Holding

The Court was split on whether the award should be set aside for fraud and public‑policy violations, and consequently referred the matter to the Chief Justice of India for a definitive ruling.

Summary

Venture Global Engineering (Venture) and Tech Mahindra (formerly Satyam) entered into a joint‑venture agreement under which each held 50% of a JV company. An arbitration under the London Court of International Arbitration awarded the shares of Venture to Satyam, finding Venture in default. After the award, the former Satyam chairman disclosed massive accounting fraud, which Venture argued vitiated the award. The trial court set aside the award on grounds of fraud, mis‑representation, suppression of material facts and violation of FEMA, but the High Court reversed that decision, holding the award was not contrary to public policy. The Supreme Court was divided: one bench held the award should be set aside, the other held it should stand, and the matter was referred to the Chief Justice for a final determination.

Issues considered

The award can be set aside under Section 34(2)(b)(ii) of the Arbitration and Conciliation Act on the ground of fraud, mis‑representation and suppression of material facts.
Whether the acts disclosed by the Satyam chairman constitute an "event of default" under the joint‑venture agreement and thus entitle Venture to terminate the agreement.
Whether the award violates the Foreign Exchange Management Act (FEMA) and is therefore against the public policy of India.
Whether the principle of issue‑estoppel applies to a Section 34 proceeding in a civil arbitration matter.
Whether Part I of the Arbitration and Conciliation Act applies to a foreign award made before the Balco decision.

Legislation cited

Arbitration and Conciliation Act, 1996s. 34(1), s. 34(2), s. 34(2)(a), s. 34(2)(b)(i), s. 34(2)(b)(ii)
Companies Act, 1956s. 209, s. 211, s. 628
Foreign Exchange Management Act, 1999
Indian Contract Act, 1872s. 17, s. 19

Subjects

ArbitrationSection 34FraudPublic policyForeign awardJoint ventureFEMAIssue estoppelEvent of defaultMisrepresentation

Judgment

[2017) 12 S.C.R. 259

VENTURE GLOBAL ENGINEERING LLC A
v.
TECH MAHINDRA LTD. & ANOTHER ETC.
(Civil Appeal Nos. 17753-17755 of2017)
NOVEMBER 01, 2017 B
[J. CHELAMESWAR AND ABHAY MANOHAR SAPRE, JJ.]
Arbitration and Conciliation Act, 1996 - s. 34 - Arbitral
award - Joint Venture between two companies for incorporating
Joint Venture Company wherein entire shareholding of JVC to be
held between two collaborating companies equally - In event of C
default, non-defaulting shareholder to purchase the defaulting
shareholders shares at book value - Appellant company declared
bankrupt - Jn vocation of arbitration clause -Award passed in favour
of non-defaulting company, directing the defaulting company to
transfer their 50% shares of JVC to non-defaulting company at D
book value - Rounds of litigation in US and Indian Courts -
Challenge to foreign arbitral award in India u/s. 34 - Subsequent
thereto, disclosure by chairman and founder of non-defaulting
company that balance sheet of the company had been manipuluted,
inflating the profit - Said additional facts brought on record -
Thereafter, as regards application by defaulting company u/s. 34, E
trial court set aside the award since it violates the provisions of
FEMA Act and is against the public policy - However, High Court
held that award is not against the public policy and restored the
award - Whether the award impugned in s. 34 proceedings is
vitiated on account of fraud, misrepresentation and suppression of F
material facts played by the chairman and founder of
non-defaulting company in the affairs of the company - Held: Per
Sapre, !.-Award was obtained by misrepresentation and
suppression of material facts having bearing over the proceedings,
thus, arbitral proceedings including the award being in violation
of public policy of India u!s. 34(2)(b)(ii) read with Explanation l(i), G
(ii) and (iii), not legally sustainable and set aside - Per Chelameswar,
I-Except mechanically repeating that the non-disclosure or
concealment of the material facts before the arbitrator is m1 act of
fraud, no discussion as to how the concealed facts are material
facts whose concealment resulted in inducing the making of the H
. 259
260 SUPREME COURT REPORTS [2017] 12 S.C.R.

A award by fraud or affected by fraud, thus, restoration of the award
upheld - In view of difference of opinion, matter referred to larger
Bench.
While directing the matter to be placed before the Hon'ble
the Chief .Justice of India, the Court
B HELD: Per Ab hay Manohar Sa pre, .J:
1.1 This Court, in earlier round of litigation in two decisions,
namely, Venture I and II, permitted the V company to raise the
additional plea in Section 34 of the Arbitration and Conciliation
Act, 1996 proceedings to challenge the arbitral proceedings
including the Award on the basis of 'R's confessional statement
c 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,
thus, be tested in the light of this material subsequent event. It
D was also held that since the case on hand relates to the period
prior to Balco's regime, it would be governed by Bhatia's regime
and, in consequence, fall in Part I of the 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 Act by the Indian Courts.
These findings attained finality being rendered inter se parties in
E this very case, are binding on the parties. [Para 99] [294-G-H;
295-A-B]
1.3 The existence of letter, its contents and signature of R
I
on the letter were never doubted and nor its author-'R' at any
point of time retracted from his confessional statement made
F therein or denied having written such letter. Therefore, the letter
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. The letter did not require any
G more formal proof. [Paras 101-103] [298-G-H; 299-A-B]
Onkar Nath & Ors. v. Delhi Administration (1977) 2
SCC 611 : [1977] 2 SCR 991 - relied on.
1.4 The acts of 'R' in the affairs of S Company were
essentially in the nature of manipulating and fabricating the
H accounts books/balance-sheets of S Company. These acts were
VENTURE GLOBAL ENGINEERING LLC v. TECH MAHINDRA 261
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done by 'R' without knowledge to all the stakeholders of S A
including V. These acts were detrimental to the interest of all the
stakeholders who were/are directly and indirectly dealing and
involved in the affairs of S and its affiliates at all material times. It
is a clear case where R suppressed the real facts relating to the
affairs of S from its stakeholders and, on the other hand, went on B
indulging in manipulating and fabricating the accounts books/
balance-sheets of S. [Paras 104-105] [300-C-E]
1.5 'S' being a limited Company registered under the
Companies Act, 1956, was under legal obligation to ensure strict
compliance of the Companies Act. Section 209 of the Companies
Act deals with Books of Account of the Company, sub-section (3) C
thereof casts an obligation on the Company to keep "proper books
of account" as are necessary to give a "true and fair view of the
state of afl'airs of tlle Company" or its Branch office and explain
its transactions. Section 211 of the Act deals with "form and
contents of balance-sheet and profit and loss account of the D
Company'', again casting an obligation on every Company that it
shall give "true andj'air view of the state of affairs of the company"
at the end of the financial year. Keeping in view the requirements
of Sections 209 and 211, the acts of 'R', in the affairs of S Company
were prima facie in breach of Sections 209 and 211 and other
Acts. It had adverse impact on the affairs of S, its affiliates and on E
those who were dealing with S at the relevant time. These acts
also constituted the acts of misrepresentation and suppression
of material facts on the part of 'R' which he himself candidly
confessed to have done it by expressing his regrets only in his
letter. It is held so against S. [Paras 108-110] [300-G-H; 301-A· F
CJ
1.6 The acts of 'R' amount to "event of default" under
Section 8.0l(b) and Section ll.05(c) of Agreement-I for the
following reasons:
(i) The acts satisfy the requirements of Section 8.0l(b) read G
with Section 11.05 (c) of Agreement-I.
(ii) 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 "V", "S", their
affiliates and assigns. A fortorari, non-compliance of any H
262 SUPREME COURT REPORTS [2017] 12 S.C.R.

