Holding

Part I of the Arbitration and Conciliation Act, 1996 applies to foreign arbitral awards unless the parties expressly exclude its provisions, and a judgment‑debtor may invoke Section 34 to set aside such an award on Indian public policy grounds.

Summary

Venture Global Engineering (VGE) and Satyam Computer Services Ltd. (SCSL) entered into a joint venture and shareholders agreement that provided for arbitration of disputes. A dispute arose and SCSL obtained an award from the London Court of International Arbitration directing VGE to transfer its shares in the joint venture. SCSL sought enforcement of the award in a US district court, while VGE filed a suit in India seeking a declaration that the award was void and an injunction against the share transfer. The Supreme Court held that Part I of the Arbitration and Conciliation Act, 1996 applies to all arbitrations, including foreign awards, unless expressly excluded, and that VGE could invoke Section 34 to set aside the award on public policy grounds. The Court also ruled that the non‑obstante clause in the shareholders agreement required enforcement to occur in India, making SCSL’s US proceedings a breach of contract. Consequently, the orders of the City Civil Court and the High Court were set aside and the appeal was allowed, directing the parties to maintain the status quo pending a merits trial.

Issues considered

The applicability of Part I of the Arbitration and Conciliation Act, 1996 to foreign arbitral awards.
Whether Section 34 of the Act can be invoked in India to set aside a foreign award on public policy grounds.
The effect of a non‑obstante clause in a shareholders agreement on the forum for enforcement of an arbitral award.
The permissibility of seeking enforcement of an award in a foreign court despite an Indian injunction.
The extent to which Indian public policy can be invoked to refuse enforcement of a foreign award.

Legislation cited

Arbitration and Conciliation Act, 1996s. 2, s. 34, s. 44, s. 45, s. 48, s. 5, s. 52, s. 53, s. 9
Companies Act, 1956s. 108, s. 110, s. 111A
Foreign Exchange Management Act, 1999

Subjects

ArbitrationInternational commercial arbitrationPart I applicabilitySection 34Section 48Public policyEnforcement of foreign awardShareholders agreementNon obstante clauseFEMACompanies Act

Judgment

[2008] 1 S.C.R. 501

VENTURE GLOBAL ENGINEERING A
II.
SATYAM COMPUTER SERVICES LTD. AND ANR.
(C.A. No. 309 of 2008)
JANUARY 10, 2008
B
[TARUN CHATTERJEE AND P. SATHASIVAM, JJ.]

~ Arbitration and Conciliation Act, 1996:
Part I - Applicability of - Held: Would apply to all
arbitrations including international commercial arbitrations c
and to all proceedings relating thereto - Where such arbitration
is held in India, the provisions would compulsorily apply -
Would also apply in case of international commercial
arbitrations held out of India, unless parties by agreement,
express or implied, exclude all or any of its provisions - D
International Commercial Arbitration .
.... ss. 34 and 48 - Arbitral award - Foreign award - Setting
~
aside of - Rjght of judgment-debtor - Held: Judgment-debtor
cannot be deprived of his right to invoke the public policy of
India to set aside the award passed by a foreign court -
E
Respondent no. 1 in enforcing award in US Court instead of
Indian court was motivated by intention of evading the legal
and regulatory scrutiny to which such transaction would be
subjected to had it been enforced in India - Intention of
l- respondent no. 1 was to avoid enforcement of award under s.48 F
• of the Act which would have given the appellant benefit of the
public policy Rule and for avoiding jurisdiction of Courts of
India though award had an intimate and close nexus in India
- Hence suit for declaration filed in Indian court to set aside
the award passed by the foreign court maintainable. G
The appellant-company and respondent No.1 a
t registered company having its office in India entered into
a Joint Venture Agreement to constitute respondent no.2
company (SVES) in which both the appellant and
501 H
502 SUPREME COURT REPORTS [2008] 1 S.C.R.

A respondent no.1 had 50% equity shareholding. Another ),._
agreement was executed between the same parties on
the same day being the Shareholders Agreement (SHA)
which contained arbitration clause. Disputes arose
between the parties. Respondent No.1 exercised its
B option to purchase the appellant-company's shares in
SVES at its book value on the allegation that the appellant
had committed an event of default under the SHA owing
to several venture companies becoming insolvent.
,.
Respondent No.1 filed a request for arbitration with
c the London Court of International Arbitration whereby a
sole arbitrator was appointed. The sole arbitrator passed
an award directing the appellant company to transfer the
shares to respondent No.1. Respondent No.1 filed a
petition for seeking enforcement of the award before the
...
D Eastern District Court of Michigan (US Court). The
appellant entered appearance to defend this proceeding
before the US Court by filing a cross petition. Thereafter, j-.

the appellant filed a suit in Indian Court for declaration to • "
set aside the award and permanent injunction on the
E transfer of shares under the Award. The District Court
passed an ad-interim ex parte order of injunction,
restraining respondent No.1 from effecting the transfer
of shares. Respondent no.1 appealed before the High
Court. The High Court admitted the appeal and directed
F interim suspension of the order of the District Court but
i
made it clear that respondent No.1 would not effect the

-
~
transfer of shares until further orders. In response to the
summons, respondent No.1 appeared in the Court and
filed a petition under Order VII Rule 11 CPC for rejection
of the plaint. The trial Court, allowed the said application
G
and rejected the plaint of the appellant. The High Court
dismissed the appeal holding that the award cannot be .J
challenged even if it is against public policy and in
contravention of statutory provisions. Hence the appeal.
H Allowing the appeal, the Court
' VENTURE GLOBAL ENGINEERING v. SATYAM 503
t COMPUTER SERVICES LTD. AND ANR.
~
Ii'i> ...x HELD: 1. The provisions of Part I of the Arbitration A
and Conciliation Act, 1996 would apply to all arbitrations
including international commercial arbitrations and to all
proceedings relating thereto. Where such arbitration is
held in India, the provisions of Part-I would compulsorily
apply and parties are free to deviate to the extent permitted B
by the provisions of Part-I. Even in the case of international
commercial arbitrations held out of India provisions of
~
\ Part-I would apply unless the parties by agreement,
express or implied, exclude all or any of its provisions.
Such an interpretation does not lead to any conflict c
between any of the provisions of the Act and there is no
lacuna as such. [Para 17] [521-E, F]
Bhatia International v. Bulk Trading S.A. & Anr. (2002)
4 sec 105 - relied on.
Pratabmull Rameshwar v. K.C. Sethia Ltd. AIR 19C
~ Calcutta 702; Nirma Ltd. v Lurgi Energie Und Entsorgung
.., ' GMBH, Germany AIR 2003 Gujarat 145; Bombay Gas
~
Company Limited v Mark Victor Mascarenhas & Ors. 1998 1
LJ 977; lnventa Fischer Gmbh & Co., K.G. v. Polygenta
Technologies Ltd. 2005 (2) Born C.R. 364; Trusuns Chemical E
Industry Ltd. v. Tata International Ltd. AIR 2004 Gujarat. 274;
Bharat Aluminium Co. Ltd. v. Kaiser Aluminium Technical
Services AIR 2005 Chhatisgarh 21; Bulk Trading SA v. Dalmia
Cement (Bharat) Limited (2006) 1 Arb.LR 38(Delhi) - referred
} to. F
J
International Standard Electric Corp. v. Bridas Sociedad
nonima Petro/era, Industrial Y Commercial 745 F.supp.172;
M & C Corporation v.. ERWIN BEHR GmbH & Co., KG, a
foreign corporation 87 F.3d 844; Yusuf Ahmed Alghanim &
G
Sons v Toys "R" US. INC. Thr. (HK) Ltd. 126 F.3d 15; Karaha
Bodas Co. L.L. C. v. Perusahaan Pertambangan Minyakdan
t
Gas Bumi Negara 364 F.3d 274; C v D (2007) EWHC 1541-
referred to.
2. To apply s.34 to foreign international awards would H
504 SUPREME COURT REPORTS [2008] 1 S.C.R.

