Reportable    

IN THE SUPREME COURT OF INDIA  

   CIVIL APPELLATE JURISDICTION  

    CIVIL APPEAL NO(s.)17753-17755 OF 2017  

 (Arising out of SLP(C) No(s). 29747-29749 of 2013)  

 VENTURE GLOBAL ENGINEERING LLC                     Appellant(s)  

                               VERSUS  

TECH MAHINDRA LTD & ANR ETC.                       Respondent(s)  

      WITH  

      CIVIL APPEAL NO(s.) 17756 OF 2017  

  (Arising out of SLP(C) No. 8298 of 2014)  

       O R D E R  

  In view of the difference of opinion in terms of separate  

judgments pronounced by us in these appeals today, the Registry is  

directed to place the papers before Hon'ble the Chief Justice of  

India for appropriate further course of action.  

          …....................J.  

        (J. CHELAMESWAR)  

          …....................J.  

        (ABHAY MANOHAR SAPRE)  

NEW DELHI  

NOVEMBER 1, 2017

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Reportable  

        IN THE SUPREME COURT OF INDIA  

        CIVIL APPELLATE JURISDICTION  

          CIVIL APPEAL Nos. 17753-17755 OF 2017                (ARISING OUT OF SLP (C) Nos. 29747-29749/2013)  

 Venture Global Engineering LLC  …   Appellant       Versus     Tech Mahindra Ltd. & Another Etc.  …   Respondents  

WITH  

CIVIL APPEAL No. 17756 OF 2017             (ARISING OUT OF SLP (C) No. 8298/2014)  

Tech Mahindra Ltd. & Another Etc.  …   Appellants          Versus    Venture Global Engineering LLC  …   Respondent  

J U D G M E N T  

Chelameswar, J.   

1. Leave granted in both the SLPs.  

I had the advantage of reading the opinion of my learned  

brother Justice Sapre.  While I agree with the conclusion recorded  

by him that the High Court erred in its conclusion on the question

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whether the proceedings initiated by VENTURE in OP No. 390 of  

2008 are barred by the principle of “issue estoppel”, I am unable to  

persuade myself to agree with his conclusions that the judgment  

under appeal is required to be reversed on the questions relating to  

public policy and fraud for the following reasons;  

2. The facts of these appeals are narrated in great detail by my  

learned brother. There is no need to repeat except to mention those  

which are essential for the purpose of my conclusion.  

3. An Arbitral Award dated 3rd April, 2006 (hereinafter the  

AWARD) came to be passed in an arbitration between VENTURE  

and SATYAM.    

The relevant portion of the AWARD reads as under:  

“A. I order VGE to deliver to Satyam share certificates in form  suitable for immediate transfer to Satyam or its designee  evidencing all of VGE’s ownership interest legal and/or beneficial  in SVES. I further order it to do all that may otherwise be  necessary to effect the transfer of such ownership to Satyam or its  designee.”  

 4. The dispute leading to the Arbitration and the AWARD arose  

out of the Agreement dated 20th October, 1999 (Agreement I)  

entered into between VENTURE and SATYAM.  

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5. Article VIII of the said Agreement defined the expression  

“Events of Default” and stipulated the consequences thereof:  

“ARTICLE VIII EVENTS OF DEFAULT AND REMEDIES  

Section 8.01 Events of Default   

For the purposes of this Agreement, an “Event of Default”  means, with respect to any Shareholder, the occurrence of any  of the following:    (a) A Bankruptcy Event occurs with respect to such  Shareholder.  

(b) Subject to clause (c) and (d) below, such Shareholder  breaches this Agreement in any material respect and fails to  cure such breach within thirty (30) days after being notified in  writing by the other Shareholder of such breach.  

(c) A Shareholder Transfers, or attempts to Transfer, any Shares  in violation of the transfer restrictions set forth in Article VII of  this Agreement.  

(d)  Such Shareholder is subject to Change in Control  

 Section 8.02 Rights Upon Events of Default Generally  

Upon the occurrence of an Event of Default (other than a  Bankruptcy Event) with respect to any Shareholder (the  Defaulting Shareholder”), the other Shareholder (the “Non- Defaulting Shareholder”) shall have the option, within thirty  (30) days after becoming aware of the Event of Default to (a)  purchase the Defaulting Shareholder’s Shares at book value  and repay Shareholder’s loan, or (b) cause the immediate  dissolution and liquidation of the COMPANY in accordance with  Article IX.   Either of such options must be exercised by the  Non-Defaulting Shareholder by written notice to the Defaulting  Shareholder within thirty (30) days after becoming aware of the  subject Event of Default.  

 Section 8.03 Rights Upon Bankruptcy Event  

Upon the occurrence of a Bankruptcy Event with respect to any  Shareholder (the “Bankrupt Shareholder”), such shareholder  shall give immediate written notice to the other Shareholder (the

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“Solvent Shareholder”). The Solvent Shareholder shall have  the option of (a) purchasing the Shares held by the Bankruptcy  Shareholder at book value and repay such Shareholder’s loans  or (b) causing the immediate dissolution of liquidation of the  company in accordance with Article IX.  Either of such options  must be exercised by the Solvent Shareholder by written notice  to the Bankrupt Shareholder within one hundred twenty (120)  days of receipt of notice of the Bankruptcy Event from the  Bankrupt shareholder.  

Section 8.04 Remedies Not Exclusive  

The rights granted in this Article are not exclusive of any other  rights or remedies available at law or in equity.”  

 6. The arbitrator inter alia opined that an Event of Default on the  

part of VENTURE occurred and therefore, VENTURE (the defaulting  

shareholder) is liable to transfer its interest i.e. 50 per cent of the  

shares in the JVC to SATYAM (non-defaulting shareholder).    

7. SATYAM filed a petition in the Eastern District Court of  

Michigan, US seeking enforcement of the AWARD against  

VENTURE.   Admittedly, the petition was allowed on 31st July, 2006  

and the District Court of Michigan by its judgment directed the  

enforcement of the AWARD.   It appears that VENTURE appealed  

against the said order in the 6th Circuit, US Appellate Court in  

Michigan.

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8. I assume for the purpose of these appeals that the directions  

of the Eastern District Court of Michigan dated 31st July, 2006 is  

legally tenable.  In the final analysis, enforcement of the AWARD  

means transfer of the shares (property of VENTURE) in the JVC.   

Since the JVC is a company registered (incorporated) in India,  

transfer of shares therein will have to be effected in accordance with  

the relevant procedure established by law of India i.e. the  

Companies Act and other related enactments which obligate  

VENTURE to perform certain acts.  If VENTURE declines to perform  

its obligations, the directions contained in the judgment of the  

American Court will have to be executed in India in accordance with  

the procedure prescribed under the Code of Civil Procedure, 1908  

for the enforcement of foreign judgments or decrees, as the case  

may be.      

9. Be that as it may, in my opinion, it was really not necessary  

for SATYAM to have approached the American Court for the  

enforcement of the AWARD, whether the AWARD is a “foreign  

award” as defined under Chapters I or II of Part II of the Arbitration  

and Conciliation Act, 1996 (hereafter “the ACT”) or not, in view of

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the judgments of this Court in Bhatia’s case1 and BALCO’s case2,  

Part I of the ACT is applicable to the AWARD since the AWARD is  

anterior to the date of the judgment of this Court in BALCO’s case3.  

“Para 197. … Thus, in order to do complete justice, we hereby  order, that the law now declared by this Court shall apply  prospectively, to all the arbitration agreements executed hereafter.”     

Therefore, the AWARD would be enforceable as if it were a decree of  

a civil court in view of Section 364 of the ACT.  

10. The only way VENTURE could avoid the enforcement of the  

AWARD is by having the AWARD set aside either under Section 34  

of the ACT or any other procedure applicable under any other  

applicable law in any other appropriate jurisdiction available to  

VENTURE under the principles of international law.  We are not  

informed of any such proceeding either subsisting or successfully  

pursued by VENTURE in any jurisdiction.  On the other hand,  

VENTURE initiated proceedings on 13th April, 2006 before the  

District Court for the Northern District of Illinois Eastern Division,  

                                                           1 Bhatia International vs. Bulk Trading S.A. & Anr., (2002) 4 SCC 105  2 Bharat Aluminium Company vs. Kaiser Aluminium Technical Services Inc., (2012) 9 SCC 552 (CB)  3 6th September 2012  4 Section 36. Enforcement.—(1)Where the time for making an application to set aside the arbitral award under  section 34 has expired, then, subject to the provisions of sub-section (2), such award shall be enforced in accordance  with the provisions of the Code of Civil Procedure, 1908 (5 of 1908) in the same manner as if it were a decree of the  Court.  

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USA for a declaration that the AWARD was not enforceable in the  

United States of America.  Subsequently, even that application was  

dismissed as withdrawn by an Order of that Court dated 25th April,  

2006.    

11. Thereafter, VENTURE filed OS No. 80 of 2006 on 28th April,  

2006 before the Ist Additional Chief Judge, City Civil Court,  

Secunderabad seeking mainly two reliefs:  

i.  a declaration that the Award was illegal and without  jurisdiction; and  

ii.    a permanent injunction restraining Satyam from enforcing  the Award.  

12. This Court had an occasion to examine the maintainability of  

the said suit in an appeal arising out of certain interlocutory  

proceedings (detailed in the judgment of my learned brother) in  

Venture Global Engineering v. Satyam Computer Services Ltd.  

& Another, (2008) 4 SCC 190 (hereinafter called VENTURE-I). In  

substance, this Court held (subject to certain qualifications) that  

VENTURE is not disentitled to challenge the AWARD in India.  

13. Consequent upon the judgment in VENTURE-I, the Ist  

Additional Chief Judge, City Civil Court, Secunderabad transferred  

O.S. No. 80 of 2006 to the Court of 2nd Additional Chief Judge City

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Civil Court at Hyderabad.  The suit was converted into an  

application under Section 34 of the ACT and was renumbered O.P.  

No. 390 of 2008.  The Suit/O.P. as originally filed was based on  

certain grounds other than the grounds on which the O.P.  

eventually came to be allowed.   

14. On the 7th of January 2009, Ramalinga Raju, the Chairman  

and founder of SATYAM made a statement in writing5 wherein he  

made certain admissions to the effect that the balance sheets of  

SATYAM had been manipulated to inflate profits to the tune of Rs.  

7080 crores.  

15. VENTURE filed an application6 under Order VIII Rule 9 of the  

CPC seeking permission to plead additional facts by amending the  

pleadings in O.P. No. 390 of 2008.  VENTURE contended that the  

facts disclosed by Ramalinga Raju and the subsequent  

developments “are crucial at the adjudication of the disputes between the  

parties” and prayed;  

“In the foregoing fats (sic) and circumstances it is humbly  submitted that the Hon’ble Court may be pleased to pass the  following orders;  

                                                           5 Letter addressed to the Board of Directors of SATYAM  6IA No. 1331 of 2009 dated 12.06.2009 in O.P. No. 390 of 2008

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a)  That the subsequent developments and events as stated in  this petition in para 3 to 21 together with the accompanying  documentation be brought on Record.    

b) Such other or further orders as may be necessary in the  interests of justice.”  

  The Trial Court, by an order dated the 3rd of November, 2009  

allowed the application.  

 16. SATYAM challenged the order dated 3rd November, 2009 in a  

revision petition before the High Court.  By an order dated the 19th  

of February, 2010, the High Court allowed the revision petition and  

dismissed Venture’s application.  The High Court held (in  

substance) that under Section 34 of the ACT, an application for  

setting aside of an Award could only be filed within 3 months  

(extendable only by another 30 days) from the date of the Award  

permitting attack against the AWARD on a new ground would  

amount to permitting the AWARD to be challenged after the  

expiration of limitation.

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17. VENTURE appealed to this Court.   This Court, by judgment of  

the 11th of August, 20107, allowed the appeal and restored the order  

of the Trial Court.    

“39. Therefore, this Court is unable to accept the contention of the  learned counsel for the respondent that the expression “fraud in the  making of the award” has to be narrowly construed. This Court  cannot do so primarily because fraud being of “infinite variety” may  take many forms, and secondly, the expression `the making of the  award'  will have to be read in conjunction with whether the award  “was induced or affected by fraud”.  

40. On such conjoint reading, this Court is unable to accept the  contentions of the learned counsel for the respondents that facts  which surfaced subsequent to the making of the award, but have a  nexus with the facts constituting the award, are not relevant to  demonstrate that there has been fraud in the making of the award.  Concealment of relevant and material facts, which should have  been disclosed before the arbitrator, is an act of fraud. If the  argument advanced by the learned counsel for the respondents is  accepted, then a party, who has suffered an award against another  party who has concealed facts and obtained an award, cannot rely  on facts which have surfaced subsequently even if those facts have  a bearing on the facts constituting the award. Concealed facts in  the very nature of things surface subsequently. Such a construction  would defeat the principle of due process and would be opposed to  the concept of public policy incorporated in the explanation.”  

 18. Thereafter, OP No. 390 of 2008 was heard and allowed by the  

trial Court by its Order dated 31.01.2012.  The AWARD was set  

aside.  

                                                           7 Venture Global Engineering v. Satyam Computer Services Limited & Another, (2010) 8 SCC 660 (“Venture-II”)   

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19. The trial court framed as many as 8 points for consideration,  

and they read:  

“(1)  Whether the proceeding as it stands now before this Court is  a suit in the true sense of the term and whether the instant  original proceeding can still be construed as a suit as contended by  the respondents and, if so, whether the proceeding is liable to be  dismissed as not maintainable?  

(2)   Whether the proceeding, even if construed as an original  petition under Section 34 of the Act, is still liable to be dismissed  as not maintainable as contended by the respondents?  

(3)   Whether the instant proceeding is barred by the law of  limitation and is liable to be dismissed on that ground?  

(4)   Whether the Bankruptcy of petitioner’s affiliates does not  constitute a bankruptcy event as per the terms and conditions  agreed to between the parties?  

(5)   Whether the award in so far as the order of transfer of  petitioner’s shares to the 1st respondent at the book value is  violation of Foreign Exchange Management Act and also a violation  of public policy?  

(6)   Whether the Award is vitiated by any irregularities in the  financial statements of 1st respondent as set out in additional  pleadings?  

(7)   Whether the petitioner was under any incapacity on account  of the suppression of material facts and the indulgence in fraud by  the 1st respondent which were said to have come to light after the  passing of the award by the learned Tribunal?   And, if so, whether  such suppression of material facts and fraud have any causative  link, and, if so, whether the award is vitiated by fraud on the part  of the 1st respondent in the facts and circumstances urged by the  petitioner?   And, if so, whether the award is liable to be set aside?  

8.   Whether the petitioner had made out valid and sufficient  grounds to set aside the impugned award, and if so, the award is  liable to be set aside?  

9.    To what relief?  

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20. After an elaborate discussion of the said points, the trial court  

concluded at para 12 of the judgment.     

