Office Location


E-5, 2nd Floor, Defence Colony
New Delhi - 110024
Tel : 011-24336744



Office No. 1410, 14th Floor, Maker Chamber V, Nariman Point, Mumbai
Tel : +91 22-22873499



Level 18, One Horizon Center, Golf Course Road, DLF Phase 5, Sector 43, Gurgaon 122002, India
Tel : +91 124 668 8146 / +91 124 668 8147


Mumbai (Entertainment and Media Practice)

Office No. 213, 2nd Floor, A-wing, Crystal Plaza, Andheri Link Road, Andheri (W), Mumbai.
Tel : 022-62360762


Mumbai (Corporate and Transactional Practice)

909/A, Capital Building, Bandra Kurla Complex, East Mumbai- 400098



21/2, 1st Main Road,
Opp Indian overseas Bank,
Bengaluru - 560009



77A, Cantt., Kanpur - 208004

Enforcement of Foreign Arbitral Awards

Recently, in two separate landmark judgments, two coordinate benches of the Delhi High Court refused to decline the enforceability of Foreign Arbitral Awards on the ground of it being against the fundamental policy of Indian law. The Delhi High Court, in both these Single Judge's judgments, NTT Docomo v. Tata Sons Limited (Docomo Case) and Cruz City v. Unitech (Unitech Case), while passing the judgment decree in favour of the foreign party(ies), not only disallowed the invocation of 'fundamental policy of Indian law' to thwart the foreign Arbitral Awards' enforceability, but also examined at length some fundamental issues pertaining to Indian Foreign Exchange laws and policy irking the foreign investors involved in the cross-border Mergers & Acquisitions (M&A) landscape. The Delhi High Court tested the legality of shareholders' agreements (SHA) and delved into issues like, 'put option', 'assured returns', 'downside protection' in view of the restrictions under the foreign exchange law and policy. It also examined in detail, issues around breach of representations and warranties and ensuing damages/indemnity arising in cross border M&A transactions. In the Docomo case, while disallowing the Reserve Bank of India's (RBI) intervention application (in the Execution Suit proceeding), the Single Judge held that there are no statutory requirements in India which mandate that RBI must necessarily be heard in proceedings involving enforcement and validity of an Arbitral Award resulting in a remittance of foreign exchange to a non-Indian entity outside of India. "The mere fact that a statutory body's power and jurisdiction might be discussed in adjudication or an Award, will not confer locus standi on such body or entity to intervene in those proceedings," held the Single Judge

What is even more encouraging for the votaries of a liberalized economy is that the Single Judges in both the judgments did not just stop at negating the applicability of 'public policy' in challenging the Foreign Arbitral Award, but they went on to examine in detail, the provisions of the shareholder's agreement in the two cases giving rise to the claims of damages/indemnity vis-a-vis the concepts of assured return and down side protection in international M&A deals. The 'put option', a standard risk protection clause for salvaging the economic value of the investments by selling the securities to the other side often at a pre-determined valuation/price in the M&A deals, was discussed in-depth in the backdrop of assured returns/ down side protection. The Delhi High Court in the Unitech Case held that a 'put option' provided to a non-resident (Cruz City) by another non-resident (Burley, an overseas subsidiary of Unitech) back-stopped by the resident Indian parent entity i.e., Unitech, cannot be held as an illegally structured FDI transaction ensuring an "assured return" at a "predetermined rate", and thus is not violating FEMA. Having examined the provisions of the Shareholders Agreement and a "Keepwell Agreement" (akin to equity backstopping/guaranteeing arrangement by parent entity to de-risk the breaches of primary obligations of its subsidiaries to the other parties under the terms of SHA), the Court held that FEMA does not prohibit any 'put option' given to the non-resident entity (Cruz City) by another non-resident entity (Burley). Displaying interpretative ingenuity, the Delhi High Court held that both Unitech and Burley had breached the obligation under the Keepwell Agreement and that Cruz City was indeed entitled to recover from Unitech a sum equal to the 'put option' price by way of damages for the breach of contract, under the terms of Keepwell Agreement.

The Delhi High Court squarely rejected the contention that the provisions of the SHA read with the Keepwell agreement provided an assured return, thus violating FEMA provisions. It held that such restrictions under the foreign exchange policy and law would not be applicable to cases where the foreign investor initiates a damage claim based on a breach of contract. If the FDI has been brought into the country based on specific representations and warranties and such representations and warranties are breached, the foreign investor would be entitled to its remedies under law, including in damages. If Cruz City has been induced to make an investment on a false assurance of the Keepwell Agreement being legal and valid, Unitech must "bear the consequences of violating the provisions of Law, but cannot be permitted to escape their liability under the Award", the Single Judge came out very strongly against Unitech. It termed Unitech's contention that the SHA was a device to circumvent the provisions of FEMA, and all its representations were false and illegal, as 'plainly dishonest', and thus held that permitting it to prevail on such contentions to resist the enforcement of the Award would plainly amount to "rewarding dishonesty and would be manifestly unjust."