A not be inconsist:ent with s.48 of the Act, or any other
provision of Part II as a situation may arise, where, even
in respect of properties situate in India and where an
award would be invalid if opposed to public policy of India,
merely because the judgment-debtor resides abroad, the
B award can be enforced against properties in India through
personal compliance of the judgment-debtor and by
holding out the threat of contempt as is being sought to
be done in the present case. In such an event, the
judgment-debtor cannot be deprived of his right under
C s.34 to invoke the public policy of India, to set aside the
award. The public policy of India includes - (a) the
fundamental policy of India; or (b) the interests of India;
or (c) justice or morality; or (d) in addition, if it is patently
illegal. This extended definition of public policy can be
by-passed by taking the award to a foreign country for
D enforcement. Respondent No.1, in enforcing the Award
in the US District Court instead of Indian Courts was
motivated by the intention of evading the legal and • •
regulatory scrutiny to which this transaction would have
been subject to had it been enforced in India. The effort
E of respondent No.1 was to avoid enforcement of the Award
under s.48 of the 1996 Act which would have given the
appellant the benefit of the Indian Public Policy rule and
for avoiding the jurisdiction of the Courts in India though
the award had an intimate and close nexus to India in view
F of the fact that, (a) the company was situated in India; (b)
the transfer of the 'ownership interests' shall be made in
India under the laws of India ; (c) all the steps necessary
have to be taken in India before the ownership interests
1tood transferred. If, therefore, respondent No.1 was not
<:\. prepared to enforce the Award in spite of this intimate and
-'close nexus to India and its laws, the appellant would
certainly not be deprived of the right to challenge the
award in Indian Courts. [Paras 19-21] [522-G, H; 523-A, B;
524-8-F]
H Oil & Natural Gas Corporation Ltd. v. Saw Pipes Ltd.
VENTURE GLOBAL ENGINEERING v. SATYAM " 505
COMPUTER SERVICES LTD. AND ANR.
"'
,..4, (2003) 5 sec 705 - relied on. A
3. Clause (c) of Section 11.05 of the Shareholders
Agreement declared that, notwithstanding that the proper
law or the governing law of the contract is the law of the
State of Michigan, their shareholders would at all times
act in accordance with the Companies Act and other B
applicable Acts/Rules being in force in India at any time.
~ The said section excluded respondent No.1 approaching
the US Courts in regard to the enforcement of the Award.·
The non-obstante clause would override the entirety of
the agreement including sub-section (b) which deals with c
settlement of the dispute by arbitration and therefore s.3
would apply to the enforcement of the award. Necessarily,
enforcement has to be in India, as declared by this very
section which overrides every other section in the
Shareholders Agreement. Respondent No.1, therefore, D
totally vio.lated the agreement between the parties by
~
'' seeking enforcement of the transfer of the shares in the
.. ~
Indian company by approaching the District Courts in the
United States. [Paras 26, 27] [528-A-G]
Sameer Barar and Ors. v. Ratan Bhushan Jain & Ors. E
(2006) 1 SCC 419; Ajay Bansal v. Anup Mehta & Ors. (2007)
2 sec 275 - referred to.
4. The specific clause in the Shareholders Agreement
+-, (SHA), conduct of the parties have not been properly
adverted to and considered by the trial Court as well as
F
the High Court. Accordingly, both the orders passed by
the City Civil Court and of the High Court are set aside.
[Para 28) [528-H; 529-A]
5. It is for the concerned court to decide the issue on G
merits and this Court has not expressed anything on the
t same. If it is found that the Court in which the appellant
has filed a petition challenging the Award is not competent
and having jurisdiction, the same shall be transferred to
the appropriate Court. Since from the inception of ordering H
506 SUPREME COURT REPORTS [2008] 1 S.C.R.

A notice in the special leave petition both parties were
directed to maintain status quo with regard to transfer of
shares in issue, the same shall be maintained till the
disposal of the suit. Considering the nature of dispute
which relates to an arbitration Award, the concerned Court
B is requested to dispose of the suit on merits within a
period of six months from the receipt of copy of this
Judgment. [Paras 22, 29] [525-A; 529-B, C, D]
CIVILAPPELLATE JURISDICTION: Civil Appeal No. 309
of 2008.
c From the final Judgment and Order dated 27.2.2007 of
the High Court of Judicature, Andhra Pradesh at Hyderabad in
C.C.C.A. No. 26/2007.
K.K. Venugopal, Vinay Kumar Misra, Rajat Tamni and B.
D Parthasarathi for the Appellant.
R.F. Nariman, Subhash Chandra Birla and Subrat Birla
for the Respondents.
The Judgment of the Court was delivered by
E P. SATHASIVAM, J. 1) Leave granted.
2)Appellant-Venture Global Engineering (in short 'VGE'),
a company incorporated in the United States of America with
its principal office at 33662, James J Pampo Drive, Fraser,
Michigan, USA 48026 through its Constituted Attorney, Mr.
F Pradeep Yadav filed this appeal challenging the final order and
judgment dated 27.2.2007 passed by the High Court of
Judicature, Andhra Pradesh at Hyderabad in City Civil Court
Appeal No. 26 of 2007 whereby the Division Bench of the High
Court dismissed their appeal.
G
3) The facts, which are necessary for the disposal of this
appeal, are as under:
On 20.10.1999, Appellant-Company and respondent
No.1- Satyam Computer Services Limited (in.short "SCSL"), a
H registered company having its office at Mayfair Centre, S.P.
VENTURE GLOBAL ENGG. v. SATYAM COMPUTER 507
SERVICES LTD. AND ANR. [SATHASIVAM, J.]
_l,
Road, Secunderabad entered into a Joint Venture Agreement A
to constitute a company named Satyam Venture Engineering
Services Ltd. respondent No.2 herein (in short "SVES") in which
both the appellant and respondent No.1 have 50 per cent equity
shareholding. Another agreement was also executed between
the parties on the same day being the Shareholders Agreement B
(in short "SHA") which provides that disputes have to be resolved
:t amicably between the parties and failing such resolution, the
disputes are to be referred to arbitration. Section 11.05 of the
SHA provides for certain terms and conditions as regards the
resolution of the disputes. In February, 2005, disputes arose c
between the parties. Respondent No.1 alleged that the appellant
had committed an event of default under the SHA owing to
several venture companies becoming insolvent and they had
exercised its option to purchase the appellant-company's shares
in SVES at its book value. On 25.07 .2005, respondent No.1
D
filed a request for arbitration with the London Court of
~-i International Arbitration which appointed Mr. Paul B Hannon as
i'
sole arbitrator on 10.9.2005. The sole Arbitrator on 3.4.2006
passed an award directing the appellant - VGE to transfer the
shares to respondent No.1. On 14.4.2006, respondent No.1 filed
a petition to recognize and enforce the award before the United E
States District Court, Eastern District Court of Michigan (US
Court). The appellant entered appearance to defend this
proceeding before the US Court by filing a cross petition. In the
said petition, it objected to the enforcement of the Award which
~ F
ordered transfer of shares which was in violation of Indian Laws
f and Regulations specifically the Foreign Exchange Management
Act, 1999 (in short "FEMA") and its notifications. The appellant
filed a suit being O.S. No. 80 of 2006 before the 1st Additional
Chief Judge, City Civil Court, Secunderabad on 28.4.2006
seeking declaration to set aside the award and permanent G
injunction on the transfer of shares under the Award. On
t 15.6.2006, the District Court passed an ad-interim ex parte order
of injunction, inter alia, restraining respondent No.1 from seeking
or effecting the transfer of shares either under the terms of the
Award or otherwise. Challenging the said order, respondent No.1 H
508 SUPREME COURT REPORTS [2008] 1 S.C.R.

