Amazon -Future Dispute : Fair Opportunity Must In A Case Of 'This Magnitude', Says Supreme Court [Full Court Room Exchange]

Srishti Ojha

9 Sep 2021 11:45 AM GMT

  • Amazon -Future Dispute : Fair Opportunity Must In A Case Of This Magnitude, Says Supreme Court [Full Court Room Exchange]

    The Supreme Court on Thursday stayed the proceedings in the Delhi High Court in relation to the attachment of the assets of Future Retail Limited and its promoters for alleged breach of the Emergency Award passed in favour of Amazon.The Court also asked all authorities including the NCLAT, CCI and the SEBI to not pass final orders for four weeks in relation to the Future-Reliance deal. "...

    The Supreme Court on Thursday stayed the proceedings in the Delhi High Court in relation to the attachment of the assets of Future Retail Limited and its promoters for alleged breach of the Emergency Award passed in favour of Amazon.

    The Court also asked all authorities including the NCLAT, CCI and the SEBI to not pass final orders for four weeks in relation to the Future-Reliance deal.

    " The issue is, we must be fair. In a matter of this magnitude, if hearing takes place without giving an opportunity of filing proper counter affidavit to parties, how can one pass orders like attaching property, pay cost, civil imprisonment etc. What is this!", the Chief Justice of India NV Ramana remarked before passing the interim order.

    A bench comprising the Chief Justice of India NV Ramana, Justice Surya Kant and Justice AS Bopanna was hearing special leave petitions filed by Future Coupons Private Ltd and Future Retail Ltd against the order passed by the single bench of the Delhi High Court. The Single Bench Order directed the attachment of assets of Future group companies and its promoters, Kishore Biyani and others, for alleged breach of the Emergency Award. The single bench had also issued a show-cause notice for the civil arrest of Biyani and other directors of Future Group

    The observation was made after submissions were made on behalf of Future Retail and FCPL that impugned orders were passed by the Single Bench after hearing the case for just three days, without hearing all the parties and without giving sufficient time to file their replies.

    The submissions were however opposed by Amazon saying that the order was passed after 8 days of arguments, including filing and arguing of submissions; nobody was denied an opportunity to be heard.

    Supreme Court on Thursday heard elaborate arguments by Senior Advocates Harish Salve and Mukul Rohatgi for Future group and Senior Advocate Gopal Subramanium for Amazon.

    Courtroom Exchange:

    Order of Single judge is wrong & contrary to Natural Justice: Senior Advocate Harish Salve for Future Retail

    Elaborating on the issue in the present matter, Senior Advocate Harish Salve appearing for FRL stated that:

    "An order was made by Emergency Arbitrator on 25th Oct 2020. An Arbitration is invoked on agreement between Amazon and Future Coupons Private Ltd(FCPL). I have a contract, a shareholder agreement with FCPL, the Indian Company which has agreement with Amazon. They invoke arbitration under FCPL- Amazon arbitration agreement and add me as a party to arbitration. I go to the emergency arbitrator and tell him I'm not party of the agreement and of the Arbitration. I tell him if you hold I'm party to the agreement it will be illegal as Government of India has not allowed foreign direct investment in multi brand retail. Therefore If you hold Amazon has interest in me, it will violate the law. The Emergency Arbitrator in Singapore didn't quite follow the point".

    Salve further added that "FRL filed a suit in Delhi High Court and claimed that the arbitration is not being challenged and claimed that, Amazon is making incorrect representation to SEBI, CCI etc in relation to a deal we have for selling our assets to Reliance. In the pandemic, retail was worst hit and revenues went down, got down in serious difficulty. We entered into a deal where Reliance is bringing in 26000 crores, all Banks will be paid off, and shops will be running. We wanted to push that deal. In that deal, my promoters get nothing."

    Explaining the Delhi High Court's interim order in the suit filed by FRL, Salve stated that the Bench held that emergency arbitrator can pass the order, held that the suit is maintainable, the resolution was valid, Directors have a fiduciary responsibility and can't blindly follow the shareholders. The Single Bench went to the extent of saying that Amazon's conduct was illegal but said it won't injunct them from making a representation. It also directed all statutory authorities to hear what both sides have to say.

    Mr Salve added that Amazon, in January, moved single-judge Bench of the Delhi High Court for enforcement of the order of the Emergency Arbitrator.

    "Day to day hearing went on. One of the things the Judge held against is that we had not taken a proper pleading of nullity. When we asked for time to respond to the application, we were not given time. We were not even given 5 days time to file a reply. And then see the order!" Salve remarked.

    "The first order was on 28th January and arguments were partly heard. The second was on 29th January, 2021 when notice issued. The arguments were heard from 2:45-4:30 and the matter was listed on 1st Feb. As if Amazon was on fire and would have collapsed if the court gave us 5 days time to reply!" Mr Salve remarked.

    Mr Salve added that the Single Judge closed the hearing on 1st February, listed the matter on 2nd February and issued an order saying that the Emergency Arbitrator has rightly proceeded and that the Order was enforceable in law.

