Explained: Supreme Court’s high bar for overturning enforcement of foreign arbitration awards

The ruling is likely to matter in investor disputes where enforcement often drags on through repeated challenges. By tightening the use of public policy and stressing finality, the court has signalled that foreign awards will be enforced unless they cross a narrow legal bar, limiting the scope for delay at the last stage.

Facts of the case

In 2014, the promoters of Financial Software and Systems Pvt. Ltd (FSSPL) and a set of private equity investors entered into a Share Acquisition and Shareholders Agreement. Like most such agreements, it contained a negotiated exit clause — an “exit mechanism” — a sequence of options through which investors could recover their investments with returns. Under the agreement, FSSPL and its promoters were under a strict obligation to ensure that a Qualified Initial Public Offering (QIPO) occurred by March 2016.

A QIPO is an “exit route” or mechanism that allows private equity and venture capital investors to liquidate their investments and realise returns. It happens when a private company lists its shares on a public stock exchange. This transition allows investors to sell their shares to the general public. If that did not happen, a cascade of alternatives, the “exit waterfall”, would kick in such as a secondary sale, a buy-back, or, failing those, a strategic sale of the company. None of it materialised.

The dispute began before the Singapore International Arbitration Centre, where the investors said they had not received the exit promised under their agreement. The tribunal held that the exit clause created a binding obligation. When the planned listing did not take place, and no alternative exit was provided, it found a breach and awarded about Rs. 11,288 million in damages. It also provided that if the amount was not paid, the investors could proceed with a strategic sale to recover their dues.

The promoters challenged the award before the Singapore High Court, the seat court, i.e., the court that supervises the arbitration and can set aside the award. They argued waiver and illegality on the ground that the arrangement amounted to a buyback—a company purchasing its own shares from investors, which is regulated under company law. The court rejected both. It found no written waiver as required by the contract and held that an award of damages is not the same as a buy-back of shares. In February 2025, it declined to set aside the award. No appeal was filed.

Enforcement in India

When the investors came to India to enforce the award, the legal framework was already narrow. Section 48 of the Arbitration and Conciliation Act allows Indian courts to refuse enforcement of a foreign award only on limited grounds. The most litigated among them, “public policy of India” is itself tightly fenced— it covers only cases involving “fraud or corruption”, violations of the “fundamental policy of Indian law”, or outcomes that shock the “most basic notions of morality or justice”. It explicitly bars a review on merits.

This architecture reflects a policy choice. India, like most jurisdictions, has committed to enforcing foreign awards with minimal interference. The system works only if courts resist the temptation to revisit the dispute.

The promoters’ case, however, asked the court to do exactly that, under the label of public policy.

What the SC held

The promoters argued that the award forced a buy-back of shares and therefore violated public policy. A buy-back is a company-driven transaction, a structured repurchase of its own shares. A surrender, in contrast, is a shareholder’s act of returning shares, often as part of a broader settlement.

The award, the court noted, did not direct the company to repurchase its shares. It required payment of damages. The surrender of shares was a corollary, a way to prevent the investors from recovering both the money and the equity.

If the promoters paid, the shares could move to them. The company’s capital was not being reduced. On that reading, the regulatory framework governing buy-backs simply did not apply.

More importantly, the Court said even if there were some inconsistency with domestic law, that alone would not breach the “fundamental policy of Indian law”. A “mere violation of a provision of a local law”, it said, is not enough.

The promoters argued that once damages had been awarded, allowing a sale amounted to granting specific performance alongside damages, something they said was impermissible under the Specific Relief Act framework.

The Court avoided the doctrinal thicket by reframing the relief. Damages, it said, were the primary remedy. The strategic sale was only a “mechanism to satisfy the awarded damages in the event of non-payment ”.

Seen this way, the sale was not an independent remedy at all. It was a tool to enforce the one that had already been granted.

The most consequential part of the judgment lies in how the Court dealt with repetition.

By the time the matter reached India, the promoters had already taken their objections to the Singapore High Court, the “seat court” that supervises the arbitration. Those objections had been rejected.

The Supreme Court held that the same issues could not be reopened at the enforcement stage. It invoked the principle of transnational issue estoppel, the idea that once a competent court has decided an issue, the same parties cannot relitigate it elsewhere. The Court described this as a way to “curb the propensity of parties to relitigate settled factual issues” by shifting forums.