“Before the last point is taken up, it is necessary to sum up the  discussion and findings.   Under point number 1, it is held that the  present proceeding after conversion from the Suit to the Original  Petition cannot be construed to be a suit and hence cannot be  rejected on the assumption that the suit is not maintainable.     Under point number 2, it is held that the present proceeding which  to be construed as an Original Petition under Section 34 of the Act  is not liable to be dismissed as not maintainable.  Under point  number 3 it is held that the instant proceeding i.e. Original  Petition is not barred by Law of Limitation.   Under point number 4  answered against the Petitioner it is held that bankruptcy of  Petitioner’s affiliates had constituted a bankruptcy event as per the  terms and conditions agreed to between the parties.   However, it is  to be noted that when this finding was recorded by the Arbitral  Tribunal the additional pleas now urged by the Petitioner before  this court were not available to the Petitioner and hence the  additional pleas were not brought to the notice of the learned  Arbitral Tribunal.  The said findings of the Arbitral Tribunal can be  sustained if only the issue of fraud is not taken into consideration.    Thus, in the absence of plea of the suppression of material facts  and fraud on the part of the 1st Respondent, the findings of the  learned arbitrator that the bankruptcy of Petitioner’s affiliates  constitutes a bankruptcy event is sustainable.   However, after the  suppressed material facts and fraud have come to light even that  finding of the Arbitral Tribunal cannot be sustained for the reasons  already assigned under point numbers 6 and 7.  Under point  number 5, the award in so far as it ordered transfer of petitioner’s  share to the 1st Respondent @ book value is in violation to FEMA  and Public Policy of India.  Under points numbers 6 and 7, it is  held that the award which is affected and induced by fraud is  vitiated and cannot be enforced being opposed to Public Policy of  India and is liable to set aside.   In view of the above findings, this  Court holds that the Petitioner has made out valid and sufficient  grounds to set-aside the impugned award and hence, the award is  liable to be set aside.   The point is accordingly answered.”  

 21. In substance, the trial court held all the points in favour of  

VENTURE except Point No.4 and concluded that the AWARD is

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required to be set aside on two grounds, (i) the direction in the  

AWARD to transfer the shares in JVC of VENTURE at book value is  

in conflict with the requirements of The Foreign Exchange  

Management Act, 1999 (hereafter referred to as “FEMA”) and  

therefore violation of public policy8, (ii) The AWARD is  

unsustainable because of the financial irregularities and the  

manipulation of the accounts of SATYAM.9 In the opinion of the  

trial court, the AWARD “is affected and induced by fraud” and  

cannot be enforced being opposed to public policy of India.  

22. Whether the above conclusions are tenable? was the question  

before the High Court.  

The High Court framed 8 points for consideration in the  

judgment under appeal.  

“1) Whether the institution of the proceedings by the 1st  respondent in the Indian Courts to enforce a foreign award can be  

                                                           8 (f)  In view of the discussion coupled with reasons the point is answered in favour of the petitioner and against  the Respondents holding that the award in so far as it ordered for transfer of petitioner’s shares to the 1st  Respondent at book value is a violation of Foreign Exchange Management Act and violation of public policy.    9 ….In view of the detailed discussions coupled with the reasons, the points 6 and 7 are thus answered in favour of  the Petitioner and against the Respondent 1 and 2 holding that the Award is vitiated by irregularities in the financial  statements of 1st Respondent as set out in additional pleadings and that the Petitioner was under an incapacity on  account of the acts of fraud committed by the 1st Respondent which had come to light after the passing of the award  by the learned Tribunal and, therefore, such acts of fraud have causative link, and hence, the award which is affected  and inducted by fraud is vitiated and cannot be enforced being opposed to Public Policy of India and is liable to set  aside on the grounds of material suppression of facts, fraud, incapacity of the Petitioner and violation of Public  Policy of India.

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justified in view of the judgment of the Supreme Court in BALCO’S  case (4 supra)?  

2)   Whether the principle of ‘issue estoppel’ gets attracted in the  facts of the case?  

3)   Whether it is competent for a party to arbitration to invoke  Part-I as well as Part-II of the Arbitration Act in relation to a  foreign award?  

4)   Whether the ground of fraud raised by the appellant has  been pleaded and proved as required in law, and whether the  finding recorded by the trial Court on that aspect can be  sustained?  

5)   Whether the award can be said to be opposed to public  policy, on the ground that the transfer of money for its  implementation, needs permission, under FEMA?  

6)    Whether an Indian Court can set aside a foreign award,  which has already been enforced in the proceedings with the  participation of both the parties to the award?  

7)   Whether the trial Court followed the correct procedure in  deciding the O.P.? and  

8)   Whether the miscellaneous orders that are challenged in  certain appeals and revisions can be sustained in law?”  

 23. Point Nos.4 and 5 above are relevant in the context of the twin  

reasons given by the trial court for arriving at the conclusion that  

the AWARD is required to be set-aside.     

24.  The High Court opined that the findings recorded by the trial  

court are unsustainable. The relevant portion of the judgment  

under appeal insofar as it pertains to point No. 4 reads:  

“In every alternative sentence, the word ‘fraud’ has been used and  it was proceeded as though fraud was proved. It is important to  mention that the trial Court did not record any finding to the effect

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that fraud has been proved by the 1st respondent, much less any  reference was made to the oral and documentary evidence.  

It hardly needs any mention that the OP was required to be tried  as a suit, particularly when allegations of far-reaching  consequences were made.   However, the trial Court was mostly  impressed by the contents of the charge-sheet filed against Mr.  Ramalinga Raju by the investigating agencies.   Even while the  cases are pending trial before the respective Courts, it has  proceeded as though the allegation as to fraud was proved.   For all  practical purposes, it has rendered the trial before the concerned  Courts, nugatory.  

We are, therefore, of the clear view that the finding of the trial  Court on the question of fraud does not accord with law.”  

Coming to point No. 5, the High Court held:  “It is also important to mention that I.A. No. 1331 of 2009 did not  contain any plea as to public policy.   It was only in relation to  alleged fraud.   The observation of the trial Court is erroneous and  contrary to record.  

It is possible to argue that, if the complaint itself is that the award  is opposed to public policy, an aggrieved party cannot be expected  to raise that plea before the Arbitrator; and if the violation of the  public policy is brought about by the award, the complaint cannot  be made at any stage, anterior to that.   However, when a ground  of that nature is raised under Section 34 of the Act, it must be  demonstrated as to how the award is opposed to public policy.    Even at the cost of repetition, it can be said that, it is only when  the award exhorts a party to the proceedings to take steps, that  has the effect of contravening law of the land, in which it is to be  enforced, that the ground can be invoked.   There is not even a  semblance of finding by the trial Court in this behalf.   It is trite  that every step for enforcing the award must be in accordance with  the relevant provisions of law.   Therefore, we answer this point in  favour of the appellant.”  

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25. The net result of the litigation is that while the Trial Court set  

aside the AWARD, the High Court reversed the trial court judgment  

and restored the AWARD.  

26. Aggrieved by the judgment, the present two appeals are filed  

one by VENTURE and other by SATYAM now represented by Tech  

Mahindra.  

27. Naturally VENTURE is aggrieved by the judgment.  

Notwithstanding the fact SATYAM succeeded before the High Court,  

SATYAM also filed a separate appeal (being SLP(C) No. 8298 of  

2014) questioning the correctness of the decision of the High Court  

insofar as it held that the trial court had the jurisdiction to examine  

the legality of the AWARD.  

28. The crux of the entire litigation is that VENTURE seeks to have  

the AWARD set aside. It must be remembered that SATYAM has not  

initiated any proceeding so far in India for the enforcement of the  

AWARD.   

29. As rightly pointed out by my learned brother, though various  

submissions were made both before the trial court and the High  

Court, before this Court VENTURE confined its attack on the

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AWARD only to two grounds i.e. the AWARD is contrary to the  

public policy of India because compliance with the AWARD would  

amount to violation of the provisions of the FEMA ACT., and the  

AWARD is required to be set aside because of the “fraud” disclosed  

by the statement dated 7th January 2009 of Ramalinga Raju.   

30. Under the scheme of the ACT an award can be set aside in this  

country only on the grounds enumerated in Section 3410, if an  

                                                           10 Section 34. Application for setting aside arbitral award.—(1)   Recourse to a Court against an arbitral award  may be made only by an application for setting aside such award in accordance with sub-section (2) and sub-section  (3).  

(2)     An arbitral award may be set aside by the Court only if-  a.     the party making the application furnishes proof that-  

                    i.        a party was under some incapacity, or  

                    ii.        the arbitration agreement is not valid under the law to which the parties have subjected it or, failing  any indication thereon, under the law for the time being in force; or  

                   iii.        the party making the application was not given proper notice of the appointment of an arbitrator or of  the arbitral proceedings or was otherwise unable to present his case; or  

                   iv.        the arbitral award deals with a dispute not contemplated by or not falling within the terms of the  submission to arbitration, or it contains decisions on matters beyond the scope of the submission  to arbitration:   

Provided that, if the decisions on matters submitted to arbitration can be separated from those not  so submitted, only that part of the arbitral award which contains decisions on matters not  submitted to arbitration may be set aside; or  

                    v.        the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the  agreement of the parties, unless such agreement was in conflict with a provision of this Part from  which the parties cannot derogate, or, failing such agreement, was not in accordance with this Part;  or  

b.    the Court finds that-  

                     i.        the subject-matter of the dispute is not capable of settlement by arbitration under the law for the time  being in force, or  

                    ii.        the arbitral award is in conflict with the public policy of India.  

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application praying for such a relief is filed in accordance with the  

procedure stipulated therein.    

Section 34(2)(b)(ii) stipulates that an award which is in conflict  

with public policy of India is liable to be set aside.    

                                                                                                                                                                                           Explanation I.-For the avoidance of any doubt, it is clarified that an award is in conflict with the public policy of  India, only if,—  

(i) the making of the award was induced or affected by fraud or corruption or was in violation of section  75 or section 81; or  

(ii) it is in contravention with the fundamental policy of Indian law; or  (iii) it is in conflict with the most basic notions of morality or justice.  

Explanation 2.- For the avoidance of doubt, the test as to whether there is a contravention with the fundamental  policy of Indian law shall not entail a review on the merits of the dispute.  

(2A) An Arbitral award arising out of arbitrations other than international commercial arbitrations, may  also be set aside by the Court, if the Court finds that the award is vitiated by patent illegality appearing on the face  of the award:  

Provided that an award shall not be set aside merely on the ground of an erroneous application of the law or  by reappreciation of evidence.   

(3) An application for setting aside may not be made after three months have elapsed from the date on  which the party making that application had received the arbitral award or, if a request had been made under section  33, from the date on which that request had been disposed of by the arbitral tribunal:  

Provided that if the Court is satisfied that the applicant was prevented by sufficient cause from making the  application within the said period of three months it may entertain the application within a further period of thirty  days, but not thereafter.   

(4) On receipt of an application under sub-section (1), the Court may, where it is appropriate and it is  so requested by a party, adjourn the proceedings for a period of time determined by it in order to give the arbitral  tribunal an opportunity to resume the arbitral proceedings or to take such other action as in the opinion of arbitral  tribunal will eliminate the grounds for setting aside the arbitral award.  

(5) An application under this section shall be filed by a party only after issuing a prior notice to the  other party and such application shall be accompanied by an affidavit by the applicant endorsing compliance with  the said requirement.  

(6) An application under this section shall be disposed of expeditiously, and in any event, within a  period of one year from the date on which the notice referred to in sub-section (5) is served upon the other party.   

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In the Explanation to Section 34(2) it is declared that “… an  

award is in conflict with the public policy of India if the making of the award  

was induced or affected by fraud …”   

31. Though the trial Court had set aside the AWARD purportedly  

on two grounds, in essence the ground is only one, that the AWARD  

is in conflict with the public policy of India.  Because the conclusion  

of the trial court on Point Nos. 6 & 7 framed by it that “the AWARD  

is affected and induced by fraud” is also an aspect of the “conflict  

with the public policy of India.”   

32. I am of the opinion that the High Court is right in reversing  

the judgment of the trial court, though the reasons given by the  

High Court, in my opinion, are not very elegant and logical.  

Therefore, I propose to examine the correctness of the  

conclusions of the trial court on Points No.5, 6 & 7 framed by it.   

PUBLIC POLICY:  

33. The trial court recorded that the AWARD is required to be set  

aside on the ground that the AWARD is opposed to the public policy  

of India.  In the opinion of the trial court, the AWARD contained  

directions which are in conflict with the FEMA Act and Regulations

20    

made thereunder.   The trial court considered this under Point No.5  

framed by it in para no.10 of its judgment.  It framed the question  

as follows:    

“(a) The question under this point is this: ‘Whether the award in  so far as the order of transfer of petitioner’s shares to the 1st  Respondent at the book value is a violation of Foreign Exchange  Management Act and violation of public policy?’     

The trial court took note of the contention of VENTURE:  

(b) The contentions of the petitioner on this aspect are as under:   “It is admitted that the Award directed 1st Respondent to acquire  the Petitioner’s shares in Respondent No. 2 at book value being  less than its fair value.   Such a direction was in express violation  of the Foreign Exchange Management (Transfer or issue of security  by a person resident outside India) Regulations, 2000, which  require such transfers to take place at fair value...”  

 34. The submission of VENTURE appears to be:   

(i) The AWARD insofar as it directed VENTURE to  

transfer its shares in the JVC to SATYAM at book  

value is in violation of the Foreign Exchange  

Management (Transfer or issue of security by a  

person resident outside India) Regulations, 2000;  

and   

(ii) The book value of the shares of JVC is less than  

that of their fair value.    

21    

35. It must be pointed out here that even according to the trial  

court SATYAM argued “that the book value of the shares is the price of  

shares as recorded in the books of accounts of the Company.  It may be above  

or below the market value.”  

On the above rival submissions, the trial Court concluded;  “Thus the award to the extent it directed the transfer of Petitioner’s  shares to the 1st Respondent at the rate of book value is violation  of Foreign Exchange Management Act and consequently the public  policy.  

*****    *****       *****   *****        *****  

In view of the discussion coupled with reasons the point is  answered in favour of the petitioner and against the Respondents  holding that the award in so far as it ordered for transfer of  petitioner’s shares to the 1st Respondent at book value is a  violation of Foreign Exchange Management Act and violation of  public policy.”  

 36. In the entire discussion dealing with the submission, neither  

the text of the regulations nor the scheme of either the FEMA Act or  

the regulations is subjected to any analysis.  The trial court did not  

even indicate the number of the regulation which mandates (if at  

all) that the transfer such as the one directed by the AWARD is  

required to be only at “fair value’ of the shares.  The trial court  

simply accepted the submission of VENTURE.  

22    

37. Assuming for the sake of argument that there is some  

stipulation in the abovementioned regulation which forbids the  

transfer of shares in question except “for a fair value”, there is no  

discussion in the judgment of the trial court as to;   

(i) what is meant by fair value of the shares under  

FEMA;  

(ii) how that fair value is to be determined;  

(iii) whether the fair value of shares is the same as  

market value of shares;  

(iv) what exactly is the fair value of the shares in  

question;   

The trial court did not even record a finding that the book value of  

the shares of the JVC is less than that of their market value or fair  

value.  It must also be pointed out here that the trial court did not  

even refer to any pleading on the basis of which submission was  

made before it.    