    "All concerned authorities were directed to maintain the status quo. They were not parties! You're issuing directions to statutory authorities now! SEBI, NCLT CCI have to now also file status reports!" Mr Salve remarked

    "When the next order was passed, we thought it would be the reasons for an interim order, instead, it was the final judgement. I have an arbitration pending, I've taken a defence that I've not breached the agreement. The single judge then says admittedly the Respondents have breached their agreement!" He said.

    With regard to the Single Judge's order directing attachment of properties, Mr Salve remarked "How do I run my business now? I'm a listed company.!"

    Mr Salve further said, "We drew his attention to the order of a single judge of Delhi High Court in the suit. If a Single Judge has held there was no prima facie agreement that will override the award of emergency arbitrator. Arbitrators have high status but they are not above the constitutional court."

    "We filed an appeal against the order and Division Bench granted us a stay on 8th February. The reasons given were that my client was not a party to the Agreement between FCPL and Amazon. They said all 3 agreements were different and group of companies doctrine would not apply." Salve said.

    Salve informed the Court that the FRL has applied to vacate the emergency order and the Tribunal is seized of the issue.

    "We've applied to the tribunal under section 16 of the (Arbitration) Act to dismiss the case against us. The hearing has concluded and Tribunal is seized of matter. One way or the other we will know." Salve said.

    "When are you expecting order?" Bench asked

    " Maybe 3-4 weeks" Salve said.

    Mr Salve stated that the reason they have rushed to the Supreme Court is because of the latest order of Delhi High Court, which said that if no relief is given by the Supreme Court, the Court will proceed with the matter.

    Mr Salve concluded by saying that "The Order of Single judge is wrong, it goes contrary to natural justice, goes contrary to an earlier order, and it goes way beyond order of the Emergency Arbitrator."

    Single Bench Order Flawed, No Time Granted For Hearing: Senior Advocate Mukul Rohatgi for Future Coupons Pvt Ltd

    Senior Advocate Mukul Rohatgi appearing for Future Coupons submitted that: "On the first date of hearing before Single Bench on 28th January, all 17 respondents appeared in hearing and no time was given. Then on 2nd the Judge reserved judgement and passed a short interim order later. No time is given then or later and a 150 page judgement is passed!"

    Mr Rohatgi added that the proceedings were for enforcement of the order of an arbitrator and not to affirm if what the arbitrator did was right or wrong.

    "By these proceedings, the judge stultifies my order in arbitration. The Impugned order is flawed procedurally. The Judge has talked about merits which he was not supposed to decide, as merit is before the arbitrator!" Mr Rohatgi said.

    Mr Rohatgi added that "This is an issue which is case-specific, it can't apply as a rule! Reliance has 1000 companies, if there is arbitration, will the 1000 companies become a party? Judge says it will apply to all 17 entities before the court."

    "The Court recorded that the emergency arbitrator gave us a fair opportunity. I did not get a fair opportunity. The impugned Order said that Respondents deliberately violated order of Emergency Arbitrator. All our assets are attached! We are directed to file affidavits. I have to show cause why I shouldn't be jailed!" Mr Rohatgi remarked.

    Mr Rohatgi concluded saying that;

    "Both orders of Single Judge Bench were stayed by the Division Bench. I am submitting that a stay which we had in Division Bench order was complete stay of effect and implementation of both orders of single judge. Please grant stay of these two orders and stay of proceedings before single bench."

    Emergency Arbitrator's Order till date is an active order: Senior Advocate Gopal Subramanium for Amazon

    Senior Advocate Gopal Subramanium appearing for Amazon submitted before the Court that an order was passed by the Emergency Arbitrator on 25th October 2020 after a detailed hearing; in this order, the respondents were injuncted from taking any steps in furtherance or aid of Board resolution made by Board of FRL in relation to the disputed transaction. They were injuncted from directly or indirectly taking any steps to transfer, dispose, or  alienate FRL's retail assets or shares held in FRL by promoters in any manner. FRL, which appeared before Emergency Arbitrator made submissions and an adverse order was passed.

    Mr Subramanium said, "If an Emergency Arbitrator is an arbitrator recognised under the part I of the Arbitration Act, its order is deemed to be an order of the court, then in that case all actions which were taken in breach of that order are clearly in violation of that order."

    "FRL did not challenge the emergency arbitrator's award and filed a suit instead. Till date, there is no appeal under section 37, so the order of Emergency Arbitrator till date is an active order!" Mr Subramanium said.

    Mr Subramanium argued that when Amazon moved for enforcement of the arbitral award before the Single judge, who was enforcing an order under 17(2) of the act, he first issued notice and hearing lasted for about 8 days.

    "We have one query, unfortunately, or whatever the reason, the SC judgement hasn't dealt with any of the facts of the case. If it had given a finding, it would have finished the case." the Bench said.

    " Facts are set out", Subramanium pointed out the Supreme Court judgment has detailed the facts.