A filed an appeal before the High Court of Andhra Pradesh. The
High Court admitted respondent's appeal and directed interim
-
suspension of the order of the District Court but made it clear
that respondent No.1 would not effect the transfer of shares until
further orders. On 13.07.2006, in response to the summons
B served upon the respondents, respondent No.1 appeared in
the Court and filed a petition under Order VII Rule 11 C.P.C. for
rejection of the plaint. The appellant filed objection to the
application. The trial Court, by its order dated 28.12.2006,
allowed the said application and rejected the plaint of the
c appellant. Challenging the said order, the appellant filed an
appeal before the High Court. On 27.2.2007, the High Court
dismissed the appeal holding that the award cannot be
challenged even if it is against the public policy and in
contravention of statutory provisions. Against the said order, the
appellant preferred the above appeal by way of special leave
0
petition.
4) Heard Mr. K.K. Venugopal, learned senior counsel,
appearing for the appellant and Mr. R.F. Nariman, learned senior
counsel, appearing for respondent No.1. )

E 5) After taking us through agreements entered into by both
the parties, subsequent developments such as alleged
violations, Award by an Arbitrator at U.K., proceedings before
the District Court, Michigan, USA and the impugned
proceedings of the 1st Additional Chief Judge-City Civil Court,
F Secunderabad as well as the order of the High Court, Mr. K.K.
Venugopal learned senior counsel appearing for the appellant
has raised the following contentions:
(i) The claim that Part I of the Arbitration and Conciliation
Act, 1996 (in short "the Act") applies to foreign awards
G
is covered by the judgment of this Court in Bhatia
International vs. Bulk Trading S.A. &Anr., (2002)
4 sec 105.
ii) The first respondent - Satyam Computer Services
H Ltd. could not have pursued the enforcement
VENTURE GLOBAL ENGG. v. SATYAM COMPUTER 509
SERVICES LTD. AND ANR. [SATHASIVAM, J.]

~
~ proceedings in the District Court in Michigan, USA A
in the teeth of the injunction granted by the Courts in
India which also, on the basis of the Comity of Courts
should have been respected by the District Court in
Michigan.
B
iii) The overriding Section 11.5 (c) of the SHA would
exclude respondent No.1- Satyam Computer
.,_
Services Ltd. approaching the US Court in regard to
the enforcement of the Award.

6) On the other hand, Mr. R.F. Narim~n, learned senior c
counsel, appearing for the first respondent, submitted that,

(i) In view of Section 44 of the Act and the terms of the
agreement, no suit would lie in India to set aside the
Award, which is a foreign Award.
D
(ii) No application under Section 34 of the Act would lie
.~. to set aside the Award .
j< ~
(iii) In view of the provisions of the Act and the terms of
the agreement, the first respondent rightly sought
enforcement of the Award in Michigan, USA, hence E
the civil suit filed at Secunderabad is not maintainable.
(iv) Section 11.5(c) of the SHA only deals with the rights
and obligations of the appellant and the first
respondent while acting as shareholders of the 2nd
~ F
respondent it has nothing to do with the enforcement
• of foreign Award.
(v) In terms of the agreement, having participated in the
arbitration proceedings in UK, filed cross-suit/
objection in the District Court, Michigan opposing G
., the Award, the appellant cannot agitate the very same
t issue in the Indian Courts namely, District Court,
Secunderabad. In other words, the appellant, VGE,
cannot ride two horses at the same time.
7) We perused all the relevant materials, Annexures and H
510 SUPREME COURT REPORTS [2008] 1 S.C.R.

