Supreme Court allows NCLT proceedings to continue in Future Coupons vs. Amazon Dispute (15 February 2022)

Date of the Judgment: 15 February 2022
Citation: [Not Available in Source]
Judges: N.V. Ramana (Chief Justice of India), A.S. Bopanna (Justice), Hima Kohli (Justice).
The Supreme Court addressed the question of whether to allow the National Company Law Tribunal (NCLT) proceedings to continue, despite an ongoing arbitration dispute between Future Coupons Private Limited (FCPL) and Amazon. The core issue revolved around a sale transaction between Future Retail Limited (FRL) and the Reliance Group, which Amazon contested, leading to arbitration. The Supreme Court bench, comprising Chief Justice N.V. Ramana and Justices A.S. Bopanna and Hima Kohli, delivered the order.

Case Background

The dispute began when Amazon initiated arbitration proceedings at the Singapore International Arbitration Center (SIAC) against Future Coupons Private Limited (FCPL) due to a sale transaction between Future Retail Limited (FRL) and the Reliance Group. Amazon sought an interim injunction to prevent FRL and FCPL from proceeding with the deal. Simultaneously, FRL filed a suit in the Delhi High Court against Amazon for tortious interference in the sale scheme.

An Emergency Arbitrator at SIAC issued an order on 25 October 2020, injuncting FRL from taking further steps in the transaction. However, the Delhi High Court on 21 December 2020, directed regulatory authorities to consider the representations of both FRL and Amazon before granting approvals. Despite the injunction, the Competition Commission of India (CCI) and the Securities and Exchange Board of India (SEBI) approved the scheme. FRL then filed for sanction of the composite scheme with the NCLT on 26 January 2021.

Amazon filed a petition in the Delhi High Court on 25 January 2021, seeking enforcement of the Emergency Arbitrator’s award. The Delhi High Court, through orders on 2 February 2021 and 18 March 2021, enforced the emergency award. The matter then reached the Supreme Court, which on 22 February 2021, allowed NCLT proceedings to continue but without a final order of sanction of the scheme.

The Supreme Court, on 6 August 2021, did not adjudicate the merits of the case, focusing only on the maintainability of a first appeal against a Single Judge’s order in enforcement proceedings. Aggrieved by the orders of the Single Judge, FCPL and FRL filed appeals directly before the Supreme Court.

Timeline

Course of Proceedings

The Emergency Arbitrator at SIAC initially injuncted FRL from proceeding with the sale transaction. The Delhi High Court, however, directed regulatory authorities to consider both sides before granting approvals. Subsequently, the CCI and SEBI approved the scheme, and FRL approached the NCLT for sanction. Amazon then sought enforcement of the emergency award in the Delhi High Court, which was initially granted. The Supreme Court initially allowed NCLT proceedings to continue without a final order. Later, the Supreme Court set aside the High Court’s orders and remanded the matter for reconsideration. The Arbitral Tribunal dismissed FRL and FCPL’s applications to vacate the emergency award. The Delhi High Court rejected immediate relief to FRL, which led to further appeals to the Supreme Court.

Legal Framework

The judgment refers to Sections 230 to 232 of the Companies Act, 2013, which deal with the power of the National Company Law Tribunal to sanction a scheme of arrangement and compromise between a company and its creditors or members. These sections outline the procedure for such schemes, including the need for a meeting of creditors or members, and the Tribunal’s power to approve or reject the scheme. The judgment also touches upon the enforcement of emergency arbitrator awards, which are considered under the Arbitration and Conciliation Act, 1996.

Arguments

Arguments by the Appellants (Future Coupons Private Limited and Future Retail Limited):

• The appellants argued for the continuation of NCLT proceedings, stating that the final order would take six to eight months to complete, involving fifteen steps as required under the Companies Act, 2013.
• They contended that the alienation of retail assets of FRL would only occur upon the final sanction of the scheme by the NCLT.
• It was submitted that Amazon would not be prejudiced if the NCLT proceedings were allowed to continue.
• FCPL argued that the Competition Commission of India (CCI) had revoked the initial Amazon-FCPL share purchase, which effectively nullifies the arbitration.
• The appellants submitted that FRL is incurring expenditure every day and there is an imminent threat of insolvency.
• They also stated that any delay in NCLT proceedings would have serious ramifications and render the agreement between FRL and the Reliance group redundant.
• They also highlighted that the livelihood of 22,000 employees of FRL are at stake.

Arguments by the Respondents (Amazon.com NV Investment Holdings LLC & Ors.):

• Amazon argued that FRL had conducted NCLT proceedings in contravention of the Emergency Arbitrator’s order and the Delhi High Court’s enforcement order.
• They contended that the Supreme Court’s order of 1 February 2022 had remanded the matter for reconsideration by the High Court, and granting any ad-interim relief would bind the High Court.
• Amazon submitted that FRL and FCPL were not entitled to any interim relief as they had not challenged the initial order of the Emergency Arbitrator.
• It was also submitted that FRL had already completed eight out of the fifteen steps of the NCLT proceedings.