    "Absolutely fine, there's no dispute about that. The question is on merits, about the grievance" ,the Bench said.

    "If an order of Emergency Arbitrator is a valid order passed by an Arbitral Tribunal, then the only scope of what this court is examining is if the single judge is right in enforcing that order", Mr Subramanium responded.

    "If the single judge had confined his order to that extent no problem, he has gone beyond that. The observations are the problem",  CJI remarked

    Mr Subramanium responded to CJI's statement saying that the observations were made as all this was argued before the Judge.

    "What does the Judge do, he has to deal with the arguments", he said.

    "Our position even before regularly constituted arbitral tribunal before whom vacation of Emergency Arbitrator order had been argued was that orders which have been passed, Tribunal has to deal with the issue uninfluenced by it", Mr Subramanium said.

    "The issue is, we must be fair. In a matter of this magnitude if hearing takes place without giving opportunity of filing proper counter affidavit to parties, how can he pass orders for attaching property, pay costs, civil imprisonment etc. What is this!" CJI remarked.

    Defending the Single Bench's order, Mr Subramanium stated that: "The First order on Feb 2nd was passed after 8 days of arguments when submissions were filed and argued. It is not that anybody was denied an opportunity to be heard. They then appealed to Division Bench to get a stay but Bench said single bench will give its final judgement."

    With regards the directions issued by the Single Bench in the impugned order, Mr Subramanium said, "Do I have any joy in asking people to go to prison? But shouldn't the order of an arbitrator be obeyed? We have no desire to take any punitive action against anyone, but can we declare the order to be nullity only because they suffer an adverse order?"

    Mr Subramanium concluded his submissions saying that,

    "I am not interested in punitive action but certainly it can't by any stretch of imagination be argued after Supreme Court's judgement on 6th August, when there is no appeal against EA's order. Without an appeal in an enforcement action, without even offering compliance of order, Can anyone say I will continue to be in breach?"

    Impugned Single Bench Order

     A single judge bench of Justice JR Midha on March 18, 2021 had directed for attachment of property of Future group companies and their promoters including Kishore Biyani. It had also directed them to file additional affidavits indicating the details of their assets and property for violation of the emergency award. Also, the Single Bench had imposed a cost of Rs. 20 lakhs on FRL and its promoters for raising an untenable plea of nullity against the award and the cost was directed to be deposited in the PM fund of Covid 19, to be used for vaccination of senior citizens belonging to the below poverty line group. The Court ordered the same to be deposited within 2 weeks and the same shall be put on record within 1 week thereafter.

    "In exercise of power under Order XXXIX Rule 2A(1) of the Code of Civil Procedure, the assets of respondents No.1 to 13 are hereby attached. Respondents No.1 to 13 are directed to file an affidavit of their assets as on today in Form 16A, Appendix E under Order XXI Rule 41(2) of the Code of Civil Procedure within 30 days. Respondent No.1, 2, 12 and 13 are directed to file an additional affidavit in the format of Annexure B-1 and respondents No.3 to 11 are directed to file an additional affidavit in the format of Annexure A-1 to the judgment of M/s Bhandari Engineers & Builders Pvt. Ltd. v. M/s Maharia Raj Joint Venture along with the documents mentioned therein within 30 days," the High Court single bench had held.

    The Court had held that the Emergency Arbitrator had rightly invoked the 'Group of Company' doctrine in relation to the Future Group companies and in view of this, the Court had also issued a show-cause notice as to why they shouldn't be detained in civil prison for violation of the order dated 25th October 2020.

    "The respondents are directed not to take any further action in violation of the interim order dated 25th October, 2020. The respondents are further directed to approach all the competent authorities for recall of the orders passed on their applications in violation of the interim order dated 25th October, 2020 within two weeks. The respondents are directed to file an affidavit to place on record the actions taken by them after 25th October, 2020 and the present status of all those actions at least three days before the next date of hearing. Respondents No.3 to 11 shall remain present before this Court on the next date of hearing," the Court had directed Future Group Companies and its Promoters.

    The single bench order was upheld by a bench led by Justice RF Nariman of the Supreme Court on August 6.

    After the retirement of Justice JR Midha in June this year, the matter was assigned to a bench of Justice Suresh Kumar Kait. On August 19, Justice Kait had adjourned the proceedings for compliance to September 16, observing that he will proceed with the matter if no stay is granted by the Supreme Court in the meanwhile.

    Case Title: Future Coupons Private Limited Vs. Amazon.Com Nv Investment Holdings LLC| Diary Number 18739| 2021

    Also Read: [BREAKING] Amazon- Future Dispute: Supreme Court Stays Enforcement Proceedings In Delhi High Court

    Delhi High Court Upholds Emergency Award Passed In Favour Of Amazon Against Future-Reliance Deal, Imposes Rs 20 Lakhs Cost On Future

    Emergency Arbitration Award Enforceable In Indian Law: Supreme Court Rules In Favour Of Amazon In Case Against Future Retail [Updated With Judgment]

    Click Here To Read/ Download Order

    Next Story