Venture Global Engineering V Satyam Computer Services Law Commercial Essay

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In order to create the business known as Satyam Venture Engineering Services Ltd. [3], in which the appellant and respondent each hold a 50% equity shareholding, Venture Global Engineering [1], a company incorporated in the United States of America, and Satyam Computer Services Limited [2] entered into a joint venture agreement.

The Shareholders Agreement, which stipulates that conflicts must be settled amicably between the parties or, in the absence of such resolution, shall be submitted to arbitration, was also signed by the parties on the same day.

There were disagreements between the parties in February 2005. Respondent No. 1 claimed that because many venture companies went bankrupt and exercised their option to buy the appellant-shares company's in SVES at book value, the appellant had committed an event of default under the Shareholders Agreement.

Respondent No. 1 submitted a request for arbitration to the London Court of International Arbitration on July 25, 2005, and on September 10, 2005, Mr. Paul B. Hannon was chosen as the single arbitrator.

On March 4, 2006, the lone arbitrator issued a decision ordering the appellant corporation to transfer the shares to respondent No. 1.

Respondent No. 1 submitted a petition to the Eastern District Court of Michigan of the United States District Court on April 14, 2006, seeking recognition and enforcement of the award (US Court). By submitting a cross petition, the appellant made an appearance to defend this case before the US Court. The implementation of the Award, which ordered the transfer of shares, was contested in the aforementioned petition. This was done on the grounds that it contravened Indian laws and regulations, notably the Foreign Exchange Management Act, 1999 and its notifications.

The appellant filed a lawsuit, O.S. No. 80 of 2006, on April 28, 2006, asking the I Additional Chief Judge of the City Civil Court in Secunderabad to declare the judgement invalid and issue a permanent restraining order against the transfer of shares covered by the award.

District Court judgement

On 15.6.2006, the District Court issued an ex parte ad-interim order of injunction prohibiting respondent No.1 from attempting to transfer shares in accordance with the terms of the Award or in any other manner.

Respondent No. 1 appealed before the High Court of Andhra Pradesh, contesting the aforementioned ruling.

Actions taken in High Court proceedings

The High Court accepted the respondents' appeal and ordered the District Court's judgement to be temporarily suspended, but it was made plain that respondent No. 1 would not transfer any shares until further orders were issued.

On 27.2.2007, the High Court denied the appeal, ruling that the award could not be contested even if it went against the public interest and the law.

Concerning the revocation of a foreign arbitral award, the Court has jurisdiction under the Arbitration and Conciliation Act, 1996.

Rebuttals from the Appellant Company

The decision of this Court in Bhatia International v. Bulk Trading S.A. and Anr. addresses the allegation that Part I of the Arbitration and Conciliation Act, 1996 applies to foreign awards. [4]

The injunction issued by the Indian courts, which the District Court in Michigan should have complied with in accordance with the Comity of Courts, prevented the first respondent, Satyam Computer Services Ltd., from pursuing enforcement proceedings in the District Court in Michigan, USA.

Respondent No. 1 Satyam Computer Services Ltd. would be prohibited from contacting the US Court in regards to the execution of the Award due to the superseding Section 11.5 (c) of the SHA.

Rebuttals made by Respondent No. 1

A lawsuit to set aside the Award, which is a foreign Award, would not be admissible in India in light of Section 44 of the Act and the provisions of the agreement.

There would be no basis for a Section 34 of the Act application to invalidate the Award.

The civil complaint filed in Secunderabad is unmaintainable since the first respondent correctly requested enforcement of the Award in Michigan, USA, in light of the Act's provisions and the conditions of the agreement.

As shareholders of the second respondent, the appellant and the first respondent are solely covered by Section 11.5(c) of the Shareholders Agreement, which has nothing to do with the enforcement of a foreign Award.

In accordance with the terms of the agreement, the appellant is prohibited from bringing the same dispute before an Indian court, namely the District Court of Secunderabad, after having participated in the arbitration proceedings in the UK and filed a cross-suit/objection in the District Court of Michigan opposing the Award.

Decision made by the Supreme Court

The requirements of Part I of the Act would apply to all arbitrations, including international commercial arbitrations, and to all procedures thereto, according to the Supreme Court's ruling in Bhatia International v. Bulk Trading S.A. [5]. The Part-I requirements shall be mandatory in the event that such arbitration is conducted in India, with the parties free to diverge to the degree authorised by those rules. The requirements of Part-I would still apply even in cases of international commercial arbitrations performed outside of India, unless the parties specifically or implicitly agreed to exclude all or all of its provisions. The Court claims that such an interpretation does not result in any inconsistency between any of the Act's provisions and that there is no such thing as a lacuna.

Applying Section 34 to foreign international awards would not conflict with Section 48 of the Act or any other Part II provision in the event that a situation arises in which, even with respect to properties located in India, where an award would be invalid if it were contrary to Indian public policy, the award can be enforced against properties in India through personal compliance of the judgment-debtor and by holding out the award against the properties in India. In this situation, the judgment-power debtor's under Section 34 to challenge the award based on Indian public policy cannot be taken away.

Because the Award in dispute is a foreign Award, the Court determined that Part I of the Act still applies.

Additionally, if it is determined that the Court in which the appellant filed a petition contesting the Award lacks jurisdiction and competence, the case will be transferred to the proper Court.

Although Section 34 of the Act only addresses challenges to domestic awards, it also allows challenges to overseas awards.

