Venture Global Engineering v. Satyam Computer Services Ltd.

Supreme Court of India · 10 January 2008 · 2 judges

Overruled in whole or in part by Bharat Aluminium Co. v. Kaiser Aluminium Technical Services Inc. (2012), which says: “With utmost respect, we are unable to agree with the conclusions recorded in the judgments of this Court in Bhatia International (supra) and Venture Global Engineering (supra).”

Following Bhatia International, Part I of the Arbitration and Conciliation Act, 1996, including Section 34, applies to a foreign award unless excluded by agreement, so the appellant's Indian suit to set aside a London award could proceed.

Facts

Venture Global Engineering, a US company, and Satyam Computer Services held equal shares in an Indian joint venture company. Their Shareholders Agreement provided for arbitration by the London Court of International Arbitration, governance by Michigan law, and, in Section 11.05(c), that the shareholders shall at all times act in accordance with the Companies Act and other laws in force in India. A sole arbitrator in London directed Venture Global to transfer its shares to Satyam, and Satyam sought enforcement in a US District Court in Michigan. Venture Global, which objected in the US court that the share transfer violated Indian law including FEMA, filed a suit in the City Civil Court, Secunderabad, to set aside the award and restrain the transfer. The trial court rejected the plaint under Order VII Rule 11 CPC, and the Andhra Pradesh High Court dismissed the appeal. Venture Global appealed by special leave.

Questions before the Court

Does Part I of the Arbitration and Conciliation Act, 1996, and in particular Section 34, apply to a foreign award, so that it can be challenged in an Indian court?
Did Section 11.05(c) of the Shareholders Agreement require the award to be enforced in India?

What the Court held

Under paragraphs 32 and 35 of Bhatia International, Part I applies to all arbitrations, including international commercial arbitrations held outside India, unless the parties by express or implied agreement exclude all or any of its provisions. The matter is concluded by that three-Judge Bench decision.
Since parties may exclude Part I by agreement, otherwise the whole of Part I applies. Applying Section 34 to a foreign award is not inconsistent with Section 48, and a judgment-debtor cannot be deprived of the right to invoke the public policy of India under Section 34.
The award had a close nexus with India because the company was Indian and the share transfer had to be made in India under Indian law; Satyam's attempt to enforce it in the US to avoid Indian scrutiny could not deprive Venture Global of its right to challenge it in Indian courts.
The non obstante clause in Section 11.05(c) overrode the whole agreement, so enforcement had to be in India. The orders of the trial court and the High Court were set aside, the suit was to be decided on merits, and status quo on the shares was maintained.

Why it matters

The judgment applied Bhatia International to hold that a foreign award, not just interim relief, falls within Part I of the 1996 Act unless the parties have excluded it, so that it can be challenged under Section 34 on the ground of the public policy of India. It stresses the nexus of the award with India and the agreement's clause requiring compliance with Indian law. The Court expressly did not decide the merits of the challenge to the award.

In the Court's words

Copied from the official judgment; each passage links to its page.

“On close scrutiny of the materials and the dictum laid down in three-Judge Bench decision in Bhatia International (supra), we agree with the contention of Mr. K.K.Venugopal and hold that paragraphs 32 and 35 of the Bhatia International (supra) make it clear that the provisions of Part I of the Act would apply to all arbitrations including international commercial arbitrations and to all proceedings relating thereto.”

Court (P. Sathasivam, J.)Page 9 of the judgment

“The very fact that the judgment holds that it would be open to the parties to exclude the application of the provisions of Part I by express or implied agreement, would mean that otherwise the whole of Part I would apply. In any event, to apply Section 34 to foreign international awards would not be inconsistent with Section 48 of the Act, or any other provision of Part II”

Court (P. Sathasivam, J.)Page 10 of the judgment

“In terms of the decision in Bhatia International (supra), we hold that Part I of the Act is applicable to the Award in question even though it is a foreign Award. We have not expressed anything on the merits of claim of both the parties. It is further made clear that if it is found that the Court in which the appellant has filed a petition challenging the Award is not competent and having jurisdiction, the same shall be transferred to the appropriate Court.”

Court (P. Sathasivam, J.)Page 13 of the judgment

Provisions interpreted

Related judgments

Follows Bhatia International v. Bulk Trading S.A. (2002)“The matter, therefore, is concluded by the three-Judge Bench decision in Bhatia International (supra).” (page 9)

Case and bench

Parties: Venture Global Engineering v. Satyam Computer Services Ltd.
Case: Civil Appeal No. 309 of 2008 (arising out of SLP (C) No. 8491 of 2007)
Decided: 10 January 2008
Bench: Tarun Chatterjee, P. Sathasivam
Opinions: Unanimous. Judgment delivered by P. Sathasivam, J.