A provision(s) of any Act/Rules by any shareholder would, thus,
amount to "event of default" u/s 8.0l(b) and 11.05(c) of
Agreement-I. [Para 113-115] [301-F-G]
(iii) Having regard to the nature of the Agreement, it is
clear that Section ll.05(c) applies to the affairs of JVC so also it
B applies to the shareholders of JVC, viz., S, V and their respective
affiliates in the affairs of their respective business activities. 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. In view thereof, breach on
C the part of S who was 50% shareholder of .JVC, was clearly made
out under Agreement-I thereby entitling V to take recourse to
the remedies provided in Sections 8.03 and 8.04 against S on
happening of such events. [Para 116-117] [301-H; 302-A-B]
(iv) The acts of R in the affairs of S were not isolated but
D spread over in several years in past as is clear from his own
statement and were prior in point of time as compared to the
breach committed by V. [Para 118] [302-C]
(v) The affairs of S had a direct bearing over the rights of
the parties to the Agreement and also on the affairs of JVC
E because S and V were the only 2 shareholders of JVC each having
50% stakes therein; S and its affiliates were also party to the
Agreements with V and their affiliates; the entire capital including
providing of the loan facilities to JVC were to be funded by S and
V as per Agreement whereas operative infrastructure was to be
F provided by S; 'R' was the Chairman of Sand JVC and, as such
being in dual capacity, was in a position to control the affairs of
both the Companies, i.e., S and JVC; the most pertinently, the
affairs of S, V, 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
G impact on the working of other group companies. Agreement-I,
has to be construed accordingly while deciding the rights of all
parties to the Agreement. Taking into consideration these
admitted facts including the findings of this Court rendered earlier
in Venture-I and II, there existed causative link inter se these
H companies. To hold otherwise would be nullifying the findings of
VENTURE GLOBAL ENGINEERING LLC v. TECH MAHINDRA 263
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this Court recorded earlier in Venture-I and II. Any major event A
occurring in the affairs of S could be made basis for determining
the rights of the parties arising out Agreement I. A fortiori, the
acts of 'R' in the affairs of S had also direct bearing over the
claim filed by S against V in arbitration proceedings in London
Court of Arbitration in 2005 because S's claim also arose out of
Agreement I/II. Had 'R' brought his acts of S to the notice of B
shareholders/Board of Directors of JVC in any Board meeting of
JVC, V too would have been able to get first right to terminate
Agreement-I under Section 8.0l(b) rw Section 11.0S(c) and claim
appropriate reliefs against S because, S's breach was prior in point
of time. V was, thus, deprived of their legal and contractual rights C
to exercise against S but for no fault of theirs. V also lost their
right to defend S claim before the Arbitrator on these grounds,
which were deliberately suppressed by S from V. [Para 119-123)
[302-D-H; 303-A-D]
(vi) Commission of fraud, misrepresentation, suppression D
of material facts from the adversary in the judicial proceedings
and the CourUArbitrator 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/ E
arbitral proceedings are rendered illegal and void ab initio. This
principle applies to arbitral proceedings in question and to Award
and thus, renders both void ab initio. [Para 124)(303-E-F]
(vii) The Award is also against the public policy of India in
the light of law laid down in Associate builder's case. It is, thus, F
liable-to be set aside since it is proved that the Award was obtained
by S against V by misrepresentation and suppression of material
facts having bearing over the proceedings; the acts of 'R' in the
affairs of 'S', as its Chairman violated several sections of IPC,
Companies Act and FEMA; and the arbitral proceedings due to
G
the reason, which came to knowledge to all stakeholders of S
including V subsequent to passing of the Award could not be said
to have been held fairly or reasonably but were concluded to the
detriment of the interest of V causing them prejudice while
defending their interest before the Arbitrator. It also deprived V
H
264 SUPREME COURT REPORTS [2017) 12 S.C.R.

A from exercising their contractual right for want of knowledge of
these acts of 'R' against Sat appropriate stage in court of Jaw in
terms of agreement. All this occurred due to S concealing these
major events at all relevant time from V. [Para 125] [303-G-H;
304-A-B]
B 1.7 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.
[Para 126] [304-C]
c 1.8 The award of an arbitral tribunal can be set aside only
on the grounds specified in Section 34 of the 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
D its enquiry only to the limited issue as to whether any ground
specified in Section 34 is made out or not, and once it is made
out, the award then has to be set aside. In the instant case, ground
u/s 34(2)(b )(ii) read with Explanation I (i)(ii) and (iii) is made out.
The arbitral proceedings including the award was passed in
violation of public policy of India under Section 34(2)(b)(ii) read
E with Explanation l(i), (ii) and (iii), thus, not legally sustainable.
[Para 127-128] [304-D-F]
1.9 The arbitral proceedings are essentially in the nature
of the civil proceedings and, therefore, in the light of law laid
down in Masud Khan's case that principle of 'issue-estoppel'
F applies to criminal proceedings only and not to any other
proceedings, the High Court was not right in applying the
principle of "issue-estoppel" for dismissing the application filed
by the appellant u/s. 34. [Para 132) [307-B-C]
1.10 The issues arising in the case must be given quietus
G in third round of litigation in this Court and which hereby is given.
Moreover, when the grounds urged by the appellant-V to attack
the Award are made out on merits in these proceedings and which
were also dealt with by the two courts below there is no justification
to again send the case back to the trial court to decide the case
on merits on some other ground, more so when such prayer was
H not made in the courts below. That apart, there is enough material
VENTURE GLOBAL ENGINEERING LLC v. TECH MAHINDRA 265
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on record on which decision could be rendered on the merits of A
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. [Para 135-136]
B
(307-E-G]
1.11 The questions are answered in favour of the appellant-
V and against the respondent-S. Impugned judgment of the High
Court is set aside and that of the trial court is restored. As a
consequence, the application filed by the V-appellant under
Section 34, is allowed. As a result thereof, the entire arbitral C
proceedings including the Award passed by the sole Arbitrator is
set aside as being against the public policy of India u/s. 34(b)(ii)
read with Explanation l(i)(ii) and (iii). [Para 142-143) [308-H; 309-
A-C]
Venture Global Engineering v. Satyam Computer D
Sen1ices Ltd. & Am:, (2008) 4 SCC 190 : [2008) 1 SCR
501 ; Bhatia International v. Bulk Trading S.A. & Afll:,
(2002) 4 SCC 105 : [2002] 2 SCR 411; Venture Global
Engineering v. Satyam Computer Services Limited &
Another (2010) 8 SCC 660 : [2010] 9 SCR 858 ; Bharat
Aluminium Co. v. Kaiser Aluminium Technical Services E
Inc., (2012) 9 SCC 552 : 2012 (12) SCR 327 ; Ram
Chandra Singh v. Savitri Devi.& Ors. (2003) 8 SCC
319 : [2003] 4 Suppl. SCR 543 ; Derry vs. Peek ;
Renusagar Power Co. Ltd. vs. General Electric Co.,
(1994) Suppl(l) SCC 644 : [1993) 3 Suppl. SCR 22 ; F
Oil & Natural Gas Corporation Ltd. v. Saw Pipes Ltd.,
[ONGC(l)] (2003) 5 sec 705 : (2003] 3 SCR 691; Oil
& Natural Gas Corporation Ltd. v. Western Geco
International Ltd. (2014) 9 SCC 263 [ONGC(II)] :
[2014] 12 SCR 1 ; Associate Builders v. Delhi
Development Authority (2015) 3 SCC 49 ; Onkar Nath G
& Ors. v. Delhi Administration, (1977) 2 SCC 611 :
[1977] 2 SCR 991 ; Masud Khan vs. State of Uttar
Pradesh, (1974) 3 SCC 469 : [1974) 1 SCR 793 -
referred to.
'Fraud and Mistake' by Kerr - Seventh Edn. H
266 SUPREME COURT REPORTS (2017] 12 S.C.R.

