Summary: The Madras High Court, led by Judge Abdul Quddhose, has made a decision in favor of PI Opportunities Fund I and others, enforcing a foreign arbitration decision against Financial Software and Systems Pvt. Ltd. and its leaders. The decision requires a strategic sale and payment of damages totaling over 1400 Crores INR.
PI Opportunities Fund I, along with other investors, had put money into Financial Software and Systems Pvt. Ltd. (FSS) through an agreement to buy and hold shares. Problems started when the investors wanted to leave their investment, saying FSS didn't provide a way out as agreed.
The arbitration panel initially made a decision on July 5, 2024, requiring FSS and its leaders to pay damages and allow a strategic sale of shares. The panel found FSS broke its promises under the agreement.
"The respondents are to fully cooperate with any strategic sale to be carried out by the petitioners."
Buyback vs. Giving Up Shares: The court explained that the decision wasn't about buying back shares, which would break Indian company laws, but rather giving up shares after paying damages.
Choice of Remedies: The respondents argued that the decision broke the rule of choice by allowing both damages and a strategic sale. The court rejected this, saying the petitioners hadn't chosen one option over the other.
Giving Up Rights: The respondents claimed the investors gave up their rights by taking part in a split sale. The court found no written proof of giving up rights as required by the agreement.
Fraud Claims: Fraud claims based on a report by Ernst & Young were brought up by the respondents. The court noted these weren't pursued during arbitration or in the Singapore High Court, calling them an afterthought.
The court enforced the arbitration decision, telling the respondents to pay damages and help with the strategic sale. Additionally, costs of INR 25 lakhs were imposed on the respondents for delaying tactics.
"The foreign arbitration decision... is declared to be enforceable by this Court against the respondents 2 & 3."
The court's decision confirms the enforcement of the international arbitration award, showing India's support for upholding such decisions under the New York Convention.
