AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2017 (11) TMI 777
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....estoppel", I am unable to persuade myself to agree with his conclusions that the judgment under appeal is required to be reversed on the questions relating to public policy and fraud for the following reasons; 2. The facts of these appeals are narrated in great detail by my learned brother. There is no need to repeat except to mention those which are essential for the purpose of my conclusion. 3. An Arbitral Award dated 3^rd April, 2006 (hereinafter the AWARD) came to be passed in an arbitration between VENTURE and SATYAM. The relevant portion of the AWARD reads as under: "A. I order VGE to deliver to Satyam share certificates in form suitable for immediate transfer to Satyam or its designee evidencing all of VGE's ownership interest legal and/or beneficial in SVES. I further order it to do all that may otherwise be necessary to effect the transfer of such ownership to Satyam or its designee." 4. The dispute leading to the Arbitration and the AWARD arose out of the Agreement dated 20^th October, 1999 (Agreement I) entered into between VENTURE and SATYAM. 5. Article VIII of the said Agreement defined the expression "Events of Default" and stipulated the....
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....icle are not exclusive of any other rights or remedies available at law or in equity." 6. The arbitrator inter alia opined that an Event of Default on the part of VENTURE occurred and therefore, VENTURE (the defaulting shareholder) is liable to transfer its interest i.e. 50 per cent of the shares in the JVC to SATYAM (non-defaulting shareholder). 7. SATYAM filed a petition in the Eastern District Court of Michigan, US seeking enforcement of the AWARD against VENTURE. Admittedly, the petition was allowed on 31^st 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^th Circuit, US Appellate Court in Michigan. 8. I assume for the purpose of these appeals that the directions of the Eastern District Court of Michigan dated 31^st July, 2006 is legally tenable. In the final analysis, enforcement of the AWARD means transfer of the shares (property of VENTURE) in the JVC. Since the JVC is a company registered (incorporated) in India, transfer of shares therein will have to be effected in accordance with the relevant procedure established by law of India i.e. the Compa....
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....United States of America. Subsequently, even that application was dismissed as withdrawn by an Order of that Court dated 25^th April, 2006. 11. Thereafter, VENTURE filed OS No. 80 of 2006 on 28^th April, 2006 before the Ist Additional Chief Judge, City Civil Court, Secunderabad seeking mainly two reliefs: i. a declaration that the Award was illegal and without jurisdiction; and ii. a permanent injunction restraining Satyam from enforcing the Award. 12. This Court had an occasion to examine the maintainability of the said suit in an appeal arising out of certain interlocutory proceedings (detailed in the judgment of my learned brother) in Venture Global Engineering v. Satyam Computer Services Ltd. & Another, (2008) 4 SCC 190 (hereinafter called VENTURE-I). In substance, this Court held (subject to certain qualifications) that VENTURE is not disentitled to challenge the AWARD in India. 13. Consequent upon the judgment in VENTURE-I, the Ist Additional Chief Judge, City Civil Court, Secunderabad transferred O.S. No. 80 of 2006 to the Court of 2^nd Additional Chief Judge City Civil Court at Hyderabad. The suit was converted into an application under Section 34....
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....raud in the making of the award" has to be narrowly construed. This Court cannot do so primarily because fraud being of "infinite variety" may take many forms, and secondly, the expression `the making of the award' will have to be read in conjunction with whether the award "was induced or affected by fraud". 40. On such conjoint reading, this Court is unable to accept the contentions of the learned counsel for the respondents that facts which surfaced subsequent to the making of the award, but have a nexus with the facts constituting the award, are not relevant to demonstrate that there has been fraud in the making of the award. Concealment of relevant and material facts, which should have been disclosed before the arbitrator, is an act of fraud. If the argument advanced by the learned counsel for the respondents is accepted, then a party, who has suffered an award against another party who has concealed facts and obtained an award, cannot rely on facts which have surfaced subsequently even if those facts have a bearing on the facts constituting the award. Concealed facts in the very nature of things surface subsequently. Such a construction would defeat the p....