A considered the rival contentions. >- ...
8) Since both Mr. K.K. Venugopal, learned senior counsel
for the appellant and Mr. R. F. Nariman, learned senior counsel,
for respondent No.1 heavily relied on a judgment of this Court in
Bhatia International (supra), in support of their respective
B
stand, let us consider the facts in that case and ultimate
conclusion arrived at therein.
9) Bhatia International filed an Appeal before this Court
against the judgment of the M.P. High Court in W.P. No. 453 of
c 2000. The appellant-Bhatia International entered into a contract
with the first respondent- Bulk Trading on 9.5.1997. This contract
contained an arbitration clause which provided that arbitration
was to be as per the Rules of the International Chamber of
Commerce (for short "ICC"). On 23.10.1997, the 1st respondent
made a request for arbitration with ICC. Parties had agreed
D
that the arbitration be held in Paris, France. ICC has appointed
a sole arbitrator. The first respondent filed an application under ~
Section 9 of the Act before the 3rd Additional District Judge, ... ...
Indore, M.P. against the appellant and the 2nd respondent. One
of the interim reliefs sought for was an order of injunction
E
restraining these parties from alienating, transferring and/or
creating third-party rights, disposing of, dealing with and/or
selling their business assets and properties. The appellant
raised the plea of maintainability of such an application. The
appellant contended that Part I of the Act would not apply to
F i
arbitrations where the place of arbitration was not in India. The ..
application was rejected by the 3rd Additional District Judge on
1-2-2000. It was held that the court at Indore (M.P.) had
jurisdiction and the application was maintainable. The appellant
filed a writ petition before the High Court of Madhya Pradesh,
G Indore Bench and the same was dismissed by the impugned
,.._
judgment dated 10-10-2000. Several contentions have been 'f
raised on behalf of the appellant, namely, Part I of the Act only
applies to arbitrations where the place of arbitration is in India
and if the place of arbitration is not in India then Part II of the
H said Act would apply. Sub-section (2) of Section 2 of the Act
VENTURE GLOBAL ENGG. v. SATYAM COMPUTER 511
SERVICES LTD. AND ANR. [SATHASIVAM, J.]
.....
makes it clear that the provisions of Part I do not apply where A
the place of arbitration is not in India. The Court at Indore could
not have entertained the application under Section 9 ofthe Act
as Part I did not apply to arbitrations which had taken place
outside India. On the other hand, on behalf of respondent No.1,
it was submitted that a conjoint reading of the provisions shows B
that Part I is to be applied to all arbitrations. It was further
submitted that unless the parties by their agreement exclude its
' provisions, Part I would also apply to all International Commercial
arbitrations including those that take place out of India.
10) The above contentions were considered in detail. In c
view of the assertion of both the senior counsel, the decision in
Bhatia International (supra) has very much bearing on the
issue raised in this case. The relevant paragraphs are
reproduced hereunder:
D
"14. At first blush the arguments of Mr. Sen appear very
~ attractive. Undoubtedly sub-section (2) of Section 2 states
,,,. ~ that Part I is to apply where the place of arbitration is in
India. Undoubtedly, Part II applies to foreign awards. Whilst
the submissions of Mr. Sen are attractive, one has to keep
in mind the consequence which would follow if they are E
accepted. The result would:
(a) Amount to holding that the legislature has left a lacuna
in the said Act. There would be a lacuna as neither Part
... I or II would apply to arbitrations held in a country which is F
~ not a signatory to the New York Convention or the Geneva
Convention (hereinafter called "a non-convention country").
It would mean that there is no law, in India, governing such
arbitrations.
( b ) Lead to an anomalous situation, inasmuch as Part I G
would apply to Jammu and Kashmir in all international
t commercial arbitrations but Part I would not apply to the
rest of India if the arbitration takes place out of India.
( c) Lead to a conflict between sub-section (2) of Section
H
512 SUPREME COURT REPORTS [2008] 1 S.C.R

}...
A 2 on one hand and sub-sections (4) and (5) of Section 2
on the other. Further, sub-section (2) of Section 2 would
also be in conflict with Section 1 which provides that the
Act extends to the whole of India.
( d) Leave a party remediless inasmuch as in international
B commercial arbitrations which take place out of India the
party would not be able to apply for interim relief in India
even though the properties and assets are in India. Thus ~

a party may not be able to get any interim relief at all."

c "16. A reading of the provisions shows that the said Act
applies to arbitrations which are held in India between
Indian nationals and to international commercial
arbitrations whether held in India or out of India. Section
2(1 )( f) defines an international commercial arbitration.
The definition makes no distinction between international
D
commercial arbitrations held in India or outside India. An
international commercial arbitration may be held in a ,._
country which is a signatory to either the New York ~ ~

Convention or the Geneva Convention (hereinafter called
"the convention country"). An international commercial
E arbitration may be held in a non-convention country. The
said Act nowhere provides that its provisions are not to
apply to international commercial arbitrations which take
place in a non-convention country. Admittedly, Part II only
applies to arbitrations which take place in a convention
F country. Mr. Sen fairly admitted that Part II would not apply i
~
to an international commercial arbitration which takes
place in a non-convention country. He also fairly admitted
that there would be countries which are not signatories
either to the New York Convention or to the Geneva
G Convention. It is not possible to accept the submission
that the said Act makes no provision for international
i
commercial arbitrations which take place in a non-
convention country."
"17. Section 1 of the said Act reads as follows:
H
VENTURE GLOBAL ENGG. v. SATYAM COMPUTER 513
SERVICES LTD. AND ANR. [SATHASIVAM, J.]
, ....t "1. Short title, extent and commencement .-(1) This Act A
may be called the Arbitration and Conciliation Act, 1996.
(2) It extends to the whole of India: Provided that Parts I,
Ill and IV shall extend to the State of Jammu and Kashmir
only insofar as they relate to international commercial
arbitration or, as the case may be, international commercial B
conciliation."
The words "this Act" mean the entire Act. This shows that
the entire Act, including Part I, applies to the whole of
India. The fact that all Parts apply to the whole of India is
clear from the proviso which provides that Parts I, Ill and c
IV will apply to the State of Jammu and Kashmir only so
far as international commercial arbitrations/conciliations
are concerned. Significantly, the proviso does not state
that Part I would apply to Jammu and Kashmir only if the
place of the international commercial arbitration is in D
Jammu and Kashmir. Thus if sub-section (2) of Section 2
.. ~ is read in the manner suggested by Mr. Sen there would
be a conflict between Section 1 and Section 2(2). There
would also be an anomaly inasmuch as even if an
international commercial arbitrntion takes place outside E
India, Part I would continue to apply in Jarnrnu and Kashmir,
but it would not apply to the rest of India. The legislature
could not have so intended."

-~
"21. Now let us look at sub-sections (2), (3), (4) and (S)
of Section 2. Sub-section (2) of Section 2 provides that F
-~
Part I would apply where the place of arbitration is in India.
To be immediately noted, that it is not providing that Part
· I shall not apply where the place of arbitration is not in
India. It is also not providing that Part I wi!I " only" apply
where the place of arbitration is in India (emphasi$ G
~r
supplied). Thus the legislature has not provioed that Part
I is not to apply to arbitrations which take place outside
India. The use of the language is significant and important.
The legislature is emphasizing that the provisions of Part
I would apply to arbitrations which take place in India, but H
514 SUPREME COURT REPORTS [2008] 1 S.C.R.

~
A not providing that the provisions of Part I will not apply to "'
arbitrations which take place out of India. The wording of
sub-section (2) of Section 2 suggests that the intention of
the legislature was to make provisions of Part I compulsorily
applicable to an arbitration, including an international
B commercial arbitration, which takes place in India. Parties
cannot, by agreement, override or exclude the non-
derogable provisions of Part I in such arbitrations. By
omitting to provide that Part I will not apply to international
commercial arbitrations which take place outside India
c the effect would be that Part I would also apply to
international commercial arbitrations held out of India. But
by not specifically providing that the provisions of Part I
apply to international commercial arbitrations held out of
India, the intention of the legislature appears to be to ally
(sic allow) parties to provide by agreement that Part I or
D
any provision therein will not apply. Thus in respect of
~
arbitrations which take place outside India even the non-
~
derogable provisions of Part I can be excluded. Such an '
agreement may be express or implied. "
E "26. Mr. Sen had also submitted that Part II, which deals
with enforcement of foreign awards does not contain any
provision similar to Section 9 or Section 17. As indicated
earlier, Mr. Sen had submitted that this indicated the
intention of the legislature not to apply Sections 9 and 17
F to arbitrations, like the present, which are taking place in i
a foreign country. The said Act is one consolidated and ~

integrated Act. General provisions applicable to all
arbitrations will not be repeated in all Chapters or Parts.
The general provisions will apply to all Chapters or Parts
unless the statute expressly states that they are not to
G
apply or where, in respect of a matter, there is a separate
provision in a separate Chapter or Part. Part II deals with i
enforcement of foreign awards. Thus Section 44 (in
Chapter I) and Section 53 (in Chapter II) define foreign
awards, as being awards covered by arbitrations under
H
VENTURE GLOBAL ENGG. v. SATYAM COMPUTER 515
SERVICES LTD. AND ANR. [SATHASIVAM, J.]

