IndiaCorpLaw: Supreme court clarifies RBI approval under FEMA not needed to satisfy arbitral awards

This August, the Supreme Court of India (the “SCI”) pronounced its Judgment in GPE (India) Ltd v. Twarit Consultancy Services Pvt Ltd, holding that payment to satisfy arbitral awards which grant damages for the breach of a put option in favour of a foreign investor does not require approval from the Reserve Bank of India (the “RBI”). India continues to maintain capital controls, and payments to non-residents for contractual obligations that contravene the exchange control law (e.g. put options) require RBI approval. After conflicting judgments from different Indian high courts on whether payment for awards granting damages for breach of such clauses needs RBI approval, the SCI’s judgment in GPE India offers much-needed clarity to foreign investors and their advisors alike.

The SCI could have taken this opportunity to lay down the law rather than just endorsing the RBI’s position, which, to their credit, is a step in the right direction.