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....on and findings. Under point number 1, it is held that the present proceeding after conversion from the Suit to the Original Petition cannot be construed to be a suit and hence cannot be rejected on the assumption that the suit is not maintainable. Under point number 2, it is held that the present proceeding which to be construed as an Original Petition under Section 34 of the Act is not liable to be dismissed as not maintainable. Under point number 3 it is held that the instant proceeding i.e. Original Petition is not barred by Law of Limitation. Under point number 4 answered against the Petitioner it is held that bankruptcy of Petitioner's affiliates had constituted a bankruptcy event as per the terms and conditions agreed to between the parties. However, it is to be noted that when this finding was recorded by the Arbitral Tribunal the additional pleas now urged by the Petitioner before this court were not available to the Petitioner and hence the additional pleas were not brought to the notice of the learned Arbitral Tribunal. The said findings of the Arbitral Tribunal can be sustained if only the issue of fraud is not taken into consideration. Thus, in the ab....
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....h acts of fraud have causative link, and hence, the award which is affected and inducted by fraud is vitiated and cannot be enforced being opposed to Public Policy of India and is liable to set aside on the grounds of material suppression of facts, fraud, incapacity of the Petitioner and violation of Public Policy of India). In the opinion of the trial court, the AWARD "is affected and induced by fraud" and cannot be enforced being opposed to public policy of India. 22. Whether the above conclusions are tenable? was the question before the High Court. The High Court framed 8 points for consideration in the judgment under appeal. "1) Whether the institution of the proceedings by the 1st respondent in the Indian Courts to enforce a foreign award can be justified in view of the judgment of the Supreme Court in BALCO'S case (4 supra)? 2) Whether the principle of 'issue estoppel' gets attracted in the facts of the case? 3) Whether it is competent for a party to arbitration to invoke Part-I as well as Part-II of the Arbitration Act in relation to a foreign award? 4) Whether the ground of fraud raised by the appellant has been pleaded and proved a....
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.... to public policy, an aggrieved party cannot be expected to raise that plea before the Arbitrator; and if the violation of the public policy is brought about by the award, the complaint cannot be made at any stage, anterior to that. However, when a ground of that nature is raised under Section 34 of the Act, it must be demonstrated as to how the award is opposed to public policy. Even at the cost of repetition, it can be said that, it is only when the award exhorts a party to the proceedings to take steps, that has the effect of contravening law of the land, in which it is to be enforced, that the ground can be invoked. There is not even a semblance of finding by the trial Court in this behalf. It is trite that every step for enforcing the award must be in accordance with the relevant provisions of law. Therefore, we answer this point in favour of the appellant." 25. The net result of the litigation is that while the Trial Court set aside the AWARD, the High Court reversed the trial court judgment and restored the AWARD. 26. Aggrieved by the judgment, the present two appeals are filed one by VENTURE and other by SATYAM now represented by Tech Mahindra. 27. Natural....
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.... arbitration may be set aside; or v. the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Part from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Part; or b. the Court finds that i. the subject-matter of the dispute is not capable of settlement by arbitration under the law for the time being in force, or ii. the arbitral award is in conflict with the public policy of India. Explanation I.-For the avoidance of any doubt, it is clarified that an award is in conflict with the public policy of India, only if,- (i) the making of the award was induced or affected by fraud or corruption or was in violation of section 75 or section 81; or (ii) it is in contravention with the fundamental policy of Indian law; or (iii) it is in conflict with the most basic notions of morality or justice. Explanation 2.- For the avoidance of doubt, the test as to whether there is a contravention with the fundamental policy of Indian law shall not ent....
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....ly one, that the AWARD is in conflict with the public policy of India. Because the conclusion of the trial court on Point Nos. 6 & 7 framed by it that "the AWARD is affected and induced by fraud" is also an aspect of the "conflict with the public policy of India." 32. I am of the opinion that the High Court is right in reversing the judgment of the trial court, though the reasons given by the High Court, in my opinion, are not very elegant and logical. Therefore, I propose to examine the correctness of the conclusions of the trial court on Points No.5, 6 & 7 framed by it. PUBLIC POLICY: 33. The trial court recorded that the AWARD is required to be set aside on the ground that the AWARD is opposed to the public policy of India. In the opinion of the trial court, the AWARD contained directions which are in conflict with the FEMA Act and Regulations made thereunder. The trial court considered this under Point No.5 framed by it in para no.10 of its judgment. It framed the question as follows: "(a) The question under this point is this: 'Whether the award in so far as the order of transfer of petitioner's shares to the 1st Respondent at the book value is a violation....