A Per Chelameswar J.:
1.1 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
B
of the "conflict with the public policy of India." The High Court
is right in reversing the judgment of the trial court though the
reasons are not very elegant and logical. [Paras 31-32) [322-A-
C]
1.2 Neither the text of the regulations nor the scheme of
c 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 V
D
Company. [Para 36) [323-E-F]
1.3 Assuming for the sake of argument that there is some
stipulation in the 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; what is meant by fair value of
the shares under FEMA; how that fair value is to be determined;
E whether the fair value of shares is the same as market value of
shares; what exactly is the fair vaiue 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. The trial court did not even refer to any pleading on
F the basis of which submission was made before it. [Para 37) [323-
G-H; 324-A-B]
1.4 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 of law relevant in the context for determining the
G 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. The conclusion recorded by the
trial court as regards the issue whether award can be said to be
opposed to public policy on the ground that the transfer of money
H for its implementation needs permission under FEMA, is
VENTURE GLOBAL ENGINEERING LLC v. TECH MAHINDRA 267
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without any basis in facts and without even identifying the A
provision of law with which the award is in conflict with. Hence,
the conclusion in this point cannot be sustained. 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
B
RBI and whether such permission is required to precede the
award etc. There is failure to identify any categorical conclusion
recorded by the trial court. Whether there are any pleadings call-
ing upon the court to examine those questions is also not indi-
cated in the judgment. [Paras 38-39] [324-C-E]
1.5 Section 34(2) of the Act declares that if making of an c
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 S and the non-disclosure of those facts by S before
the arbitrator would amount either to 'inducing' the making of
the award by fraud; or the award made in ignorance of those facts D
by virtue of non-disclosure of those facts by S would be an 'award
affected by fraud', would be the questions relevant for deciding
whether the award is required to be set aside. The Act does not
define the expression 'Fraud'. From the language of the
explanation to Section 34(2), what renders an award liable to be
set aside is that the making of the award must have been induced E
by fraud or the award is affected by fraud. Neither does the trial
court judgment identify the legal parameters for recording a
conclusion that the making of the award was induced by or fraud
or that the award is affected by fraud, nor does it explain how the
non-disclosure of the facts relating to the true financial status of F
S actually is an inducement for making of the award. Whereas the
trial court relied upon the observations made by this Court in
VENTURE-II. [Paras 42-44] [325-B-C; 326-D; 327-A-B]
1.6 The conclusion of the trial court that the various facts
brought on record by V-appellant borne by the disclosure G
statement of 'R' dated 7 .01.2009 and the subsequent
developments thereafter (Concealed facts) are 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
H
268 SUPREME COURT REPORTS [2017] 12 S.C.R.

A to the pleadings of 'V' as to how 'V' 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. The trial court does not give any reason
justifying the conclusion that the "Concealed facts" are material
B
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
c of the award by fraud or affected by fraud. [Para 45] [328-A-D]
1.7 This Court in Venture II only held that the concealed
facts of 'R' are relevant and, therefore, V-appellant must be
permitted to plead those facts. But this Court did not make any
declaration that such facts would constitute material facts
D 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 that "nothing said in the judgment would be construed
as even remotely expressing any opinion on the legality of the
E award." [Para 46] [328-E-F]
1.8 The High Court rightly disagreed with the conclusions
of the trial court and reversed the judgment of the trial court.
The High Court ought to have given more cogent reasons for
the disagreement. In the circumstances, the High Court rightly
F 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. [Para 47, 48]
[329-E-F]
1.9 If this Court agrees with the conclusion of the High
G Court that the AWARD is not liable to be set aside, the appeal of
S would become purely academic. Even otherwise, a reading of
the SLP discloses, all that S 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
H correctness of the decision of a Constitution Bench of this Court
VENTURE GLOBAL ENGINEERING LLC v. TECH MAHINDRA 269
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in BALCO's case and that such a course ought not to be permitted. A
[Para 49] [329-G-H]

Bhatia International v. Bulk Trading S.A. & Anr. (2002)
4 SCC 105 : [2002] 2 SCR 411 ; Bharat Aluminium
Company v. Kaiser Aluminium Technical Services Inc.,
(2012) 9 sec 552 (CB) : [2012] 12 SCR 327 ; Bharat B
Aluminium Co. v. Kaiser Aluminium Technical Services
Inc., [2012] 9 SCC 552 : [2012] 12 SCR 327 ; Venture
Global Engineering v. Satyam Computer Services Ltd.
& Anothe1; (2008) 4 SCC 190 : [2008] 1 SCR 501 ;
Venture Global Engineering v. Satyam Computer
Services Limited & Another, (2010) 8 SCC 660
c
("Venture-II") : [2010] 9 SCR 858 - referred to.
"KERR on the Law of Fraud and Mistake" 1952
(7'" Edn.) Sweet & Maxwell Limited - referred to.
D
Case Law Reference
In the .Judgment of Justice Sapre

[2008] 1 SCR 501 referred to Para 28
[2002] 2 SCR 411 referred to Para 28 E
[2010] 9 SCR 858 referred to Para 38
[2012] 12 SCR 327 referred to Para 51

[2003] 4 Suppl. SCR 543 referred to Para 82
F
[1993] 3 Suppl. SCR 22 referred to Para 89
[2003] 3 SCR 691 referred to Para 89
[2014] 12 SCR 1 referred to Para 90
(2015) 3 sec 49 referred to Para 90 G

[1977] 2 SCR 991 referred to Para 102
[1974] 1 SCR 793 referred to Para 130

H
270 SUPREME COURT REPORTS (2017] 12 S.C.R.

A In the .Judi:ment of .Justice Chelameswar
[2002] 2 SCR 411 referred to Para9
[2012] 12 SCR 327 referred to Para9
[2012] 12 SCR 327 referred to Para9
B [2008] 1 SCR 501 referred to Para 12
[2010] 9 SCR 858 referred to Para 17
CIVILAPPELLATE JURISDICTION: Civil Appeal Nos. 17753-
17755 of2017.
C From the final Judgment and Order dated 23.08.2013 of the
High Court of Andhra Pradesh at Hyderabad in CMANos.832, 834 and
864 of2012 respectively
WITH
Civil Appeal No.17756 of2017.
D
K.K. Venugopal, K.V. Vishwanathan, Sr. Advs, V.K. Misra, Rajat
Taimni, Naval Sharma, Saket Satapathy, Ms.Shriya Luke, Devendra Singh,
Ro hit Bhat, Vivek Reddy, Abhijeet Sinha, Ms.Shally Bhasin, Chaitnaya
Safaya, Ms.Shruti Garg, SiddhantBuky, Siddharth Naidu, E.C.Agrawala,
Advs for the appearing parties.
E
The following Judgments and Order of the Court were
delivered by
ABHAY MANOHAR SAPRE, .J. I. Special Leave Petition
(Civil) Nos.29747-29749 of 2013 are filed by the Venture Global
F Engineering LLC. Special Leave Petition (C) No.8298 of2014 is filed
by Tech Mahindra Ltd. Both of them are Bodies Corporate. They are
the plaintiff and the !st defendant respectively in O.S. No.87 of 2012 on
the file of the 1''Additional Chief Judge, City Civil Court, Secunderabad.
2. Leave granted.
G 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.
H
VENTURE GLOBAL ENGINEERING LLC v. TECH MAHINDRA 271
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4. By order dated 31.01.2012, O.P. No.390 of 2008 was allowed A
setting aside the Award.
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. B
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 C
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.
D
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
E
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
F
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 G
of JVC and 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.

H
272 SUPREME COURT REPORTS (2017] 12 S.C.R.

A (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
B
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.
c
(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.
D
(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 a Change in Control."
E
(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
F 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
G
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."
H
VENTURE GLOBAL ENGINEERING LLC v. TECH MAHINDRA 273
LTD. & ANOTHER ETC. [ABHAY MANOHAR SAPRE, J.]

(iv) Sections 8.03 and 8.04 stipulate the rights and obligations A
flowing from the occurrence of the "event of default". One of them is
that the noncdefaulting 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 B .
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 "Sol vent Shareholder"). The
c
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 D
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 E
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 F
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
G
the disagfeement 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 ~ith this Section 11.5 (a) shall be
a condition precedent to the commencement of any judicial
or other legal proceeding." H
274 SUPREME COURT REPORTS [2017] 12 S.C.R.

A (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
B resolved via negotiations shall be submitted for final, binding
arbitration to 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).
c (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
D 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 NC entered into another Agreement dated 11.02.2000, Agreement-
II called Non-Compete Agreement. Clause 5 of the Agreement provides
E that the Agreement shall be governed by and construed according to
laws of the State of 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
F 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
G
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."
H
VENTURE GLOBAL ENGINEERING LLC v. TECH MAHINDRA 275
LTD. & ANOTHER ETC. [ABHAY MANOHAR SAPRE, J.]

