CHY and another v CIA

CourtInternational Commercial Court (Singapore)
JudgeVivian Ramsey IJ
Judgment Date11 February 2022
Neutral Citation[2022] SGHC(I) 3
Citation[2022] SGHC(I) 3
Docket NumberOriginating Summons No 1 of 2021 (Summons No 5567 of 2020)
Hearing Date20 April 2021
Plaintiff CounselDanny Ong Tun Wei and Sheila Ng Hui Ping (Rajah & Tann Singapore LLP)
Defendant CounselPaul Tan Beng Hwee and Tian Yi Tan (Cavenagh Law LLP)
Subject MatterArbitration,Award,Recourse against award,Setting aside,Public policy
Published date16 February 2022
Vivian Ramsey IJ:

This case concerns an application by the plaintiffs, CHY and CHZ, to set aside the Final Award dated 19 June 2020 (the “Award”) made in an arbitration under the auspices of the International Chamber of Commerce (the “ICC”) (the “Arbitration”), pursuant to Art 34(2)(b)(ii) of the UNCITRAL Model Law on International Commercial Arbitration (“Model Law”), as incorporated under s 3 of the International Arbitration Act (Cap 143A, 2002 Rev Ed) (“IAA”) on the ground that the Award is in conflict with the public policy of Singapore.

The first plaintiff, CHY, is a company incorporated under the laws of India. It has been a majority shareholder in the second plaintiff, CHZ, since around 2009. CHZ is also a company incorporated under the laws of India.

The defendant, CIA, is an investment holding company incorporated under the laws of the Republic of Mauritius. CIA is part of a larger investment group (“X Co”) and was incorporated for the purposes of completing X Co’s minority investment in CHZ.

CIA has applied in HC/SUM 5567/2020 (“SUM 5567”) to strike out the plaintiffs’ expert evidence on Indian law, Dr [Y].

The Transaction

In or around 2010, CIA agreed to invest in CHZ and CHY. CHZ, CHY and CIA (the “Parties”) entered into a number of agreements pursuant to which CIA acquired a total of 1,340,000 shares in CHZ (approximately 14.91% of CHZ’s shared capital) by 12 March 2010 (the “Transaction Documents”).

The Transaction Documents included a Shareholders Agreement (the “SHA”) and a Letter Agreement between CHY and CIA (the “Letter Agreement”), both dated 9 October 2009.

Clause 10.1 of the SHA obliged the plaintiffs to list CHZ on the Bombay Stock Exchange (“BSE”) or the National Stock Exchange (“NSE”), or make a public offer of CHZ’s shares on those exchanges by 30 June 2012. Clause 11.1 of the SHA listed various events, the occurrence of which would give rise to CIA’s right (the “Put Right”) under cl 11.2 to “require [CHY], if legally able or otherwise to arrange a third party, to purchase, at the option of [CIA], all or a portion of [CIA’s shares in CHZ]” at the “Put Price” (ie, the “Put Option”). One such event was if the plaintiffs failed to comply with cl 10.1 of the SHA.

Under Clause 11.3 of the SHA, the consideration to be paid for the purchase of shares under the Put Option, was defined as the total amount invested by CIA in the acquisition plus an amount equal to a 22% compounded annual rate of return on the invested amount (the “Put Price”). Clause 11.3 also provided that, if required for the sale of the Put Shares, a valuation of the shares would be done by a specified merchant banker or chartered accountant within seven days. This valuation is referred to as the “Put Calculated Price”.

The Letter Agreement provided that, should a valuation be required under cl 11.3 of the SHA, the Put Calculated Price was to be determined on the basis of a valuation methodology which would yield the highest valuation of CHZ for the Put Shares and that, should the Put Calculated Price be less than the Put Price, the parties would enter into a non-compete agreement and CHY would pay to CIA the difference between the Put Price and the Put Calculated Price, as consideration for the non-compete agreement (the “Non-Compete Fee”).

As stated in the Award at [12], “[i]t is also common ground that the law governing the substantive rights of the Parties is Indian law. In this regard, clause 21 of the SHA provides: This Agreement shall be governed and construed in accordance with the laws of India.”


By 30 June 2012, CHZ’s shares had not been listed on the BSE or the NSE and no public offer had been made for the sale of CHZ’s shares on the said exchanges. Although CIA’s right to exercise the Put Option arose on or around 1 July 2012, CIA did not exercise this right at that time but, instead, the Parties sought to negotiate CIA’s exit from its shareholding in CHZ and eventually executed an Amended Share Purchase Agreement on or around 24 January 2013 (“ASPA”), under which CHY would re-acquire the Put Shares from CIA at a price level ranging from INR281.16 to INR352.58 per share depending on the time of purchase of the shares. Under cl 3.1 of the ASPA, CHY’s reacquisition of the Put Shares from CIA was stated to be subject to the Reserve Bank of India (“RBI”) approval. The RBI did not approve of the transaction, and CHY did not ultimately re-acquire the Put Shares.