the New York Convention and the Geneva Convention A
respectively. Part II then contains provisions for
enforcement of "foreign awards" which necessarily would
be different. For that reason special provisions for
enforcement of foreign awards are made in Part II. To the
extent that Part II provides a separate definition of an arbitral B
award and separate provisions for enforcement of foreign
--J· awards, ,the provisions in Part I dealing with these aspects
will not apply to such foreign awards. It must immediately
be clarified that the arbitration not having taken place in
India, all or some of the provisions of Part I may also get c
excluded by an express or implied agreement of parties.
But if not so excluded the provisions of Part I will also
apply to "foreign awards". The opening words of Sections
45 and 54, which are in Part 11, read "notwithstanding
anything contained in Part I". Such a non obstante clause
D
had to be put in because the provisions of Part I apply to

)1 Part II."
"32. To conclude, we hold that the provisions of Part I
would apply to all arbitrations and to all proceedings relating
thereto. Whe.re such arbitration is held in India the E
provisions of Part I would compulsorily apply and parties
are free to deviate only to the extent permitted by the
derogable provisions of Part I. In cases of international
commercial arbitrations held out of India provisions of Part
.} I would apply unless the parties by agreement, express or F
f implied, exclude all or any of its provisions. In that case
the laws or rules chosen by the parties would prevail. Any
provision, in Part I, which is contrary to or excluded by that
law or rules will not apply."
"35. Lastly, it must be stated that the said Act does not G
"t. appear to be a well-drafted legislation. Therefore the High
' Courts of Orissa, Bombay, Madras, Delhi and Calcutta
cannot be faulted for interpreting it in the manner indicated
above. However, in our view a proper and conjoint reading
of all the provisions indicates that Part I is to apply also to H
516 SUPREME COURT REPORTS [2008] 1 S.C.R.

A international commercial arbitrations which take place out
of India, unless the parties by agreement, express or
implied, exclude it or any of its provisions. Such an
interpretation does not lead to any conflict between any of
the provisions of the said Act. On this interpretation there
B are no lacunae in the said Act. This interpretation also
does not leave a party remediless. Thus such an
interpretation has to be preferred to the one adopted by
the High Courts of Orissa, Bombay, Madras, Delhi and
Calcutta. It will therefore have to be held that the contrary
c view taken by these High Courts is not good law."
11) Mr. K.K. Venugopal, learned senior counsel, has
pointed out that paragraph 14 of the judgment of Bhatia
International (supra) sets out four independent reasons for
arriving at the conclusion that Part I would apply to foreign Awards
D that are as follows:
i) to hold to the contrary would result in a lacunae as *
Non-Convention country awards cannot be enforced "' ..
in India.
E ii) Section 1(2) expressly extends Part I to the State of
Jammu and Kashmir so far as it relates to
international commercial arbitration giving rise to an
anomaly so far as the rest of India is concerned unless
Part I applies to international commercial arbitrations
F in the other States as well.
iii) If the word "only" is read into Section 2(2), it would
then render the sub-section inconsistent with sub-
sections (4) and (5) of Section 2 which apply Part I
to all arbitrations, meaning thereby, including foreign
G international arbitrations.
iv) As otherwise, no relief can be sought in India even
though the properties and assets are situated in India,
merely because the arbitration is an international
commercial arbitration.
H
VENTURE GLOBAL ENGG. v. SATYAM COMPUTER 517
SERVICES LTD. AND ANR. [SATHASIVAM, J.]
.... ,..{
Further, by drawing our attention to the specific conclusion A
arrived in paragraphs 32 and 35, he reiterated that the issue
has been very well concluded and the argument based on
paragraph 26 is nof acceptable.

12) Mr. Nariman heavily relied on paragraph 26 of the
judgment in Bhatia International which we have extracted B
supra. According to him, the said paragraph contains not only
~ the submissions of Mr. Sen, who appeared for Bhatia
International therein but also the ultimate conclusion of the Bench.
He reiterated that the Court concluded "Thus Section 44 (in
Chapter I) and Section 53 (in Chapter II) define foreign Awards, c
as being awards covered by arbitrations under the New York
Convention and the Geneva Convention respectively. Part 11 then
contains provisions for enforcement of "foreign awards" which
~
necessarily would be different. For that reason, special
provisions for enforcement of foreign awards are made in Part D
II. To the extent that Part II provides a separate definition of an
~ arbitral award and separate provisions for enforcement of
"' rl foreign awards, the provisions in Part I dealing with these aspects
will not apply to such foreign awards. It must immediately be
clarified that the arbitration not having taken place in India, all or E
some of the provisions of Part I may also get excluded by an
express or implied agreement of parties. But if not so excluded,
the provisions of Part I will also apply to "foreign awards". The
opening words of Sections 45 and 54, which are in Part II, read
-} "notwithstanding anything contained in Part i" Such a non F
> obstante clause had to be put in because the provisions of Part
I apply to Part II.
13) According to Mr. K.K. Venugopal, paragraphs 26 and
27 start by dealing with the arguments of Mr. Sen who argued
that Part I is not applicable to foreign awards. He further pointed G
-... out that it is only in the sentence starting at the bottom of para
t 26 that the phrase "it must immediately be clarified" that the
finding of the Court is rendered. That finding is to the effect that
an express or implied agreement of parties can exclude the
applicability of Part I. He further pointed out that the finding H
518 SUPREME COURT REPORTS [2008] 1 S.C.R.

A specifically states that, "But if not so excluded, the provisions of }- )i
Part I will also apply to all "foreign awards". This exception which
is carved out, based on agreement of the parties. By omitting
to provide that Part I will not apply to international commercial
arbitrations which take place outside India the effect would be
B that Part I would also apply to international commercial
arbitrations held out of India. But by not specifically providing
that the provisions of Part I apply to international commercial
arbitrations held out of India, the intention of the legislature
appears to be to allow parties to provide by agreement that '
c Part I or any provision therein will not apply. Thus in respect of
arbitrations which take place outside India even the ;1on-
derogable provisions of Part I can be excluded. Such an
agreement may be express or implied. He further pointed out
the very fact that the judgment holds that it would be open to the
parties to exclude the application of the provisions of Part I by
D
express or implied agreement, would mean that otherwise the
whole of Part I would apply. In any event, according to him, to
apply Section 34 to foreign international awards would not be
f .,.
I-
inconsistent with Section 48 of the Act, or any other provision of
Part II as a situation may arise, where, even in respect of
E properties situate in India and where an award would be invalid
if opposed to the public policy of India, merely because the
judgment-debtor resides abroad, the award can be enforced
against properties in India through personal compliance of the
judgment-debtor and by holding out the threat of contempt as is
F being sought to be done in the present case. In such an event, ...
the judgment-debtor cannot be deprived of his right under A

