VENTURE GLOBAL ENGINEERING V. SATYAM COMPUTER SERVICES LTD.
Venture Global Engineering v. Satyam Computer Services Ltd. & Anr. 2008 (4) SCC 190
- Whether Indian courts can overturn a foreign arbitral ruling under the Arbitration and Conciliation Act of 1996?
- Whether Part I of the Arbitration and Conciliation Act, 1996, applicable when the arbitration seat is outside of India? Under Section 34, read with Section 9 of the Act, is the aggrieved party entitled to challenge a foreign award made outside India?
- Part I of the Arbitration and Conciliation Act of 1996 applies to all arbitrations, including international commercial arbitrations, unless the parties expressly or implicitly exclude all or all of its terms by agreement.
- Section 48(1)(e) of the Act, read together with Section 48(3) of the Act, states that an action to set aside a foreign award within the meaning of Section 44 of the Act must be brought before the competent authority of the country in which, or under the legislation of which, the award was issued.
- Venture Global Engineering, a US corporation, and Satyam Computer Services Limited, an Indian company, formed a joint venture to form Satyam Venture Engineering Services Ltd.
- A Shareholders Agreement (SHA) was also signed, which stated that conflicts between the parties should be resolved gently and, if not, should be referred to arbitration.
- Respondent No.1 claimed that the Appellant violated the SHA and exercised the option to buy the Appellant’s shares in Satyam Venture Engineering Services Ltd.
- Respondent No. 1 filed an arbitration request with the London Court of International Arbitration, which assigned an arbitrator.
- The arbitrator ordered Venture Global Engineering to transfer the shares to respondent No. 1.
- Respondent No.1 petitioned the United States District Court for the Eastern District of Michigan to recognize and enforce the award.
- The Appellant challenged the award’s execution, arguing it violated Indian laws. In India, the Appellant filed a suit to vacate the award and secured an injunction.
- Respondent No.1 appealed the injunction judgment, and the High Court suspended the injunction but barred the transfer of shares.
- Respondent No.1 also requested that the Appellant’s complaint be dismissed.
- It was held by the Court that unless expressly excluded by the parties, the requirements of Part I of the Arbitration and Conciliation Act, 1996, apply to all arbitrations, including international commercial arbitrations.
- In this situation, the Shareholders Agreement (SHA) included a non-obstante clause (Section 11.5(c)), which supersedes all other terms of the agreement, including the arbitration provision.
- As a result, the arbitration ruling must be enforced in India, as stated by the SHA’s Section 11.5(c), even though the contract’s governing law was Michigan law.
- It was held that Respondent No.1 breached the agreement by pursuing the execution of the award in the United States District Court rather than in India.
- As a result, both the injunction order and the High Court judgment were reversed.