The High Court of Madras on Friday found that a Singapore arbitration award that directed SEPC Ltd (formerly, Shriram EPC) to pay up ₹195 crore plus interest, “is recognised and held to be enforceable as a decree of this court.”

The case relates to a subsidiary of SEPC, Haldia Coke and Chemicals Pvt Ltd, in which the petitioners — two Mauritius-headquartered companies and a venture capital fund incorporated in India — had invested. (These were GPE (India) Ltd, GPE JV1 Ltd and Gaja Trustee Company Pvt Ltd.)

The investors, under the agreement, were given several exit options, including IPO, buyback and put options. They exercised their put options, which entitled them to sell their holdings for ₹200 crore. SEPC, and its parent company, SVL, did not buyback the shares nor caused them to be bought by some others. Aggrieved, the petitioners went to the Singapore International Arbitration Center (SIAC) and won their case there. The case then moved to the Madras High Court for recognition of the arbitral award.

Satish Parasaran, appearing for SEPC, argued that the put option could not be enforced because it promised a guaranteed return to the investors, which was a violation of the Foreign Exchange Management Act (FEMA). He said a foreign arbitral award, if it infringes on any public policy of India, cannot be enforceable.

PS Raman, argued on behalf of the petitioners essentially that even if it was a violation, it was rectifiable, because the payment could be made with RBI’s approval. Indeed, the Singapore arbitrator had also said absence of RBI’s approval was rectifiable.

On Friday, the Madras High Court recognised the ‘foreign award’, and said “the respondents are required to pay the amounts claimed by the petitioners”. This, of course, was “subject to an in accordance with terms and conditions, if any, imposed by the RBI in its approval.”

Justice Senthilkumar Ramamoorthy observed that “if the foreign award is not complied with, after obtaining RBI approval, it is open to the petitioners to institute appropriate proceedings in accordance with the applicable provisions of the Code of Civil Procedure, 1908.”

With this, SEPC faces a burden of around ₹250 crore (including interest). However, a source in the company told businessline, “We are indemnified. The case will go up to Supreme Court and will be settled. No impact on SEPC.”

The annual report of SEPC for 2021-22 recognises the dispute and says: “The company has entered into an inter-se arrangement dated September 29, 2015, with TCPL and Shri Housing Pvt Ltd by which, the company will be fully indemnified, in case of any liability arising out of any suits, proceedings, disputes, damages payable by the company on any defaults arising out of the investments made by the complainant in the associate. In view of the said inter-se arrangements, the company does not have any liability whatsoever, on account of this award which is subject to the outcome of the respondents’ appeal before all appropriate jurisdictional courts/forums.”

TCPL is Twarit Consultancy Pvt Ltd, one of the respondents in the case.

On the NSE, the SEPC share closed at ₹11.65, 20 paise (1.75 per cent) higher than the previous close on Friday.