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....gulations 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. 37. Assuming for the sake of argument that there is some stipulation in the abovementioned regulation which forbids the transfer of shares in question except "for a fair value", there is no discussion in the judgment of the trial court as to; (i) what is meant by fair value of the shares under FEMA; (ii) how that fair value is to be determined; (iii) whether the fair value of shares is the same as market value of shares; (iv) what exactly is the fair value of the shares in question; The trial court did not even record a finding that the book value of the shares of the JVC is less than that of their market value or fair value. It must also be pointed out here that the trial court did not even refer to any pleading on the basis of which submission was made before it. 38. The entire exercise undertaken by the trial court only demonstrates the ....
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....lected in the books was further accentuated by the fact that the company had to carry additional resources and assets to justify higher lever of operations - thereby significantly increasing the costs). Ramalinga Raju's statement is not very clear regarding the point of time at which the fudging of the accounts of SATYAM commenced. (The trial court at para 11(a) of the judgment recorded a submission that the fudging commenced w.e.f. the year 2002.) 42. In my opinion, Points No.6 & 7 framed by the trial court are too vague and imprecise. Section 34(2) of the ACT declares that if making of an award is either "induced or affected by fraud", the same is liable to be set aside. Whether the facts relating to the fudging of the accounts of SATYAM and the non-disclosure of those facts by SATYAM before the arbitrator would amount either (i) to 'inducing' the making of the AWARD by fraud; or (ii) the AWARD made in ignorance of those facts by virtue of non-disclosure of those facts by SATYAM would be an 'award affected by fraud', - would be the questions relevant for deciding whether the AWARD is required to be set aside. 43. The expression "Fraud" has no definition in law which has ....
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....ith his connivance, or by his agent, with intent to deceive another party thereto or his agent, or to induce him to enter into the contract:- (1) the suggestion, as a fact, of that which is not true, by one who does not believe it to be true; (2) the active concealment of a fact by one having knowledge or belief of the fact; (3) a promise made without any intention of performing it; (4) any other act fitted to deceive; (5) any such act or omission as the law specially declares to be fraudulent.) 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 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. 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 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 ....
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....disclosure would render the AWARD liable to be set aside is wholly untenable. No reference is made to the pleadings of VENTURE as to how VENTURE believed that the "CONCEALED FACTS" are material for the adjudication of the dispute by the arbitrator. Equally absent is the discussion by the trial court as to how the "CONCEALED FACTS" would become material facts in the context of the arbitration. In the entire discussion on point nos.6 & 7, the trial court does not give any reason justifying the conclusion that the "CONCEALED FACTS" are material facts in the context of the arbitration. Except mechanically repeating the words of this Court that the non-disclosure or concealment of the material facts before the arbitrator is an act of fraud, there is no discussion as to how the CONCEALED FACTS are material facts whose concealment resulted in inducing the making of the AWARD by fraud or affected by fraud. 46. It must be remembered here that this Court in VENTURE-II categorically declared: "44. This Court also holds that the facts concealed must have a causative link. And if the concealed facts, disclosed after the passing of the award, have a causative link with the facts cons....
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....ry jurisdiction under Article 136 of the Constitution of India. I would therefore dismiss the appeals of VENTURE. CIVIL APPEAL No. OF 2017 (ARISING OUT OF SLP (C) No. 8298/2014) 49. If this Court agrees with the conclusion of the High Court that the AWARD is not liable to be set aside, the appeal of SATYAM would become purely academic. Even otherwise, a reading of the Special Leave Petition discloses, all that SATYAM is seeking is to reagitate the question of the applicability of Part-I of the ACT to an international commercial arbitration. In other words, it is a challenge to the correctness of the decision of a Constitution Bench of this Court in BALCO's case. I am of the opinion that such a course ought not to be permitted. I would, therefore, dismiss the appeal of SATYAM. JUDGMENT Abhay Manohar Sapre, J. 1. Special Leave Petition (Civil) Nos.29747-29749 of 2013 are filed by the Venture Global Engineering LLC. Special Leave Petition (C) No.8298 of 2014 is filed by Tech Mahindra Ltd. Both of them are Bodies Corporate. They are the plaintiff and the 1st defendant respectively in O.S. No.87 of 2012 on the file of the 1st Additional Chief Judge, City Civil Court, S....