38. The entire exercise undertaken by the trial court only  

demonstrates the unfortunate trend in the legal system where  

without settling the facts in issue first and identifying the questions

23    

of law relevant in the context for determining the controversy  

between the parties, case law is dumped upon and examined by the  

courts.  The result is an exercise like the one undertaken by the  

trial court.  I am of the opinion that the conclusion recorded by the  

trial court on Point No.5 is without any basis in facts and without  

even identifying the provision of law with which the AWARD is in  

conflict with.  Hence, in my opinion, the conclusion in this point  

cannot be sustained.   

39. In the process of such uncharted debate, the trial court  

undertook an examination whether the payment of US$ 622,656 to  

be made towards the book value of the shares requires permission  

of the Reserve Bank of India and whether such permission is  

required to precede the award etc.  I failed to identify any categoric  

conclusion recorded by the trial court on that question.  Whether  

there are any pleadings calling upon the court to examine those  

questions is also not indicated in the judgment.  

24    

FRAUD:  

 40. The next question is - whether fudging of the accounts of  

SATYAM would in any way provide a ground for VENTURE to seek  

setting aside of the AWARD?    

41. The content of the letter11 dated 7th January 2009 of  

Ramalinga Raju, if true undoubtedly would have legal consequences  

both civil and criminal for SATYAM, Ramalinga Raju and some  

more persons who are responsible for the fudging of the accounts of  

SATYAM.  Various civil and criminal proceedings were in fact  

initiated and some consequences followed.  

According to the Statement of Ramalinga Raju, the fudging of  

accounts of SATYAM took place over a number of years.12  

                                                           11 Extracted in extenso by my learned brother  12 The gap in the balance Sheet has arisen purely on account of inflated profits over a period of last several years  (limited only to Satyam standalone, books of subsidiaries reflecting true performance). What started as a marginal  gap between actual operating profit and the one reflected in the books of accounts continued to grow over the years.   It has attained unmanageable proportions as the size of company operations grew significantly (annualized revenue  run rate of Rs. 11,276 crore in the September quarter, 2008 and official reserves of Rs. 8,392 crore).   The  differential in the real profits and the one reflected in the books was further accentuated by the fact that the company  had to carry additional resources and assets to justify higher lever of operations – thereby significantly increasing the  costs.

25    

Ramalinga Raju’s statement is not very clear regarding the point of  

time at which the fudging of the accounts of SATYAM commenced.13    

42. In my opinion, Points No.6 & 7 framed by the trial court are  

too vague and imprecise.  Section 34(2) of the ACT declares that if  

making of an award is either “induced or affected by fraud”, the  

same is liable to be set aside.  Whether the facts relating to the  

fudging of the accounts of SATYAM and the non-disclosure of those  

facts by SATYAM before the arbitrator would amount either (i) to  

‘inducing’ the making of the AWARD by fraud; or (ii) the AWARD  

made in ignorance of those facts by virtue of non-disclosure of those  

facts by SATYAM would be an ‘award affected by fraud’, - would be  

the questions relevant for deciding whether the AWARD is required  

to be set aside.      

43. The expression “Fraud” has no definition in law which has  

universal application. In “KERR on the Law of Fraud and Mistake”14, it is  

said:  

                                                           13 The trial court at para 11(a) of the judgment recorded a submission that the fudging commenced w.e.f. the year  2002.   14 McDonnell, Denis Lane & Monroe, John George, A Treatise on the Law of Fraud and Mistake, KERR ON  THE LAW OF FRAUD AND MISTAKE, 1952 (7th Edn.) Sweet & Maxwell Limited (London), page 1.

28    

of relevant and material facts which should have been disclosed before the  

Arbitrator is an act of fraud” to support the conclusion that the AWARD  

is required to be set aside.  

The Trial Court opined that:   

“In the light of this legal position and the pleadings supported by  documentary evidence on record, I am of the well considered view  that there is adequate pleading on the point of material  suppression of facts and fraud and also the required standard of  evidence to prima facie accept the version of the Petitioner on the  application of the test of preponderance of probabilities.   

… Therefore, the non-disclosure of material facts and fraud go to  the root of the matter and suggest that they do have a causative  link affecting the award.   In view of the detailed discussions  coupled with the reasons, the points 6 and 7 are thus answered in  favour of the Petitioner and against the Respondent 1 and 2  holding that the Award is vitiated by irregularities in the financial  statements of 1st Respondent as set out in additional pleadings and  that the Petitioner was under an incapacity on account of the acts  of fraud committed by the 1st Respondent which had come to light  after the passing of the award by the learned Tribunal and,  therefore, such acts of fraud have causative link, and hence, the  award which is affected and induced by fraud is vitiated and  cannot be enforced being opposed to Public Policy of India and is  liable to set aside on the grounds of material suppression of facts,  fraud, incapacity of the Petitioner and violation of Public Policy of  India.”  

   45. In my opinion, the conclusion of the trial court that the  

various facts brought on record by VENTURE borne by the  

disclosure statement of Ramalinga Raju dated 7th January, 2009  

and the subsequent developments thereafter (I shall refer to them  

collectively as ‘CONCEALED FACTS’ for the sake of convenience) are

29    

material facts which ought to have been disclosed before the  

Arbitrator and the failure to make such a disclosure would render  

the AWARD liable to be set aside is wholly untenable.  No reference  

is made to the pleadings of VENTURE as to how VENTURE believed  

that the “CONCEALED FACTS” are material for the adjudication of  

the dispute by the arbitrator.  Equally absent is the discussion by  

the trial court as to how the “CONCEALED FACTS” would become  

material facts in the context of the arbitration.   In the entire  

discussion on point nos.6 & 7, the trial court does not give any  

reason justifying the conclusion that the “CONCEALED FACTS” are  

material facts in the context of the arbitration.  Except mechanically  

repeating the words of this Court that the non-disclosure or  

concealment of the material facts before the arbitrator is an act of  

fraud, there is no discussion as to how the CONCEALED FACTS are  

material facts whose concealment resulted in inducing the making  

of the AWARD by fraud or affected by fraud.        

46. It must be remembered here that this Court in VENTURE-II  

categorically declared:  

30    

“44. This Court also holds that the facts concealed must have a  causative link. And if the concealed facts, disclosed after the  passing of the award, have a causative link with the facts  constituting or inducing the award, such facts are relevant in a  setting-aside proceeding and award may be set aside as affected or  induced by fraud. The question in this case is therefore one of  relevance of the materials which the appellant wants to bring on  record by way of amendment in its plea for setting aside the award.  

45.  Whether the award will be set aside or not is a different  question and that has to be decided by the appropriate court. In  this appeal, this Court is concerned only with the question whether  by allowing the amendment, as prayed for by the appellant, the  Court will allow material facts to be brought on record in the  pending setting-aside proceeding. Judging the case from this  angle, this Court is of the opinion that in the interest of justice and  considering the fairness of procedure, the Court should allow the  appellant to bring those materials on record as those materials are  not wholly irrelevant or they may have a bearing on the appellant's  plea for setting aside the award.  

46.  Nothing said in this judgment will be construed as even  remotely expressing any opinion on the legality of the award. That  question will be decided by the court where the setting-aside  proceeding is pending. The proceeding for setting aside the award  may be disposed of as early as possible, preferably within 4  months.”  

 This Court only held that the CONCEALED FACTS of Ramalinga  

Raju are relevant and, therefore, VENTURE must be permitted to  

plead those facts.  But this Court did not make any declaration that  

such facts would constitute material facts rendering the AWARD  

liable to be set aside on the ground that the non-disclosure of those  

facts before the arbitrator would amount to fraud, inducing the  

making of the AWARD or that the AWARD is affected by the fraud.     

At the same time, this Court categorically declared in para 61 that

31    

“nothing said in the judgment will be construed as even remotely expressing  

any opinion on the legality of the award.”     

47. The High Court rightly disagreed with the conclusions of the  

trial court and reversed the judgment of the trial court. High Court  

ought to have given more cogent reasons for the disagreement.   

48. In the circumstances, I am of the opinion that the High Court  

rightly reversed the judgment of the trial court, not warranting any  

interference by this Court in exercise of the discretionary  

jurisdiction under Article 136 of the Constitution of India.  I would  

therefore dismiss the appeals of VENTURE.  

CIVIL APPEAL No.             OF 2017  (ARISING OUT OF SLP (C) No. 8298/2014)    49. If this Court agrees with the conclusion of the High Court that  

the AWARD is not liable to be set aside, the appeal of SATYAM  

would become purely academic.  Even otherwise, a reading of the  

Special Leave Petition discloses, all that SATYAM is seeking is to re-

agitate the question of the applicability of Part-I of the ACT to an  

international commercial arbitration.  In other words, it is a  

challenge to the correctness of the decision of a Constitution Bench  

of this Court in BALCO’s case.  I am of the opinion that such a

32    

course ought not to be permitted.  I would, therefore, dismiss the  

appeal of SATYAM.  

 …………………………J.   

              (J. CHELAMESWAR)  New Delhi  November 01, 2017

1  

REPORTABLE  

        IN THE SUPREME COURT OF INDIA    

        CIVIL APPELLATE JURISDICTION    

          CIVIL APPEAL Nos. 17756 OF 2017         (ARISING OUT OF SLP (C) Nos. 29747-29749/2013)  

 Venture Global Engineering LLC …….Appellant(s)  

        VERSUS     

Tech Mahindra Ltd. & Anr. Etc. ……Respondent(s)    

WITH    

CIVIL APPEAL No.             OF 2017         (ARISING OUT OF SLP (C) No. 8298/2014)    Tech Mahindra Ltd. & Anr. Etc. …….Appellant(s)    

         VERSUS     

Venture Global Engineering LLC. ……Respondent(s)                          

J U D G M E N T  

Abhay Manohar Sapre, J.  

1.  Special Leave Petition (Civil) Nos.29747-29749  

of 2013 are filed by the Venture Global Engineering

2  

LLC.  Special Leave Petition (C) No.8298 of 2014 is  

filed by Tech Mahindra Ltd.  Both of them are  

Bodies Corporate.   They are the plaintiff and the  

1st defendant respectively in O.S. No.87 of 2012 on  

the file of the 1st Additional Chief Judge, City Civil  

Court, Secunderabad.    

2.  Leave granted.  

3.  O.S. No.87 of 2012 was filed praying that an  

Arbitral Award dated 03.04.2006 (hereinafter  

referred to as the “Award”) be set aside in exercise of  

the power under Section 34 of the Arbitration and  

Conciliation Act, 1996 (hereinafter referred to as the  

“AAC Act”).   O.S. No. 87 of 2012 was transferred to  

the Court of Chief Judge, City Civil Court,  

Hyderabad and re-numbered as O.P. No. 390 of  

2008.    

4. By order dated 31.01.2012, O.P. No.390 of  

2008 was allowed setting aside the Award.

3  

5. Aggrieved by the said order, the defendant  

preferred three appeals to the High Court of Andhra  

Pradesh.  By a common judgment dated  

23.08.2013, the High Court allowed the appeals.    

Hence, the instant appeals.  

6. The necessary background facts of these  

appeals are:  

7. For the sake of convenience and brevity, the  

plaintiff-Venture Global Engineering LLC is  

hereinafter referred to as “Venture”, whereas  

defendant No.1-Tech Mahindra (formerly known as  

Satyam Computer Services Private Ltd. is  

hereinafter referred to as “Satyam”  and defendant  

No.2-Satyam Venture Engineering Services is  

hereinafter referred to as “JVC”.   

8. Plaintiff-Venture in O.S. No.87 of 2012 is a  

Company incorporated under the US laws.  It is one  

of a group of companies.    

4  

9. Satyam is an Indian Company registered  

under the Companies Act, 1956 with its office at  

Hyderabad engaged in the business of computer  

software.   

10.  On 20.10.1999, the Venture and Satyam  

entered into a Joint Venture and Shareholder  

Agreement (hereinafter referred to as Agreement-I)  

for incorporating JVC.  The entire shareholding of  

JVC is to be held between the two collaborating  

companies equally. The Agreement consists of XI  

Articles.  Each Article consists of several sections.    

11. Annexure-A to the Agreement defines several  

expressions used in the Agreement.    

12. The provisions of Agreement-I relevant to the  

controversy on hand are:   

(i) Section 6 (a) to (e) of Article VI which  

provide that both Venture and Satyam would not  

compete in any manner in the business of JVC and

5  

also would not compete inter se in their respective  

business directly or indirectly so long as both of  

them hold shares in JVC and also within two years  

after they cease to hold the shares in the JVC.    

(ii) Section 8.01 of Article VIII defines the  

expression “event of default”.  It then sets out four  

events of default in clauses (a) to (d). One such  

event specified in Clause (a) is – “A bankruptcy  

event when occurs with respect to a shareholder.”   

It reads as under:  

“Section 8.01 Events of Default    For purposes of this Agreement, an  “Event of Default” means, with respect  to any Shareholder, the occurrence of  any of the following:    

(a) A Bankruptcy Event occurs with  respect to such Shareholder.    

(b) Subject to clause (c) and (d) below, such  Shareholder breaches this Agreement in  an material respect and fails to cure  such breach within thirty(30) days after  being notified in writing the other  Shareholder of such breach.    

(c) A Shareholder Transfers, or attempts to

6  

Transfer, any Shares in violation of the  transfer restrictions set forth in Article  VII of this Agreement.    

(d) Such Shareholder is subject to a Change  in Control.”  

(iii) Section 8.02 provides the  

consequences of the occurrence of any “event of  

default”.   It reads as under:  

“Section 8.02 Rights Upon Events of Default  Generally    Upon the occurrence of an Event of Default  (other than a Bankruptcy Event) with respect  to any Shareholder (the “Defaulting  Shareholder”), the other Shareholder (the  “Non-Defaulting Shareholder”) shall have the  option, within thirty (30) days after becoming  aware of the Event of Default to (a) purchase  the Defaulting Shareholder’s Shares at book  value and repay Shareholder’s loan, or (b)  cause the immediate dissolution and  liquidation of the COMPANY in accordance  with Article IX. Either of such options must  be exercised by the Non-Defaulting  Shareholder by written notice to the  Defaulting Shareholder within thirty (30)   days after becoming aware of the subject  Event of Default.”    

(iv) Sections 8.03 and 8.04 stipulate the  

rights and obligations flowing from the occurrence

7  

of the “event of default”.  One of them is that the  

non-defaulting shareholder shall have an option  

within 30 days after becoming aware of the  

occurrence of the “event of default” to either  

purchase the defaulting shareholder's shares at  

book value or cause the immediate dissolution and  

liquidation of the JVC Company following the  

procedure prescribed in Agreement-I.  It read as  

under:  

“Section 8.03 Rights Upon Bankruptcy Event    Upon the occurrence of a Bankruptcy Event  with respect to any Shareholder (the  “Bankrupt Shareholder”), such shareholder  shall give immediate written notice to the  other Shareholder (the “Solvent  Shareholder”). The Solvent Shareholder shall  have the option of (a) purchasing the Shares  held by the Bankruptcy Shareholder at book  value and repay such Shareholder’s loans or  (b) causing the immediate dissolution of  liquidation of the company in accordance  with Article IX. Either of such options must  be exercised by the Solvent Shareholder by  written notice to the Bankrupt Shareholder  within one hundred Twenty (120) days of  receipt of notice of the Bankruptcy Event  from the Bankrupt shareholder.”   