14. In September 2000, Satyam entered into an Agreement with A
another American Company called-TRW Automotive to provide
information technology to TRW. Satyam also entered into a "sub-
contract" 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 B
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. c
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.
18. The Arbitrator delivered his reasoned Award on 03.04.2006.
He rejected the claims of Venture and allowed the claims of Satyam. D
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. E
20. The relevant part of the operative portion of the Award reads
as under:
"A. I order VGE 1 to deliver to Satyam share certificates
in form suitable for immediate transfer to Satyam 2 or its
F
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 ownership
described in Section 6.lA above, I order Satyam to pay VGE G
US$622,656, such sum being the net difference between
the amount payable by Satyam to VGE for the book value
1
VGE = VENTURE
'Satyam = SATYAM
3 SVES=JVC H
•

276 SUPREME COURT REPORTS [2017] 12 S.C.R.

A 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.
B 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
c 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
D
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 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
E
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.
F 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 (0.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
G enforcing the 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.
H
VENTURE GLOBAL ENGINEERING LLC v. TECH MAHINDRA 277
LTD. & ANOTHER ETC. [ABHAY MANOHAR SAPRE, J.]

26. Aggrieved by the order dated 15.06.2006, Satyam filed Misc. A
Appeal No.519/2006 in the High Court ofAndhra 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 B
"the Code") praying for rejection of the plaint and dismissal of suit.
28. By order dated 28.12.2006, the Trial Judge 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. c
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: D
(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 E
Companies Act (Para 34);
(iii) That parties will have a right to challenge 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 l l.05(b) - (Para 39);
F
(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 G
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);
H
278 SUPREME COURT REPORTS (2017] 12 S.C.R.

A (vii) That Satyam should not have continued with the proceedings
filed in US Courts against 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 oflaw laid down in Bhatia International's
B 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
c 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 of the Award
D 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
E petitions against the order dated I 0.01.2008 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 Addi.
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
F
Hyderabad. The suit was then converted into an application under.Section
34 of the Act and was renumberyd as O.P. No. 390/2008.
35. On 07.01.2009, B. Ramalinga Raju-Chairman and founder of
the Satyam made a disclosure and confessed in writing that the balance
G sheets of Satyam had been manipulated inflating the rrofits to the tune
of Rs.7080 crores. Mis 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
H
VENTURE GLOBAL ENGINEERING LLC v. TECH MAHINDRA 279
LTD. & ANOTHER ETC. [ABHAY MANOHAR SAPRE, J.]

seeking permission to bring additional facts on record by amending the A
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 addition to those already taken. The Trial
B
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 apelication C
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
oflimitation.
38. Venture carried the matter to this Court. This Court, by judgment
dated 11.08.2010, in Venture Global Engineering vs. Satyam D
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. 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 E
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/ F
misrepreseritation/ 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 G
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 H
280 SUPREME COURT REPORTS [2017] 12 S.C.R.

A 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
B 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
c 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.
D 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
E Court of Easter District of Michigan against Sat yam alleging, inter alia,
that the Award is vitiated by the fraudulent conduct of 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
F 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
G
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. Venture also filed
an appeal on 12.12.2012 to U.S. Court of appeal against the order dated
H 23.03.2012 by which their amended application was rejected.
VENTURE GLOBAL ENGINEERING LLC v. TECH MAHINDRA 281
LTD. & ANOTHER ETC. [ABHAY MANOHAR SAPRE, J.]

43. On 13.09.2012, U.S. Court of appeal for the sixth Circuit A
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, ·satyamjoined B
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 oftheAAC Act and by
its final order dated 3 I .01.2012 allowed the application and set aside the
Award. The Trial Court held: C
(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 withiQ the period of limitation; D
(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;
E
(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 fraud and mis-representation played
F
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 G
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.
H
282 SUPREME COURT REPORTS [2017] 12 S.C.R.

A 47. After the aforesaid judgment, Venture filed another civil suit
being O.S.No.87/2012 in the Court of 1st Additional Chief Judge,
Secunderabad against Satyam seeking restitution of all their rights in
JVC as a consequence of setting aside of the 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 ofJVC and by
B
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 1"Additional Chief Judge directing
the parties to maintain status quo in relation to the subject matter of
C 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
D the parties to appeals to maintain status quo in relation to the affairs of
JVC and also 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:
E (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 "Daleo"), (2012) 9 SCC 552 for the
reason that the agreements in question were executed between
the parties prior to BALCO regime whereas the decision
F
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 oftheAACAct filed by
.Venture in Indian Courts are hit by the principle of "issue
G estoppel" ~nd 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;

H
VENTURE GLOBAL ENGINEERING LLC v. TECH MAHINDRA 283
LTD. & ANOTHER ETC. [ABHAY MANOHAR SAPRE, J.]

(v) a case of fraud and misrepresentation set up by Venture in A
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 B
in US Courts and hence now they cannot be reopened in Indian
Courts by taking recourse to the provisions of.the AAC 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 C
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 D
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.
E
54. Satyam 's challenge is confined only to the finding of the High
Court that the Trial Court has 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 of2013 and F
respondent in S.L.P.(C) No.8298 of2014, Mr. K.V. Vishwanathan, learned
senior counsel for Tech Mahindra Ltd.-respondent No. I in SLP(C)
Nos.29747-49 of2013 and appellant No. I in S.L.P.(C) No.8298 of2014
and Mr. Iqbal Chagla, learned senior counsel for Satyam Venture
Engineering Services-respondent No.2 in SLP(C) Nos.29747-49 of2013
and appellant No.2 in S.L.P.(C) No.8298 of2014 and also perused the ·G
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 urged many-fold submissions as detailed hereinbelow and
H
284 SUPREME COURT REPORTS [2017] 12 S.C.R.

A 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 ..
B 57. While elaborating· his arguments, learned senior counsel
submitted that firstly,the Award impugned in Section 34 proceedings. out
of which these appeals arise· i,s vitiated on account of fraud,
misrepresentation and suppression of material facts p1ayed 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
c AAC Act and, therefore, the Award in question deserves to be set aside.
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 .01.2909 that he not only indulged in several fraudulent and
illegal acts in the affairs of Satyam but also indulged in manipulating and
D 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
E 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 passing
of the impugned award in ignorance of these material major events
F 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
G
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?

H
VENTURE GLOBAL ENGINEERING LLC v. TECH MAHINDRA 285
LTD.. & ANOTHER ETC. [ABHAY MANOHAR SAPRE, J.]

61. In the third place, learned senior counsel submitted that if the A
fraud/.manipulation/ misrepresentation/suppression of material facts had
been disclosed to all the stakeholders including Ven~ure when actually
committed and, in all fairness, it ought to have been disclosed by Mr.
Raju· then it would have enabled Venture to t~rminate Agreement-I
forthwith and 'claim appropriate reliefs against Satyam in terms of
Agreement-I at that time itself. B
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 ~onstituted an
"event of default" under Section 8.01 (b) read with Section 11.05 (c) for C
tennination of Agreement-I and for claiming reliefs against Satyam as
per Agreement-I.
63. In the fifth place, learned senior counsel 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, D
judicial notice of such fact could be taken by the Court for relying upon
the Jetter 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 E
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/ F
misrepresentation/suppression of material facts etc., ifresorted to while
prosecuting the judicial proceedings for obtaining the order/judgment/
award, the same would result in vitiating suchjudicial 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, G
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 fTlade basis to quash the Award in question on the ground of it
being against the public policy oflndia.

H
286 SUPREME COURT REPORTS [2017] 12 S.C.R.

A 66. In the seventh place, learned senior counsel submitted that
the acts of Mr. Raju attracted the rigor of Section 8.0l(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 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.
B
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
c Sections 8.0l(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
D Satyam committed another breach 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.
E 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 8.0l(b) and 11.05 (c) is wide enough to
include the acts of Mr. Raju which he did in affairs of Satyam and his
F 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 Company", contended that this doctrine
applies to the facts of this case and, therefore, if the issues arising in the
G 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 011 the basis of
H
VENTURE GLOBAL ENGINEERING LLC v. TECH MAHINDRA 287
LTD. & ANOTHER ETC. [ABHAY MANOHAR SAPRE, J.]

material on record, which is not in dispute. Learned counsel, therefore, A
urged that k.eeping in view these submissions, the Award is against the
public policy oflndia as explained and clarified in Section 34(2){b)(ii)
Explanation I(i)(ii) and (iii) read with Explanation 2 of the AACAct and
hence it deserves to be set aside on this ground also.
73. It is essentially these submissions and some more which are B
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.
c
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.
D
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 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 E
Jess 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 F
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 counsel for G
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.
H
288 SUPREME COURT REPORTS [2017] 12 S.C.R.