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....t in clauses (a) to (d). One such event specified in Clause (a) is - "A bankruptcy event when occurs with respect to a shareholder." It reads as under: "Section 8.01 Events of Default For purposes of this Agreement, an "Event of Default" means, with respect to any Shareholder, the occurrence of any of the following: (a) A Bankruptcy Event occurs with respect to such Shareholder. (b) Subject to clause (c) and (d) below, such Shareholder breaches this Agreement in an material respect and fails to cure such breach within thirty(30) days after being notified in writing the other Shareholder of such breach. (c) A Shareholder Transfers, or attempts to Transfer, any Shares in violation of the transfer restrictions set forth in Article VII of this Agreement. (d) Such Shareholder is subject to a Change in Control." (iii) Section 8.02 provides the consequences of the occurrence of any "event of default". It reads as under: "Section 8.02 Rights Upon Events of Default Generally Upon the occurrence of an Event of Default (other than a Bankruptcy Event) with respect to any Shareholder (the "Defaulting Shareholder"), the other Shar....
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....eement to the senior officer VENTURE and the senior officer of SATYAM designees for their review and resolution in such manner as they deem necessary or appropriate. Compliance with this Section 11.5 (a) shall be a condition precedent to the commencement of any judicial or other legal proceeding." (vi) Section 11.05 (b) stipulates the governing law of the agreement; "(b) This Agreement shall be construed in accordance with and governed by the laws of the State Michigan, United States, without regard to the conflicts of law rules of such jurisdiction. Disputes between the parties that cannot be resolved via negotiations shall be submitted for final, binding arbitration to the London Court of Arbitration." It provides that the disputes between the parties, if not settled through negotiations, shall be referred to arbitration to the London Court of International Arbitration (hereinafter referred to as LCIA). (vii) Section 11.05(c) stipulates ensuring compliance of provisions of Companies Act and other applicable Acts/Rules, which are in force in India at any time. It reads as under: "(c) Notwithstanding anything to the contrary in this agreement, the Shareho....
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....uptcy)" on the part of Venture had occurred entitling Satyam to claim reliefs specified in Section 8.03 of Agreement-I against Venture. The Arbitrator also held that Venture violated Agreement-II by failing to provide business as stipulated in the Agreement. 20. The relevant part of the operative portion of the Award reads as under: "A. I order VGE (VGE = VENTURE) to deliver to Satyam share certificates in form suitable for immediate transfer to Satyam (Satyam = SATYAM) or its designee evidencing all of VGE's ownership interest (legal and/or beneficial) in SVES (SVES = JVC). 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 6.1A above, I order Satyam to pay VGE US$622,656, such sum being the net difference between the amount payable by Satyam to VGE for the book value of the share of SVES (plus interest) and the amount payable by VGE to Satyam for the disgorgement of royalties paid to VGE by SVES (plus interest). C. I order VGE to pay Satyam GBP48,777.48, the costs of the Arbitration as determined by the LCI....
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....e allowed the application. The plaint was rejected. 29. Challenging the said order, Venture filed appeal before the High Court. The High Court dismissed the appeal on 27.02.2007. 30. Aggrieved by the said order, Venture moved this Court. This Court allowed the appeal by a reported judgment in Venture Global Engineering vs. Satyam Computer Services Ltd. & Anr., (2008) 4 SCC 190 (hereinafter referred to as "Venture-I"). This Court, inter alia, held that: (i) Venture was entitled to challenge the Award in Indian Courts as the provisions of Part I of AAC Act will apply to the Award in the light of law laid down in Bhatia International vs. Bulk Trading S.A. & Anr., (2002) 4 SCC 105 (See Paras 33/35); (ii) That Award violates the provisions of FEMA and the Companies Act (Para 34); (iii) That parties will have a right to challenge the Award including its enforceability in Indian Courts by virtue of Section 11.05(c) of Agreement-I which has an overriding effect on all clauses of the Agreement including Section 11.05(b) - (Para 39); (iv) That Satyam violated the terms of Agreement-I when they sought transfer of shares of Indian company in US Courts ....
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.... 7080 crores. M/s Price Waterhouse Cooper (PWC), the auditors of Satyam was compelled to declare that the financial statements of Satyam could no longer be considered accurate or/and reliable. 36. Venture filed an application (IA No. 1331 of 2009 dated 12.06.2009) under Order VIII Rule 9 of the Code in O.P. No.390/2008 seeking permission to bring additional facts on record by amending the pleadings to question the legality of the Award. It was contended that the disclosure of facts made by Ramlainga Raju prima facie constituted a fraud and misrepresentation committed by Satyam on all the stakeholders including Venture and, therefore, the Award is liable to be set aside on this ground in addition to those already taken. The Trial Court, by order dated 03.11.2009, allowed the application. 37. Challenging the order, Satyam filed a revision before the High Court. By order dated 19.02.2010, the revision was allowed. The application (IA No.1331/2009) filed by Venture stood dismissed. The High Court held that under Section 34 of the AAC Act, an application for setting aside of an Award could be filed only within 3 months (extendable by 30 days) from the date of the Award and a new g....