8  

“Section 8.04 Remedies Not Exclusive – The  rights granted in this Article are not  exclusive of any other rights or remedies  available at law or in equity.”    

(v) Article XI, Section 11.05 (a) prescribes  

the procedure for the settlement of disputes:  

“ (a) In the event of a dispute between the  parties to this Agreement regarding the  terms and conditions of this Agreement or  any of the transaction documents, the  Parties shall negotiate in good faith for a  period of 30 days in an effort to resolve the  issues causing such dispute.   If such  negotiations are not successful, the parties  shall submit the disagreement to the senior  officer VENTURE and the senior officer of  SATYAM designees for their review and  resolution in such manner as they deem  necessary or appropriate.  Compliance with  this Section 11.5 (a) shall be a condition  precedent to the commencement of any  judicial or other legal proceeding.”    

 (vi) Section 11.05 (b) stipulates the  

governing law of the agreement;  

“(b)  This Agreement shall be construed in  accordance with and governed by the laws of  the State Michigan, United States, without  regard to the conflicts of law rules of such  jurisdiction.   Disputes between the parties  that cannot be resolved via negotiations shall  be submitted for final, binding arbitration to

9  

the London Court of Arbitration.”    

It provides that the disputes between the parties, if  

not settled through negotiations, shall be referred to  

arbitration to the London Court of International  

Arbitration (hereinafter referred to as LCIA).   

(vii) Section 11.05(c) stipulates ensuring  

compliance of provisions of Companies Act and  

other applicable Acts/Rules, which are in force in  

India at any time.  It reads as under:  

“(c)  Notwithstanding anything to the  contrary in this agreement, the Shareholders  shall at all times act in accordance with the  Company’s Act and other applicable  Acts/Rules being in force, in India, at any  time.”   

 13. Pursuant to the aforementioned Agreement,  

Satyam, Venture and JVC entered into another  

Agreement dated 11.02.2000, Agreement–II called  

Non-Compete Agreement. Clause 5 of the Agreement  

provides that the Agreement shall be governed by  

and construed according to laws of the State of

10  

Michigan (US) without regard to conflicts of law  

rules of its jurisdiction.  It then also provides that  

the disputes between the parties, if cannot be  

mutually resolved, shall be referred to arbitration to  

the LCIA.  It also provides that a party to the  

Agreement may seek injunctive relief in a Court of  

competent jurisdiction restraining a violation of the  

Agreement.  It reads as under:  

“Clause 5 – This agreement shall be governed  by and construed according to the Laws of  the States of Michigan, United States,  without regard to conflicts of law rules of  such jurisdiction.   Disputes between the  parties which cannot be resolved via  negotiations shall be submitted for final,  binding arbitration to the London Court of  Arbitration.   In addition, a party may seek  injunctive relief in a court of competent  jurisdiction, restraining a violation of this  agreement.”  

14. In September 2000, Satyam entered into an  

Agreement with another American Company called-

TRW Automotive to provide information technology  

to TRW.   Satyam also entered into a “sub-contract"

11  

with the JVC to share the benefits of the business  

with TRW.   

 15. Between March 2003 to May 2004, 21  

members of the Group of Companies of which the  

Venture is a member filed bankruptcy proceedings  

in U.S. Courts and were declared bankrupt.  

16. Aforementioned two events gave rise to  

disputes between Venture and Satyam.  Eventually  

Satyam invoked the arbitration clause contained in  

Section 11.5 (b) of Agreement-I by filing a request  

with the LCIA for arbitration on 25.07.2005 against  

Venture.   

17. On 10.09.2005 the LCIA appointed Mr. Paul B.  

Hanon as sole Arbitrator to decide the disputes.  

Both the parties entered appearance before the  

Arbitrator and filed their respective claims against  

each other.

12  

18. The Arbitrator delivered his reasoned Award on  

03.04.2006.  He rejected the claims of Venture and  

allowed the claims of Satyam.  

19. The Arbitrator held that an "event of default  

(bankruptcy)" on the part of Venture had occurred  

entitling Satyam to claim reliefs specified in Section  

8.03 of Agreement-I against Venture.  The Arbitrator  

also held that Venture violated Agreement-II by  

failing to provide business as stipulated in the  

Agreement.  

20. The relevant part of the operative portion of the  

Award reads as under:   

“A. I order VGE1 to deliver to Satyam  share certificates in form suitable for  immediate transfer to Satyam2 or its  designee evidencing all of VGE’s ownership  interest (legal and/or beneficial) in SVES3. I  further order it to do all that may otherwise  be necessary to effect the transfer of such  ownership to Satyam or its designee.  

 B. Concurrently with the transfer of  

                                                        1  VGE = VENTURE  2  Satyam = SATYAM  3  SVES = JVC

13  

ownership described in Section 6.1A above, I  order Satyam to pay VGE US$622,656, such  sum being the net difference between the  amount payable by Satyam to VGE for the  book value of the share of SVES (plus  interest) and the amount payable by VGE to  Satyam for the disgorgement of royalties paid  to VGE by SVES (plus interest).   

 C. I order VGE to pay Satyam  

GBP48,777.48, the costs of the Arbitration as  determined by the LCIA Court.   

 D. I order VGE to pay to Satyam  

US$1,488,454.11 Satyam’s additional costs  as determined in Section 5.12 hereof.  

 E. I order VGE to pay Satyam interest  

at the 5 per cent per annum compounded  annually on the unpaid balance of the sums  set forth in Sections 6.1 C and D hereof until  such sums are paid.   

 F. I declare that Satyam is released  

from its obligation under the NCA not to  compete with SVES or VGE with respect to  engineering services to the automotive  industry.”   

21. Aggrieved by the Award, Venture filed a  

complaint against Satyam on 13.04.2006 before the  

United States District Court for the Northern  

District of Illinois, Eastern Division (USA) seeking a  

declaration that the Award was not enforceable in

14  

US.   By an Order dated 25.04.2006, the said  

complaint was dismissed as withdrawn.   

22. On 14.04.2006, Satyam filed a petition against  

Venture in Eastern District Court of Michigan (US)  

seeking to enforce the Award against the Venture.    

On 28.04.2006, Venture filed its response and  

cross-petition in Satyam’s petition. By Order dated  

31.07.2006, Satyam’s petition was allowed directing  

enforcement of the Award.    

23. Aggrieved by order dated 31.07.2006, Venture  

filed an appeal on 08.09.2006 in 6th circuit US  

appeal Court in Michigan.  

24. On 28.04.2006, Venture filed a civil suit (O.S.  

No.80/2006) before the 1st  Additional Chief Judge  

City Civil Court Secunderabad seeking (i) a  

declaration that the Award is illegal and without  

jurisdiction, (ii) a decree for grant of permanent  

injunction restraining Satyam from enforcing the

15  

Award which, inter alia, directed Venture to sell  

their 50% shares of JVC to Satyam at book value.  

25. In the said suit, on 15.06.2006, an ex parte  

injunction order was passed restraining Satyam  

from enforcing the Award insofar as it directed  

transfer of shares by Venture to Satyam.    

26. Aggrieved by the order dated 15.06.2006,  

Satyam filed Misc. Appeal No.519/2006 in the High  

Court of Andhra Pradesh.  By its order dated  

13.09.2006, the High Court allowed the said appeal,  

remitted the matter to the Trial Court for fresh  

adjudication on merits.  

27. On remand, Satyam filed an application (IA  

No.2042/2006) under Order VII Rule 11 of the Code  

of Civil Procedure, 1908 (in short “the Code”)  

praying for rejection of the plaint and dismissal of  

suit.   

28. By order dated 28.12.2006, the Trial Judge

16  

allowed the application. The plaint was rejected.   

29. Challenging the said order, Venture filed  

appeal before the High Court.  The High Court  

dismissed the appeal on 27.02.2007.   

30. Aggrieved by the said order, Venture moved  

this Court.   This Court allowed the appeal by a  

reported judgment in Venture Global Engineering  

vs. Satyam Computer Services Ltd. & Anr.,   

(2008) 4 SCC 190 (hereinafter referred to as  

“Venture-I”).  This Court, inter alia, held that:    

(i) Venture was entitled to challenge the Award  

in Indian Courts as the provisions of Part I of AAC  

Act will apply to the Award in the light of law laid  

down in Bhatia International vs. Bulk Trading  

S.A. & Anr., (2002) 4 SCC 105 (See Paras 33/35);   

(ii) That Award violates the provisions of FEMA  

and the Companies Act (Para 34);    

(iii) That parties will have a right to challenge

17  

the Award including its enforceability in Indian  

Courts by virtue of Section 11.05(c) of Agreement-I  

which has an overriding effect on all clauses of the  

Agreement including Section 11.05(b) - (Para 39);  

(iv) That Satyam violated the terms of  

Agreement-I when they sought transfer of shares of  

Indian company in US Courts (Paras 40/44);  

(v) That the appropriate remedy for a person,  

aggrieved by the Award, lies in filing application  

under Section 34 of the AAC Act in Indian Courts  

rather than filing a civil suit;  

(vi) Conversion of the suit into proceedings  

under Section 34 of the AAC Act  is permissible in  

law and such proceedings can be transferred to the  

Court of competent jurisdiction, if necessary (Para  

41);  

(vii) That Satyam should not have continued  

with the proceedings filed in US Courts against

18  

Venture on the strength of the Award in the light of  

injunction orders passed by the Courts in India  

against Satyam and (Para 42),  

(viii)  That in the light of law laid down in  

Bhatia International’s case (supra), even though  

the Award in question is a foreign Award, yet it will  

be governed by  Part I of the Act (Para 47).    

31. This Court observed "we have not expressed  

anything on merits of the claim of both the parties.”  

This Court further observed that the Trial Court was  

at liberty to transfer the case to the competent  

Court to decide the case (if found necessary) on  

merits and directed parties to maintain status quo  

with respect to transfer of shares.    

32. On 17.01.2008, the Eastern District of  

Michigan Southern Division, US Court passed an  

order observing therein that Venture violated the  

order of US Courts which directed the enforcement

19  

of the Award and called upon the parties to move to  

this Court.  Venture filed an appeal to US Court of  

Appeal.  In the appeal, Venture attempted to provide  

some new evidence to show fraud played by Satyam.  

It was, however, dismissed on 09.04.2009  

33. In the meanwhile, both Venture and Satyam  

filed review petitions against the order dated  

10.01.2008 passed in Venture I by this Court.  By  

order dated 29.04.2008, this Court dismissed both  

the review petitions.     

34. Pursuant to the order of this Court in Venture  

I, the Ist Addl. Chief Judge, City Civil Court,  

Secunderabad transferred O.S. No.80 of 2006 to the  

Court of 2nd Additional Chief Judge, City Civil  

Court of Hyderabad.  The suit was then converted  

into an application under Section 34 of the Act and  

was renumbered as O.P. No. 390/2008.   

35. On 07.01.2009, B. Ramalinga Raju-Chairman

20  

and founder of the Satyam made a disclosure and  

confessed in writing that the balance sheets of  

Satyam had been manipulated inflating the profits  

to the tune of Rs.7080 crores. M/s Price  

Waterhouse Cooper (PWC), the auditors of Satyam  

was compelled to declare that the financial  

statements of Satyam could no longer be considered  

accurate or/and reliable.    

36. Venture filed an application (IA No. 1331 of  

2009 dated 12.06.2009) under Order VIII Rule 9 of  

the Code in O.P. No.390/2008 seeking permission  

to bring additional facts on record by amending the  

pleadings to question the legality of the Award.  It  

was contended that the disclosure of facts made by  

Ramlainga Raju prima facie constituted a fraud and  

misrepresentation committed by Satyam on all the  

stakeholders including Venture and, therefore, the  

Award is liable to be set aside on this ground in

21  

addition to those already taken. The Trial Court, by  

order dated 03.11.2009, allowed the application.   

37. Challenging the order, Satyam filed a revision  

before the High Court. By order dated 19.02.2010,  

the revision was allowed.  The application (IA  

No.1331/2009) filed by Venture stood dismissed.   

The High Court held that under Section 34 of the  

AAC Act, an application for setting aside of an  

Award could be filed only within 3 months  

(extendable by 30 days) from the date of the Award  

and a new ground of attack to the Award cannot be  

permitted after the expiry of the period of limitation.  

38. Venture carried the matter to this Court. This  

Court, by judgment dated 11.08.2010, in Venture  

Global Engineering vs. Satyam Computer  

Services Limited & Anr.  (2010) 8 SCC 660  

(hereinafter referred to as Venture II) allowed the  

appeal and restored the order of the Trial Court.  

22  

This Court held that the facts, which are sought to  

be brought on record by the Venture, are relevant  

for deciding the rights of the parties to O.P. No. 390  

of 2008.   It was also held that those facts have  

causative link with the facts, which constituted the  

lis of the Award or induced the making of the Award  

and, therefore, relevant and material for deciding  

the legality of the Award.   

39. In substance, this Court permitted Venture to  

challenge the Award on the ground that it was  

obtained by playing fraud/misrepresentation/  

suppression of material facts.   

40. It is apposite to quote Paras 44 to 46 of this  

Court’s judgment, which dealt with this issue:  

“44. This Court also holds that the facts  concealed must have a causative link. And if  the concealed facts, disclosed after the  passing of the award, have a causative link  with the facts constituting or inducing the  award, such facts are relevant in a setting- aside proceeding and award may be set aside  as affected or induced by fraud. The question  in this case is therefore one of relevance of

23  

the materials which the appellant wants to  bring on record by way of amendment in its  plea for setting aside the award.  

45. Whether the award will be set aside or not  is a different question and that has to be  decided by the appropriate court. In this  appeal, this Court is concerned only with the  question whether by allowing the  amendment, as prayed for by the appellant,  the Court will allow material facts to be  brought on record in the pending setting- aside proceeding. Judging the case from this  angle, this Court is of the opinion that in the  interest of justice and considering the  fairness of procedure, the Court should allow  the appellant to bring those materials on  record as those materials are not wholly  irrelevant or they may have a bearing on the  appellant’s plea for setting aside the award.  

46. Nothing said in this judgment will be  construed as even remotely expressing any  opinion on the legality of the award. That  question will be decided by the court where  the setting-aside proceeding is pending. The  proceeding for setting aside the award may  be disposed of as early as possible, preferably  within 4 months.”  

41. On 28.12.2010, Venture filed a complaint  

(suit) in U.S. District Court of Easter District of  

Michigan against Satyam alleging, inter alia, that  

the Award is vitiated by the fraudulent conduct of

24  

the former Chairman of Satyam, who suppressed  

the material facts in the arbitral proceedings.  In the  

complaint (suit), Venture alleged that Ramalinga  

Raju played fraud and misrepresentation on all  

stakeholders of Satyam including Venture and also  

on judicial process.  It, therefore, prayed that the  

Award in question be set aside on this ground.  

42. Satyam entered appearance in the aforesaid  

complaint/suit filed by Venture and opposed the  

complaint on several grounds.  By order dated  

30.03.2012, U.S. District Court dismissed the  

Venture’s complaint/suit.  On 10.04.2012, Venture  

filed an application in the complaint seeking  

permission to amend the complaint/suit.  The U.S.  

