Can Foreign Arbitral Award Be Challenged In India On Grounds Rejected By Seat Court? Supreme Court Explains 'Transnational Issue Estoppel'

The Supreme Court has held that enforcement of a foreign arbitral award cannot be blocked on “public policy” grounds under Section 48 of the Arbitration and Conciliation Act, 1996 when the issue has already been finally decided by the seat court, and Indian courts cannot re-examine the merits under the guise of enforcement, due to the applicability of the doctrine of 'transnational issue estoppel'.

“we must necessarily bear in mind that though the grounds under Section 48 of the Arbitration Act would have to be applied independently, in the course of such an exercise by the enforcement court in India, a party which has failed in its challenge to the arbitral award before the seat court cannot seek to reopen factual issues that were argued on merits and settled by such court once again before the enforcement court. 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.”, observed a bench of Justices Sanjay Kumar and K. Vinod Chandran.

In essence, the Court said that “a merits-based evaluation cannot be resorted to by the enforcement court and it cannot reopen factual issues which were conclusively settled on merits by the decision of the seat court.”

The dispute began in 2014 when three foreign investors invested in FSSPL, a digital payment services company, under an agreement providing an exit through an IPO by 2016. When the IPO failed, the agreement allowed alternate exit options, including share sale, buy-back, or strategic sale. As no exit was provided by the FSSPL despite notices, the investors-initiated arbitration before the Singapore International Arbitration Centre.

In July 2024, the tribunal held FSSPL and its promoters liable for failing to provide an exit and awarded about ₹1,400 crore in damages, with interest, and allowed a strategic sale if payment was not made. The promoters challenged the award before the Singapore High Court, but their plea was rejected in February 2025, and they did not appeal further.

The investors then sought enforcement in India under the Arbitration and Conciliation Act, 1996. The Madras High Court upheld the award, rejected objections on public policy and other grounds including the violation of fundamental laws of India arguing that the direction in the award to pay damages to the investors, who offered to surrender their shares upon payment amounted to violation of Companies Act, 2013 as this arrangement according to the Appellants/promoters amounted to an illegal "buy-back" of shares by FSSPL. The High Court dismissed these contentions and imposed costs of ₹25 lakh on the promoters, acknowledging the limitation of reopening the decided case on merits.

Aggrieved by the High Court's decision, the promoter appealed to the Supreme Court.

Dismissing the Appeal, the judgment authored by Justice Sanjay Kumar observed that the Appellant had merely repackaged its failed contention to block the enforcement by taking a plea of violation of public policy ground, which is barred by the application of the doctrine of 'transnational issue estoppel'.

“…it is not open to a party whose contentions on the merits of a particular issue on facts have been rejected by the seat court to seek review thereof by the enforcement court. Such a 'merits-based' evaluation is beyond the scope of the enforcement court's jurisdiction under Section 48 of the Arbitration Act and would be barred by application of the doctrine of 'transnational issue estoppel'.”, the court observed.

What Is Doctrine of Transnational Issue Estoppel?

The Doctrine of Transnational Issue Estoppel is the concept of 'issue estoppel' in international commercial arbitrations and the arbitral awards that arise therefrom.

According to the Court, “the application of the doctrine of 'transnational issue estoppel' would effectively curb the propensity of parties to relitigate settled factual issues taking advantage of the fact that they are before a different court in a different jurisdiction, viz., the enforcement court in a country other than the situs of the seat court. This would invariably narrow the scope of interference by the enforcement court with an arbitral award that has already passed muster with the seat court. This would add value and augment the efficiency of arbitration as a dispute resolution mechanism to settle trans-border commercial disputes.”

Does the Doctrine of Transnational Issue Estoppel Differ From Res Judicata?

Further explaining the doctrine of “transnational issue estoppel,” the Supreme Court distinguished it from res judicata, observing that while res judicata bars a court from deciding a dispute that has already attained finality between the same parties, issue estoppel operates against a party by preventing them from re-raising an issue that has already been decided against them, even in subsequent proceedings involving a different party.

“res judicata debars a court from exercising its jurisdiction to determine the lis if it has attained finality between the parties whereas the doctrine of 'issue estoppel' is invoked against the party if such an issue has been decided against him, he would be estopped from raising the same in a later proceeding.”, the court observed.

For the applicability of the doctrine of transnational issue estoppel, the following conditions should be met:

"(1) that the judgment must be given by a foreign court of competent jurisdiction;

(2) that the judgment must be final and conclusive and on the merits;

(3) that there must be identity of parties; and

(4) that there must be identity of subject matter, which means that the issue decided by the foreign court must be the same as that arising in the later proceeding."

No Violation Of Indian Law To Justify Interference In Enforcement Of Foreign Award

The Court rejected the Appellant's contention on violation of provisions of the Companies Act, 2013, holding that the buy-back and surrender of shares are distinct concepts, since the investors have surrendered their shares upon receiving damages, which did not amount to an unlawful buy-back under company law.