The Supreme Court cited State Maharashtra Vs. M/s Hindustan Construction Company Ltd. [6] in addressing whether there was a time limit on amending the grounds in an application under Section 34, finding that "where application under Section 34 has been made within the prescribed time, leave to amend grounds, in such an application, if the peculiar circumstances of the case and the interest of justice so warrant, can be granted." The court ruled that when addressing an amendment request, courts typically give priority to content over style and procedure, with the interest of justice being one of the most important factors. As a result, if a party has the right to alter its pleadings in light of the fairness of the case, that party's ability to amend cannot be taken away just because the amendment petition used the erroneous section or provision.

Number Decidendi

Unless the parties expressly or implicitly agree to exclude all or some of its provisions, Part-requirements I's will apply in international commercial arbitrations conducted outside of India.


The Supreme Court declared four years ago that any domestic arbitration award deemed to be in violation of Indian legislative provisions could be revoked by Indian courts for breaching "public policy" (ONGC v. SAW Pipes). The Indian Arbitration Act of 1996 was designed to end the potentially unlimited court review of Indian arbitral rulings, but this broad understanding of "public policy" changed that. Both inside and outside of India, the SAW Pipes ruling drew harsh criticism. Practitioners expressed their hope that the Supreme Court would change its mind.

Due to this, even if deals are set up so that disputes are arbitrated outside of India, there is still a potential that after Venture Global, parties would use fictitious justifications to invalidate arbitral rulings in Indian courts, undermining the parties' initial agreement. The Supreme Court's acknowledgement that parties can construct appropriate language in their contracts to prevent (or at least restrict) the opportunity for such judicial review is the only consolation. [7] The Venture Global Engineering ruling by the court has wide-ranging effects. Even though the Arbitration Act was passed in 1996 in order to increase verdicts' enforceability and decrease the Court's role, it appears to be part of a trend by Indian courts to submit arbitration awards to increasing scrutiny and interference. The enforcement of international arbitration awards in India is now less guaranteed since it provides Indian courts additional power to examine the merits of any arbitration award issued in another nation under Indian law. Parties should think about incorporating clauses that specifically exclude specific sections of the India Arbitration Act when entering into agreements with parties who may have assets in India that are required to pay an arbitration judgement. [8]

The Venture Global case has broad implications since it introduces a new mechanism and a new basis for contesting a foreign award that are not provided for in the Act. The new process requires that anybody attempting to enforce a foreign award submit both an application for enforcement under Section 48 of the Act and an application to set aside the award under Section 34 of the Act. The additional ground stipulates that the award must also satisfy the extended "public policy" basis established under Section 34 of the Act, in addition to the New York Convention grounds adopted in Section 48. In actuality, the legally required procedure for enforcing a foreign award would become superfluous until the application to set it aside (under Section 34) is resolved. The statutorily intended reasons for contesting the award would also be moot because the award would still need to satisfy the broader "public policy" ground even if the applicant prevailed on the New York Convention grounds (and virtually have to meet a challenge to the award on merits). Thus, the Venture Global case largely displaces the legally intended mechanism for the execution of foreign awards with judge-made law.

Furthermore, a three Bench ruling in the case of Renu Sagar [9] holds to the opposite insofar as the Judgment enables a challenge to a foreign judgement on the wider interpretation of public policy is per incuriam as a larger. Additionally, Saw Pipes (the case on which Venture Global bases this assertion) had unmistakably limited its wider interpretation of public policy to just domestic awards. Application of the wider concept of public policy to foreign awards is obviously per incuriam because the Supreme Court in Venture Global did not observe this self-imposed restriction in Saw Pipes or the narrower interpretation of public policy in Renu Sagar. [10]

Recently occurring events

The situation was returned to the Hyderabad Civil Court in accordance with the Supreme Court's ruling. Ramalinga Raju, the chairman of Satyam, admitted to a significant fraud in a letter dated January 7, 2009, while the case was still pending before the Hyderabad Civil court. Tech Mahindra later made a bid for Satyam and changed its name to Mahindra Satyam. Then, Venture filed a petition with the Civil Court in an effort to record numerous documents and pleadings related to the fraud resulting from Ramalinga Raju's letter and to contest the foreign arbitral decision based on Raju's letter.

Venture's petition was approved by the Civil Court. The High Court received an appeal from Mahindra Satyam. In a thorough ruling, the Division Bench of the A.P. High Court ruled that Ramalinga Raju's statement and the subsequent investigation details have nothing to do with the foreign arbitral award and are therefore irrelevant when determining whether the foreign arbitral award in Satyam's favour is valid.

Additionally, the High Court ruled that Venture's application was past due. According to the Arbitration Act, a party has just 90 days to submit a petition challenging an award. Almost three years after the Award was given, Venture submitted a petition. The Court ruled that once the deadline for contesting the Arbitral Award has passed, a party cannot file an amendment or add new evidence to the record. Additionally, the High Court ruled that the party was not permitted to bring up any new arguments in the challenge procedures before the Civil Court that were not brought up before the Arbitrator. [11]

In a shareholding dispute with the IT company over a 50:50 joint venture, Satyam Venture Engineering, the Supreme Court today permitted US-based Venture Global Engineering (VGE) to use former Satyam Computer chairman B Ramalinga Raju's confessional testimony. Satyam Computer was plagued by fraud. The ruling of the Hyderabad High Court, which stated that Raju's confessional statement could not be utilised in a city civil court where VGE had appealed against an arbitration award, was overturned by a bench made up of Justices G S Singhvi and Asok Kumar Ganguly. However, the Supreme Court ruled that the Secunderabad civil court's decision to use Raju's confessional statement or not would be left to its discretion. Additionally, the top court ordered the city court to rule on the merits of VGE's plea within four months. [12]

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