Court, by order dated 23.08.2012, dismissed the  

application.  On 21.09.2012, Venture filed an  

appeal to U.S. Court of appeal against the order  

dated 30.03.2012 rejecting their complaint/suit.  

25  

Venture also filed an appeal on 12.12.2012 to U.S.  

Court of appeal against the order dated 23.03.2012  

by which their amended application was rejected.    

43. On 13.09.2012, U.S. Court of appeal for the  

sixth Circuit allowed the appeal filed by Venture  

and set aside the order of the District Court  

dismissing the suit/complaint filed by Venture.  The  

suit/complaint is now remanded to the District  

Court.  It is pending.  

44. Coming back to the litigation pending in Indian  

Courts, consequent upon the judgment of this  

Court in Venture-II,  Satyam joined issues with  

Venture on the additional pleadings and contended  

that the facts pleaded have no causative links with  

Award.  Satyam also objected to admissibility of the  

documents filed by Venture.  The Trial Court heard  

the application filed by Venture under Section 34 of  

the AAC Act and by its final order dated 31.01.2012

26  

allowed the application and set aside the Award.  

The Trial Court held:   

(i) civil suit filed by Venture could be converted to be  

an application under Section 34 of the AAC Act and,  

accordingly, converted;   

(ii) the application filed by Venture under Section 34  

of the AAC Act is within the period of limitation;  

(iii) the Court to which the civil suit was transferred  

has jurisdiction to try and decide the application  

under Section 34 of the AAC Act;   

(iv) bankruptcy of the Venture’s affiliates constitutes  

an event of default as defined under Agreement-I;    

(v) the Award insofar as it directs the Venture to  

transfer their 50%  shares of  JVC to Satyam for  

book value violates the provisions of FEMA and is  

against public policy;   

(vi) the facts revealed by the statement made by  

Ramalinga Raju (Chairman of Satyam) constitute

27  

fraud and mis-representation played by Satyam on  

various stakeholders in Satyam including Venture;  

(vii) it has causative link with the facts which  

formed the basis of the Award.   

45. It is, therefore, held that the Award is not  

sustainable in law.  Sustaining such Award would  

be against public policy and the grounds mentioned  

above would cumulatively constitute ground for  

setting aside the Award under Section 34 of the AAC  

Act.  

46. Aggrieved by the said order, Satyam carried  

the matter in appeal to the High Court in CMA  

No.832/2012.  

47. After the aforesaid judgment, Venture filed  

another civil suit being O.S.No.87/2012 in the  

Court of Ist Additional Chief Judge, Secunderabad  

against Satyam seeking restitution of all their rights  

in JVC as a consequence of setting aside of the

28  

Award.  During the pendency of the suit, Venture  

also applied for grant of ex parte interim relief (IA  

No.1143/2012) in relation to transfer of shares of  

JVC and by another application being IA No.  

1360/2012 sought order restraining Satyam and  

JVC not to take any major decision in the affairs of  

JVC.  

48. By orders dated 27.04.2012 and 04.06.2012,  

both the applications were disposed of by the 1st  

Additional Chief Judge directing the parties to  

maintain status quo in relation to the subject matter  

of both the I.As.  

49. Satyam preferred two appeals against the said  

two orders – CMAs 834 and 844 of 2012.  The three  

appeals were clubbed together.  

50. By interim order dated 22.08.2012, the High  

Court directed all the parties to appeals to maintain  

status quo in relation to the affairs of JVC and also

29  

in relation to the rights of the shareholders of the  

said company and of Venture.   

51. By final order dated 23.08.2013, the High  

Court allowed the appeals filed by Satyam. The High  

Court, inter alia, held that:   

(i) the civil suit/application filed by Venture  

under Section 34 of the Act is maintainable  

and not hit by the decision of Bharat  

Aluminium Company vs. Kaiser Aluminium  

Technical Services Inc. (in short “Balco”),  

(2012) 9 SCC 552 for the reason that the  

agreements in question were executed between  

the parties prior to BALCO regime whereas the  

decision rendered in BALCO has a prospective  

effect;   

(ii) proceedings in question are governed by part I  

of the AAC Act;    

(iii) Civil suits/application under Section 34 of the

30  

AAC Act filed by Venture in Indian Courts are  

hit by the principle of  "issue estoppel" and are  

thus not maintainable in law;   

(iv) Venture had no right to invoke both Part I and  

Part II, i.e., Sections 34 and 48 because it is  

against the Scheme of the AAC Act;   

(v) a  case of fraud and misrepresentation set up  

by Venture in additional pleadings is not in  

accordance with law inasmuch as these  

allegations neither satisfies the requirements  

of law and nor were proved by oral or  

documentary evidence;   

(vi) the Award in question is not against the public  

policy;   

(vii) since the issues arising between the parties  

have attained finality in US Courts and hence  

now they cannot be reopened in Indian Courts  

by taking recourse to the provisions of the AAC

31  

Act; and  

(viii) since both the parties to the suit/application  

did not agree to treat the documents filed by  

them as proved and no evidence was adduced  

to prove them in accordance with law although  

the application under Section 34 of the AAC  

Act is required to be decided like a suit, the  

Trial Court did not follow the stipulated  

procedure while deciding the application.           

52. Aggrieved by the said judgment, both Venture  

and Satyam filed instant appeals by way of special  

leave petitions before this Court.   

53. Venture, in substance, seeks restoration of the  

order of the Trial Court, which had allowed their  

application under Section 34 of the AAC Act and  

had set aside the Award.  

54. Satyam’s challenge is confined only to the  

finding of the High Court that the Trial Court has

32  

jurisdiction to entertain and decide the application  

filed under Section 34 of the AAC Act.  

55. Heard Mr. K. K. Venugopal,  learned senior  

counsel for Venture Global Engineering LLC-

appellant in SLP(C) Nos.29747-49 of 2013 and  

respondent in S.L.P.(C) No.8298 of 2014, Mr. K.V.  

Vishwanathan, learned senior counsel for Tech  

Mahindra Ltd.-respondent No.1 in SLP(C)  

Nos.29747-49 of 2013 and appellant No.1 in  

S.L.P.(C) No.8298 of 2014  and Mr. Iqbal Chagla,  

learned senior counsel for Satyam Venture  

Engineering Services-respondent No.2 in SLP(C)  

Nos.29747-49 of 2013 and appellant No.2 in  

S.L.P.(C) No.8298 of 2014  and also perused the  

written submissions filed by the parties.  

56. Mr. K. K. Venugopal, learned senior counsel,  

appearing for the Venture while assailing the  

legality and correctness of the impugned judgment

33  

urged many-fold submissions as detailed  

hereinbelow and submitted that the impugned  

judgment is legally unsustainable inasmuch as it is  

based on wrong application of law which governs  

the issues whereas the order of the Trial Court  

which rightly allowed the application filed by the  

appellant under Section 34 of the AAC Act and set  

aside the award deserves to be restored.      

57. While elaborating his arguments, learned  

senior counsel submitted that firstly, the Award  

impugned in Section 34 proceedings out of which  

these appeals arise is vitiated on account of fraud,  

misrepresentation and suppression of material facts  

played by Mr. Raju in the affairs of Satyam.  

According to learned counsel, a ground of fraud  

which stands made out in this case squarely falls  

under Section 34 of the AAC Act and, therefore, the  

Award in question deserves to be set aside.

34  

58. In the second place, learned senior counsel  

submitted that it is not in dispute that Mr. Raju, in  

no uncertain terms, admitted in his letter dated  

07.01.2009 that he not only indulged in several  

fraudulent and illegal acts in the affairs of Satyam  

but also indulged in manipulating and fabricating  

the accounts and the balance-sheet of Satyam with  

a sole intention to secure illegal monetary gains.   

59. Learned senior counsel, therefore,  submitted  

that such fraudulent and illegal acts of Mr. Raju  

once surfaced in the public domain had a direct  

bearing over the issues involved in the arbitral  

proceedings because these acts relate to the period  

prior to commencement of arbitral proceedings and  

continued during the pendency of arbitral  

proceedings but without any knowledge to Venture  

and learned Arbitrator and hence the entire arbitral  

proceedings, which eventually culminated in

35  

passing of the impugned award in ignorance of  

these material major events connected with  

Venture, Satyam and their affiliates, stood vitiated  

on account of Mr. Raju’s activities.   

60. In other words, the submission was that, if the  

factum of the fraud, misrepresentation, suppression  

etc. had been disclosed or/and had come to the  

notice of the Arbitrator or/and Venture, it being the  

most relevant and material ground, the same could  

be made basis for seeking setting aside of the  

arbitral proceedings including the Award in  

question.  In any event, according to learned  

counsel, the arbitral proceedings would not have  

then resulted in passing of the Award in question in  

favour of Satyam, had these facts been taken into  

consideration?      

61. In the third place, learned senior counsel  

submitted that if the fraud/manipulation/

36  

misrepresentation/suppression of material facts had  

been disclosed to all the stakeholders including  

Venture when actually committed and, in all fairness,  

it ought to have been disclosed by Mr. Raju then it  

would have enabled Venture to terminate   

Agreement-I forthwith and claim appropriate reliefs  

against Satyam in terms of Agreement-I at that time  

itself.     

62. In the fourth place, learned senior counsel  

submitted that firstly, the fraud/misrepresentation  

/suppression played by Mr. Raju in the affairs of  

Satyam was prior in point of time as compared to  

the "event of default" by the Venture and secondly,  

the acts of Mr. Raju also constituted an "event of  

default" under Section 8.01(b) read with Section  

11.05 (c) for termination of Agreement-I and for  

claiming reliefs against Satyam as per Agreement-I.  

63. In the fifth place, learned senior counsel

37  

submitted that the confessional statement of Mr.   

Raju was a "notorious fact" and known to the whole  

world and especially known to those in market and,  

therefore, judicial notice of such fact could be taken  

by the Court for relying upon the letter including its  

contents against Satyam without any further  

evidence to prove it.  

64. In the sixth place, learned senior counsel  

submitted that it is a fundamental principle of law  

that any award/order/judgment passed in judicial  

proceedings once found to have been obtained by a  

party against his adversary by taking recourse to  

illegal means such as fraud, manipulation,  

misrepresentation, suppression of material facts etc.  

then the entire judicial proceedings including  

award/order/judgment passed therein is rendered  

void ab initio.  The reason is that  

fraud/manipulation/misrepresentation/suppression

38  

of material facts etc., if resorted to while prosecuting  

the judicial proceedings for obtaining the  

order/judgment/award, the same would result in  

vitiating such judicial proceedings.  

65. This legal principle, according to learned  

senior counsel, applies to the facts of this case with  

full force and, therefore, the fraud played,  

manipulation done and suppression of material  

facts made by Mr. Raju as its creator was rightly  

held proved by the Trial Court and was, therefore,  

rightly made basis to quash the Award in question  

on the ground of it being against the public policy of  

India.   

66. In the seventh place, learned senior counsel  

submitted that the acts of Mr. Raju attracted the  

rigor of Section 8.01(b) read with Section 11.05 (c)  

and since Section 11.05(c) has an overriding effect  

on all sections, as held by this Court in Venture-I, if

39  

these acts had been disclosed, it would have  

enabled the Venture to seek termination of  

Agreement-I under Sections 8.02 and 8.03 against  

Satyam.   

67. In other words, according to learned senior  

counsel, there was a causative link between the acts  

of Mr. Raju, which he did in the affairs of Satyam  

and the issues which were subject matter of arbitral  

proceedings.  It is for this reason, learned counsel  

urged that the acts of Mr. Raju constituted an  

"event of default" under Section 8.01 read with  

Sections 8.01(b) and 11.05(c).   Venture, according  

to him, was, therefore, deprived of exercising their  

right against Satyam to claim reliefs in terms of  

Agreement-I due to suppression of the acts by Mr.  

Raju from all stakeholders.  

68. In the eighth place, learned senior counsel  

submitted that Satyam committed another breach

40  

of Section 4.01 when it appointed Mr. Raju as one of  

the nominee Directors on the Board of JVC.  It was  

also an "event of default" under Section 8.01 read  

with Section 4.01, which entitled the Venture to  

terminate the Agreement-I and seek appropriate  

reliefs against Satyam.   

69. According to learned senior counsel, a person  

who indulged in such acts was not eligible for being  

nominated in the Board of JVC.   

70. In the ninth place, learned senior counsel  

submitted that the scope and width of Sections  

8.01(b) and 11.05 (c) is wide enough to include the  

acts of Mr. Raju which he did in affairs of Satyam  

and his acts were sufficient for terminating the  

Agreement-I and seek appropriate relief as provided  

in the Agreement-I.  

71. In the tenth place, learned senior counsel,  

placing reliance on the doctrine of "alter ego of the

41  

Company", contended that this doctrine applies to  

the facts of this case and, therefore, if the issues  

arising in the case are examined in the light of this  

doctrine, the Award impugned is liable to be set  

aside on this ground also.  

72. In the eleventh place, learned senior counsel  

contended that in order to decide the questions  

involved, it is not necessary to appreciate any  

evidence and the issues have to be decided only on  

the basis of material on record, which is not in  

dispute.  Learned counsel, therefore, urged that  

keeping in view these submissions, the Award is  

against the public policy of India as explained and  

clarified in Section 34(2)(b)(ii) Explanation I(i)(ii) and  

(iii) read with Explanation 2 of the AAC Act and  

hence it deserves to be set aside on this ground  

also.  

73. It is essentially these submissions and some

42  

more which are dealt with infra were elaborated by  

the learned counsel with the aid of relevant sections  

of Agreement-I and II together with decisions of this  

Court described as Venture I and Venture II  

rendered in the earlier round of litigation in this  

very case, relevant provisions of the AAC Act and  

decided cases cited at the Bar.  

74. In reply, learned counsel for the respondents  

supported the impugned order and contended that  

the appellant has failed to make out any case for  

interference by this Court in the impugned order  

inasmuch as none of the submissions urged by  

learned counsel for the appellant has any merit and  

deserve rejection for want of any factual foundation.  

75. Learned counsel further contended that firstly,  

the appellant’s submissions are based on sheer  

hypothesis with no factual foundation and hence  

cannot be made basis to set aside the arbitral

43  

proceedings and Award.  It was urged that  

otherwise also they are totally irrelevant and have  

no causative link in any manner with the arbitral  

proceedings and nor they have any kind of impact  

on the arbitral proceedings much less adverse and  

lastly, the acts of Mr. Raju were in relation to affairs  

of Satyam and hence had no significance while  

examining the legality and correctness of arbitral  

proceedings and Award under Section 34 of AAC  

Act.  It was also urged that there is no evidence to  

prove the alleged acts of Mr. Raju as being illegal in  

any manner. Learned counsel elaborated these  

submissions by placing reliance on relevant sections  

of Agreement -I and the decided case law.  

76. Having heard learned counsel for the parties  

and on perusal of the record of the case and the  

written submissions, I find force in the submissions  

urged by  Mr. K.K. Venugopal, learned senior

44  

counsel for the appellant (Venture).  

77. In substance, the questions, which arise for  

consideration in these appeals, are essentially three.   

In other words, the fate of these appeals largely  

depends upon the answers to the following  

questions as, in my view, these questions are  

interlinked together.  

