Foreign award enforcement upheld where regulatory breach was rectifiable and contracts were not void for unlawful financial assistance.

The HC held that enforcement of a foreign award may be refused on public policy grounds only where it offends a fundamental and non-derogable principle of Indian law; a rectifiable foreign exchange breach or contractual irregularity was insufficient, so enforcement could not be denied on that basis. It further held that the share purchase arrangements were not shown to be unlawful financial assistance under Section 67(2) of the Companies Act, 2013 or void under the Contract Act, as the commercial purpose was exit from investments rather than prohibited financing. The award of damages and interest was also upheld because the tribunal applied reasonable compensation and was entitled to grant interest.

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Issues: (i) whether enforcement of the foreign award could be refused on the ground that the underlying share purchase arrangements and the award contravened the fundamental policy of Indian law, including the foreign exchange regime; (ii) whether the agreements were void or unenforceable for allegedly violating Section 67(2) of the Companies Act, 2013 and Section 23 of the Indian Contract Act, 1872; and (iii) whether the award of damages and interest was liable to refusal of enforcement.

Issue (i): whether enforcement of the foreign award could be refused on the ground that the underlying share purchase arrangements and the award contravened the fundamental policy of Indian law, including the foreign exchange regime.

Analysis: Enforcement of a foreign award can be refused on public policy grounds only within the narrow confines of Section 48 of the Arbitration and Conciliation Act, 1996. The applicable test is whether the award infringes a fundamental and non-derogable principle of Indian law, and not whether there is merely an error in contractual or statutory interpretation. The foreign exchange objections were examined in that framework. The agreements contemplated exit and transfer arrangements in a regulated securities transaction, and the record showed that such performance was not inherently forbidden and could be undertaken with appropriate Reserve Bank of India approval. A rectifiable breach under the foreign exchange law does not, by itself, render the award unenforceable on public policy grounds.

Conclusion: The award did not violate the fundamental policy of Indian law on the foreign exchange objections, and enforcement could not be refused on that basis.

Issue (ii): whether the agreements were void or unenforceable for allegedly violating Section 67(2) of the Companies Act, 2013 and Section 23 of the Indian Contract Act, 1872.

Analysis: The objection that the arrangements amounted to unlawful financial assistance was rejected on the evidence and the commercial context. The documents did not establish that providing financial assistance for purchase of the shares of the public company was the object contemplated when the parties entered into the transaction. The commercial understanding was found to be that the respondents undertook payment obligations in return for the petitioners' exit from their investments, rather than to finance an impermissible share purchase. The alleged violation of Section 67(2) was therefore not made out, and the contracts were not shown to be void under Sections 23 and 24 of the Indian Contract Act, 1872.

Conclusion: The challenge based on Section 67(2) of the Companies Act, 2013 and Sections 23 and 24 of the Indian Contract Act, 1872 failed.

Issue (iii): whether the award of damages and interest was liable to refusal of enforcement.

Analysis: The arbitral tribunal treated the contractual stipulation as penal to the extent it exceeded reasonable compensation and then assessed damages on the basis of the proved breach and the market value of the shares on the date of breach. That approach was held to be consistent with the law on reasonable compensation. The tribunal's award of interest was also upheld, since the arbitral tribunal had authority to award interest and the rate adopted did not offend the fundamental policy of Indian law. No ground was established to deny enforcement on these aspects.

Conclusion: The award of damages and interest was not liable to refusal of enforcement.

Final Conclusion: The foreign award was recognized and held enforceable as a decree of the Court, and the objections to enforcement were rejected.

Ratio Decidendi: A foreign award may be refused enforcement on public policy grounds only if it offends a fundamental and non-derogable principle of Indian law, and a rectifiable regulatory breach or an alleged statutory inconsistency that does not render the award void will not, by itself, bar enforcement.

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