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....hat question will be decided by the court where the setting-aside proceeding is pending. The proceeding for setting aside the award may be disposed of as early as possible, preferably within 4 months." 41. On 28.12.2010, Venture filed a complaint (suit) in U.S. District Court of Easter District of Michigan against Satyam alleging, inter alia, that the Award is vitiated by the fraudulent conduct of the former Chairman of Satyam, who suppressed the material facts in the arbitral proceedings. In the complaint (suit), Venture alleged that Ramalinga Raju played fraud and misrepresentation on all stakeholders of Satyam including Venture and also on judicial process. It, therefore, prayed that the Award in question be set aside on this ground. 42. Satyam entered appearance in the aforesaid complaint/suit filed by Venture and opposed the complaint on several grounds. By order dated 30.03.2012, U.S. District Court dismissed the Venture's complaint/suit. On 10.04.2012, Venture filed an application in the complaint seeking permission to amend the complaint/suit. The U.S. Court, by order dated 23.08.2012, dismissed the application. On 21.09.2012, Venture filed an appeal to U.S. Court of ....
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....foresaid judgment, Venture filed another civil suit being O.S.No.87/2012 in the Court of Ist Additional Chief Judge, Secunderabad against Satyam seeking restitution of all their rights in JVC as a consequence of setting aside of the Award. During the pendency of the suit, Venture also applied for grant of ex parte interim relief (IA No.1143/2012) in relation to transfer of shares of JVC and by another application being IA No. 1360/2012 sought order restraining Satyam and JVC not to take any major decision in the affairs of JVC. 48. By orders dated 27.04.2012 and 04.06.2012, both the applications were disposed of by the 1st Additional Chief Judge directing the parties to maintain status quo in relation to the subject matter of both the I.As. 49. Satyam preferred two appeals against the said two orders - CMAs 834 and 844 of 2012. The three appeals were clubbed together. 50. By interim order dated 22.08.2012, the High Court directed all the parties to appeals to maintain status quo in relation to the affairs of JVC and also 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 appea....
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....747-49 of 2013 and respondent in S.L.P.(C) No.8298 of 2014, Mr. K.V. Vishwanathan, learned senior counsel for Tech Mahindra Ltd.-respondent No.1 in SLP(C) Nos.29747-49 of 2013 and appellant No.1 in S.L.P.(C) No.8298 of 2014 and Mr. Iqbal Chagla, learned senior counsel for Satyam Venture Engineering Services-respondent No.2 in SLP(C) Nos.29747-49 of 2013 and appellant No.2 in S.L.P.(C) No.8298 of 2014 and also perused the written submissions filed by the parties. 56. Mr. K. K. Venugopal, learned senior counsel, appearing for the Venture while assailing the legality and correctness of the impugned judgment urged many-fold submissions as detailed hereinbelow and submitted that the impugned judgment is legally unsustainable inasmuch as it is based on wrong application of law which governs the issues whereas the order of the Trial Court which rightly allowed the application filed by the appellant under Section 34 of the AAC Act and set aside the award deserves to be restored. 57. While elaborating his arguments, learned senior counsel submitted that firstly, the Award impugned in Section 34 proceedings out of which these appeals arise is vitiated on account of fraud, misrepresenta....
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....ed senior counsel submitted that firstly, the fraud/misrepresentation /suppression played by Mr. Raju in the affairs of Satyam was prior in point of time as compared to the "event of default" by the Venture and secondly, the acts of Mr. Raju also constituted an "event of default" under Section 8.01(b) read with Section 11.05 (c) for termination of Agreement-I and for claiming reliefs against Satyam as per Agreement-I. 63. In the fifth place, learned senior counsel submitted that the confessional statement of Mr. Raju was a "notorious fact" and known to the whole world and especially known to those in market and, therefore, judicial notice of such fact could be taken by the Court for relying upon the letter including its contents against Satyam without any further evidence to prove it. 64. In the sixth place, learned senior counsel submitted that it is a fundamental principle of law that any award/order/judgment passed in judicial proceedings once found to have been obtained by a party against his adversary by taking recourse to illegal means such as fraud, manipulation, misrepresentation, suppression of material facts etc. then the entire judicial proceedings including award/....