78. First, whether the acts of Mr. Raju in the  

affairs of Satyam, as admitted by him in his letter  

dated 07.01.2009, amounts to misrepresentation/  

suppression of material facts and, if so, whether  

they could be made basis to seek quashing of an  

Award dated 03.04.2006 of the sole Arbitrator on  

the ground of it  being against the public policy of  

India under Section 34(2)(b)(ii) read with  

Explanation (1)(i)(ii) and (iii) of the AAC Act;  second,  

whether the acts of Mr. Raju, in the affairs of  

Satyam, has any causative link to the arbitral

45  

proceedings or/and to JVC affairs and, if so,  

whether such acts constitute an “event of default”  

under Section 8.01(b) read with Section 11.05(c)  

thereby entitling the Venture  to terminate the  

Agreement I and claim relief as contemplated in  

Sections 8.03 and 8.04 against Satyam; and third, if  

the aforesaid questions are answered in affirmative  

then whether they constitute a ground to enable the  

Court to set aside the Award under Section 34 of  

AAC Act.    

79. Before I examine the facts of this case to  

answer the aforementioned questions, it is  

necessary to take note of the law, which applies to  

the case on hand.  Indeed, if I may say so, it is fairly  

well settled by the several decisions of this Court.  

80. The expression "fraud" occurring in Section 34  

is not defined in the AAC Act but is defined in  

Section 17 of the Indian Contract Act,1872.  It reads

46  

as under:  

“17. ‘Fraud’ defined.—‘Fraud’ means and  includes any of the following acts committed  by a party to a contract, or with his  connivance, or by his agent, with intent to  deceive another party thereto or his agent, or  to induce him to enter into the contract:— —  (1) the suggestion, as a fact, of that which is  not true, by one who does not believe it to be  true;    (2) the active concealment of a fact by one  having knowledge or belief of the fact;    (3) a promise made without any intention of  performing it;    (4) any other act fitted to deceive;    (5) any such act or omission as the law  specially declares to be fraudulent.     Explanation.—Mere silence as to facts likely  to affect the willingness of a person to enter  into a contract is not fraud, unless the  circumstances of the case are such that,  regard being had to them, it is the duty of  the person keeping silence to speak, or  unless his silence, is, in itself, equivalent to  speech.”  

81. The expression "public policy of India" and  

what it includes is explained and clarified for  

avoiding any doubt in the Explanation I(i), (ii) and  

(iii) and Explanation 2 of Section 34(2)(b)(ii) of the

47  

AAC Act.  It reads as under:  

Section 34. Application for setting aside  arbitral award-  (1)…………………………………………………………    (2)  An arbitral award may be set aside by the  Court only if-    (a)…………………………………………………………    (b)  the Court finds that-    (i)………………………………………………………     (ii) the arbitral award is in conflict with the  public policy of  India.    Explanation 1.—For the avoidance of any  doubt, it is clarified that an award is in  conflict with the public policy of India, only  if,—    (i) the making of the award was induced  or affected by fraud or corruption or was in  violation of Section 75 or Section 81; or     (ii) it is in contravention with the  fundamental policy of Indian law; or    (iii) it is in conflict with the most basic  notions of morality or justice.     Explanation 2.—For the avoidance of doubt,  the test as to whether there is a  contravention with the fundamental policy of  Indian law shall not entail a review on the  merits of the dispute.”  

48  

82. The expression  "fraud", what it means and  

once proved to have been committed by the party to  

the Lis against his adversary then its effect on the  

judicial proceedings was succinctly explained by  

this Court in Ram Chandra Singh vs. Savitri Devi  

& Ors., (2003) 8 SCC 319 in the following words:   

“Fraud as is well known vitiates every solemn  act. Fraud and justice never dwell together.  Fraud is a conduct either by letter or words,  which induces the other person or authority  to take a definite determinative stand as a  response to the conduct of the former either  by word or letter. It is also well settled that  misrepresentation itself amounts to fraud.  Indeed, innocent misrepresentation may also  give reason to claim relief against fraud. A  fraudulent misrepresentation is called deceit  and consists in leading a man into damage by  willfully or recklessly causing him to believe  and act on falsehood. It is a fraud in law if a  party makes representations which he knows  to be false, and injury ensues therefrom  although the motive from which the  representations proceeded may not have  been bad. An act of fraud on court is always  viewed seriously. A collusion or conspiracy  with a view to deprive the rights of others in  relation to a property would render the  transaction void ab initio. Fraud and  deception are synonymous. Although in a  given case a deception may not amount to  fraud, fraud is anathema to all equitable  principles and any affair tainted with fraud

49  

cannot be perpetuated or saved by the  application of any equitable doctrine  including res judicata.”     

83. Similarly, how the leading authors have dealt  

with the expressions "fraud”, “misrepresentation”,  

“suppression of material facts” with reference to  

various English cases also need to be taken note of.   

This is what the learned author - “Kerr” in his book  

“Fraud and Mistake” has said on these  

expressions.  

84. While dealing with the question as to what  

constitutes fraud, the learned author said, “What  

amounts to fraud has been settled by the decision of  

House of Lords in Derry vs. Peek (f) where lord  

Herscheel said “fraud is proved when it is shown  

that a false representation has been made (1)  

knowingly or (2) without belief in its truth or (3)  

recklessly, careless whether it be true or false.” (See  

Kerr on Fraud and Mistake- Seventh Edition.

50  

Page 10/11).  

85. The author has said that, Courts of Equity  

have from a very early period had jurisdiction to set  

aside Awards on the ground of fraud, except where  

it is excluded by Statute.  So also, if the Award was  

obtained by fraud or concealment of material  

circumstances on the part of one of the parties so as  

to mislead the Arbitrator or if either party be guilty  

of fraudulent concealment of matters which he  

ought to have declared, or if he willfully mislead or  

deceive the Arbitrator, such Award may be set  

aside. (See - Kerr on Fraud and Mistake - Seventh  

Edition - pages 424, 425)   

86. The author said that,  if a man makes a  

representation in point of fact, whether by  

suppressing the truth or suggesting what is false,  

however innocent his motive may have been, he is  

equally responsible in a civil proceeding as if he had

51  

while committing these acts done so with a view to  

injure others or to benefit himself.  It matters not  

that there was no intention to cheat or injure the  

person to whom the statement was made. (See -  

Kerr on Fraud and Mistake – Seventh Edition,  

page 7)  

87. This rule of law is applicable not only between  

the two individuals entering into any contract but is  

also applicable between an individual and a  

company and also between the two companies.  

(See- Kerr on Fraud and Mistake – Seventh  

Edition, page 99).  

88. The author said that this principle is also not  

limited to cases where an express and distinct  

representation by words has been made, but it  

applies equally to cases where a man by his silence  

causes another to believe in the existence of a  

certain state of things, or so conducts himself as to

52  

induce a reasonable man to take the representation  

to be true, and to believe that it was meant that he  

should act upon it, and the other accordingly acts  

upon it and so alters his previous position. (See -  

Kerr on Fraud and Mistake – Seventh Edition,  

page 110).  

89. The author said that where there is a duty or  

obligation to speak, and a man in breach of that  

duty or obligation holds his tongue and does not  

speak and does not say the thing which he was  

bound to say, if that be done with the intention of  

inducing the other party to act upon the belief that  

the reason why he did not speak was because he  

had nothing to say, there is a fraud (See- Kerr on  

Fraud and Mistake-Seventh Edition, page 110).  

90. So far as expression "public policy of India" in  

the context of arbitration cases is concerned, this  

Court examined the meaning, scope and ambit of

53  

this expression for the first time in the case of  

Renusagar Power Co. Ltd. vs. General Electric  

Co., 1994 Suppl(1) SCC 644 in the context of   

Foreign Awards (Recognition & Enforcement) Act,  

1961.  It was then examined in the case of Oil &  

Natural Gas Corporation Ltd. vs. Saw Pipes Ltd.,  

(2003) 5 SCC 705[ONGC(I)] and then again in  

another case of Oil & Natural Gas Corporation  

Ltd. vs. Western Geco International Ltd., (2014) 9  

SCC 263[ONGC(II)]. It was recently examined in  

Associate Builders vs. Delhi Development  

Authority, (2015) 3 SCC 49 in the context of  

Section 34 of the Arbitration and Conciliation Act,  

1996.  

91. In between this period, this Court had also  

examined the expression in some cases.  However,  

in Associate Builders’s case (supra), this Court  

examined the expression in detail in the light of all

54  

previous decisions referred above on the subject.  

R.F. Nariman, J. speaking for the Bench held that  

the law laid down in the cases ONGC (I) and ONGC  

(II) has been consistently followed by this Court till  

date.  His Lordship further clarified the meaning of  

expression–“public policy of India” and what it  

includes therein and held that violation of the  

provisions of Foreign Exchange Act, disregarding  

orders of superior Courts in India and their binding  

effect, if disregarded, would be violative of the  

Fundamental Policy of Indian Laws.  It was,  

however, held that juristic principle of “judicial  

approach” demands that a decision be fair,  

reasonable and objective.   In other words, a  

decision which is wholly arbitrary and whimsical  

would not be termed as fair, reasonable or an  

objective determination of the questions involved in  

the case.  It was also held that observance of audi

55  

alteram partem principle is also a part of juristic  

principle which needs to be followed.  It was held  

that if the Award is against justice or morality, it is  

against public policy.  It was held that if there is a  

patent illegality noticed in the Award, it is also  

against public policy.  

92. Keeping in view the aforementioned broad  

principle of law in mind, I examine the questions in  

the light of undisputed facts of the case on hand  

and in the context of the submissions urged.  

93. It is apposite to take note of some more  

relevant sections of Agreement-I in addition to those  

quoted above.  In my view, these sections also have  

material bearing over the controversy involved as  

they show the true nature of Joint Venture  

Agreement. Instead of quoting these sections in  

verbatim, its reference alone may suffice.   

94. These relevant sections are, (1) Recitals in the

56  

Agreement, (2) Clause C of Recitals, (3) Section  

1.01(c) and (d), (4) Section 3.02-Place of business,  

(5) Section 4.01-Authority of Board; Election of  

Chairman, (6) Section 4.03-Board Meetings and  

related matters, (7) Section 4.06-Financial,  

Accounting and Tax Matters, (8) Section 5.06-

Capital, (9) Section 5.07-Relationship between the  

Shareholders and the Company, (10) Section 5.08-

Power of Board of Directors, (11) Section 6.03-

Ownership of Proprietary Information; Public  

Disclosures; Non-use of Proprietary and  

Confidential information, (12) Section 6.07-

Representation and Warranties, (13) Definitions of  

expressions – (a) Affiliate, (b) Company’s Act, and (c)  

Shareholder or Shareholders.   

95. Reading of Agreement-I as a whole and, in  

particular, in the context of the afore-noted sections  

of the Agreement would go to  show (1) the nature of

57  

the Joint Venture Agreement, (2) who are parties to  

the agreement and what are their inter se rights and  

obligations, and  (3) how and in what manner the  

JVC was to do business in India.   

96. Following features emerge from reading the  

Agreements:  

(i) First, the Joint Venture Agreement was  

between the "Satyam and its affiliates" on the one  

part and "Venture and its affiliates" on the other  

part. In other words, Agreement I and Agreement II  

were between the "Satyam" and "Venture" as also it  

included along with them their respective   

"affiliates"  (See-Recitals in Agreement I-which read  

-"hereinafter together with all its affiliates, referred to  

as "Satyam" and  "Venture” ).  

(ii) Second, Satyam and Venture were the only two  

shareholders of JVC each holding 50% equity share  

capital of JVC.

58  

(iii) Third, since JVC was formed to do its new  

business in India, it was made obligatory upon  

"Satyam and its affiliates", "Venture and its  

affiliates” and "JVC" to ensure compliance of all the  

Indian Laws in force.  In other words, all the  

stakeholders, who formed the “JVC", were under  

legal obligation to ensure strict compliance of all the  

Indian Laws (Acts/Rules/Regulations) not only in  

relation to business activities of “JVC” alone but  

also to ensure compliance of all the Indian laws in  

their respective business activities jointly and  

severally, namely, Satyam, Satyam’s affiliates,  

Venture and Venture’s affiliates.    

(iv) Fourth, Satyam to begin with was to provide  

all infrastructural facilities to JVC to enable it to  

start its new business in India.  

(v) Fifth, the Chairman of JVC was to be  

nominated by Satyam, who would have a right to

59  

preside over all Board of Directors’ meetings of JVC.  

(vi) Sixth, it was obligatory on JVC to maintain  

"true and correct" accounts of JVC by ensuring  

strict compliance of all Indian laws governing  

accounting and finances and to disclose to their  

major stakeholders the true picture of the JVC's  

financial status.  

97. It is not in dispute that the Agreements were  

entered into in the year 1999 whereas the business  

operations of JVC began in 2000. It is also not in  

dispute that in terms of Section 5.06(a) and (b),  

Satyam was to give loan in cash and provide all  

infrastructural facilities, Human Resources,  

Accounting, Networking facilities and legal advice to  

JVC.  It is also not in dispute that Satyam and  

Venture, on 20.10.1999, had prepared a financial  

plan pursuant thereto each one had contributed  

$US 300.000 and $US 60.000 per month to cover

60  

short falls in Bank loan of JVC. (page 176 of SLP  

paper book).  It is also not in dispute that in terms  

of the Agreements (Section 4.01/5.03), Mr. Raju was  

nominated as Chairman of JVC and he presided  

over all the Board of Directors meetings of JVC from  

2000 onwards in addition to presiding over of the  

Board meetings of Satyam being its Chairman.  

98. At this stage, it is apposite to reproduce in  

verbatim the most crucial document namely, a  

“confessional statement of Mr. Raju in the form of a  

letter dated 7th January, 2009 addressed to  

Satyam's Board of Directors".  It is this confessional  

statement, which turned the entire complexion of  

the case on hand.   

99. As mentioned above, this Court, in earlier  

round of litigation in two decisions, namely, Venture  

I and II, permitted the Venture to raise the  

additional plea in Section 34 proceedings to

61  

challenge the arbitral proceedings including the  

Award on the basis of Mr. Raju's confessional  

statement made on 07.01.2009.  It was held by this  

Court that such being a material fact which came  

into existence as a subsequent event had a direct  

bearing over the issues arising in the case, the  

legality and correctness of arbitral proceedings  

including the Award could, therefore, be tested in  

the light of this material subsequent event.  It was  

also held that since the case on hand relates to the  

period prior to Balco’s regime (supra), it would be  

governed by Bhatia (supra) regime and, in  

consequence, fall in Part I of the AAC Act.  It was  

held that, as a result, the legality of the Award,  

though foreign in nature, could still be decided  

under Section 34 of the AAC Act by the Indian  

Courts.  These findings attained finality being  

rendered inter se parties in this very case, are

62  

binding on the parties.  This is the reason, why the  

issues arising in this case are being decided in these  

proceedings.   

