In a significant ruling reinforcing India’s pro-arbitration stance, the Supreme Court upheld the enforcement of a foreign arbitral award worth over ₹1400 crore against the promoters of a Chennai-based digital payments company. The Court declined to interfere with earlier findings that treated the award as enforceable under Indian law.
Background of the Case
The dispute arose in Nagaraj V. Mylandla vs PI Opportunities Fund-I & Ors., where foreign investors sought enforcement of an arbitral award passed under the rules of the Singapore International Arbitration Centre (SIAC).
The investors had invested in Financial Software and Systems Pvt. Ltd. (FSSPL) under a 2014 shareholders’ agreement. This agreement guaranteed them an “exit” mechanism such as an IPO, secondary sale, or buy-back within a stipulated timeline.
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However, the exit did not materialize. Investors alleged that the promoters failed to fulfill their contractual obligations, leading to arbitration proceedings seated in Singapore.
On July 5, 2024, a three-member arbitral tribunal held that the promoters had committed a “material breach” by failing to provide an exit to the investors.
The tribunal awarded damages based on the “exit price” calculated as of September 18, 2020. It directed the promoters to jointly pay substantial sums to investors, along with interest.
“The tribunal found that Clause 19 imposed an absolute obligation to provide an exit,” the judgment records.
The award further stated that if damages were not paid within 90 days, investors could proceed with a “strategic sale” of the company.
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The promoters challenged the award before the Singapore High Court, arguing violation of natural justice and improper interpretation of contractual clauses. However, the challenge was rejected on February 21, 2025.
Subsequently, the investors approached the Madras High Court for enforcement. The High Court ruled in their favour, holding that the award did not violate India’s public policy and could be enforced as a decree.
The High Court emphasized restraint, noting that courts should not re-examine the merits of a foreign award.
Before the Supreme Court, the promoters argued that enforcement would violate Indian public policy. They contended that the award effectively resulted in an unlawful “buy-back” of shares and conflicted with provisions of the Companies Act and Specific Relief Act.
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They also claimed that multiple remedies damages, strategic sale, and termination rights had been granted simultaneously, contrary to contractual principles.
On the other hand, the investors maintained that the award only granted damages, and the surrender of shares was a safeguard against double recovery. They argued that this did not amount to a buy-back under Indian law.
The Supreme Court examined the framework under Sections 47 to 49 of the Arbitration and Conciliation Act, 1996, which governs enforcement of foreign awards.
The Court reiterated that enforcement can be refused only on limited grounds, such as violation of public policy or denial of natural justice.
It noted that objections raised by the promoters had already been considered by the arbitral tribunal and the Singapore High Court.
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The Court also highlighted the principle of “transnational issue estoppel,” observing that parties cannot reopen issues already decided by the court at the seat of arbitration.
Upholding the Madras High Court’s order, the Supreme Court ruled that the arbitral award was enforceable in India and could be treated as a decree.
The Court found no violation of fundamental policy of Indian law or principles of natural justice. It concluded that the objections raised were insufficient to block enforcement under Section 48 of the Arbitration Act.
Case Title: Nagaraj V. Mylandla vs PI Opportunities Fund-I & Ors.
Judges: Justice Sanjay Kumar and Justice K. Vinod Chandran