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.... in affairs of Satyam and his acts were sufficient for terminating the Agreement-I and seek appropriate relief as provided in the Agreement-I. 71. In the tenth place, learned senior counsel, placing reliance on the doctrine of "alter ego of the Company", contended that this doctrine applies to the facts of this case and, therefore, if the issues arising in the case are examined in the light of this doctrine, the Award impugned is liable to be set aside on this ground also. 72. In the eleventh place, learned senior counsel contended that in order to decide the questions involved, it is not necessary to appreciate any evidence and the issues have to be decided only on the basis of material on record, which is not in dispute. Learned counsel, therefore, urged that keeping in view these submissions, the Award is against the public policy of India as explained and clarified in Section 34(2)(b)(ii) Explanation I(i)(ii) and (iii) read with Explanation 2 of the AAC Act and hence it deserves to be set aside on this ground also. 73. It is essentially these submissions and some more which are dealt with infra were elaborated by the learned counsel with the aid of relevant sections of....
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.... 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 8.01(b) read with Section 11.05(c) thereby entitling the Venture to terminate the Agreement I and claim relief as contemplated in Sections 8.03 and 8.04 against Satyam; and third, if the aforesaid questions are answered in affirmative then whether they constitute a ground to enable the Court to set aside the Award under Section 34 of AAC Act. 79. Before I examine the facts of this case to answer the aforementioned questions, it is necessary to take note of the law, which applies to the case on hand. Indeed, if I may say so, it is fairly well settled by the several decisions of this Court. 80. The expression "fraud" occurring in Section 34 is not defined in the AAC Act but is defined in Section 17 of the Indian Contract Act,1872. It reads 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....
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....i Devi & Ors., (2003) 8 SCC 319 in the following words: "Fraud as is well known vitiates every solemn act. Fraud and justice never dwell together. Fraud is a conduct either by letter or words, which induces the other person or authority to take a definite determinative stand as a response to the conduct of the former either by word or letter. It is also well settled that misrepresentation itself amounts to fraud. Indeed, innocent misrepresentation may also give reason to claim relief against fraud. A fraudulent misrepresentation is called deceit and consists in leading a man into damage by willfully or recklessly causing him to believe and act on falsehood. It is a fraud in law if a party makes representations which he knows to be false, and injury ensues therefrom although the motive from which the representations proceeded may not have been bad. An act of fraud on court is always viewed seriously. A collusion or conspiracy with a view to deprive the rights of others in relation to a property would render the transaction void ab initio. Fraud and deception are synonymous. Although in a given case a deception may not amount to fraud, fraud is anathema to all equit....
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....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 other accordingly acts upon it and so alters his previous position. (See - Kerr on Fraud and Mistake - Seventh Edition, page 110). 89. The author said that where there is a duty or obligation to speak, and a man in breach of that duty or obligation holds his tongue and does not speak and does not say the thing which he was bound to say, if that be done with the intention of inducing the other party to act upon the belief that the reason why he did not speak was because he had nothing to say, there is a fraud (See- Kerr on Fraud and Mistake-Seventh Edition, page 110). 90. So far as expression "public policy of India" in the context of arbitration cases is concerned, this Court examined the meaning, scope and ambit of this expression for the first time in the case of Renusagar Power Co. Ltd. vs. General Electric Co., 1994 Suppl(1) SCC 644 in the context of Foreign Awards (Recognition ....
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....ls in the Agreement, (2) Clause C of Recitals, (3) Section 1.01(c) and (d), (4) Section 3.02-Place of business, (5) Section 4.01-Authority of Board; Election of Chairman, (6) Section 4.03-Board Meetings and related matters, (7) Section 4.06-Financial, Accounting and Tax Matters, (8) Section 5.06- Capital, (9) Section 5.07-Relationship between the Shareholders and the Company, (10) Section 5.08- Power of Board of Directors, (11) Section 6.03- Ownership of Proprietary Information; Public Disclosures; Non-use of Proprietary and Confidential information, (12) Section 6.07- Representation and Warranties, (13) Definitions of expressions - (a) Affiliate, (b) Company's Act, and (c) Shareholder or Shareholders. 95. Reading of Agreement-I as a whole and, in particular, in the context of the afore-noted sections of the Agreement would go to show (1) the nature of the Joint Venture Agreement, (2) who are parties to the agreement and what are their inter se rights and obligations, and (3) how and in what manner the JVC was to do business in India. 96. Following features emerge from reading the Agreements: (i) First, the Joint Venture Agreement was between the "Satyam and its affi....