100. The letter dated 07.01.2009 reads as under:  

“To the Board of Directors  Satyam Computer Services Ltd.     From B. Ramalinga Raju  Chairman, Satyam Computer Services Ltd.    January 7, 2009    Dear Board Members,    It is with deep regret, and tremendous  burden that I am carrying on my conscience,  that I would like to bring the following facts  to your notice:    1. The Balance Sheet carries as of  September 30, 2008.    

a. Inflated (non-existent)cash and bank balances  of Rs.5,040 crore (as against Rs.5361 crore  reflected in the books)  

 b. An accrued interest of Rs.376 crore which is  

non-existent.     

c. An understated liability of Rs.1,230 crore on  account of funds arranged by me.   

 d. An over stated debtors position of Rs.490  

crore (as against Rs.2651 reflected in the  books)  

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2. For the September quarter (Q2) we reported a  revenue of Rs.2,700 crore and an operating  margin of Rs.649 crore (24% of revenues) as  against the actual revenues of Rs.2,112 crore  and an actual operating margin of Rs.61 crore  (3% of revenues). This has resulted in  artificial cash and bank balances going up by  Rs.583 crore in Q2 alone.     The gap in the balance Sheet has arisen  purely on account of inflated profits over a  period of last several years (limited only to  Satyam stand alone, books of subsidiaries  reflecting true performance). What started as  a marginal gap between actual operating  profit and the one reflected in the books of  accounts continued to grow over the years. It  has attained unmanageable proportions as  the size of company operations grew  significantly (annualized revenue run rate of  Rs.11,276 crore in the September quarter,  2008 and official reserves of Rs.8,392 crore).  The differential in the real profits and the  one reflected in the books was further  accentuated by the fact that the company  had to carry additional resources and assets  to justify higher level of operations – thereby  significantly increasing the costs.     Every attempt made to eliminate the gap  failed. As the promoters held a small  percentage of equity, the concern was that  poor performance would result in a take-over,  thereby exposing the gap. It was like riding a  tiger, not knowing how to get off without  being eaten.     The aborted Maytas acquisition deal was the  last attempt to fill the fictitious assets with  real ones. Maytas’ investors were convinced  that this is a good divestment opportunity

64  

and a strategic fit. Once Satyam’s problem  was solved, it was hoped that Maytas’  payments can be delayed. But that was not to  be. What followed in the last several days is  common knowledge.     I would like the Board to know:    

1. That neither myself, nor the Managing  Director (including our spouses) sold any  shares in the last eight years – excepting for  a small proportion declared and sold for  philanthropic purposes.   

 2. That in the last two years a net amount of  

Rs.1,230 crore was arranged to Satyam (not  reflected in the books of Satyam) to keep the  operations going by resorting to pledging all  the promoter shares and raising funds from  known sources by giving all kinds of  assurances (Statement enclosed, only to the  members of the board). Significant dividend  payments, acquisitions, capital expenditure  to provide for growth did not help matters.  Every attempt was made to keep the wheel  moving and to ensure prompt payment of  salaries to the associates. The last straw was  the selling of most of the pledged share by  the lenders on account of margin triggers.   

   3. That neither me, nor the Managing Director  

took even one rupee/dollar from the  company and have not benefited in financial  terms on account of the inflated results.   

 4. None of the board members, past or present,  

had any knowledge of the situation in which  the company is placed. Even business leaders  and senior executives in the company, such  as, Ram Mynampati, Subu D, T.R. Anand,

65  

Keshab Panda, Virender Agarwal, A.S.  Murthy, Hari T, SV Krishnan, Vijay Prasad,  Manish Mehta, Murali V, Sriram Papani, Kiran  Kavale, Joe Lagioia, Ravindra Penumetsa,  Jayaraman and Prabhakar Gupta are unaware  of the real situation as against the books of  accounts. None of my or Managing Director’s  immediate or extended family members has  any idea about these issues.     Having put these facts before you, I leave it  to the wisdom of the board to take the  matters forward. However, I am also taking  the liberty to recommend the following steps:     

1. A Task Force has been formed in the last few  days to address the situation arising out of  the failed Maytas acquisition attempt. This  consists of some of the most accomplished  leaders of Satyam: Subu D, T.R. Anand,  Keshab Panda and Virender Agarwal,  representing business functions, and A.S.  Murthy, Hari T and Murali V representing  support functions. I suggest that Ram  Mynampati be made the Chairman of this  Task Force to immediately address some of  the operational matters on hand. Ram can  also act as an interim CEO reporting to the  board.   

 2. Merrill Lynch can be entrusted with the task  

of quickly exploring some Merger  opportunities.   

   3. You may have a ‘restatement of accounts’  

prepared by the auditors in light of the facts  that I have placed before you.   

 I have promoted and have been associated  with Satyam for well over twenty years now. I

66  

have seen it grow from few people to 53,000  people, with 185 Fortune 500 companies as  customers and operations in 66 countries.  Satyam has established an excellent  leadership and competency base at all levels.  I sincerely apologize to all Satyamites and  stakeholders, who have made Satyam a  special organization, for the current  situation. I am confident they will stand by  the company in this hour of crisis.     In light of the above, I fervently appeal to the  board to hold together to take some  important steps. Mr. T.R. Prasad is well  placed to mobilize support from the  government at this crucial time. With the  hope that members of the Task Force and the  financial advisor, Merrill Lynch (now Bank of  America) will stand by the company at this  crucial hour, I am marking copies of this  statement to them as well.      Under the circumstances, I am tendering my  resignation as the chairman of Satyam and  shall continue in this position only till such  time the current board is expanded. My  continuance is just to ensure enhancement of  the board over the next several days or as  early as possible.     I am now prepared to subject myself to the  laws of the land and face consequences  thereof.   

(B.Ramalinga Raju)  

Copies marked to:  

1.Chairman SEBI  

2. Stock Exchanges”   (Emphasis supplied)”  

67  

101. It may here be mentioned that the aforesaid  

letter, its contents and signature of the author of  

the letter - Mr. Raju, were never in dispute and nor  

at any point of time anyone questioned it.  In other  

words, the existence of letter, its contents and  

signature of Mr. Raju on the letter were never  

doubted and nor its author (Mr. Raju) at any point  

of time retracted from his confessional statement  

made therein or denied having written such letter.   

102. In my opinion, therefore, the letter in question  

was rightly received in evidence without requiring  

any further formal proof to corroborate its existence  

and contents. That apart, it being a  "notorious fact”   

being in the knowledge of the whole World and  

especially those in the trade, the Courts could take  

judicial notice of such evidence as held by this  

Court in the case of Onkar Nath & Ors. Vs. Delhi  

Administration, (1977) 2 SCC 611.  It is

68  

appropriate to quote the words of the leaned Judge-

Justice Y.V.Chandrachud (as His Lordship then  

was), who speaking for the Bench held as under:  

“6. One of the points urged before us is  whether the courts below were justified in  taking judicial notice of the fact that on the  date when the appellants delivered their  speeches a railway strike was imminent and  that such a strike was in fact launched on  May 8, 1974. Section 56 of the Evidence Act  provides that no fact of which the Court will  take judicial notice need be proved. Section  57 enumerates facts of which the Court  “shall” take judicial notice and states that on  all matters of public history, literature,  science or art the Court may resort for its aid  to appropriate books or documents of  reference. The list of facts mentioned in  Section 57 of which the Court can take  judicial notice is not exhaustive and indeed  the purpose of the section is to provide that  the Court shall take judicial notice of certain  facts rather than exhaust the category of  facts of which the Court may in appropriate  cases take judicial notice. Recognition of  facts without formal proof is a matter of  expediency and no one has ever questioned  the need and wisdom of accepting the  existence of matters which are  unquestionably within public knowledge. (See  Taylor, 11th Edn., pp. 3-12; Wigmore, Section  2571, footnote; Stephen’s Digest, notes to  Article 58; Whitley Stokes’ Anglo-Indian  Codes, Vol. II, p. 887.) Shutting the judicial  eye to the existence of such facts and  matters is in a sense an insult to  commonsense and would tend to reduce the

69  

judicial process to a meaningless and  wasteful ritual. No court therefore insists on  formal proof, by evidence, of notorious facts  of history, past or present. The date of poll,  the passing away of a man of eminence and  events that have rocked the nation need no  proof and are judicially noticed. Judicial  notice, in such matters, takes the place of  proof and is of equal force. In fact, as a  means of establishing notorious and widely  known facts it is superior to formal means of  proof. Accordingly, the courts below were  justified in assuming, without formal  evidence, that the Railway strike was  imminent on May 5, 1974 and that a strike  paralysing the civic life of the Nation was  undertaken by a section of workers on May 8,  1974.”  

103. I apply the aforementioned principle of law to  

the facts of this case and hold that letter dated  

07.01.2006 of Mr. Raju did not require any more  

formal proof.  

104. On reading its contents, I am of the view that  

the acts of Mr. Raju, in the affairs of Satyam, were  

essentially in the nature of manipulating and  

fabricating the accounts books/balance-sheets of  

Satyam.  These acts were done by Mr. Raju without  

knowledge to all the stakeholders of Satyam

70  

including Venture.  These acts were detrimental to  

the interest of all the stakeholders who were/are  

directly and indirectly dealing and involved in the  

affairs of Satyam and its affiliates at all material  

times.   

105. In my opinion, it is a clear case where Mr. Raju  

suppressed the real facts relating to the affairs of  

Satyam from its stakeholders and, on the other  

hand, went on indulging in manipulating and  

fabricating the accounts books/balance-sheets of  

Satyam.    

106. Satyam, being a limited Company registered  

under the Indian Companies Act, 1956, was under  

legal obligation to ensure strict compliance of the  

Companies Act.   

107. Section 209 of the Companies Act deals with  

Books of Account of the Company.  Sub-section (3)  

thereof casts an obligation on the Company to keep

71  

"proper books of account" as are necessary to give a  

“true and fair view of the state of affairs of the  

Company” or its Branch office and explain its  

transactions.  

108. Similarly, Section 211 of the Act deals with  

“form and contents of balance-sheet and profit and  

loss account of the Company”.  This Section again  

casts an obligation on every Company that it shall  

give "true and fair view of the state of affairs of the  

company" at the end of the financial year.  Sub-

section(3B) provides that if the Company does not  

comply with the accounting standard prescribed  

then they have to disclose the reasons for not being  

able to do so.  Non-compliance of these provisions  

renders the Company to suffer penalty prescribed  

under Section 628 and other Sections of the Act.  

109. Keeping in view the requirements of Sections  

209 and 211, I am of the considered opinion that

72  

the acts of Mr. Raju, in the affairs of Satyam, were  

prima facie in breach of Sections 209 and 211 of  

1956 Act and other Acts.  It had adverse impact on  

the affairs of Satyam, its affiliates and on those who  

were dealing with Satyam at the relevant time.  

110. These acts also constituted the acts of  

misrepresentation and suppression of material facts  

on the part of Mr. Raju which he himself candidly  

confessed to have done it by expressing his regrets  

only in his letter dated 07.01.2009.  In my view, the  

principle of law quoted from “Kerr” above squarely  

applies to the facts of this case.  I, accordingly, hold  

so against Satyam.    

111. This takes me to examine the next question as  

to whether the acts of Mr. Raju, in the affairs of  

Satyam, amount to "event of default" under Sections  

8.01 and 11.05(c) of Agreement-I and, if so, its effect  

on the rights of the parties to the Agreement.  

73  

112. In my opinion, the acts of Mr. Raju amount to  

“event of default" under Section 8.01(b) and Section  

11.05(c) of Agreement-I for the following reasons:  

113. First, the acts satisfy the requirements of  

Section 8.01(b) read with Section 11.05 (c) of  

Agreement-I.  

114. Second, Section 11.05(c) which gives  

overriding effect on all Sections of Agreement I casts  

an obligation on “Shareholders” to ensure  

compliance of all laws of India.  The expressions  

“Shareholder” and “Shareholders” include  

“Venture”, “Satyam”, their affiliates and assigns.     

115. A fortorari, non-compliance of any provision(s)  

of any Act/Rules by any shareholder would,  

therefore, amount to "event of default" under  

Sections 8.01(b) and 11.05(c) of Agreement-I.  

116. Third, having regard to the nature of the  

Agreement, it is clear that  Section 11.05(c) applies

74  

to the affairs of JVC so also it  applies to the  

shareholders of JVC, viz., Satyam, Venture and  

their respective affiliates in the affairs of their  

respective business activities.  In my view, to  

confine the applicability of Section 11.05(c) only to  

the affairs of JVC would defeat the very purpose of  

Joint Venture Agreement.  It would also not be the  

true interpretation of Section 11.05(c) and nor was  

it intended by the parties.  

117. In this view of the matter, in my view, breach  

on the part of Satyam, who was 50% shareholder of  

JVC, was clearly made out under Agreement-I  

thereby entitling Venture to take recourse to the  

remedies provided in Sections 8.03 and 8.04 against  

Satyam on happening of such events.  

118. Fourth, the acts of Mr. Raju, in the affairs of  

Satyam, were not isolated but spread over in several  

years in past as is clear from his own statement

75  

(see -Para 2 of the letter) and were prior in point of  

time as compared to the breach committed by  

Venture.    

119. Fifth, the affairs of Satyam had a direct  

bearing over the rights of the parties to the  

Agreement and also on the affairs of JVC because  

Satyam and Venture were the only 2 shareholders of  

JVC each having 50% stakes therein; second,  

Satyam and its affiliates were also party to the  

Agreements with Venture and their affiliates; third,  

the entire capital including providing of the  loan  

facilities to JVC were to be funded by Satyam and  

Venture as per Agreement dated 20.10.1999  

whereas operative infrastructure was to be provided  

by Satyam; fourth, Mr. Raju was the Chairman of   

Satyam and JVC and, as such being in dual  

capacity, was in a position to control the affairs of  

both the Companies, i.e., Satyam and JVC; fifth and

76  

the most pertinently, the affairs of Satyam, Venture,  

JVC and their respective affiliates were so  

intrinsically connected with each other that any  

major event occurring in one Company would have  

had direct and indirect impact on the working of  

other group companies. Agreement-I, in my view,  

has to be construed accordingly while deciding the  

rights of all parties to the Agreement.  

120.  It could not be, therefore, contended that  

there was no causative link of any kind between  

these Companies inter se.  On the other hand,  

taking into consideration these admitted facts  

including the findings of this Court rendered earlier  

in Venture-I and II, I am clearly of the view that  

there existed causative link inter se these  

companies. To hold otherwise would be nullifying  

the findings of this Court recorded earlier in  

Venture-I and II.

77  

121. In the light of aforesaid reasons, any major  

event occurring in the affairs of Satyam could be  

made basis for determining the rights of the parties  

arising out Agreement I.  

122. A fortiori, the acts of Mr. Raju, in the affairs of  

Satyam, had also direct bearing over the claim filed  

by Satyam against Venture in arbitration  

proceedings in London Court of Arbitration in 2005  

because Satyam’s claim also arose out of Agreement  

I/II.  Had Mr. Raju brought his acts of Satyam to  

the notice of shareholders/Board of Directors of  

JVC in any Board meeting of JVC, Venture too  

would have been able to get first right to terminate  

Agreement-I under Section 8.01(b) read with Section  

11.05(c) and claim appropriate reliefs against  

Satyam because, as held above, Satyam breach was  

prior in point of time.   