A 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)
B
of the AAC Act; second, whether the acts of Mr. Raju, in the affairs of
Satyam, has any causative link to the arbitral proceedings or/and to JVC
affairs and, if so, whether such acts constitute an "event of default"
under Section 8.0l(b) read with Section 11.0S(c) thereby entitling the
Venture to tem1inate the Agreement I and claim relief as contemplated
c 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
D 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
E Act, 1872. It reads 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
F into the contract:- -
(I) 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;
G
(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.
H
VENTURE GLOBAL ENGINEERING LLC v. TECH MAHINDRA 289
LTD. & ANOTHER ETC. [ABHAY MANOHAR SAPRE, J.]

Explanation.~Mere silence as to facts likely to affect the A
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 B
is explained and clarified for avoiding any doubt in the Explanation l(i),
(ii) and (iii) and Explanation 2 of Section 34(2)(b)(ii) of the AAC Act. It
reads as under:
Section 34. Application for setting aside arbitral award-
(1) .................................................................. c
(2) An arbitral award may be set aside by the Court only if-
(a) ................................................................. .
(b) the Court finds that-
D
(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 E
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 F
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 G
whether there is a contravention with the fundamental policy
of Indian law shall not entail a review on the merits of the
dispute.".

H
290 SUPREME COURT REPORTS [2017] 12 S.C.R.

A 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 sec
319 in the following words:
B "Fraud as is well known vitiates every solemn act. Fraud
µnd 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
c 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
D 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
E 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 cannot be perpetuated or saved by the application
of any equitable doctrine including res judicata."
F 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.
G 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 (I) knowingly or (2) without belief in its truth or (3) recklessly,
careless whether it be true or false." (See Kerr on Fraud and Mistake-
H Seventh Edition. Page 10/11).
VENTURE GLOBAL ENGINEERING LLC v. TECH MAHINDRA 291
LTD. & ANOTHER ETC. [ABHAY MANOHAR SAPRE; J.]

85. The author has said that, Courts of Equity have from a very A
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
B
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
c
a civil proceeding as ifhe had 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) D
87. This rule oflaw 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 E
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 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 F
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 aduty 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 G
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). ·

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292 SUPREME COURT REPORTS (2017] 12 S.C.R.

A 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 this expression for the first time in the case of Renusagar
Power Co. Ltd. vs. General Electric Co., 1994 Suppl(!) SCC 644 in
the context of Foreign Awards (Recognition & Enforcement) Act, 1961.
It was then examined in the case of Oil & Natural Gas Corporation
B
Ltd. vs. Saw Pipes Ltd., (2003) 5 SCC 705[0NGC(I)] and then again
in another case of Oil & Natural Gas Corporation Ltd. vs. Western
Geco International Ltd., (2014) 9 SCC 263[0NGC(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
c Conciliation Act, 1996.
91. In between this period, this Court had also examined the
expression in some cases. However, in Associate Builders's ca~e
(supra), this Court examined the expression in detail in the light of all
previous decisions referred above on the subject. R.F. Nariman, J.
D 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 oflndia" 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
E 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
F also held that observance of audi 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.
G 92. Keeping in view the aforementioned broad principle oflaw 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
H also have material bearing over the controversy involved as they show
VENTURE GLOBAL ENGINEERING LLC v. TECH MAHINDRA 293
LTD. & ANOTHER ETC. [ABHAY MANOHAR SAPRE, J.]

the true nature of Joint Venture Agreement. Instead of quoting these A
sections in verbatim, its reference alone may suffice.
94. These relevant sections are, (1) Recitals in the Agreement,
(2) Clause C of Recitals, (3) Section 1.0l(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) B
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. ( ll) Section
6.03-0wnership of Proprietary Information; Public Di~dosures; Non-
use of Proprietary and Confidential information, (12) Section 6.07-
Representation and Warranties, (13) Definitions of expressions - (a) c
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 the Joint Venture Agreement, (2) who are parties to the
agreement and what are their inter se rights and obligations, and (3) D
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 E
other part. In other words, Agreement I and Agreement U 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" ).
F
(ii) Second, Satyam and Venture were the only two shareholders
of JVC each holding 50% equity share capital of JVC.
(iii) Third, since JVC was fonned 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
G
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. H
294 SUPREME COURT REPORTS [2017] 12 S.C.R.

A (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 preside over all Board of Directors' meetings
of JVC.
B (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 JV C's financial status.
97. It is not in dispute that the Agreements were entered into in
C · 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
D prepared a financial plan pursuant thereto each one had contributed $US
300.000 and $US 60.000 per month to cover 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 4.0115.03), 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
E '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 7'h January, 2009 addressed to Satyam s
Board of Directors". It is this confessional statement, which turned
F the entire complexion of the case on hand.
99. As mentioned above, this Court, in earlier round oflitigation in
two decisions, namely, Venture I and II, permitted the Venture to raise
the additional plea in Section 34 proceedings to challenge the arbitral
proceedings including the Award on the basis of Mr. Raju's confessional
G statement made on 07.01.2009. It was held by this Court that such
being a material fact which tame 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
H
VENTURE GLOBAL ENGINEERING LLC v. TECH MAHINDRA 295
. LTD. & ANOTHER ETC. [ABHAY MANOHAR SAPRE, J.]

(supra), it would be governed by Bhatia (supra) regime and, in A
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
binding on the parties. This is the reason, why the issues arising in this
B
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 c
Chairman, Satyam Computer Services Ltd.
·--1~

January 7, 2009
Dear Board Members,
It is with deep regret, and tremendous burden that I am D
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) E
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 F
Rs.2651 reflected in the books)
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 G
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
H
296 SUPREME COURT REPORTS [2017] 12 S.C.R.

A only to Satyam stand alone, books of subsidiaries reflecting
true performance). What started as a maq~inal 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
B
of Rs.11,276 crore in the September <1uarter, 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
c operations - thereby significantly increasfog 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
D 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
and a strategic fit. Once Satyam's problem was solved, it
E 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
F 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
G 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
H
VENTURE GLOBAL ENGINEERING LLC v. TECH MAHINDRA 297
LTD. & ANOTHER ETC. [ABHAY MANOHAR SAPRE, J.]

made to keep the wheel moving and to ensure prompt A
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 B
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, c
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 D
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:
E
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 F
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. G
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.
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298 SUPREME COURT REPORTS [2017] 12 S.C.R.

A I have promoted and have been associated with Satyam for
well over twenty years now. I 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
B
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
c 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.
D 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 entiim.cenl-i..~t ·of the :fioa.rd·. ~: _.
over the next several days or a~· fatly- as· possible. ' .: : ..
E I am now prepared to subject myself to the laws of the land
and face consequences thereof.
(B.Ramalinga Raju)
Copies marked fo:
F I.Chairman SEBI
2. Stock Exchanges" (Emphasis supplied)"

I 01. It may here be mentioned that the aforesaid letter,_ its contents
G and signature of the authorofthe 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.
H
VENTURE GLOBAL ENGINEERING LLC v. TECH MAHINDRA 299
LTD. & ANOTHER ETC. [ABHAY MANOHAR SAPRE, J.]

102. In my opinion, therefore, the letter in question was rightly A
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
B
Administration, ( 1977) 2 SCC 611. It is 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 c
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 D
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 E
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 c1uestioned the need and wisdom of accepting the
existence of matters which are unquestionably within public F
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 judicial process to a meaningless and G
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
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300 SUPREME COURT REPORTS [2017] 12 S.C.R.