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....an of JVC and he presided over all the Board of Directors meetings of JVC from 2000 onwards in addition to presiding over of the Board meetings of Satyam being its Chairman. 98. At this stage, it is apposite to reproduce in verbatim the most crucial document namely, a "confessional statement of Mr. Raju in the form of a letter dated 7th January, 2009 addressed to Satyam's Board of Directors". It is this confessional statement, which turned the entire complexion of the case on hand. 99. As mentioned above, this Court, in earlier round of litigation in two decisions, namely, Venture I and II, permitted the Venture to raise the additional plea in Section 34 proceedings to challenge the arbitral proceedings including the Award on the basis of Mr. Raju's confessional statement made on 07.01.2009. It was held by this Court that such being a material fact which came into existence as a subsequent event had a direct bearing over the issues arising in the case, the legality and correctness of arbitral proceedings including the Award could, therefore, be tested in the light of this material subsequent event. It was also held that since the case on hand relates to the period pri....
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....uated by the fact that the company had to carry additional resources and assets to justify higher level of operations - thereby significantly increasing the costs. Every attempt made to eliminate the gap failed. As the promoters held a small percentage of equity, the concern was that poor performance would result in a take-over, thereby exposing the gap. It was like riding a tiger, not knowing how to get off without being eaten. The aborted Maytas acquisition deal was the last attempt to fill the fictitious assets with real ones. Maytas' investors were convinced that this is a good divestment opportunity and a strategic fit. Once Satyam's problem was solved, it was hoped that Maytas' payments can be delayed. But that was not to be. What followed in the last several days is common knowledge. I would like the Board to know: 1. That neither myself, nor the Managing Director (including our spouses) sold any shares in the last eight years - excepting for a small proportion declared and sold for philanthropic purposes. 2. That in the last two years a net amount of Rs. 1,230 crore was arranged to Satyam (not reflected in the books of Satyam) to....
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.... few people to 53,000 people, with 185 Fortune 500 companies as customers and operations in 66 countries. Satyam has established an excellent leadership and competency base at all levels. I sincerely apologize to all Satyamites and stakeholders, who have made Satyam a special organization, for the current situation. I am confident they will stand by the company in this hour of crisis. In light of the above, I fervently appeal to the board to hold together to take some important steps. Mr. T.R. Prasad is well placed to mobilize support from the government at this crucial time. With the hope that members of the Task Force and the financial advisor, Merrill Lynch (now Bank of America) will stand by the company at this crucial hour, I am marking copies of this statement to them as well. Under the circumstances, I am tendering my resignation as the chairman of Satyam and shall continue in this position only till such time the current board is expanded. My continuance is just to ensure enhancement of the board over the next several days or as early as possible. I am now prepared to subject myself to the laws of the land and face consequences thereof. ....
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....f accepting the existence of matters which are unquestionably within public knowledge. (See Taylor, 11th Edn., pp. 3-12; Wigmore, Section 2571, footnote; Stephen's Digest, notes to Article 58; Whitley Stokes' Anglo-Indian Codes, Vol. II, p. 887.) Shutting the judicial eye to the existence of such facts and matters is in a sense an insult to commonsense and would tend to reduce the judicial process to a meaningless and wasteful ritual. No court therefore insists on formal proof, by evidence, of notorious facts of history, past or present. The date of poll, the passing away of a man of eminence and events that have rocked the nation need no proof and are judicially noticed. Judicial notice, in such matters, takes the place of proof and is of equal force. In fact, as a means of establishing notorious and widely known facts it is superior to formal means of proof. Accordingly, the courts below were justified in assuming, without formal evidence, that the Railway strike was imminent on May 5, 1974 and that a strike paralysing the civic life of the Nation was undertaken by a section of workers on May 8, 1974." 103. I apply the aforementioned principle of law to the facts of this case ....