123. In my opinion, Venture was, therefore,

78  

deprived of their legal and contractual rights to  

exercise against Satyam but for no fault of theirs.   

Venture also lost their right to defend Satyam’s  

claim before the Arbitrator on these grounds, which  

were deliberately suppressed by Satyam from  

Venture.  

124. Sixth, it is a well settled principle of law that  

commission of fraud, misrepresentation,  

suppression of material facts from the adversary in  

the judicial proceedings and the Court/Arbitrator  

result in vitiating the entire judicial/arbitral  

proceedings including judgment/order/award  

passed thereon once come to the knowledge of the  

party concerned.  On proving existence of  

commission of fraud, misrepresentation,  

suppression of material facts by the party concern,  

the judicial/arbitral proceedings are rendered illegal  

and void ab initio.  This principle applies to arbitral

79  

proceedings in question and to Award dated  

03.04.2006 and thus renders both void ab initio.  I  

accordingly hold so.    

125. Seventh, the Award dated 03.04.2006 is also  

against the public policy of India in the light of law  

laid down by this Court in the case of Associate  

builder’s case quoted supra,  It is, therefore, liable  

to be set aside for the reasons that it is proved that  

the Award was obtained by Satyam against Venture  

by misrepresentation and suppression of material  

facts having bearing over the proceedings; second,  

the acts of Mr. Raju, in the affairs of Satyam, as its  

Chairman violated several sections of IPC,  

Companies Act and FEMA; and third, the arbitral   

proceedings in question due to this reason, which  

came to knowledge to all stakeholders of Satyam  

including Venture subsequent to passing of the  

Award could not be said to have been held fairly or

80  

reasonably but were concluded to the detriment of  

the interest of  Venture causing them prejudice  

while defending their interest  before the learned  

Arbitrator.  It also deprived Venture from exercising  

their contractual right for want of knowledge of  

these acts of Mr. Raju against Satyam at  

appropriate stage in court of law in terms of  

agreement. All this occurred obviously due to  

Satyam concealing these major events at all relevant  

time from Venture.    

126. As taken note of above, once the fraud,  

misrepresentation or suppression of fact, if found to  

have been done by the party in any judicial  

proceedings is later discovered or disclosed then it  

would relate back to the date of its actual  

commission and would necessarily result in vitiating  

such judicial proceedings.  Such is the case here.  

127. The Award of an arbitral Tribunal can be set

81  

aside only on the grounds specified in Section 34 of  

the AAC Act and on no other ground.  The Court  

cannot act as an Appellate Court to examine the  

legality of Award nor it can examine the merits of  

claim by entering in factual arena like an Appellate  

Court.  It has to confine its enquiry only to the  

limited issue as to whether any ground specified in  

Section 34 of AAC Act is made out or not.  Once the  

ground under Section 34 of the AAC Act is made  

out, the Award then has to be set aside.  In the case  

on hand, in my view, a ground under Section  

34(2)(b)(ii) read with Explanation I (i)(ii) and (iii) is  

made out.  I accordingly hold so.  

128. In the light of  foregoing discussion,  I am of  

the opinion that the arbitral proceedings including  

the Award in question was passed in violation of  

public policy of India under Section 34(2)(b)(ii) read  

with Explanation 1(i), (ii) and (iii) of the AAC Act and

82  

thus not legally sustainable.  I accordingly hold so.   

129. This takes me to examine the next argument of  

learned senior counsel for the appellant that the  

High Court was not right in dismissing the  

appellant’s application by applying the principle of  

"issue-estoppel".  I find force in the appellant’s  

submission.   

130. This Court in the case of Masud Khan vs.  

State of Uttar Pradesh, (1974) 3 SCC 469 had the  

occasion to consider the question of applicability of  

principle of "issue-estoppel" to judicial proceedings.   

Their Lordships speaking through A. Alagiriswami,  

J. examined the facts of that case in the light of law  

laid down in several English and Indian cases and  

held that principle of "issue-estoppel" applies to  

criminal proceedings only and not to any other  

proceedings. This is what His Lordship held in para  

4 and in concluding para:

83  

“4. But that apart, this matter could be  decided on another point. The question of  issue-estoppel has been considered by this  Court in Pritam Singh v. State of Punjab, AIR  1956 SC 415,  Manipur Administration v.  Thokchom Bira Singh, AIR 1965 SC 87 and  Piara Singh v. Staff of Punjab,(1969) 1 SCC  379. Issue-estoppel arises only if the earlier  as well as the subsequent proceedings were  criminal prosecutions. In the present case  while the earlier one was a criminal  prosecution the present is merely an action  taken under the Foreigners (Internment)  Order for the purpose of deporting the  petitioner out of India. It is not a criminal  prosecution. The principle of issue-estoppel  is simply this: that where an issue of fact has  been tried by a competent court on a former  occasion and a finding has been reached in  favour of an accused, such a finding would  constitute an estoppel or res judicata against  the prosecution not as a bar to the trial and  conviction of the accused for a different or  distinct offence but as precluding the  reception of evidence to disturb that finding  of fact when the accused is tried  subsequently even for a different offence  which might be permitted by law. Pritam  Singh case was based on the decision of the  Privy Council is Sambasivam v. Public  Prosecutor, Federation of Malaya, (1950) AC  458. In that case Lord MacDermott speaking  for the Board said:  

“The effect of a verdict of  acquittal pronounced by a  competent court on a lawful  charge and after a lawful trial is  not completely stated by saying  that the person acquitted cannot  be tried again for the same

84  

offence. To that it must be added  that the verdict is binding and  conclusive in all subsequent  proceedings between the parties  to the adjudication.”  

It should be kept clearly in mind that the  proceeding referred to herein is a criminal  prosecution. The plea of issue-estoppel is not  the same as the plea of double jeopardy or  autrefois acquit. In King v. Wilkes, 77 CLR  511, Dixon, J., referring to the question of  issue-estoppel said:  

“...it appears to me that there is  nothing wrong in the view that  there is an issue-estoppel, if it  appears by record of itself or as  explained by proper evidence,  that the same point was  determined in favour of a prisoner  in a previous criminal trial which  is brought in issue on a second  criminal trial of the same prisoner  ... There must be a prior  proceeding determined against  the Crown necessarily involving  an issue which again arises in a  subsequent proceeding by the  Crown against the same prisoner.  The allegation of the Crown in the  subsequent proceeding must itself  be inconsistent with the acquittal  of the prisoner in the previous  proceeding. But if such a  condition of affairs arises I see no  reason why the ordinary rules of  issue-estoppel should not apply....  Issue-estoppel is concerned with  the judicial establishment of a  proposition of law or fact between

85  

parties. It depends upon well- known doctrines which control  the relitigation of issues which  are settled by prior litigation.”  

The emphasis here again would be seen to be  on the determination of criminal liability. In  Marz v. Queen, 96 CLR 62,  the High Court of  Australia said:  

“The Crown is as much precluded  by an estoppel by judgment in  criminal proceedings as is a  subject in civil proceedings... The  law which gives effect to issue- estoppel is not concerned with  the correctness or incorrectness  of the finding which amounts to  an estoppel, still less with the  process of reasoning by which the  finding was reached in fact ... It is  enough that an issue or issues  have been distinctly raised or  found. Once that is done, then, so  long as the finding stands, if there  be any subsequent litigation  between the same parties, no  allegations legally inconsistent  with the finding, may be made by  one of them against the other.”  

Here again it is to be remembered that the  principle applies to two criminal proceedings  and the proceeding with which we are now  concerned is not a criminal proceeding. We  therefore hold that there is no substance in  this contention.  

5. The petition is dismissed.”   

86  

131. Applying the aforesaid principle of law to the  

facts of the case, I find that the arbitral proceedings  

out of which these appeals arise are essentially in  

the nature of the civil proceedings and, therefore, in  

the light of law laid down in the case of Masud  

Khan(supra), the High Court was not right in  

applying the principle of "issue-estoppel" for  

dismissing the application filed by the appellant  

under Section 34 of the AAC Act.   

132. In other words, the application filed by the  

appellant under Section 34 of the AAC Act could not  

be dismissed by applying the principle of "issue-

estoppel", which in the light of law laid down in the  

case of Masud Khan (supra) had no application to  

the civil proceedings.  

133. Mr. Chagla and Mr. Vishwanathan, learned  

senior counsel for the respondents, apart from  

supporting the impugned judgment of the High

87  

Court made various submissions on the merits of  

the case as taken note of supra.  However, in the  

light of the detailed reasoning given supra, the  

submissions of learned counsel for the respondents  

do not survive. They need not be, therefore, dealt  

with separately again in detail.  

134. Yet, another submission of Mr. Vishwanathan  

in Satyam’s appeal that Satyam still has a right to  

raise the issues on merits in Section 34 proceedings  

in Trial Court has no substance in the light of what  

I have held above.  

135. In my view, the issues arising in the case must  

be given quietus in third round of litigation in this  

Court and which I hereby give to the case.  

Moreover, when the grounds urged by the appellant  

(Venture) to attack the Award are made out on  

merits in these proceedings and which were also  

dealt with by the two Courts below then I do not

88  

find any justification to again send the case back to  

the Trial Court to decide the case on merits on some  

other ground.  It is more so when such prayer was  

not made in the Courts below.  

136. That apart, there is enough material on record  

on which decision could be rendered on the merits  

of the case.  Indeed, it was so rendered by the Trial  

Court and the High Court though of reversal.   In  

the light of facts emerging from the record, it is not  

considered necessary to have another round of  

litigation for filing any additional material or to  

adduce any more evidence again before the Trial  

Court.  

137. Learned counsel for the appellant attacked the  

legality of the Award on other grounds also.  In the  

light of foregoing discussion, I do not consider it  

necessary to deal with any other grounds.   

138. Learned counsel for the appellant cited several

89  

decisions in support of his submission. These  

decisions are: 2008(4) SCC 190, 2010(8) SCC 660,  

2015(10) SCC 213, 2016(2) Scale 60, 2003(5) SCC  

705, 1997(3) SCC 540, 1993(2) SCC 507,1996(4)  

SCC 622, 1972 Appeal Cases 153, 2015(4) SCC  

609, 1995(2) SCC 513, 2010(8) SCC 665, 1994(1)  

SCC 1, 2000(3) SCC 581, 1964(4) SCR 19, 1974(1)  

SCC 242, 2003(8) SCC 673, 1955(2) SCR 271,  

1969(1) SCR 1006, 1977(2) SCC 611, 2010(8) SCC  

660, 1995(1) SCC 478, 2005(4) SCC 605, 2005(4)  

SCC 530, 2015(4) SCC 609, 2010(8) SCC 44,  

2011(1) SCC 74, 2009(10) SCC 259, 2016(4) SCC  

126 and 1955(1) SCR 206.   

139. Learned Counsel for the respondents cited  

several decisions in support of his submissions.  

These decisions are: 1966(3) SCC 527, 2010(4) SCC  

491, 1972 (2) SCR 646, 1968(3) SCR 1, 2012(8) SCC  

148, AIR 1971 SC 1949, 1972(4) SCC 562, 2013(10)

90  

SCC 758, 1966(3) SCR 283, 1996(4) SCC 622,  

2010(7) SCC 1, 1977(2) SCC 611, 1977(8) SCC 683,  

2003(11) SCC 405, 1996(6) SCC 665, 2005(4) SCC  

530, 2006(6) SCC 94, 2009(17) SCC 796, 1951 SCR  

548, 1998(4) SCC 577 and 1996(5) SCC 550.   

140. I have carefully gone through these decisions  

cited at the bar by both the learned counsel  

appearing for the parties.  In my view, there can be  

no quarrel to the legal principles laid down in these  

cases as they are laid down in the light of facts  

involved in them.  However, in the light of what I  

have held supra, it is not necessary to deal with  

each of these decisions in detail separately.    

141. I, however, consider it apposite to mention that  

I have considered the issue arising in arbitral  

proceedings in the context of AAC Act only and,  

have not expressed any opinion on any of the case  

relating to this case which are pending in various

91  

Courts in India including in foreign Courts against  

Satyam and its officials and vice versa.  All such  

pending cases will, accordingly, be decided in  

accordance with law.  

142. In view of foregoing discussion, the questions  

posed above are answered in affirmative and in  

favour of the appellant (Venture) and against the  

respondent(Satyam).  The appeals filed by Venture  

Global Engineering LLC thus succeed and are,  

accordingly, allowed with cost of Rs.5 lacs payable  

by Satyam to the appellant (Venture). Impugned  

judgment of the High Court is accordingly set aside  

and that of the judgment/order passed by the Trial  

Court is hereby restored.   

143. As a consequence, the application filed by the  

Venture (appellant herein) under Section 34 of the  

AAC Act, out of which these appeals arise, is  

allowed. As a result thereof, the entire arbitral  

92  

proceedings including the Award dated 03.04.2006  

passed by the sole Arbitrator is set aside as being  

against the public policy of India under Section  

34(b)(ii) read with Explanation I(i)(ii) and (iii) of the  

AAC Act.        

144. As a Consequence, the appeal filed by Tech  

Mahindra is dismissed.   

                                                 ...……..................................J.        [ABHAY MANOHAR SAPRE]   New Delhi;  November 01, 2017  

            1  

ITEM NO.1501               COURT NO.2               SECTION XII-A  

(For judgment)  

              S U P R E M E  C O U R T  O F  I N D I A  

                      RECORD OF PROCEEDINGS  

Petition(s) for Special Leave to Appeal (C)  No(s).29747-29749/2013  

VENTURE GLOBAL ENGINEERING LLC                     Petitioner(s)  

                               VERSUS  

TECH MAHINDRA LTD & ANR ETC.                       Respondent(s)  

WITH SLP(C) No. 8298/2014 (XII-A)  

Date : 01-11-2017 These petitions were called on for pronouncement  

         of judgment today.  

For Petitioner(s)/ Mr. K.V. Vishwanathan,Sr.Adv,  

Respondent(s) Mr. Abhijit Sinha,Adv.  

   Ms. Shally Bhasin,Adv.  

   Mr. Siddhant Boxy,Adv.  

                   Mr. E. C. Agrawala, AOR  

   Mr. Dhruv Mehta,Sr.Adv.  

   Mr. V.K. Misra,Adv.  

   Mr. Rajat Taimni,Adv.  

   Mr. Naval Sharma,Adv.  

   Mr. Saket Satapathy,Adv.

            2  

   Mrs. Shriye Luke,Adv.  

                   Mr. Devendra Singh, AOR  

   Mr. Abhijit Sinha,Adv.  

                   Mr. Abhinav Mukerji, AOR      

      Hon'ble Mr. Justice J. Chelameswar and Hon'ble Mr. Justice  

Abhay Manohar Sapre pronounced separate and dissenting judgments of  

the Bench comprising His Lordship and Hon'ble Mr. Justice Abhay  

Manohar Sapre, in these petitions.  

Leave granted in the SLPs.    In terms of common signed  

reportable order, the Registry is directed to place the papers  

before Hon'ble the Chief Justice of India for appropriate further  

course of action.  

Pending application(s), if any, stand disposed of.  

(OM PARKASH SHARMA)                             (MADHU NARULA)  

 AR CUM PS                                      BRANCH OFFICER  

(Two signed reportable judgments and the common order are placed on  

the file)