Issues Framed by the Supreme Court

The Supreme Court did not frame specific issues in this order. However, the core issue before the court was whether to allow the NCLT proceedings to continue beyond the 8th stage, considering the ongoing arbitration and the previous orders of the High Court and the Emergency Arbitrator.

Treatment of the Issue by the Court

Authorities

The judgment does not explicitly cite any cases or books. It primarily refers to the orders passed by the Emergency Arbitrator, the Delhi High Court, and previous orders of the Supreme Court itself in the same matter. The legal provisions considered were Sections 230 to 232 of the Companies Act, 2013.

Judgment

How each authority was viewed by the Court:

The Court acknowledged the existence of the Emergency Arbitrator’s order and the Delhi High Court’s enforcement orders, but did not make a final determination on their validity at this stage. Instead, the Court directed the High Court to reconsider all contentions. The Court also considered the NCLT proceedings under Sections 230 to 232 of the Companies Act, 2013.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the need to balance the interests of all parties involved. The Court acknowledged the ongoing arbitration proceedings and the orders passed by the Emergency Arbitrator and the High Court. However, it also took into account the practical implications of halting the NCLT proceedings, including the potential financial distress of FRL and the impact on its employees. The Court aimed to ensure that all contentions were properly considered by the Delhi High Court, without prejudicing any party.

Logical Reasoning:

The Court did not explicitly reject any alternative interpretations in this order. The focus was on ensuring that the Delhi High Court had the opportunity to reconsider the matter in light of all the contentions raised by both parties.

The Supreme Court’s decision was to allow FRL to approach the Delhi High Court for permission to continue the NCLT proceedings beyond the 8th stage. The Court requested the High Court to consider all contentions raised by both parties and pass appropriate orders expeditiously. The Court did not make any final determination on the merits of the case, leaving it to the High Court to decide.

The Court’s reasoning was based on the following points:

• The NCLT proceedings were at an advanced stage, with eight out of fifteen steps already completed.
• The final sanction of the scheme by the NCLT would take six to eight months.
• Halting the NCLT proceedings could lead to financial distress for FRL and impact the livelihood of its employees.
• The Court wanted to ensure that all contentions were properly considered by the Delhi High Court.

The judgment includes the following quotes:

“We grant liberty to FRL to approach the High Court by filing an application seeking continuation of the NCLT proceedings beyond the 8th Stage (Meeting of Shareholders and creditors).”

“Accordingly, we request the learned Single Judge of the Delhi High Court, to consider all the contentions raised by both the parties in this regard and pass appropriate order as to continuation of the NCLT proceedings beyond the stage mentioned at serial no. 8 and other regulatory approvals expeditiously, uninfluenced by any observations made herein.”

“Civil Appeals are disposed of in terms of the aforesaid order.”

There were no dissenting opinions in this judgment. The bench was unanimous.

The Supreme Court’s analysis focused on the procedural aspects of the case, specifically the need for the Delhi High Court to reconsider the matter in light of all the contentions raised by both parties. The Court did not delve into the substantive issues of the arbitration or the merits of the sale transaction between FRL and the Reliance Group.

The decision has potential implications for future cases involving arbitration and NCLT proceedings. It highlights the need for courts to balance the interests of all parties and to consider the practical implications of their decisions. It also emphasizes the importance of ensuring that all contentions are properly considered before making a final determination.

No new doctrines or legal principles were introduced in this judgment.

Key Takeaways

• The Supreme Court allowed Future Retail Limited (FRL) to approach the Delhi High Court for permission to continue NCLT proceedings beyond the 8th stage.
• The Delhi High Court was requested to consider all contentions raised by both parties and pass appropriate orders expeditiously.
• The Supreme Court did not make any final determination on the merits of the case, leaving it to the High Court to decide.
• This decision highlights the need to balance the interests of all parties in cases involving arbitration and NCLT proceedings.
• The practical implications of halting NCLT proceedings, including financial distress and impact on employees, were considered.

Directions

The Supreme Court directed the Delhi High Court to consider all contentions raised by both parties regarding the continuation of NCLT proceedings beyond the 8th stage and pass appropriate orders expeditiously.

Specific Amendments Analysis

There is no specific amendment analysis in this judgment.

Development of Law

The ratio decidendi of this case is that in cases involving a conflict between arbitration proceedings and NCLT proceedings, courts must balance the interests of all parties and consider the practical implications of their decisions. This case does not change the previous position of the law but rather reinforces the need for a balanced approach in such complex matters.

Conclusion

The Supreme Court disposed of the civil appeals by allowing Future Retail Limited to approach the Delhi High Court for permission to continue the NCLT proceedings. The Court directed the High Court to consider all contentions raised by both parties and pass appropriate orders expeditiously, without making any final determination on the merits of the case. This decision underscores the need for a balanced approach in cases involving arbitration and NCLT proceedings, considering the practical implications for all parties involved.