Put Options and Enforcement of Foreign Awards in India


In another instance of the Indian judiciary’s pro-arbitration approach, the Bombay High Court in a recent judgement enforced a SIAC award arising out of a dispute relating to a shareholder agreement. The Court rejected public policy objections to enforcement relating to inadequacy of stamp duty and alleged violations of exchange control regulations.


Banyan Tree Growth Capital LLC (“Banyan Tree“), a Mauritius company entered into a Share Subscription Agreement (“SSA”) with the promoters of Axiom Cordages Limited (“Axiom”) i.e. Responsive Industries Limited (“Responsive”) and Wellknown Business Ventures LLP (“Wellknown”). Banyan Tree invested USD 50 million in Axiom, in the form of equity shares and convertible debentures. The parties entered into a Put Option Deed (forming a part of SSA), enabling Banyan Tree an exit obliging Responsive and Wellknown to purchase its shares in Axiom. As security for this arrangement, the parties entered into an escrow agreement on the understanding that Wellknown would retain the shares of Responsive or its cash equivalent in a specified escrow account to ensure that Wellknown and Responsive had the requisite liquidity to meet their payment obligation to Banyan under the Put Option Deed.

Subsequently, Wellknown without Banyan Tree’s consent or knowledge transferred the escrow shares out of the demat-escrow account to its own account. When Banyan Tree learnt of the transfer, it sought restoration of the escrow shares, which Wellknown refused to do. Banyan Tree sought and obtained a status quo order from the Bombay High Court under the Arbitration & Conciliation Act, 1996.

Banyan Tree then exercised its put option but the promoters refused to comply claiming that the Put Option Deed was void under Indian law.

The dispute was referred to SIAC arbitration at Singapore. The arbitral tribunal at SIAC found the Put Option Deed to be valid and awarded damages in favour Banyan Tree. Banyan Tree applied to enforce the SIAC award before the Bombay High Court, which was opposed by the promoters of Axiom.

Axiom contended that the Put Option Deed was a securities/derivatives contract and/or a forward contract, which was prohibited under the Securities Contract Regulation Act (SCRA). SCRA, according to Axiom, only permitted spot delivery contracts and the Put Option Deed not being a spot delivery contract was prohibited.

The issues that arose before the Court were –

  1. Whether the Put Option Deed is inadequately stamped, resulting in the illegality of the contract?
  2. Whether the Put Option Deed is unenforceable under Securities Contract Regulations Act, 1956 (“SCRA”)?
  3. Whether the Put Option Deed is unenforceable under Foreign Exchange Management Act, 1999 (‘FEMA’)?
  4. Whether the arbitral award is contrary to the fundamental policy of India law?

On the first issue, the Court found that the conduct of a party creates substantive legal consequences. As the obligation of adequately stamping the Put Option Deed was cast on Axiom, the Court held that it was estopped from contending that the document was inadequately stamped. The Court also noted that the Put Option Deed was admitted in evidence before the Arbitral Tribunal and no objections were raised by Axiom on the validity of the documents. The Court observed that it was trite law that once a document is admitted in evidence, the instrument cannot subsequently be questioned due to inadequacy of stamp duty. The Court held that this principle of law would also apply to the enforcement and execution of a foreign arbitral award in India.

On the second issue, the Court observed that the legislative intent underlying the SCRA is to prevent undesirable transactions in securities. The Court noted that the Put Option Deed could not be treated as an undesirable transaction. As the exit option for Banyan Tree, was a buy-back arrangement, it could not by definition be traded on any stock exchange and consequently would not attract SCRA.

As regards the third issue, the Court dismissed the objection to the award violating FEMA by relying on the recent Supreme Court judgement in Vijay Karia & Ors. Vs. Prysmian Cavi E Sistemi SRL & Ors1. The Supreme Court in this judgement held that enforcement of a foreign award would not be refused for violation of exchange control regulations. The Court considering the legislative scheme of FEMA concluded that any infraction of its provisions would not render the Put Option Deed illegal or/or the foreign award unenforceable.

The Court gave short shrift to the public policy objection to enforcement by reiterating that it is restricted to three categories i.e. fundamental policy of Indian law or the interest of India, justice or morality. The Court dismissed the objections to enforcement advanced by Axiom as they did not offend any of the three categories. The Court consequently ruled that the award was enforceable as a decree of the Court.


The judgement reaffirms the shift in Indian judicial philosophy and approach to enabling enforcement of foreign awards in India. The ruling discourages technical and pedantic challenges to enforcement and emphasises that the Indian court as the executing court under the NYC will not revisit the merits of the dispute by reappreciating the evidence and material facts that have been finally determined by the award.

  • 1 2020 SCC Online SC 177

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