Section 34 to invoke the public policy of India, to set aside the
award. He very much relied on the judgment of this Court in Oil •
& Natural Gas Corporation Ltd. vs. Saw Pipes Ltd. (2003)
G 5 sec 705 wherein particularly, in paragraphs 30 and 31, the
public policy of India has been defined to include-
't
(a) the fundamental policy of India; or
(b) the interests of India; or
H (c) justice or morality; or
VENTURE GLOBAL ENGG. v. SATYAM COMPUTER 519
. SERVICES LTD. AND ANR. [SATHASIVAM, J.]
,,\-
(d) in addition, if it is patently illegal. A
He pointed out that this extended definition of public policy
can be by-passed by taking the award to a foreign country for
enforcement. In such circumstances, according to him, there is
nothing inconsistent between Section 48 which deals with
enforcement and Section 34 which deals with a challenge to 8
the Award. He also relied on a decision of the Division Bench
>-(
of the Calcutta High Court in Pratabmull Rameshwar vs. K.C.
Sethia Ltd., AIR 1960 Calcutta 702. In paragraphs 45 and 63,
the Calcutta High Court while dealing with Arbitration Act of 1940
sets out the reasoning in support of a challenge being c
permissible in India to a foreign award.
14) In order to find out an answer to the first and prime
issue and whether the decision in Bhatia International (supra)
is an answer to the same, let us go into the details regarding
D
the suit filed by the appellant as well as the relevant provisions
~ of the Act. The appellant-VGE filed O.S. No. 80 of2006 on the
;. -.I
file of the 1st Additional District Court, Secunderabad, for a
declaration that the Award dated 3.4.2006 is invalid,
unenforceable and to set aside the same. Section 5 of the Act
makes it clear that in matters governed by Part I, no judicial E
·~
authority shall intervene except where so provided. Section 5
which falls in Part I, specifies that no judicial authority shall
intervene except where so provided. The Scheme of the Act is
t such that the general provisions of Part I, including Section 5,
~ will apply to all Chapters or Parts of the Act. Section 2(5) which F
falls in Part I, specifies that "this part shall apply to all arbitrations
and to all proceedings relating thereto." It is useful to refer
Section 45 which is in part II of the Act which starts with non
.obstante clause namely, "Notwithstanding anything contained
in Part I or in Code of Civil Procedure ............ " Section 52 in G
1 Chapter I of Part II of the Act provides that "Chapter II of this Part
shall not apply in relation to foreign awards to which this Chapter
applies." As rightly pointed out, the said section does not exclude ·
the applicability of Part I of the Act to such awards.
H
520 SUPREME COURT REPORTS f2008] 1 S. C.R.
;..
A 15) Part 11 of the Act speaks about the enforcement of
certain foreign awards. Section 48 speaks about conditions for
enforcement of foreign awards. Section 48(1) (e) read with
Section 48(3) of the Act specify that an action to set aside the
Award would lie to the competent authority. Mr. Nariman, after
B taking us through the relevant provisions of Chapter I Part II
submitted that Section 48(1 )(e) read with Section 48(3) of the
Act specifies that an action to set aside a foreign award within y.
the meaning of Section 44 of the Act would lie to the "competent
authority of the country in which. or under the law of which, that
c award was made". According to him, the phrase "the
country ...... underthe law of which, that award was made" refers
to the country of the curial law of arbitration, in the extremely
rare situation where the parties choose a curial law other than
the law of the country of the seat of arbitration. He further pointed
out that therefore such a challenge would lie only to the competent
D
Court of the country in which the foreign award was made. He
also submitted that the said principle is recognized internationally :A
by Courts in US and UK as well as by several High Courts in
... ..
India. The US decisions which support/recognize the above
principle are :
E
(1) International Standard Electric Corp. vs. Bridas
Sociedad Anonima Petrolera, Industrial Y Comercial,
745 F.supp.172
...
(2) M & C Corporation vs. ERWIN BEHR GmbH & i
F Co., KG, a foreign corporation, 87 F.3d 844 ..
(3) Yusuf Ahmed Alghanim & Sons vs. Toys "R" US.
INC. Thr. (HK) Ltd. 126 F.3d 15
(4) Karaha Sodas Co. L.L.C. vs. Perusahaan
G Pertambangan Minyakdan Gas Bumi Negara 364 F.3d
274 ,,,.
(5) C v. D (2007) EWHC 1541
16) Apart from the above US decisions, Mr. R.F. Nariman,
H pointed out that all the Indian High Courts except the Gujarat
VENTURE GLOBAL ENGG. v. SATYAM COMPUTER 521
SERVICES LTD. AND ANR. [SATHASIVAM, J]
,
..... A
High Court in Nirma Ltd. vs. Lurgi Energie Und Entsorgung A
GMBH, Germany, AIR 2003 Gujarat 145 have taken this
consistent view in the following judgments:
(a) Bombay Gas Company Limited vs. Mark Victor
Mascarenhas & Ors., 1998 1 LJ 977
B
(b) lnventa Fischer Gmbh & Co., K.G. vs. Polygenta
~· Technologies Ltd., 2005 (2) Born C.R. 364

(c) Trusuns Chemical Industry Ltd. vs. Tata
International Ltd. AIR 2004 Gujarat 274
c
(d) Bharat Aluminium Co. Ltd. vs. Kaiser Aluminium
Technical Services, AIR 20_05 Chhatisgarh 21
(e) Bulk Trading SA vs. Dalmia Cement (Bharat)
Limited, (2006) 1 Arb.LR 38(Delhi)
D
17) On close scrutiny of the materials and the dictum laid
.,£ down in three-Judge Bench decision in Bhatia International
~ -l
(supra), we agree with the contention of Mr. K.K.Venugopal and
hold that paragraphs 32 and 35 of the Bhatia International
(supra) make it clear that the provisions of Part I of the Act would
E
apply to all arbitrations including international commercial
arbitrations and to all proceedings relating thereto. We further
hold that where such arbitration is held in India, the provisions
of Part-I would compulsorily apply and parties are free to deviate
.....
. to the extent permitted by the provisions of Part-I. It is also clear
that even in the case of international commercial arbitrations F
I
held out of India provisions of Part-I would apply unless the
parties by agreement, express or implied, exclude all or any of
its provisions. We are also of the view that such an interpretation
does not lead to any conflict between any of the provisions of
the Act and there is no lacuna as such. The matter, therefore, is G
concluded by the three-Judge Bench decision in Bhatia 4
·1
International (supra).
18) Learned senior counsel for the respondent based on
para 26 submitted that in the case of foreign award which was
H
522 SUPREME COURT REPORTS [2008] 1 S.C.R.

