Satyam Venture Arbitration Case- SC refers Matter to Larger Bench

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November 07, 2017

Venture Global Engineering LLC vs Tech Mahindra Ltd & Anr.

Date of Judgment: November 2, 2017

This case involves one of the most celebrated joint venture of our times i.e. the venture between Satyam Computer Services Limited (now represented by Tech Mahindra) and Venture Global Engineering LLC to constitute a company named Satyam Venture Engineering Services Ltd. in which both the appellant and respondent had 50 per cent equity shareholding. The Shareholders Agreement between the parties provided that disputes have to be resolved amicably between the parties and failing such resolution, the disputes would be referred to arbitration.

Background of the case- In the case, the seminal issue revolved around Arbitration Award passed in April, 2006 whereby Venture Global was directed to deliver to Satyam share certificates. To enforce the Award, Satyam filed a petition with the Eastern Court of Michigan, US in accordance to the terms of the Agreement. Later the Award was enforced by the US Court, however Venture Global appealed against the order in the US Appellate Court, Michigan. Thereafter, Venture Global eventually challenged the Arbitration Award in question under Section 34 of the Arbitration Act, 1996.

Later on when the case was taken up by the Trial Court, the Trial Court set aside the Award on two grounds:  (i) the direction in the AWARD to transfer the shares in JVC of Venture Global at book value is in conflict with the requirements of Foreign Exchange Management Act, 1999  (FEMA) and therefore in violation of public policy (ii) The Award is unsustainable because of the financial irregularities and the manipulation of the accounts of SATYAM. The Trial Court opined that the Award was induced by fraud and could not be enforced being opposed to public policy. When the case came up before the High Court, the High Court found Trial Court’s order as unsustainable and upheld the Award, aggrieved by which Venture Global approached the Supreme Court in the present case.

The case was taken up Two-Judge Bench of the Supreme Court comprising of Justices Abhay Mohan Sapre and Justice Chelameswar. However, both the Judges had divergent views in the case and hence referred the case to the Chief Justice of India.

Justice Sapre went with the Trial Court’s view and was of the opinion that the Award was liable to be set aside as it was induced by fraud and in conflict of provisional requirements under the Foreign Exchange Management Act, 1999.

Justice Chelameswar in the case remarked that the High Court rightly disagreed with the conclusions of the trial court and reversed the judgment of the trial court.

The case details can be accessed here.

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