A 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
B
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 letterdated 07.01.2006 of Mr. Raju did not require
any more formal proof.
c
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 including Venture. These acts were
D detrimental to the interest of all the stakeholders who were/are directly
and indirectly dealing and involved in the affairs ofSatyam 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,
E on the other hand, went on indulging in manipulating and fabricating the
accounts books/balance-sheets of Satyam.
l 06. Satyam, being a limited Company registered under the Indian
Companies Act, 1956, was under legal obligation to ensure strict
compliance of the Companies Act.
F
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 "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.
G
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
H
VENTURE GLOBAL ENGINEERING LLC v. TECH MAHINDRA 301
LTD. & ANOTHER ETC. [ABHAY MANOHAR SAPRE, J.]

does not comply with the accounting standard prescribed then they have A
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.
I 09. Keeping in view the requirements of Sections 209 and 211, I
am of the considered opinion that the acts of Mr. Raju, in the affairs of B
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 Satya1n, its
affiliates and on those who were dealing with Satyam at the relevant
time.
110. These acts also constituted the acts of misrepresentation c
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.
D
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 l 1.05(c) of Agreement-I and, if so, its effect on
the rights of the parties to the Agreement.
112. In my opinion, the acts of Mr. Raju amount to "event of E
default" under Section 8.0l(b) and Section l l.05(c) of Agreement-I for
the following reasons:
113. First, the acts satisfy the requirements of Section 8.0l(b)
read with Section 11.05 (c) of Agreement-I.
114. Second, Section l l .05(c) which gives overriding effect on all F
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. Afortorari, non-compliance of any provision(s) of any Actl
Rules by any shareholder would, therefore, amount to "event of default" G
under Sections 8.0l(b) and l l.05(c) of Agreement-I.
116. Third, having regard to the nature of the Agreement, it is
clear that Section I 1.05(c) applies to the affairs of JVC so also it applies
to the shareholders of JVC, viz., Satyam, Venture and their respective
H
302 ·SUPREME COURT REPORTS (2017] 12 S.C.R.

A 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. ·
B 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.

c 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 (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
D 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
E 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 the most pertinently, the affairs of Satyam, Venture,
JVC and their respective affiliates were so intrinsically connected with
F 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
G
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.
H
VENTURE GLOBAL ENGINEERING LLC v. TECH MAHINDRA · 303
LTD. &ANOTHER ETC. [ABHAY MANOHAR SAPRE, J.)

121. In the light of aforesaid reasons, any major event occurring A
in the affairs of Satyam could be made basis for determining the rights
of the parties arising out Agreement I.
122. Afortiori, the acts of Mr. Raju, in the affairs of Satyam, had
also direct bearing over the claim filed by Satyam agaipst Venture in
arbitration proceedings in London Court of Arbitration in 2005 beca11se B
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 8.0l(b) read with
Section 11.0S(c) and claim appropriate reliefs against Satyam because,
as held above, Satyam breach was prior in point of time.
c
123. In my opinion,.Venture was, therefore, deprived of their legal
and contrac.tual 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. D

124. Sixth, it is a well settled principle oflaw 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 includingjudgment/order/award passed
thereon once come to the knowledge of the party concerned. On proving E
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
proceedings in question and to Award dat.ed 03.04.2006 and thus renders
both void ab initio. I accordingly hold so. F
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 G
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
H
304 SUPREME COURT REPORTS [2017] 12 S.C.R.

A not be said to have been held fairly or 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
B
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
c vitiating such judicial proceedings. Such is the case here.
127. The Award of an arbitral Tribunal can be set 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
D 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
E 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 wits passed in
violation of public policy oflndia under Section 34(2)(b)(ii) read with
Explanation 1(i), (ii) and (iii) of the AAC Act and thus not legally
F sustainable. I accordingly hold so.
129. This takes me to examine the next argument oflearned 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.
G 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
H cases and held that principle of "issue-estoppel" applies to criminal
VENTURE GLOBAL ENGINEERING LLC v. TECH MAHINDRA 305
LTD. & ANOTHER ETC. [ABHAY MANOHAR SAPRE, J.]

proceedings only and not to any other proceedings. This is what His A
Lordship held in para 4 and in concluding para:
"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 Pu11jab, AIR 1956
SC 415, Manipur Administration v. Tliokchom Bira Singh, B
AIR 1965 SC 87 and Piara Singh v. Staff of Pimjab,(1969) 1
sec 379. lssue-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 C
deporting the petitioner out of India. It is not !I 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 D
. 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 Si11gh case was based on the E
decision of the Privy Council is Sambasivq.m 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 F
trial is not completely stated by saying that the person
acquitted cannot be tried again for the same offence. To
that it must be added that the verdict is binding and
conclusive in all subsequent proceedings between the
parties to the adjudication." G
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 Ki11g v. Wilkes, 77 CLR 511,
Dixon, J., referring to the question of issue-estoppel said: H
306 SUPREME COURT REPORTS [2017] 12 S.C.R.

A " ...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
B
be a prior proceeding determined against the Crown
necessarily involving an issue which again arises in a
subse<1uent proceeding by the Crown against the same
prisoner. The allegation of the Crown in the subsequent
proceeding must itself be inconsistent with the acquittal
c 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 parties. It depends
upon well-known doctrines which control the relitigation
D
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:
E "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
F 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
G 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.
H S. The petition is dismissed."
VENTURE GLOBAL ENGINEERING LLC v. TECH MAHINDRA 307
LTD. & ANOTHER ETC. [ABHAY MANOHAR SAPRE, J.]

131. Applying the aforesaid principle of law to the facts of the A
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
B
AAC Act.
132. In other words, the application filed by the appellant under
Section 34 oftheAACAct 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.
c
133. Mr. Chagla and Mr. Vishwanathan, learned senior counsel
for the respondents, apart from supporting the impugned judgment of
the High 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 D
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. E

135. In my view, the issues arising in the case must be given
quietus in third round oflitigation 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 find F
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 G
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.
H
308 SUPREME COURT REPORTS [2017] 12 S.C.R.

A 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 decisions in
support of his submission. These decisions are: 2008(4) sec 190, 2010(8)
B sec 660, 2015(10) sec 213, 2016(2) Scale 60, 2003(5) sec 705, 1997(3)
sec 540, 1993(2) sec 507,1996(4) sec 622, 1972Appeal Cases 153,
2015(4) sec 609, 1995(2) sec 513, 2010(8) sec 665, 1994(1) sec 1,
2000(3) sec 581, 1964(4) scR 19, 1974(1) sec 242, 2003(8) sec
673, 1955(2) SCR 271, 1969(1) SCR 1006, 1977(2) sec 611, 2010(8)
c SCC660, 1995(1) SCC478,2005(4) SCC605,2005(4) sec 530,2015(4)
sec 609, 2010(8) sec 44, 2011(1) sec 74, 2009(10) sec 259, 2016(4)
sec 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)SCC491, 1972(2)SCR646, 1968(3)SCR l,2012(8)SCC 148,
D AIR 1971SC1949, 1972(4)SCC562,2013(10)SCC758, 1966(3)SCR
283, 1996(4) sec 622, 2010(7) sec 1, 1977(2) sec 611, 1977(8) sec
683, 200301 >sec 405, 1996(6) sec 665, 2005(4) sec 530, 2006(6)
sec 94, 2009(17) sec 796, 1951 scR 548, t998(4) sec 577 and
1996(5) sec 550.
E 140. I have carefully gone through thes·e 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
F 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 Courts in India including in
G 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
H Engineering LLC thus succeed and are, accordingly, allowed with cost
VENTURE GLOBAL ENGINEERING LLC v. TECH .MAHINDRA 309
LTD. & ANOTHER ETC.

of Rs.5 lacs payable by Satyam to the appellant (Venture). Impugned A
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 B
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) oftheAACAct.
144. As a Consequence, the appeal filed by Tech Mahindra is
dismissed. C
. CHELAMESWAR, J. I. 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 whether the
proceedings initiated by VENTURE in OP No. 390 of 2008 are barred D
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 E
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. F
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 ev.idencing
all ofVGE's ownership interest legal and/or beneficial in SVES. I
further order it to do all that may otherwise be necessary to effect G
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 20'h October, 1999 (Agreement I) entered
into between VENTURE and SATYAM.
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310 SUPREME COURT REPORTS (2017] 12 S.C.R.

A 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
B 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
C 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
D 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
E. 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
Defaultiri·g Shareholder's Shares at book value and repay.
Shareholder's loan, or (b) cause the immediate dissoluti.on and
F liquidation of the COMPANY in accordance with Article IX.
Either of such options must be exercised by the Non-Qefaulting
Shareholder by written notice to the Defaulting Shareholder within
thirty (30) days after becoming aware of the subject Event of .
Default.
G Section 8.03 Rights Upon Bankruptcy Event
Upon the occurrence ofa Bankruptcy Event with respect to any
Shareholder (the "Bankrupt Shareholder"), such shareholder shall
glve immediate written notice to the other Shareholder (the
"Solvent Shareholder"). The Solvent Shareholder shall have
H
VENTURE GLOBAL ENGINEERING LLC v. TECH MAHINDRA 311
LTD. & ANOTHER ETC. [CHELAMESWAR, J.]

the option of (a) purchasing the Shares held by the Bankruptcy A
Shareholder at book value and repay such Shareholder's loans or
(b) causing the immediate dissolution ofliquidation 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 B
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 remed.ies available at law or in equity." c
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 · D
Michigan, US seeking enforcement of the AWARD against VENTURE.
Admittedly, the petition was allowed on 31'' 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 6'h Circuit, US Appellate Court in Michigan. E
8. I assume for the purpose of these appeals that the directions of
the Eastern District Court of Michigan dated 31" 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 F
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. }f
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 G
· 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 H
312 SUPREME COURT REPORTS [2017] 12 S.C.R.