·;...
A passed outside India is not enforceable in India by invoking the "
provisions of the Act or the CPC. However, after critical analysis
of para 26, we are unable to accept the argument of learned
senior counsel for the respondent. Paras 26 and 27 start by
dealing with the arguments of Mr. Sen who argued that Part I is
B not applicable to foreign awards. It is only in the sentence starting
at the bottom of para 26 that the phrase "it must immediately be
clarified" that the finding of the Court is rendered. That finding is .,_
to the effect that an express or implied agreement of parties
can exclude the applicability of Part I. The finding specifically
c states: "But if not so excluded, the provisions of Part I will also
apply to all "foreign awards". This exception which is carved
out, based on agreement of the parties, in para 21 (placitum (e)
to (f) is extracted below:
"By omitting to provide that Part I will not apply to
D international commercial arbitrations which take place
outside India the effect would be that Part I would also ~
apply to international commercial arbitrations held out of ,. ..
India. But by not specifically providing that the provisions
of Part I apply to international commercial arbitrations held
E out of India, the intention of the legislature appears to be
to allow parties to provide by agreement that Part I or any
provision therein will not apply. Thus in respect of
arbitrations which take place outside India even the non-
derogable provisions of Part I can be excluded. Such an
-t
F agreement may be express or implied."
19) The very fact that the judgment holds that it would be
open to the parties to exclude the application of the provisions
of Part I by express or implied agreement, would mean that
otherwise the whole of Part I would apply. In any event, to apply
G Section 34 to foreign international awards would not be
t'
inconsistent with Section 48 of the Act, or any other provision of
Part II as a situation may arise, where, even in respect of
properties situate in India and where an award would be invalid
if opposed to the public policy of India, merely because the
H judgment-debtor resides abroad, the award can be enforced

~
VENTURE GLOBAL ENGG. v. SATYAM COMPUTER 523
SERVICES LTD. AND ANR. [SATHASIVAM, J.]

'-.
,.... against properties in India through personal compliance of the A
judgment-debtor and by holding out the threat of contempt as is
being sought to be done in the present case. In such an event,
the judgment-debtor cannot be deprived of his right under
· Section 34 to invoke the public policy of India, to set aside the
award. As observed earlier, the public policy of India includes - B·
(a) the fundamental policy of India; or (b) the interests of India;
or (c) justice or morality; or (d) in addition, if it is patently illegal.
.:ii·
This extended definition of public policy can be by-passed by
taking the award to a foreign country for enforcement.

20) Mr. K.K.Venugopal also highlighted that in Company c
Law; the word 'transfer' has a definite connotation which would
require the ownership of the shares to be transferred to the
transferee, which would involve the following steps being taken
under the Companies Act and the rules and regulations
thereunder, as well as the Foreign Exchange Management Act, D
1999 (FEMA):
~.
... --l i) Obtaining a Share Transfer Form 7-8 and having it
endorsed by the prescribed authority under the
Companies Act, 1956 in compliance with Section
108. E

ii) Execution of Share Transfer Form 7-8 by the
appellant and respondent.
iii) Payment of stamp duty on the transfer of shares.
+ F
.k iv) Sending duly executed Share Transfer Form 7-8 and
the share Certificates to SVES, the respondent No.2
herein under Section 110 of Companies Act.
v) Respondent No.2 approving the transfer of shares
and causing alternation in its Register of Members G
under Section 111A.
)'
' vi) Compliance with Rules and Regulations, completing
prescribed forms, giving relevant undertakings in
accordance with Indian foreign exchange laws and
H
524 SUPREME COURT REPORTS [2008] 1 S.C.R.

A Regulations such as the Foreign Exchange
Management Act, 1999 and its notifications, given
that the transaction involved transfer of shares from
a non-resident to a resident.

By pointing out, he submitted that respondent No.1, in
8
enforcing the Award in the US District Court instead of Indian
Courts was motivated by the intention of evading the legal and
regulatory scrutiny to which this transaction would have been
subject to had it been enforced in India. In the light of the statutory
provisions as provided in the Companies Act and FEMA, we
C agree with the submission of Mr. K.K.Venugopal.

21) As rightly pointed out the effort of respondent No.1 was
to avoid enforcement of the Award under Section 48 of the 1996
Act which would have given the appellant herein the benefit of
the Indian Public Policy rule based on the judgment in the Saw
0
Pipes case (supra) and for avoiding the jurisdiction of the
Courts in India though the award had an intimate and close nexus
to India in view of the fact that, (a) the company was situated in
India; (b) the transfer of the 'ownership interests' shall be made
in India under the laws of India as set out above; (c) all the steps
E necessary have to be taken in India before the ownership
interests stood transferred. If, therefore, respondent No.1 was
not prepared to enforce the Award in spite of this intimate and
close nexus to India and its laws, the appellant herein would
certainly not be deprived of the right to challenge the award in
F Indian Courts.
•
22) Mr. R.F. Nariman by placing the factual details, namely,
filing of petition before the Michigan Court for execution of the
Award the objection petition filed by the first respondent herein
G as well as the orders passed by the Court of Michigan, US
submitted that the appellant having participated and consented
in those proceedings is precluded from re-opening the very same ._.
issue by filing a suit in a court at Secunderabad which is not
permissible either under law or in terms of their conduct. In view
H of the legal position derived from Bhatia International (supra),
VENTURE GLOBAL ENGG. v. SATYAM COMPUTER 525
SERVICES LTD. AND ANR. [SATHASIVAM, J.]

-4-- we are unable to accept Mr. Narima~'s argument. It is relevant A
to point out that in this proceeding, we are not deciding the
merits of the claim of both parties, particularly, the stand taken
in the suit filed by the appellant-herein for setting aside the award.
It is for the concerned court to decide the issue on merits and
we are not expressing anything on the same. The present B
conclusion is only with regard to the main issue whether the
aggrieved party is entitled to challenge the foreign award which
~ was passed outside India in terms of Section 9/34 of the Act.
Inasmuch as the three-Judge Bench decision is an answer to
the main issue raised, we are unable to accept the contra view c
taken in various decisions relied on by Mr. Nariman. Though in
Bhatia International (supra) the issue relates to filing a petition
under Section 9 of the Act for interim orders the ultimate
conclusion that Part I would apply even for foreign awards is an
answer to the main issue raised in this case.
D
23) Mr. K.K. Venugopal, learned senior counsel, next
-~.,
contended that the overriding section 11.05 (c) of the
.Jt· -i Shareholders Agreement would exclude respondent No.1
approaching the US Courts in regard to enforcement of the
Award. Section 11.05 (b) and (c) of the Shareholders Agreement E
between the parties read as follows:
"(b) This Agreement shall be construed in accordance
with and governed by the laws of the State of Michigan,
United States, without regard to the conflicts of law rules
'{ ,.. of such jurisdiction. Disputes between the parties that F
> cannot be resolved via negotiations shall be submitted for
final, binding arbitration to the London Court of Arbitration.
(c) Notwithstanding anything to the contrary in this
agreement, the Shareholders shall at all times act in
G
accordance with the Companies Act and other applicable
Acts/Rules being in force, in India at any time."
l
It was pointed out that the non-obstante clause would
override the entirety of the agreement including sub-section (b)
which deals with settlement of the dispute by arbitration. It was H
526 SUPREME COURT REPORTS (2008] 1 S.C.R.

