Foreign Arbitration Award Won’t Be Automatically Enforceable In India: Supreme Court

The Supreme Court held that a Foreign Award would not be automatically enforceable in India and the Court must be satisfied that such an award is enforceable under Part-II Chapter-I of the Arbitration and Conciliation Act, 1996 (A&C Act).

The Court held thus in a batch of six Civil Appeals preferred under Section 62 of the Insolvency and Bankruptcy Code, 2016 (IBC) by erstwhile promoters and various Operational Creditors of the Corporate Debtor against the common final Judgment of the National Company Law Appellate Tribunal (NCLAT).

The three-Judge Bench comprising Chief Justice of India (CJI) B.R. Gavai, Justice Satish Chandra Sharma, and Justice K. Vinod Chandran observed, “It can thus be seen that the foreign award will be deemed to be a decree of the court only when the court is satisfied that the foreign award is enforceable under Part-II Chapter-I of the Arbitration Act. Therefore, a foreign award would not be automatically enforceable in India. For it to be enforceable in India, the court is required to be satisfied that such an award is enforceable under Part-II Chapter-I of the Arbitration Act.”

The Bench was of the view that unless there is a specific provision with regard to distribution of EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortisation) in the RfRP (Request for Resolution Plan), permitting the CoC (Committee of Creditors) to raise a new stand at this stage will be totally inconsistent with the avowed object for which the IBC was incorporated.

Senior Advocates Dhruv Mehta, Balbir Singh, Advocates Arjun Asthana, and Manu Beri appeared for the Appellants while Solicitor General Tushar Mehta, Senior Advocates Navin Pahwa, Pinaki Misra, Neeraj Kishan Kaul, and Gopal Jain appeared for the Respondents.

Facts of the Case

In 2017, the Reserve Bank of India (RBI) identified 12 large scale corporate defaulters, with outstanding debts valued at Rs. 5,000 crore and above, now infamously known as the “dirty dozen”. The Corporate Debtor – BPSL (M/s Bhushan Power and Steel Limited) was one of the defaulters identified by the RBI. The Respondent in the lead matter i.e., Punjab National Bank (PNB) filed a Company Petition under Section 7 of the IBC before the NCLT, which was admitted and the Corporate Insolvency Resolution Process (CIRP) commenced. After the imposition of moratorium, the Interim Resolution Professional (IRP), invited claims from all the creditors and stakeholders and a huge number of claims were raised by the stakeholders. Pursuant to an advertisement published by the RP, 12 Potential Resolution Applicants (PRAs) including the Respondent-JSW Steel Ltd., submitted their Resolution Plan to the RP. JSW emerged as the highest evaluated plan based on the evaluation matrix formulated in accordance with the Code and the relevant regulations.

Pursuant to the negotiations, JSW Steel Ltd. submitted the addendum letter whereby it amended and clarified certain terms of the CRP to ensure compliance with the amended regulations. Thereafter, JSW was declared as the SRA (Successful Resolution Applicant). Subsequently, RP filed a Company Application and during its pendency, the Central Burau of Investigation (CBI) registered an FIR against the BPSL (Corporate Debtor) and its directors under Sections 420, 468, 471 and 477A read with Section 120B of the Indian Penal Code, 1860 (IPC), and Section 13(2) read with Section 13(1)(d) of the Prevention of Corruption Act, 1988 (PC Act). Based on this, the Enforcement Directorate (ED) registered a case under the Prevention of Money Laundering Act, 2002 (PMLA). The NCLT dismissed the applications raising objections and approved the Resolution Plan. This was challenged before NCLAT, which modified some of the conditions imposed by NCLT and dismissed the Appeals. Being aggrieved, the Appellants approached the Apex Court. The senior counsel for the Respondents submitted that once the enforcement Petitions filed before the Calcutta High Court were withdrawn, the foreign award could not be enforced and was not binding under Indian law. 

