The Saga of Unnecessary Judicial Interference Continues: Delhi High Court stays Amazon-Future Group Arbitration

Recently, a division bench of the Delhi High Court (‘HC’) stayed the arbitral proceedings in Amazon.com NV Investment Holdings LLC v. Future Coupons Private Limited, being administered by the Singapore International Arbitration Centre (‘SIAC’). The stay was granted pursuant to appeal filed against order of a single bench of the HC who had dismissed the petitions under Article 227 of the Constitution seeking interference with the SIAC arbitral proceedings.

The HC’s rationale behind the stay on the arbitral proceedings is that the main agreement between Amazon and Future Coupons Private Limited (‘FCPL’) and, consequently, the arbitration agreement, has been rendered prima facie ‘unenforceable’. This is on account of an order dated 17 December 2021 passed by the Competition Commission of India, whereby the approval granted for the acquisition of 49% of the equity shareholding of FCPL by Amazon by way of its previous order dated 28 November 2019 (‘Acquisition Approval’), has been kept in abeyance (‘CCI Order’). The HC’s grievance with the arbitral proceedings appears to be that the arbitral tribunal failed to give priority to the application filed by FCPL seeking termination of proceedings (in view of the CCI Order) over recording evidence of expert witnesses. Amazon has challenged the stay order before the Supreme Court and the matter is presently pending adjudication.

In this post, I argue how the stay order passed by the HC sets a bad precedent in the arbitration space as it lacks cogent reasoning and is contrary to settled position of law which discourages judicial interference in such instances.

Perverse Reasoning of the Stay Order

At the outset, it must be noted that the scope of judicial interference through petitions filed under article 227 of the Constitution is limited to exceptional and rare cases of ‘patent lack of inherent jurisdiction’, as has been settled by the Supreme Court in Deep Industries and Bhaven Construction. This resonates with the non-obstante clause under section 5 of the Arbitration & Conciliation Act, 1996 (‘Arbitration Act’). The rationale behind this provision is the reduction of excessive judicial interference, in line with the UNCITRAL Model Law on International Commercial Arbitration.

The stay order fails to establish a ‘patent lack of inherent jurisdiction’ on the part of the arbitral tribunal in the present case, which would have justified such interference. The primary ground for seeking intervention of the court was FCPL’s termination application not being taken up before recording evidence of witnesses. Being procedural in nature, this issue did not warrant judicial interference in exercise of the HC’s powers under article 227.

Without going into the merits of CCI’s findings, it is pertinent to note that the CCI Order has not withdrawn or cancelled the Acquisition Approval, but has simply held it in abeyance. This is coupled with the fact that the CCI Order can be appealed against before the National Company Law Appellate Tribunal, a remedy which Amazon has pursued recently.

Be that as it may, the stay order fails to provide reasons as to how the Acquisition Approval being held in abeyance has any bearing on the enforceability of the arbitration agreement between the parties; this is a subject matter which in any event falls strictly within the confines of the arbitral tribunal’s jurisdiction. The HC merely relies on the CCI Order’s finding on merits that Amazon has misrepresented and suppressed crucial facts which have denied the CCI an opportunity to assess the effects of the acquisition—how this finding affects the enforceability of the arbitration agreement and in turn the on-going arbitral proceedings is unclear.

At most, in arguendo, assuming that the CCI Order does have an impact on the main shareholders’ agreement between Amazon and FCPL, it is a settled principle of law that the arbitration agreement is separate (and separable) from the main agreement and is capable of surviving on its own. An arbitration agreement has a life distinct from the underlying contract. It is this legal principle which enables arbitral proceedings related to an agreement whose validity is impugned.

Thus, the enforceability of the arbitration agreement and, in turn, the arbitral proceedings are not affected by the CCI Order in this case. The stay order seems to have been oblivious to the above settled legal position while declaring the arbitration agreement to be prima facie unenforceable in light of the CCI Order and, consequently, staying further arbitral proceedings on this ground.

Arbitral Tribunal is the Sole Master of Procedures

As far as the procedure for conducting arbitral proceedings is concerned, the arbitral tribunal is the sole master and has complete discretion according to the provisions of the Arbitration Act. Section 19 of the Arbitration Act provides that not only is the arbitral tribunal not bound by the Code of Civil Procedure, 1908 (‘CPC’), it has the option of conducting proceedings in any other suitable manner it deems fit.

It is a settled principle of law that the autonomy conferred on the arbitral tribunal with respect to procedural aspects is greater than that exercised by civil courts which are bound by the rigours of the CPC. This principle has been recently reiterated by the HC itself in Telecommunication Consultants India Limited, where it was held that the ‘legislative intent appears to be vest the Arbitral Tribunal with autonomy and flexibility in the matter of conduct of its proceedings so as to expedite the proceedings and cut the procedural wrangles witnessed in courts’.

In light of the foregoing, the flexibility would also vest the discretion in the arbitral tribunal to decide the manner in which the proceedings are to be conducted, including the order in which the applications filed by the parties are to be adjudicated. Thus, in the SIAC proceedings between Amazon and FCPL, the arbitral tribunal has the sole discretion in deciding the order of priority between hearing the application seeking the termination of the proceedings filed by FCPL and recording the evidence of expert witnesses.

Nevertheless, in the present case, the arbitral tribunal had, in fact, shortened the scheduled four days’ hearing of the expert witnesses to three days in order to hear FCPL’s termination application on the fourth day. Further, the arbitral tribunal had even provided reasons for scheduling the hearing of the termination applications on the fourth day after hearing the expert witnesses. As evident, it was not that the arbitral tribunal had refused to hear FCPL’s termination application. Rather, it was a matter of sequence and scheduling the date of hearing which is the sole prerogative of the arbitral tribunal and thus did not warrant judicial interference.

Conclusion

There is no doubt that the stay order will delay and derail the proceedings of the international commercial arbitration between Amazon and FCPL where scheduling dates is a major challenge as it is subject to the availability of arbitrators often from different jurisdictions, and of expert witnesses. The predicament is further compounded by restrictions on account of the pandemic.

The HC’s stay order is yet another illustration of unnecessary and excessive judicial interference in arbitral proceedings prevalent in India which not only dissuades foreign investment but also diminishes India’s chances of becoming a global arbitration hub. This is a step in the wrong direction as it shows the judicial system in bad light and adversely impacts India’s reputation for its ease of doing business.

Ameya Vikram Mishra is an associate for Justice A.K. Sikri, former Judge of the Supreme Court of India and International Judge, Singapore International Commercial Court.