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Arbitration Initiated By Amazon Must Be Terminated, Says Future Group

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The Delhi High Court on Monday reserved its order on the petition by the Future Group seeking a direction to the SIAC arbitral tribunal to first decide on its application on termination of arbitration proceedings.

The Singapore based three-member tribunal is hearing the arbitration dispute initiated by Amazon.com NV Investment Holdings alleging violation of contractual obligation by Future Coupons Pvt. Amazon had initiated the arbitration arguing that the Future Group’s transaction with Mukesh Ambani’s Reliance Group violated the terms of the 2019 contract. Amazon had invested in the Future Group by acquiring a 49% stake in Future Coupons—a promoter entity of Future Retail Ltd.

The arguments on allegations of contractual violation took place in November and the arbitral tribunal is set to hear the parties on damages this month.

Meanwhile, the Competition Commission of India suspended its 2019 approval to the transaction between Amazon and Future Group. Amazon had failed to identify and notify strategic interest over Future Retail, the regulator had concluded.

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Citing this order, the Future Group approached the SIAC tribunal seeking termination of arbitration proceedings. Subsequently, Future Coupons and Future Retail approached the Delhi High Court requesting it to direct the SIAC tribunal to first decide the termination application.

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The petition by the two Future Group companies came up for hearing before the single judge bench of Justice Amit Bansal.

Arbitration Proceedings Must End In Light Of The CCI Order: Future Group

The arguments for the Future Group were led by Senior Advocate Mukul Rohatgi who told the court that the arbitration proceedings cannot go on in light of the CCI suspending the approval to the 2019 transaction.

Law says an arbitrator must terminate the proceeding if it has become unnecessary or impossible, Rohatgi said.

The petition by FCPL relied on Section 32(2)(c) of the Arbitration and Conciliation Act, 1996, that allows for termination of proceedings if “the arbitral tribunal finds that the continuation of the proceedings has for any other reason become unnecessary or impossible”.

Rohatgi insisted that the tribunal must first take up the application for termination as it was based on a regulator’s order.

Arguing for Future Retail, Senior Advocate Harish Salve reiterated that the company has taken the stance from the beginning that it was unnecessarily being dragged in the arbitration proceedings between Future Coupons and Amazon. To be clear, the Singapore-based arbitral tribunal in an earlier order has held Future Retail to be a party to the arbitration.

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The tribunal, Salve further argued, had shown scant regard for Indian law by deciding to resume with the arbitration proceedings without deciding on the termination application.

The arbitral tribunal can take up the hearing on quantum of damages later as it would require examination of expert witnesses and in the meanwhile take up and decide the termination application first, Salve and Rohatgi told the court.

Arbitration Agreement Survives Irrespective Of The Underlying Contract: Amazon

While Amazon didn’t concede to Future Group’s interpretation of the CCI‘s order, it maintained that it doesn’t affect the arbitration agreement.

Senior Advocate Gopal Subramanium told the court that it is a well-settled position that the arbitration agreement is an independent agreement and it survives even when the underlying contract goes.

‘’On the date when the CCI approval happened, it was a valid contract and it wasn’t terminated.’’ said Subramanium, adding that “the arbitration agreement does not perish with the agreement”.

Amazon further defended the tribunal’s powers to decide its procedure and told the court that the tribunal had assured that it will take care of Future Group’s concerns.

If there is a tangible ground to terminate, then the tribunal will terminate the proceedings, Subramanium said.

The bench of Justice Amit Bansal will pronounce its order on Tuesday.

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