Sufficient Mental Elements for Disobedience are not Present in Case FRL Selling the Retail Businesses & Assets to Reliance: SC

Appeal against various orders of Delhi High Court connected to the Amazon­ Future dispute. 

Facts

• On 22.08.2019, Amazon entered into Shareholder and Share Subscription Agreements with Future Coupon Private Limited (FCPL). Through these instruments, Amazon intended to acquire a 49% stake in FCPL.  
• The aforesaid agreements contained an arbitration agreement, wherein parties resolved to   settle   their   disputes in accordance with the Arbitration Rules of the Singapore International Arbitration Center (SIAC).
• On 12.08.2019, FCPL and its promoters entered into a Shareholder Agreement with Future Retail Limited   (FRL). Through this Agreement, FCPL was granted certain protective rights. 
• FRL submitted that there was business downturn due to Covid­-19 lockdowns as there was in March restrictions on retail sale through brick and mortar shops.
• The Board of FRL decided to sell, retail businesses and assets to Reliance, for a consideration in excess of Rs. 25,000 crores.
•  Amazon initiated arbitration proceedings before the SIAC. Amazon filed an application for emergency relief.
• On 25.10.2020, the Emergency Arbitrator passed an Interim Award in favor of Amazon.
• In the meanwhile, CCI and SEBI approved the composite Scheme proposed by FRL­ Reliance. Thereafter, FRL filed for sanction of the composite Scheme of arrangement under the provisions of Sections 230 to 232 of the Companies Act, 2013 before National Company Law Tribunal (NCLT).
• Amazon filed a Petition for enforcement of the Emergency Arbitrator Award, under Section 17(2) of the Arbitration and Conciliation Act, 1996, before the Delhi High Court.

Findings

A catena of procedural orders passed by the High Court in OMP (ENF) (COMM) No.17 of 2021. From the record, we observe that FRL and FCPL were not provided sufficient time or opportunity to file their counter or raise their defense. On 29.01.2021, they were allowed to file a brief note of submission within twenty four hours, before orders were passed on 02.02.2021.

On a perusal of the orders, this Court finds that serious procedural errors were committed by the learned Single Judge. 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 the Rule of law. Natural justice is usually discussed in the context of administrative actions, wherein procedural requirement of a fair hearing is read in to ensure that no injustice is caused. When it comes to judicial review, the natural justice principle is built into the rules and procedures of the Court, which are expected to be followed meticulously to ensure that highest standards of fairness are afforded to the parties. Whenever an order is struck down as invalid being in violation of the principles of natural justice, there is no final decision of the case and fresh proceedings are left open. All that is done is to vacate the order assailed by virtue of its inherent defect. Such proceedings are not terminated and are usually remitted back. 

Judgment

Supreme Court held that  in the suit instituted by FRL, the learned Single Judge had earlier allowed FRL and Amazon to continue their pursuit before various regulatory authorities, and in view of the interim orders of this Court dated 22.02.2021 and 09.09.2021, and the Courts is inclined to set ­aside aforesaid directions as the pre­condition of  ‘sufficient mental element  for wilful disobedience’ is not satisfied. Moreover, Mr. Gopal Subramanium, learned Senior Advocate appearing for Amazon, has stated that Amazon is not interested in proceeding with the punitive directions. This Court set  aside  the punitive directions issued in the impugned orders of learned Single Judge dated 02.02.2021 and 18.03.2021. Coming to the merits of the case, we would like to mention a disconcerting aspect wherein the interim order enforcing the Emergency Award has adopted a standard beyond ‘prima facie view’, as required under law. It is expected of Courts to be cautious while making observations on the merits of the case, which would inevitably influence the Arbitral Tribunals hearing the matters on merit.  

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