The Supreme Court has upheld the enforcement of a foreign arbitral award against the promoters of Financial Software and Systems Pvt. Ltd. (FSSPL), rejecting a series of objections raised on grounds of public policy, alleged buy-back of shares, and violation of statutory provisions.
The dispute arose from a shareholders’ agreement under which foreign investors were entitled to an exit mechanism. Upon failure of the promoters to provide such exit, arbitration proceedings were initiated under the Singapore International Arbitration Centre, culminating in an award directing payment of damages equivalent to the “exit price,” with a fallback option of enforcing a strategic sale in case of non-payment.
Before the Supreme Court, the promoters contended that enforcement of the award would effectively result in a buy-back of shares in violation of the Companies Act. The Court, however, firmly rejected this argument, holding that there was a clear distinction between “surrender of shares” and “buy-back of shares.” It noted that the arbitral award did not stipulate that the shares would be surrendered to the company and that, in fact, such surrender could even be made to the promoters themselves, thereby increasing their shareholding rather than reducing share capital. The Court also observed that the offer to surrender shares had been made by the investors themselves to avoid unjust enrichment and could not now be used to challenge the award.
The Court further held that once the Singapore High Court, as the seat court, had rejected the buy-back argument, the same could not be reopened at the enforcement stage in India. Applying the doctrine of transnational issue estoppel, it ruled that parties cannot re-agitate issues already conclusively decided by the seat court by repackaging them as public policy objections under Section 48 of the Arbitration and Conciliation Act, 1996.
On the contention that the investors had pursued multiple remedies simultaneously in violation of the agreement, the Court held that this was a matter of contractual interpretation already considered by the arbitral tribunal and could not be revisited in enforcement proceedings. It similarly rejected the argument that the award violated the Specific Relief Act, clarifying that the primary relief granted was damages and that the option of strategic sale was merely a mode of recovery in case of default, not a grant of specific performance.
The Court also clarified that termination of the promoters’ rights under the agreement was only an interim protective measure and not an independent exit mechanism, and that it ceased to operate once damages were awarded. Emphasising the limited scope of interference under Section 48, the Court reiterated that enforcement of foreign awards can be refused only on narrow grounds and does not permit a merits review.
Finding no merit in the objections, the Court dismissed the special leave petitions and imposed additional costs of ₹25 lakh on the promoters, observing that the challenge was an attempt to delay enforcement of the award.
Appearances:
For Petitioner (s) : Mr. Gopal Subramanian, Sr. Adv.; Mr. Anirudh Krishnan, Adv.; Mr. Mahesh Agarwal, Adv.; Mr. Ashish Kabra, Adv.; Mr. Nishant Kadur, Adv.; Mr. Ansh Desai, Adv.; Ms. Madhavi Agrawal, Adv.; Ms. Gauri Subramanium, Adv.; Mr. Uday Aditya Jetley Pocha, Adv.; Mr. Jayavardhan Singh, Adv.; Mr. Pavan Bhushan, Adv.; Mr. Adnan Yousef, Adv.; Mr. Adarsh Subramanian, Adv.; Mr. Anuraag Rajagopalan, Adv.; Mr. Nivethithaa.s, Adv.; Mr. E. C. Agrawala, AOR
For Respondent (s) : Mr. Rajendra Barot, Adv.; Mr. Prabhav Shroff, Adv.; Ms. Mrudula Dixit, Adv.; Mr. Naman Nayyar, Adv.; Ms. Aditi Nazre, Adv.; Ms. Shivam Jain, Adv.; Mr. Shivam Jain, Adv.; Ms. Sia Ganju, Adv.; Mr. Abhijnan Jha, AOR; Mr. Shyam Divan, Sr. Adv.; Mr. Suhrith Parthasarathy, Adv.; Ms. Rashmi Nandakumar, AOR; Ms. Rhia Marshall, Adv.; Ms. Amritha Sathyajith, Adv.; Ms. Yashmita Pandey, Adv.
Mr. Ankur Singhal, Adv.; Mr. Rongon Choudhary, Adv.; Dr. Abhishek Manu Singhvi, Sr. Adv.; Mr. Ritin Rai, Sr. Adv.; Mr. Anuj Berry, Adv.; Ms. Shalaka Patil, Adv.; Ms. Anusha Ramesh, Adv.; Mr. Utkarsh Srivastava, Adv.
Ms. Shilpa Sengar, Adv.; Ms. Gauri Pasricha, Adv.; Mr. Harsh Khanchandani, Adv.; Mr. Daksh Kadian, Adv.
Mr. Amit Bhandari, Adv.. ; Mr. Anush Raajan, AOR; Mr. Balaji Srinivasan, AOR; Mr. Vishwaditya Sharma, Adv.
Ms. Kanishka Singh, Adv.; Ms. Harsha Tripathi, Adv.; Mr. Subornadeep Bhattacharjee, Adv.; Ms. Suganya T.s., Adv.; Mr. Parikshit Pitale, Adv.; Mr. K. Shiva, Adv.; Mr. Rohan Dewan, Adv.; Ms. Aakriti Priya, Adv.; Ms. Garima Jain, Adv.; Ms. Lakshmi Rao, Adv.; Mr. S. Eshwar, Adv.; Mrs. Aanchal M. Niching, Adv.
