioner terminated the SHA and the respondents did not comply with its obligations. An Arbitral Tribunal was constituted under the SIAC Rules. On 01.06.2023, the Tribunal issued an Award, which upheld the termination of SHA as well as the respondent's obligation under the SHA. It directed an independent valuer to conduct a new valuation. On 01.10.2023, the petitioners were awarded Rs. 9 crore in costs. The petitioners filed petitions under section 49 of the Act to enforce these awards. PwC was appointed as the independent valuer. PwC on 2.01.2024 issued a valuation report determining the enhanced call price at Rs. 181 crores. The respondents refused to make payment of the enhanced call price and disputed the independence of the valuer. On 19.01.2024, the Delhi High Court ordered a status quo on the respondent's assets. On 20.02.2024, the petitioners applied for emergency interim relief under Schedule I of SIAC Rules. On 13.03.2024, the court allowed the enforcement of the Awards. The Emergency Arbitrator gave a direction to the respondents to provide a bank guarantee of Rs. 145 crores by 28.03.2024. The Respondents stated in their representations that they were unable to provide a bank guarantee because of the Delhi High Court's order which injuncted them from dealing with their assets. The High Court modified the injunction on 01.05.2024. On 31.05.2024, the Respondents filed an application to modify the Emergency Arbitrator's decision to substitute the bank guarantee with another form of security. The Arbitral Tribunal rejected the modification request on 24.07.2024 and directed the Respondents to provide security in the form of bank guarantee in the amount of Rs. 145 crores within 14 days. The Respondents did not comply with the Tribunal's Order. The Petitioners filed the petition under section 9 of the Arbitration and Conciliation Act 1996, seeking the following reliefs: Direction to Respondents to deposit Rs. 145 crore as security, pending the arbitral proceedings and enforcement of the award. Alternative direction to Respondents to provide a bank guarantee for the same amount. Appointment of a Court Receiver. Attachment of the assets of the Respondents upto the value of Rs. 145 crore. Restraint on Respondents from dealing with or encumbering their assets. Direction to Respondents to disclose all their assets. Grant of ex-parte ad interim reliefs in terms of prayers (E) and (F). Contentions of the Parties: Petitioners' Contentions: The Emergency Arbitrator's Decision, an "Emergency Interim Award”, was an interim “order” rather than a final award as contemplated by Part II of the Act. Paragraph 8 of Schedule 1 of the SIAC Rules makes distinct use of the terms “awards” and “orders.” In Amazon.com NV Investment Holdings LLC v. Future Retail Limited, the Supreme Court noted that an Emergency Arbitrator's “award” is an “order”.The Emergency Arbitrator's Decision would not be one which was enforceable under Part II of the Act. Hence, the Petitioner would always have recourse to section 9 of the Act by virtue of the proviso to section 2(2). Although section 9 cannot be used to enforce an emergency arbitrator's orders, the Court can independently assess the facts and grant interim relief. Reliance was placed upon Raffles Design International India Private Limited & Anr. v. Educomp Professional Education Ltd & Ors.The parties having agreed to a procedure which contemplated the appointment of an Emergency Arbitrator, must be bound by its decisions. In Amazon.com NV Investment Holdings LLC, it was ...

Bombay High Court Reaffirms Binding Nature Of Emergency Arbitrator's Decision, Grants Interim Relief U/S 9 Of Arbitration Act

Tazeen Ahmed

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