A further pointed out that sub-section (c), therefore, would apply
to the enforcement of the Award which declares that,
notwithstanding that the proper law or the governing law of the •
contract is the law of the State of Michigan, their shareholders
shall at all times act in accordance with the Companies Act and
B other applicable Acts/Rules being in force in India at any time.
In such circumstances, it is the claim of the appellant that
necessarily enforcement has to be in India, as mentioned in
sub-section (c) which overrides every other section in the
Shareholders Agreement. Mr. K.K. Venugopal further pointed
c out that respondent No.1 totally violated the agreement between
the parties by seeking enforcement of the transfer of the shares
in the Indian company by approaching the District Court in the
United States. On the other hand, Mr. Nariman pointed out that
Section 11.05 (b) of the Shareholders agreement alone governs
the rights and obligations between the appellant and the first
0
respondent inter se and dispute resolution thereof. In view of
our discussion supra, we agree with the stand of the learned
senior counsel for the appellant.
24) Coming to the other contentions particularly the fact
E that the suit has been filed before the trial Court which is a court
of competent jurisdiction under Section 2(e) of the Act and not
an application under Section 34 of the Act, Mr. K.K. Venugopal
pointed out that it would not affect the issue of jurisdiction as
this Court has upheld the conversion of a suit into a Section 9
F petition under the Act. (vide Sameer Barar and Ors. Vs. Ratan
Bhushan Jain & Ors. (2006) 1 SCC 419) and in another
instance, converted a writ petition into a first appeal under the •
Civil Procedure Code. (vide Ajay Bansal vs. Anup Mehta &
Ors. (2007) 2 SCC 275). Even otherwise, ifthe Court in question
G is not having jurisdiction in the interest of justice the suit/
proceeding has to be transferred to the court having competent
jurisdiction.
25) Learned senior counsel for the appellant submitted
that the first respondent - Satyam Computer Services Ltd. could
H not have pursued the enforcement proceedings in the District
VENTURE GLOBAL ENGG. v. SATYAM COMPUTER 527
SERVICES LTD. AND ANR. [SATHASIVAM, J)

~- Court in Michigan, USA in the teeth of the injunction granted by A
. the Courts in India which also, on the basis of the Comity of
Courts, should have been respected by the District Courts in
Michigan, USA. Elaborating the same, he further submitted that
the injunction of the trial court restraining the respondents from
seeking or effecting the transfer of shares either under the terms B
of the Award or otherwise was in force between 15.06.2006
and 27.06.2006. The injunction of the High Court in the following
~-
terms "appellant (i.e. respondent No.1) shall not effect the
transfer of shares of the respondents pending further orders"
was in effect from 27.06.2006 till 28.12.2006. The judgment of c
the US District Court was on 13.07.2006 and 31.07.2006 when
the Award was directed to be enforced as sought by respondent
No.1, notwithstanding the injunction to the effect that the appellant
(respondent No.1 herein) "shall not effect the transfer of shares
of the respondents pending further orders." The first respondent
D
pursued his enforcement suit in Michigan District Courts to have
-4"\ a decree passed directing - " ... VGE shall deliver to Satyam or
~ ~
its designee, share certificates in a form suitable for immediate
transfer to Satyam evidencing all of the appellant's ownership
interest in Satyam Ventures Engineering Services (SVES), the
party's joint venture company." Further, the "VGE (appellant E
herein) shall do all that may otherwise be necessary to effect
the transfer of its ownership interest in SVES to Satyam (or its
designee)". It is pointed out that obtaining this order by pursuing
the case in the US District Courts, in the teeth of the prohibition
-+ contained in the order of the High Court, would not only be a F
• contempt of the High Court but would render all proceedings
before the US courts a brutum tu/men, and liable to be ignored.
Though Mr. R.F.Nariman has pointed out that the High Court
only restrained the respondent from effecting transfer of the
shares pending further orders by the City Civil Court, G
..,, Secunderabad: after the orders of the trial Court as well as
limited order of the High Court, the first respondent ought not to
have proceeded the issue before the District Court, Michigan
without getting the interim orders/directions vacated.
H
528 SUPREME COURT REPORTS [2008] 1 S.C.R.

A 26) Finally, the overriding section 11.5 (c) of the SHA
cannot be ignored lightly. As pointed out, the said section would
exclude respondent No.1- Satyam Computer Services Ltd.
approaching the US Courts in regard to the enforcement of the
Award. Section 11.05 (b) and (c) of the Shareholders Agreement
B between the parties which is relevant has already been extracted
in para 23.
The non-obstante clause would override the entirety of the ·f:
agreement including sub-section (b) which deals with settlement
of the dispute by arbitration. Sub-section (c), therefore, would
c apply to the enforcement of the Award which declares that,
notwithstanding that the proper law or the governing law of the
contract is the law of the State of Michigan, their shareholders
shall at all times act in accordance with the Companies Act and
other applicable Acts/Rules being in force in India at any time.
D Necessarily, enforcement has to be in India, as declared by this
very section which overrides every other section in the
Shareholders Agreement. Respondent No .1, therefore, totally ,...
,_
violated the agreement between the parties by seeking •
enforcement of the transfer of the shares in the Indian company
E by approaching the District Courts in the United States.
27) The claim of the first respondent that the section,
namely, 11.05 (c) of the SHA cannot be construed to mean that
Indian law is a substantive law of the contract or that Indian law
would govern the dispute resolution clause in Section 11.05(b)
F are not acceptable. As rightly pointed out and observed earlier, "t-
the non obstante clause would over ride the entirety of the
agreement including sub-section (b) which deals with the
settlement of the dispute by arbitration and, therefore, section 3
would apply to the enforcement of the award. In such event,
G necessarily enforcement has to be in India as declared by the
very section which over rides every other section.
~f

28) The above-mentioned relevant aspects, the legal
position as set out in three-Judge Bench decision in Bhatia
International (supra), specific clause in the Shareholders
H
VENTURE GLOBAL ENGG. v. SATYAM COMPUTER 529
SERVICES LTD. AND ANR. [SATHASIVAM, J.]
+ Agreement (SHA), conduct of the parties have not been properly A
· adverted to and considered by the trial Court as well as the
High Court. Accordingly, both the orders passed by the City Civil
Court and of the High Court are set aside.
29) In terms of the decision in Bhatia International
(supra), we hold that Part I of the Act is applicable to the Award B
in question even though it is a foreign Award. We have not
~-
expressed anything on the merits of claim of both the parties. It
is further made clear that if it is found that the Court in which the
appellant has filed a petition challenging the Award is not
competent and having jurisdiction, the same shall be transferred c
to the appropriate Court. Since from the inception of ordering
notice in the special leave petition both parties were directed
to maintain status quo with regard to transfer of shares in issue,
the same shall be maintained till the disposal of the suit.
Considering the nature of dispute which relates to an arbitration D
Award, we request the concerned Court to dispose of the suit
~
;Jo 4 on merits one way or the other within a period of six months
from the date of receipt of copy of this judgment. Civil appeal is
allowed to this extent. No costs.
D.G. Appeal allowed. E

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