“…there is no indication in the arbitral award as to whom the surrender of shares is to be made. Logically, if the Mylandlas themselves make the payments due under the award, the shares would be surrendered to them, which would, in effect, increase their shareholding in FSSPL and would not be either a buy-back by FSSPL or reduction of its share capital. Therefore, on the face of it, the provisions of Sections 66 to 68 of the Companies Act have no application and the contention of the Mylandlas that enforcement of the award would result in violation thereof, and in consequence, violation of the public policy of India, has no legs to stand upon.”, the court observed.

“…we may also note that 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. Once the seat court held that there was no buy-back of shares and only a surrender of shares by the Investors, that issue stood settled once and for all and it is not open to the Mylandlas to seek to reopen the same on the anvil of Section 48(2)(b) of the Arbitration Act. Such a ground would have been available to them only if the seat court had agreed that the transaction in question amounted to a buy-back of shares but stopped short of granting relief on that score. The Mylandlas could have built upon such a finding so as to require examination thereof apropos a 'public policy' ground under Section 48(2)(b) of the Arbitration Act. As rightly held by the learned Judge, once such an issue stood decided by the seat court against the Mylandlas, 'transnational issue estoppel' would apply.”, the court added.

Once Parameters Of Public Policy Violation Were Considered In Foreign Award, Enforcement In India Can't Be Challenged

The Court said that “notwithstanding the decision of the seat court upholding an arbitral award, the same can still be subjected to examination by the enforcement court against the parameters of the 'public policy' of the State in which enforcement of such award is sought.”

Since, in the case on hand, the arbitral tribunal specifically noted in the award that it had carefully and fully considered the applicable law, i.e., Indian law, and one of the members of the arbitral tribunal was an eminent senior counsel of the Supreme Court, therefore the Madras High Court had rightly refused to consider the challenge to the award in the context of the 'public policy of India' grounds urged before it, the Court said.

Accordingly, the appeal was dismissed with a cost of Rs. 25 lakhs to be paid by the Appellant-Mylandlas jointly to each of the Investors.

Cause Title: Nagaraj V. Mylandla versus PI Opportunities Fund-I and others Etc.

Citation : 2026 LiveLaw (SC) 305

Click here to download the judgment

Appearance:

For Petitioner(s) Mr. Gopal Subramanian, Sr. Adv. Mr. Mahesh Agarwal, Adv. Mr. Anirudh Krishnan, Adv. Mr. Ashish Kabra, Adv. Mr. Nishant Kadur, Adv. Mr. Ansh Desai, Adv. Ms. Madhavi Agrawal, Adv. Ms. Gauri Subramanium, Adv. Mr. Uday Aditya Jetley Pocha, Adv. Mr. Jayavardhan Singh, Adv. Mr. Pavan Bhushan, Adv. Mr. Adnan Yousef, Adv. Mr. Adarsh Subramanian, Adv. Mr. Gauri Subramanium, Adv. Mr. Anuraag Rajagopalan, Adv. Mr. Nivethithaa.s, Adv. Mr. E. C. Agrawala, AOR Mr. Anuraag Rajagopalan, Adv.

For Respondent(s) Mr. Neeraj Kishan Kaul, Sr. Adv. Mr. Raghav Agrawal, Adv. Mr. Prabhav Shroff, Adv. Ms. Mrudula Dixit, Adv. Mr. Naman Nayyar, Adv. Ms. Aditi Nazre, Adv. Mr. Shivam Jain, Adv. Ms. Sia Ganju, Adv. Mr. Abhijnan Jha, AOR Mr. Shyam Divan, Sr. Adv. Mr. Suhrith Parthasarathy, Adv. Ms. Rashmi Nandakumar, AOR Ms. Amritha Sathyajith, Adv. Ms. Rhia Marshall, Adv. Mr. Ankur Singhal, Adv. Ms. Yashmita Pandey, Adv. Mr. Rongon Choudhary, Adv. Dr Abhishek Manu Singhvi, Sr. Adv. Mr. Mukul Rohatgi, Sr. Adv. Mr. Mr Ritin Rai, Sr. Adv. Mr. Anuj Berry, Adv. Ms. Shalaka Patil, Adv. Ms. Anusha Ramesh, Adv. Mr. Utkarsh Srivastava, Adv. Ms. Shilpa Sengar, Adv. Ms. Gauri Pasricha, Adv. Mr. Harsh Khanchandani, Adv. Mr. Daksh Kadian, Adv. M/s Trilegal Advocates On Record, AOR Mr. Harsh Khanchanadi, Adv. Mr. Anush Raajan, AOR Mr. Jeevandham Rajagopal, Adv. Mr. S. Aravindham, Adv. Mr. Revanth A., Adv. Mr. Pradyumn Yadav, Adv. Mr. Balaji Srinivasan, AOR Mr. Vishwaditya Sharma, Adv. Mr. S. Eshwar, Adv. Mrs. Aanchal M Nichani, Adv.