The island nation recently lost a Singapore arbitration award to local shipping company Betamax worth $120 million. Betamax sought to attach the fuel worth nearly $40 million from ONGC's Mangalore refinery meant to be shipped to Mauritius to recover its dues.

That sent diplomatic channels in both countries churning and prompted the intervention of the Indian foreign ministry in the high court, seeking time for a bench in Mauritius to decide on the award's enforceability. A challenge to the award in the Mauritius Supreme Court is to be heard in March.

Additional solicitor general Prabhuling Navadgi argued that exports go from India to Mauritius every month and shipments can be attached even at a later date but the current holdup had led to a crisis in the island nation and was straining ties with India.

The Karnataka High Court accepted the government's argument and vacated a stay preventing export of the products to Mauritius. The Pacific Diamond is now ready to sail to its destination. The Mauritius State Trading Corporation was represented by prominent arbitration lawyer Hiroo Advani, while Betamax was represented by Benoit Chambers of Mauritius and Shardul Amarchand.

ONGC, Advani and Chambers didn't respond to queries. Navadgi told the court that Mauritius had been forced to source petroleum products from other countries, including Saudi Arabia, on an urgent basis.

"We are not saying don't honour the award, but just that the Mauritius government isn't at risk of not paying," he said. Pending a decision by the Mauritius Supreme Court, attaching assets would be premature, he said, indicating that the Indian courts may look to that ruling for cues.

Betamax, which primarily ships oil from Mangalore to Mauritius, got its contract under the previous regime in Mauritius. The deal was cancelled when the regime changed. The company challenged the cancellation and won the $120 million award. Betamax then filed suit in India to attach the petroleum products, which belong to the Mauritius State Trading Corporation from the time they are loaded onto the ship.

Since India is a signatory to the New York convention of arbitration, the immediate response was to stay the shipment and grant Betamax recovery rights. Mauritius depends entirely on India for oil products and only has a reserve of about 30 days, said an expert. It has a tie-up with ONGC subsidiary Mangalore Refinery and Petrochemicals Ltd for fuel supplies.

The stay had been imposed till it was decided whether Betamax could attach it to recover the award amount. While the stay has been vacated, that matter will continue to be heard in the Indian court in January.