Court’s Observations

The Supreme Court after hearing the contentions of the counsel, noted, “It can thus be seen that an appeal against an order approving a Resolution Plan would be available before the NCLAT only when it is found that the approved resolution plan is in contravention of the provisions of any law for the time being in force or there has been any material irregularity in exercise of powers by the resolution professional during the corporate insolvency resolution period or that the debts owed to OCs of the Corporate Debtor have not been provided for in the resolution plan in the manner specified by the Board or that the insolvency resolution process costs have not been provided for repayment in priority to all other debts or the resolution plan does not comply with any other criteria specified by the Board.”

The Court added that the Appeal before the NCLAT in this matter does not fit in any of the aforesaid criteria and since an Appeal before NCLAT itself was not made out, the Appeals before the Apex Court on a conjoint reading of Sections 61 and 62 are not tenable since no question of law pertaining to any of the five grounds specified in Section 61 of the IBC arises for consideration in this case.

“It can thus be seen that this Court has taken a view that when a concurrent view has been taken by two adjudicating authorities provided under the special statute, unless it is found that such a view was in ignorance of the mandatory statutory provisions or was based on extraneous consideration or was ex-facie arbitrary or illegal, an interference would not be warranted”, it said.

The Court remarked that the Appellants could have been non-suited on the short ground of concurrent findings of the NCLT and the NCLAT alone. It further reiterated that if a CCD is to be compulsorily converted at the time of maturity, without any obligation of repayment of a debt, it must be treated the same as an equity instrument.

“We are therefore of the view that the CCDs infused by the SRA – JSW are to be treated the same as an equity infusion. … Not only that but it has been the consistent view of this Court in a catena of judgments including K. Shashidhar (supra) that the commercial wisdom of the CoC cannot be interfered with either by the Adjudicating Authority, the Appellate Authority or this Court”, it also noted.

The Court reiterated that a Successful Resolution Applicant cannot be faced with ‘undecided’ claims after the Resolution Plan submitted by it has been accepted as that would amount to “hydra heads popping up” which would throw into uncertainty the amounts payable by a prospective resolution applicant who would successfully take over the business of the corporate debtor.

“This Court has, in unambiguous terms, held that the RfRP issued in terms of Section 25 of the IBC and considered by the CoC had provided that distribution of profits made during the CIRP would not go towards payment of debts of any creditor”, it added.

Moreover, the Court said that once the Resolution Plan has been approved by the CoC and the Adjudicating Authority under Section 31(2), permitting any claims to be reopened which were not a part of the RfRP or Resolution Plan will be doing violence to the provisions of IBC.

Conclusion

The Court noted that there is nothing on record that shows that the CoC had approved pre-CIRP payments and such payments to the Appellants find no mention anywhere in the Resolution Plan.

“This Court has, time and again, held through a catena of judgments that any and all payments made to creditors relating to the pre – CIRP dues must be done only in accordance with the Resolution Plan and with the express agreement of the CoC. Therefore, we do not find any new question of law being raised through the present appeals and thus, they are liable to be dismissed”, it further reiterated.

The Court remarked that as such, the very purpose for which the IBC was enacted—namely, to ensure that the Corporate Debtor continues as a going concern—has not only been achieved, but the Corporate Debtor has been transformed from a loss making to a profit-making entity.

“If, after the implementation of the Resolution Plan, the SRA – JSW has converted a loss making entity into the one making profits, can it be penalised for that? Suppose if instead of the Corporate Debtor being converted into a profit-making entity, the losses would have increased, can the Corporate Debtor claim refund of the amount paid? If we permit the claim not to be part of the Resolution Plan which has been approved by the CoC and the NCLT to be raised at such a belated stage, it could open a Pandora’s Box and the very purpose of the IBC providing sanctity to the finality of the Resolution Plan duly approved would stand vitiated”, it also asked.

The Court observed that the SRA cannot be forced to deal with claims that are not a part of the RfRP issued in terms of Section 25 of the IBC or a part of its Resolution Plan.

“We therefore do not find any merit in the contention of either the ex-promoters-cum-directors of the Corporate Debtor or the CoC in that regard. If such a contention is accepted, it will frustrate the very purpose for which the IBC came to be enacted”, it concluded.

Accordingly, the Apex Court dismissed the Appeals and upheld the NCLAT’s Judgment.

Cause Title- Kalyani Transco v. M/s Bhushan Power and Steel Limited and Others (Neutral Citation: 2025 INSC 1165)

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