The enforcement of arbitral awards in India has frequently
intersected with regulatory regimes beyond the Arbitration and
Conciliation Act, 1996 ("Act") more
persistently than foreign exchange control under the Foreign
Exchange Management Act, 1999 ("FEMA").
One recurring issue has been whether satisfaction of an arbitral
award involving payment to a non-resident requires prior approval
from the Reserve Bank of India ("RBI")
particularly where such payment could be characterised as a capital
account transaction. In a recent decision, the Supreme Court has
clarified that RBI approval under FEMA is not a prerequisite for
satisfying arbitral awards marking an important development in
India's arbitration and enforcement landscape. The ruling
resolves a line of conflicting High Court decisions and removes a
significant practical impediment to award enforcement, particularly
in cross-border disputes.
