Re-Colouring Facts As Public Policy Ground Not Enough To Resist Enforcement Of Foreign Arbitral Award: Supreme Court

The Supreme Court of India on Wednesday held that enforcement of foreign arbitral awards cannot be resisted under Section 48 of the Arbitration and Conciliation Act, 1996, on a party's plea re-characterizing factual disputes as issues of public policy, particularly as courts cannot re-examine awards on merits at the enforcement stage.

A Division Bench comprising Justice Sanjay Kumar and Justice Vinod Chandran dismissed Special Leave Petitions filed by Nagaraj V. Mylandla and Sharada Mylandla against enforcement of a Singapore-seated arbitral award directing payment of Rs 6,614 million to PI Opportunities Fund-I, Rs 2,804 million to Millenna FVCI Limited, Rs 777 million to NYLIM I and Rs 1,093 million to NYLIM II.

“By giving a different colour to a factual issue, it is not open to a party to the foreign award to seek to bring it within the ambit of Section 48(2)(b) of the Arbitration Act by raising a' public policy' ground. The doctrine of 'transnational issue estoppel' would bar the same," it observed.

It further held that “one must remember that it is the sovereign commitment of India to honour foreign awards, except on the exhaustive grounds provided under Article V of the New York Convention”, and added that “such a merits-based evaluation is beyond the scope of the enforcement court's jurisdiction under Section 48 of the Arbitration Act”.

The dispute originated from a Share Acquisition and Shareholders Agreement (SASHA) dated October 10, 2014, between Financial Software and Systems Pvt Ltd (FSSPL), its promoters Nagaraj V. Mylandla and Sharada Mylandla, the employee welfare trust and institutional investors, including Bengaluru-based PI Opportunities Fund-I and Mauritius-based Millenna FVCI Limited and NYLIM Jacob Ballas funds.

The investors acquired a 51.76% stake, with the promoters required to ensure a Qualified Initial Public Offering (QIPO) by March 31, 2016.

When the QIPO failed to materialise, the exit mechanisms under Clause 19 of the SASHA became available to the investors, including secondary sale, buy-back/recapitalisation and strategic sale upon material breach.

Despite repeated notices, the promoters failed to provide a viable exit, leading the investors to initiate arbitration before the Singapore International Arbitration Centre in 2022 under the SIAC Rules, the seat of arbitration being Singapore.

An award dated July 5, 2024, was rendered by a three-member tribunal.

It held the promoters in 'material breach' for failing to provide an exit and directed payment of exit price-based damages as of September 18, 2020 Rs 6,614 million to PI Opportunities Fund-I, Rs 2,804 million to Millenna FVCI Limited, Rs 777 million to NYLIM I, and Rs 1,093 million to NYLIM II.

It also provided a 90-day window for payment, failing which the investors could proceed with a strategic sale to recover dues.

The award was unsuccessfully challenged before the Singapore High Court on February 21, 2025.

Thereafter, the investors sought enforcement in India under Sections 47 to 49.

By order dated September 22, 2025, the Madras High Court held the award enforceable as a decree, rejecting all objections raised by the Mylandlas.

Aggrieved, the Mylandlas moved the Supreme Court through Special Leave Petitions under Article 136 of the Constitution of India.

They argued that the award, requiring payment with surrender of shares and permitting a strategic sale, violated the Companies Act, 2013 (Sections 66–68) and the Specific Relief Act, 1963, and that the court must examine its substance.

The investors countered that such objections were already or could have been raised before the Singapore High Court, and that enforcement courts cannot review merits. They also contended that surrender is not a buy-back and strategic sale is only to realise damages.

The Supreme Court upheld the reasoning of the Madras High Court and emphasised that enforcement proceedings are not a forum for re-litigation.

Applying the doctrine of transnational issue estoppel, it held that issues decided by the seat court cannot be reopened in India, as doing so would undermine finality and enable abuse of process.

“It is not open to a party to the foreign award to seek to bring it within the ambit of Section 48(2)(b) of the Arbitration Act by raising a 'public policy' ground. Such a 'merits-based' evaluation is beyond the scope of the enforcement court's jurisdiction under Section 48 of the Arbitration Act”, it held.

Rejecting the argument that the award amounted to an illegal buy-back or impermissible specific performance, the Court further reiterated that such contentions sought a reappreciation of the arbitral tribunal's findings, which is impermissible at the enforcement stage.

Bench criticised the attempt as “a mudslinging effort by the Mylandlas with the hope that some of the mud so flung would stick, they are richly deserving of being mulcted with further costs".

Accordingly, dismissing the appeals and affirming the enforceability of the award, it imposed costs of Rs 25 lakh payable by Mylandlas to each investor group.