A under Chapters I or II of Part II of the Arbitration and Conciliation Act,
1996 (hereaftet "the ACT") or not, in view of the judgments of this
Court in Bhatia's ease 1 and BALCO's ease2 , 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 •
B "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.
I 0. The only way VENTURE could avoid the enforcement of the
c 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
D any jurisdiction. On the other hand, VENTURE initiated proceedings
on J3 1hApril, 2006 before the District Court for the Northern District of
Illinois Eastern Division, 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 25 1hApril, 2006.
E
11. Thereafter, VENTURE filed OS No. 80 of2006 on 28'hApril,
2006 before the !st Additional Chief Judge, City Civil Court, Secunderabad
seeking mainly two reliefs:
i. a declaration that the Award was illegal and without jurisdiction;
. and
F
ii. a permanent injunction restraining Satyam from enforcing the
Award.

I Bhatia International vs. Bulk Trading S.A. & Am:, (2002) 4 sec 105
2 Bharat Aluminium Company vs. Kaiser Aluminium Technical Services Inc.,

G (2012) 9 sec 552 (CB)
3
6'" September 2012
4
Section 36. Enforcement.-( I )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
H Court.
VENTURE GLOBAL ENGINEERING LLC v. TECH MAHINDRA 313
LTD. & ANOTHER ETC. [CHELAMESWAR, J.]

12. This Court had an occasion to examine the maintainability of A
the said suit in an appeal arising out of certain interlocutory proceedings
(detailed in the judgment of tny 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 B
to challenge the AWARD in India.
13. Consequent upon the judgment in VENTURE~!. the Ist
Additional Chief Judge, City Civil Court, Secunderabad transferred O.S.
No. 80 of 2006 to the Court of 2•d Additional Chief Judge City Civil
Court at Hyderabad. The suit was converted into an applic<1tion under C
Section 34 of the ACT and was renumbered O.P. No. 390 of2008. · The
Suit/0.P. as originally filed was based on certain groul)ds other than the
grounds on which the 0.P. eventually came to be allowed.
14. On the 7'h of January 2009, Ramalinga Raju, the Chairman
and founder of SATYAM made a statement in writing 5 wherein he made .
certain admissions to the effect that the balance sheets of SATYAM D
had been manipulated to inflate profits to the tune ·of Rs. 7080 crores.
15. VENTURE filed an application 6 under Order VIII Rule 9 of
the CPC seeking permission to plead additional facts by amending the
pleadings in O.P. No. 390 of2008. VENTURE contended that the facts
disclosed by Ramalinga Raju and the subsequent developments "are E
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;
F
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."
G
The Trial Court, by an order dated the 3n1 of November, 2009
allowed the application.

'Letter addressed to the Board of Directors of SATYAM
6
IA No. 1331 of 2009 dated 12.06.2009 in O.P. No. 390 of 2008 H
314 SUPREME COURT REPORTS [2017) 12 S.C.R.

A 16. SATYAM challenged the order dated 3ni November, 2009 in a
revision petition before the High Court. By an order dated the 19'h 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)
B
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.
17. VENTURE appealed to this Court. This Court, by judgment
of the 11th of August, 20107 , allowed the appeal and restored the order
c 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
D 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
E 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
F 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 stibsequently. Such a
G construction would defeat the principle of due process and would
be opposed to the concept of public policy incorporated in the
explanation.''

7
Venture Global Engineering v. Satyam Computer Services Limitpd & Another. (2010)
8 SCC 660 ("Venture-II")
H
VENTURE GLOBAL ENGINEERING LLC v. TECH MAHINDRA 315
LTD. & ANOTHER ETC. [CHELAMESWAR, J.]

18. Thereafter, OP No. 390 of 2008 was heard and allowed by A
the trial Court by its Order dated 31.01.2012. The AWARD was set
aside.
19. The trial court framed as many as 8 points for consideration,
and they read:
"(I) Whether the proceeding as it stands now before this Court is B
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 c
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 D
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 I" respondent at the book value is
violation of Foreign Exchange Management Act and also a violation
E
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
F
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 G
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? H
316 SUPREME COURT REPORTS [2017] 12 S.C.R.

A 9. To what relief?
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
B 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 cif the Act is
c 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
D nqted that when this finding was recorded by the Arbiiral 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 ifonly
E 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 1" 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
F 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
I" Respondent@ book value is in violation to FEMA and Public
Policy of India. Under points numbers 6 and 7, it is held that the
G 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."
H
VENTURE GLOBAL ENGINEERING LLC v. TECH MAHINDRA 317
LTD. & ANOTHER ETC. [CHELAMESWAR, J.]

21. In substance, the trial court held all the points in favour of A
VENTURE except Point No.4 and concluded that the AWARD is
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 ofThe Foreign Exchange Management Act, 1999
(hereafter referred to as "FEMA") and therefore violation of public
B
policy 8 , (ii) The AWARD is unsustainable because of the financial
irregularities and the manipulation of the accounts ofSATYAM. 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 oflndia.
22. Whether the above conclusions are tenable? was the question
before the High Court. c
The High Court framed 8 points for consideration in the judgment
under appeal.
"1) Whether the institution of the proceedings by the 1" respondent
in the Indian Courts to enforce a foreign award can be justified in D
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 E
Part-I as well as Part-II of the Arbitration Act in relation to a
foreign award?

'(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 F
for transfer of petitioner's shares to the t• Respondent at book value is a violation of
Foreign Exchange Management Act and violation of public policy.

• ... .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 I and 2 holding
that the Award is vitiated by irregularities in the financial statements.of I" Respondent
as set out in additional pleadings and that the Petitioner was under an incapacity on G
account of the acts of fraud committed by the I" 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 oflndia 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.
H
318 SUPREME COURT REPORTS [2017j 12 S.C.R.

·-·
A 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,
B 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
c
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.
D
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
E
to mention that the trial Court did not record any finding to the
effect that fraud has been proved by the I" 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
F 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
G
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 ac.cord with law."
Coming to point No. 5, the High Court held:
H
VENTURE GLOBAL ENGINEERING LLC v. TECH MAHINDRA 319
LTD. & ANOTHER ETC. [CHELAMESWAR, J.] ·

"It is also important to mention that I.A. No. 1331 of 2009 did not A
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 B
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 C
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 D
with the relevant provisions of law. Therefore, we answer this
point in favourofthe appellant."
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.
E
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 of2014) F
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 G
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,
H
320 SUPREME COURT REPORTS (2017] 12 S.C.R.

A before this Court VENTURE confined its attack on the 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 7' 11 January
2009 of Ramalinga Raju.
B
30. Under the scheme of the ACT an award can be set aside in
this country only on the grounds enumerated in Section 34 10, if an
application praying for such a relief is filed in accordance with the
procedure stipulated therein.

c toSection 34. Application for setting aside arbitral award.-(]) Recourse to a
Comt 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-
D i. a party was under some incapacity. or
ii. the arbitration agreement is not valid under the Jaw to which the parties have
subjected it or, failing any indication thereon, under the law for the time being in force;
or
1u. the party making the application was not given proper notice of the appoincment
E 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
F 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 agree1nent of the parties, unless such agree1nent \\'US 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
G b. the Court finds that-
1. 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 Tndia.

H
VENTURE GLOBAL ENGINEERING LLC v. TECH MAHINDRA 321
LTD. & ANOTHER ETC. [CHELAMESWAR, J.]

Section 34(2)(b)(ii) stipulates that an award which is in conflict A
with public policy oflndia is liable to be set aside.
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 ... "
B

fap/wwtio11 l.-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 C
(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 oflndian law shall not entail a review on the merits of the
dispute.
(2AJ An Arbitral award arising out of arbitrations other than international D
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 rcappreciation of evidence.
(3) An application for setting aside may not be made after three months have
E
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. F
(4) On receipt of an application under sub-section (I). 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 G
issuing a prior notice to the other party and such application shall be acconipanied 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.
H
322 SUPREME COURT REPORTS [2017] 12 S.C.R.

