Foreign arbitral award enforcing compensatory damages upheld where RBI approval was not required for the payment transaction.

A foreign arbitral award granting compensatory damages for breach of share purchase arrangements was considered enforceable in India because it did not require transfer of shares or payment of consideration for any equity transfer. The RBI clarified that payment of such damages is a current account transaction under the foreign exchange framework and does not require specific approval or permission. On that basis, no legal impediment was found under the arbitration enforcement regime, and RBI approval was not treated as a precondition to enforcement on the facts presented.

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Issues: Whether the foreign arbitral award, granting compensatory damages to the award-holders, could be recognized and enforced in India without any legal impediment and whether prior RBI approval was required before enforcement.

Analysis: The award was for compensatory damages arising from breach of the share purchase arrangements and did not direct transfer of shares or payment of consideration for any equity transfer. The RBI's affidavit clarified that payment of damages of this nature is a current account transaction under the foreign exchange framework and does not require any specific approval or permission. In that view, the Court found no contravention that would bar enforcement under the enforcement provisions of the arbitration law.

Conclusion: The foreign award was held enforceable in India, and RBI approval was not treated as a precondition to enforcement on the facts presented.

Final Conclusion: The award-holder's enforcement rights were upheld and the matter was disposed of with directions for the execution proceedings to continue expeditiously.

Ratio Decidendi: A foreign award granting compensatory damages, where no transfer of shares is ordered and the RBI states that such payment is a current account transaction not requiring specific approval, is not ed from enforcement in India on RBI-approval grounds.

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