Subsequently, CIA informed CHY that it would be exercising the Put Option by way of a notice dated 14 July 2017 (the “Put Notice”). On 21 July 2017, CHY notified CIA that it would not recognise and act on the Put Notice for various reasons, including that the Put Option was contrary to Indian law.

The dispute culminated in CIA submitting a Request for Arbitration (“Request”) to the Secretariat of the ICC on 15 June 2018 which commenced the Arbitration under the 2017 edition of the ICC Rules (“ICC Rules”).

A three-member tribunal was constituted (the “Tribunal”) on 29 November 2018. The proceedings closed on 8 June 2020 and the plaintiffs received the Award by way of email on 9 July 2020, with the majority of the Tribunal deciding in favour of CIA and declaring that CHY had wrongfully challenged the validity and enforceability of the Put Option and wrongfully refused and/or failed to complete the acquisition of the Put Shares. The Tribunal then made orders requiring that the plaintiffs pay damages to CIA in the amount of the Put Price, and that upon receipt of the Put Price, CIA was to transfer its shares in CHZ to CHY or a party specified by CHY. The arbitrator in the minority provided a dissenting opinion dated 19 June 2020 in which he found that the Put Option was invalid and unenforceable under regulations made under India’s Foreign Exchange Management Act 1999 (“FEMA”). These regulations will be referred hereafter as the FEMA Regulations.

On 8 October 2020, the plaintiffs commenced these proceedings by HC/OS 992/2020 to set aside the Award. On 7 January 2021, the proceedings were transferred to the Singapore International Commercial Court and became SIC/OS 1/2021. The Parties provided written submissions and written reply submissions and the hearing took place on 19 April 2021.

On 15 June 2021 CIA wrote to draw my attention to the judgment of the Privy Council in Betamax Ltd v State Trading Corporation (Mauritius) [2021] UKPC 14 (“Betamax”) and made submissions on its relevance to the issues in this case. On 25 June 2021, the plaintiffs responded to those submissions.

In proceedings in India to enforce the Award, the Calcutta High Court held that the Award was enforceable and I was provided with a copy of the court’s judgment. The plaintiffs stated that they disagreed with that judgment and intended to file an appeal. I understand that the Supreme Court of India has now dismissed the plaintiffs’ application for leave to appeal.

The ground for setting aside

The plaintiffs submit that the Award should be set aside for being in conflict with the public policy of Singapore because the Award compels the plaintiffs to pay CIA assured returns as consideration for the Put Shares; it is illegal under Indian law for the plaintiffs to pay CIA such assured returns as that would be a violation of FEMA Regulations exposing them to criminal sanctions; and an arbitral award which compels the parties to perform an illegal act punishable by criminal sanctions in a foreign state is contrary to the public policy of Singapore and should be set aside.

CIA submits that the plaintiffs’ application should be dismissed, first, because the issues regarding “illegality” of the Put Option were fully ventilated and finally determined in the Award and, as a seat court, the Singapore courts will not and cannot intervene in findings of foreign law made by an arbitral tribunal. Second, while the plaintiffs have characterised their application as a challenge based on “illegality” of the Put Option, they are in fact arguing that the Tribunal wrongly interpreted cl 11.2 of the SHA which cannot be relied upon to set aside the Award. Thirdly, the “public policy” concerns do not meet the threshold for setting-aside of arbitral awards under Singapore law. Fourthly and in any event, the Put Option and the Award are not “illegal” under Indian law and neither are they contrary to Indian public policy. Fifthly, the plaintiffs’ assertion that the Award ignores the requirement of proof of loss for the grant of damages under s 73 of the Indian Contract Act 1872 (“Indian Contract Act”) is incorrect and does not raise any concern of Singapore public policy.

The FEMA Regulations, which form the main underlying basis for the challenge, were made under FEMA. They require that a foreign investor, who wishes to exit from an Indian entity by selling its shares to a resident Indian third-party, has to conduct such sale at a FEMA compliant price determined by a valuation exercise and not at “assured returns”.

The issues in this case arising to the challenge based on non-compliance with the FEMA Regulations are: To what extent can the Tribunal’s findings based on Indian law be reviewed on an application under Article 34(2)(b)(ii) of the Model Law. To what extent can the Tribunal’s award of damages and return of shares be challenged on an application under Article 34(2)(b)(ii) of the Model Law. If the court can review the Tribunal’s findings on Indian law and come to a contrary view on those findings, would the matters raised amount to grounds for setting aside an award as being contrary to public policy of Singapore under Article 34(2)(b)(ii)?

To what extent can the Tribunal’s findings based on Indian law be reviewed on an application under Article 34(2)(b)(ii) of the Model Law

The issues in this case bear some similarity to the issues which I had to decide in Gokul Patnaik v Nine Rivers Capital Ltd [2021] 3...

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1 cases
  • Chy v Cia
    • Singapore
    • High Court (Singapore)
    • 11 February 2022
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