Bombay High Court rejects objections to enforcement of foreign award and upholds legality of put option under SCRA AND FEMA

Brief Facts

On 12 September 2008, Banyan Tree Growth Capital LLC (“Petitioner”) and Respondent Nos. 2 and 3 entered into a Share Subscription Agreement (“SSA”) whereunder the Petitioner made an initial investment of USD 50 million in return for equity shares and convertible debentures in Axiom Cordages Ltd. (“Respondent No. 1 Company”). The parties also entered into a put option deed on the same date (“Put Option Deed”) whereunder Respondent Nos. 2 and 3 were required to buy the Petitioner’s shareholding in Respondent No. 1 (“Put Securities”) to secure its exit. However, upon the exercise of the put option right by the Petitioner in 2015, Respondent Nos. 2 & 3 refused to purchase the Put Securities and stated that the Put Option Deed was void ab initio under Indian law. The dispute was referred to arbitration at the Singapore International Arbitration Centre. The arbitral tribunal held the Put Option Deed to be a valid and legal contract under Indian law and awarded damages to the Petitioner based on the fair market value of the Put Securities, which remained uncontested by the Respondents (“Award”).

The Respondents opposed the petition for enforcement of the Award filed before the Bombay High Court (“Court”) and contended that the Award was against the public policy of India, and for the first time, raised an objection that the Put Option Deed was inadequately stamped.

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