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....n the part of Mr. Raju which he himself candidly confessed to have done it by expressing his regrets only in his letter dated 07.01.2009. In my view, the principle of law quoted from "Kerr" above squarely applies to the facts of this case. I, accordingly, hold so against Satyam. 111. This takes me to examine the next question as to whether the acts of Mr. Raju, in the affairs of Satyam, amount to "event of default" under Sections 8.01 and 11.05(c) of Agreement-I and, if so, its effect on the rights of the parties to the Agreement. 112. In my opinion, the acts of Mr. Raju amount to "event of default" under Section 8.01(b) and Section 11.05(c) of Agreement-I for the following reasons: 113. First, the acts satisfy the requirements of Section 8.01(b) read with Section 11.05 (c) of Agreement-I. 114. Second, Section 11.05(c) which gives overriding effect on all Sections of Agreement I casts an obligation on "Shareholders" to ensure compliance of all laws of India. The expressions "Shareholder" and "Shareholders" include "Venture", "Satyam", their affiliates and assigns. 115. A fortorari, non-compliance of any provision(s) of any Act/Rules by any shareholder would, therefor....
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.... 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. 121. In the light of aforesaid reasons, any major event occurring in the affairs of Satyam could be made basis for determining the rights of the parties arising out Agreement I. 122. A fortiori, the acts of Mr. Raju, in the affairs of Satyam, had also direct bearing over the claim filed by Satyam against Venture in arbitration proceedings in London Court of Arbitration in 2005 because Satyam's claim also arose out of Agreement I/II. Had Mr. Raju brought his acts of Satyam to the notice of shareholders/Board of Directors of JVC in any Board meeting of JVC, Venture too would have been able to get first right to terminate Agreement-I under Section 8.01(b) read with Section 11.05(c) and claim appropriate reliefs against Satyam because, as held above, Satyam breach was prior in point of time. 123. In my opinion, Venture was, therefore, deprived....
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....ual commission and would necessarily result in vitiating such judicial proceedings. Such is the case here. 127. The Award of an arbitral Tribunal can be set aside only on the grounds specified in Section 34 of the AAC Act and on no other ground. The Court cannot act as an Appellate Court to examine the legality of Award nor it can examine the merits of claim by entering in factual arena like an Appellate Court. It has to confine its enquiry only to the limited issue as to whether any ground specified in Section 34 of AAC Act is made out or not. Once the ground under Section 34 of the AAC Act is made out, the Award then has to be set aside. In the case on hand, in my view, a ground under Section 34(2)(b)(ii) read with Explanation I (i)(ii) and (iii) is made out. I accordingly hold so. 128. In the light of foregoing discussion, I am of the opinion that the arbitral proceedings including the Award in question was passed in violation of public policy of India under Section 34(2)(b)(ii) read with Explanation 1(i), (ii) and (iii) of the AAC Act and thus not legally sustainable. I accordingly hold so. 129. This takes me to examine the next argument of learned senior counsel for t....
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....clusive in all subsequent proceedings between the parties to the adjudication." It should be kept clearly in mind that the proceeding referred to herein is a criminal prosecution. The plea of issue-estoppel is not the same as the plea of double jeopardy or autrefois acquit. In King v. Wilkes, 77 CLR 511, Dixon, J., referring to the question of issue-estoppel said: "...it appears to me that there is nothing wrong in the view that there is an issue-estoppel, if it appears by record of itself or as explained by proper evidence, that the same point was determined in favour of a prisoner in a previous criminal trial which is brought in issue on a second criminal trial of the same prisoner... There must be a prior proceeding determined against the Crown necessarily involving an issue which again arises in a subsequent proceeding by the Crown against the same prisoner. The allegation of the Crown in the subsequent proceeding must itself be inconsistent with the acquittal of the prisoner in the previous proceeding. But if such a condition of affairs arises I see no reason why the ordinary rules of issue-estoppel should not apply.... Issue-estoppel is concerned wi....
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.... dealt with separately again in detail. 134. Yet, another submission of Mr. Vishwanathan in Satyam's appeal that Satyam still has a right to raise the issues on merits in Section 34 proceedings in Trial Court has no substance in the light of what I have held above. 135. In my view, the issues arising in the case must be given quietus in third round of litigation in this Court and which I hereby give to the case. Moreover, when the grounds urged by the appellant (Venture) to attack the Award are made out on merits in these proceedings and which were also dealt with by the two Courts below then I do not find any justification to again send the case back to the Trial Court to decide the case on merits on some other ground. It is more so when such prayer was not made in the Courts below. 136. That apart, there is enough material on record on which decision could be rendered on the merits of the case. Indeed, it was so rendered by the Trial Court and the High Court though of reversal. In the light of facts emerging from the record, it is not considered necessary to have another round of litigation for filing any additional material or to adduce any more evidence again before....