Foreign award enforcement requires narrow public policy review, not merits reassessment, under the Arbitration and Conciliation Act.

Section 48(2)(b) of the Arbitration and Conciliation Act, 1996 permits only a narrow public policy inquiry when resisting enforcement of a foreign award, and it does not allow a merits review of the arbitral tribunal's reasoning. The article notes that the fundamental policy exception is confined to a clear breach of basic Indian legal principles. It also explains that the award was viewed as commercially coherent and not shown to violate the Securities Contracts (Regulation) Act or FEMA in a manner attracting the public policy bar. On that basis, the foreign award was treated as enforceable and executable as a decree.

---

---

Issues: (i) Whether the scope of inquiry under Section 48(2)(b) of the Arbitration and Conciliation Act, 1996 permits a merits-based examination while resisting enforcement of a foreign award; (ii) Whether the foreign award was unenforceable for violating the Securities Contracts (Regulation) Act, 1956 and the Foreign Exchange Management Act, 1999.

Issue (i): Whether the scope of inquiry under Section 48(2)(b) of the Arbitration and Conciliation Act, 1996 permits a merits-based examination while resisting enforcement of a foreign award.

Analysis: Section 48 embodies a narrow and pro-enforcement regime for foreign awards. The grounds for refusal are limited, and the public policy objection under Section 48(2)(b) is further restricted by the explanations, including the bar against a review on the merits of the dispute. The threshold for invoking fundamental policy of Indian law is high and is confined to a breach of the most basic principles of Indian law. A party resisting enforcement cannot convert Section 48 proceedings into an appeal on the correctness of the arbitral tribunal's reasoning.

Conclusion: The inquiry under Section 48(2)(b) does not permit a merits review, and the resistance to enforcement had to be tested only on the limited public policy grounds available under the provision.

Issue (ii): Whether the foreign award was unenforceable for violating the Securities Contracts (Regulation) Act, 1956 and the Foreign Exchange Management Act, 1999.

Analysis: On the SCRA issue, the arbitral tribunal had construed the share purchase and exit arrangements as constituting a spot delivery arrangement and treated the contractual transfer mechanism as consistent with the statutory definition and the applicable regulatory framework. On the FEMA issue, the tribunal interpreted the put option and the expression "legally able" in a commercially sensible manner and held that procurement of a non-resident third-party purchaser did not violate FEMA. The court held that these findings were reasonable, commercially coherent, and not shown to offend the fundamental policy of Indian law. It further held that FEMA violations, even if assumed, would not by themselves render the award unenforceable. The award was also treated as one awarding damages for breach of contractual obligations rather than as direct enforcement of the put option.

Conclusion: The award did not violate the SCRA or FEMA in a manner that attracted the public policy bar, and enforcement was not refused on that ground.

Final Conclusion: The foreign award was held enforceable under Part II of the Arbitration and Conciliation Act, 1996 and was directed to be treated as a decree of the court for execution.

Ratio Decidendi: Enforceability of a foreign award under Section 48 can be refused on public policy grounds only where enforcement clearly and manifestly offends the fundamental policy of Indian law, and the court cannot reappreciate the merits or disturb a commercially reasoned arbitral interpretation unless that high threshold is met.

---