A 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 oflndia. 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
B . policy oflndia."
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
c 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
D which are in conflict with the FEMA Act and Regulations made
thereunder. The trial court considered this under Point No.5 framed by
it in para no. I 0 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 1"
E 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 1" Respondent to acquire
F
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 ... "
G 34. The, submission of VENTURE appears to be:
(i) The AWARD insofar as it directed VENTURE to transfer its
shates 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;
H and
VENTURE GLOBAL ENGINEERING LLC v. TECH MAHINDRA . 323
LTD. & ANOTHER ETC. [CHELAMESWAR, J.]

(ii) The book value of the shares of JVC is less than that of their A
fair value.
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." B
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 1" Respondent at the rate of book value is violation
of Foreign Exchange Management Act and consequently the public
policy. c
***** ***** ***** ***** *****
In view.. of the discussion coupled with reasons the point is
answered in favour of the petitioner ~nd against the Respondents
holding that the award in so far as it ordered for transfer of D
petitioner's shares to the 1''Respondent at book val_ue 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 FEMAAct or the E
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.
F
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; G
(ii) how that fair value is to be determined;
(iii) whether the fair value of shares is the same as market value
of shares;

H
324 . SUPREME COURT REPORTS [2017) 12 S.C.R.

A (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
B it.
38. The entire exercise undertaken by the trial court only demon-
strates the unfortunate trend in the legal system where without settling
the facts in issue first and identifying the questions oflaw relevant in the
context for determining the controversy between the parties, case law is
c 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 con-
clusion 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.
D
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
E recor.ded 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.
•
FRAUD:
40. The next question is - whether fudging of the accounts of
F
SATYAM would in any way provide a ground for VENTURE to seek
setting aside of the AWARD?
41. The content of the letter'' dated 7'" January 2009 ofRamalinga
Raju, if true undoubtedly would have legal consequences both civil and
G 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.

"Extracted in extenso by my learned brother
H
VENTURE GLOBAL ENGINEERING LLC v. TECH MAHINDRA 325
LTD. & ANOTHER ETC. [CHELAMESWAR, J.]

According to the Statement of Ramalinga Raju, the fudging of A
accounts of SATYAM took place over a number of years. 12 Ramalinga
Raju's statement is not very clear regarding the point of time at which
the fudging of the accounts of SATYAM commenced.11
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 B
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 c
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: D

"It is not easy to give a definition of what constitutes fraud in the
extensive signification in which that term is understood by Civil
Courts of Justice. The Courts have always avoided hampering
themselves by defining or laying down as a general proposition
what shall be held to constitute fraud. Fraud is infinite in variety E

"The gap in the balance Sheet has arisen purely on account of inflated profits over a
period oflast 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. F
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 or° operations - thereby
significantly increasing the c.osts. , . ,.
11
The trial court at para 11 (a) of the judgment recorded a submission that the fudging G
commenced w.e. f. the year 21)02..
14
McDonnell, Denis Lane & Monroe,J.ohn George, A Treatise 011 th« (,q~ oj)"1~111tf.and
Mistake, KERR ON THE LAW OF FRAUDAND MISTAKE, 1952 (7'h Edn.) Sweet
& Maxwell Limited (London), page I ..
H
326 SUPREME COURT REPORTS · (2017] 12 S.C.R.

A .. : Courts have always declined to define it, ... reserying to
themselves the liberty to deal with it under whatever form it may
present itself. Fraud ... may be said to include properly all acts,
omissions, and concealments which involve a breach of legal or
equitable duty, trust or confidence, justly reposed, and are injurious
to another, or by which an undue or unconscientious advantage is
B
taken of another. All surprise, trick, cunning, dissembling and other
unfair way that is used to cheat any one is considered as fraud.
Fraud in all cases implies a willful act on the part of any one,
whereby another is sought to be deprived, by illegal or inequitable
means, of what he is entitled to."
c The ACT does not define the expression 'Fraud'. A reference is
made to the definition of the expression 'Fraud' in Section 17 of the
Contract Act, 1872 in a bid to explain the meaning of the word 'fraud' .15
44. But the fact remains, such a definition is valid only in the
context of contracts. In my opinion, the definition under Section 17 of
D the Contract Act may not be of any great assistance, to understand the
meaning and scope of the explanation to Section 34(2) of the ACT.
"Section 19 of the Contract Act declares that if the consent to an agreement is caused
by fraud, such agreement though a contract, is voidable at the option of the party
whose consent was so caused.
E "Section 19 Voidability of agreements without free consent.-When consent to
an agreement is caused by coercion, fraud or misrepresentation, the agreement is a
contract voidable at the option of the party whose consent was so caused. A party to
a contract, whose consent was caused by fraud or misrepresentation, may, if he thinks
fit ..insist that the contract shall be performed, and that he shall be put in the position
in which he would have been if the representations made had. been true."
F
Section 17 of the Contract Act defines fraud.

Section 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:-
(!) the suggestion, as a fact, of that which is not true, by one who does not believe it to
G 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.
H
VENTURE GLOBAL ENGINEERING LLC v. TECH MAHINDRA 327
LTD. & ANOTHER ETC. [CHELAMESWAR, J.]

From the language of the explanation to Section 34(2), what renders an A
AWARD liable to be set aside is that the making of the AWARD must
have been induced by fraud or the AWARD is affected by fraud. Neither.
does the trial court judgment identify the legal parameters for recording
a conclusion that the making of the AWARD was induced by or fraud or
that the AWARD is affected by fraud, nor does it explain how the non-
disclosure of the facts relating to the true financial status of SATYAM B
actually is an inducement for making of the AWARD. On the other
hand, the trial court relied upon the observations made by this Court in
VENTURE-II (Venture Global Engineering v. Satyilm Computer
Services Limited & Another, (2010) 8 SCC 660), that "conceali:nent of
relevant and material facts which should have been disclosed before the C
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 D
view .that there is adequate pleading on the point of ma~erial
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 E
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 F
of 1" 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 l" 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 G
being opposed to Public Policy oflndia and is liable to set aside on
the grounds of material suppression of facts, fraud, incapacity of
the Petitioner and violation of Public Policy oflndia."

H
328 SUPREME COURT REPORTS (2017] 12 S.C.R.

A 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 7'h January, 2009 and the subsequent
developments thereafter (I shall refer to them ·collectively· as
'CONCEALED FACTS' for the sake of convenience) are material facts
which ought to have been disclosed before the Arbitrator and the failure
B
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
C "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
D
arbitrator is an act of fraud, there is no discussion as to how the
CONCEA,LED FACTS are material facts whose concealment resulted
in inducing the making of the AWARD by fraud or affected b:;- ~raud.
46. It must be remembered here that this Court in VENTURE-II
. categorically declared:
E . ' , ... ·~

. · ·'.'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 aw<1rd. 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
F 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. Whetherthe award will be set aside or not is a different question
.and that has to be decided by the appropriate court. In this appeal,
G . 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
H fairness of procedure, the Court should allow the appellant to bring
VENTURE GLOBAL ENGINEERING LLC v. TECH MAHINDRA 329
LTD. & ANOTHER .E!C:, [CHELAMESWAR, J.]
., .

those materials on record .as those materials are not wholly A
irrelevant or they n1ay h<ive 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 B
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 ofRamalinga
Raju are relevant and, therefore, VENTURE must be permitted to plead
those facts. But this Court did not make any declaration that such facts c
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 "nothing said in the judgment
will be construed as even remotely expressing any opinion on the legality D
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.
E
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 oflndia. I would therefore dismiss
the appeals of VENTURE.
CIVIL APPEAL No.17756 OF 2017 F
(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 G
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~ Constitution Bench of this Court in BALCO's case.
I am of the opinion that such a course ought not to be permitted. I
would, therefore, dismiss the appeal of SATYAM.
H
330 SUPREME COURT REPORTS (2017] 12 S.C.R.

A ORDER
In view of the difference ofopinion 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 oflndia for appropriate
further course of action.
B
Nidhi Jain Matters to be placed before Hon'ble CJI