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CASE NO.: Appeal (civil)  309 of 2008

PETITIONER: Venture Global Engineering

RESPONDENT: Satyam Computer Services Ltd. & Anr.

DATE OF JUDGMENT: 10/01/2008

BENCH: Tarun Chatterjee & P. Sathasivam

JUDGMENT: JUDGMENT

(Arising out of SLP (C) No.8491 OF 2007)

P. Sathasivam, J. 1)      Leave granted.  2)       Appellant - Venture Global Engineering (in short \021VGE\022),  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.  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.   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 \023SCSL\024), a  registered company having its office at Mayfair Centre, S.P.  Road, Secunderabad entered into a Joint Venture Agreement  to constitute a company named Satyam Venture Engineering  Services Ltd. respondent No.2 herein (in short \023SVES\024) 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 (in short \023SHA\024) which provides that  disputes have to be resolved 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 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\022s shares in SVES at  its book value.  On 25.07.2005, respondent No.1 filed a  request for arbitration with the London Court of International  Arbitration which appointed Mr. Paul B Hannon as sole  arbitrator on 10.9.2005.  The sole Arbitrator on 3.4.2006  passed an award directing the appellant \026 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 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 ordered transfer of shares which was in

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violation of Indian Laws and Regulations specifically the  Foreign Exchange Management Act, 1999 (in short \023FEMA\024)  and its notifications.  The appellant filed a suit being O.S. No.  80 of 2006 before the Ist Additional Chief Judge, City Civil  Court, Secunderabad on 28.4.2006 seeking declaration to set  aside the award and permanent injunction on the transfer of  shares under the Award.  On 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 filed  an appeal before the High Court of Andhra Pradesh.  The High  Court admitted respondent\022s 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 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 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 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.    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 Ist Additional Chief Judge-City Civil Court,  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 \023the Act\024) applies to foreign awards is  covered by the judgment of this Court in Bhatia  International vs. Bulk Trading S.A. & Anr., (2002) 4  SCC 105. ii)     The first respondent - Satyam Computer Services Ltd.  could not have pursued the enforcement proceedings in  the District Court in Michigan, USA 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.   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. Nariman, learned senior  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.   (ii)    No application under Section 34 of the Act would lie to  set aside the Award. (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 the  civil suit filed at Secunderabad is not maintainable.

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(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 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 the Award, the  appellant cannot agitate the very same 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  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 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  2000.  The appellant-Bhatia International entered into a  contract with the first respondent \026 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 \023ICC\024).  On 23.10.1997, the  Ist respondent made a request for arbitration with ICC.   Parties had agreed 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 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  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, Indore Bench and the same was dismissed by the  impugned judgment dated 10-10-2000. Several contentions  have been 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 said Act would apply. Sub-section (2)  of Section 2 of the Act makes it clear that the provisions of  Part I do not apply where the place of arbitration is not in  India. The Court at Indore could not have entertained the  application under Section 9 of the 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 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 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:

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\02314. 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  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 not  a signatory to the New York Convention or the Geneva  Convention (hereinafter called \023a non-convention country\024).  It would mean that there is no law, in India, governing such  arbitrations.   

( b ) Lead to an anomalous situation, inasmuch as Part I  would apply to Jammu and Kashmir in all international  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 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  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.\024   \02316. 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  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 \023the  convention country\024). An international commercial  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 country. Mr.  Sen fairly admitted that Part II would not apply 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 Convention. It is not  possible to accept the submission that the said Act makes no  provision for international commercial arbitrations which  take place in a non-convention country.\024  \02317. Section 1 of the said Act reads as follows:  \0231. Short title, extent and commencement .\027(1) This Act may  be called the Arbitration and Conciliation Act, 1996.   (2) It extends to the whole of India:   Provided that Parts I, III 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 conciliation.\024  The words \023this Act\024 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

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from the proviso which provides that Parts I, III and 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 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  arbitration takes place outside India, Part I would continue  to apply in Jammu and Kashmir, but it would not apply to  the rest of India. The legislature could not have so intended.\024   \02321. Now let us look at sub-sections (2), (3), (4) and (5) of  Section 2. Sub-section (2) of Section 2 provides that 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 will \023 only \024 apply where the  place of arbitration is in India (emphasis supplied). Thus the  legislature has not provided 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 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 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 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 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. \023  

\02326. 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 to  arbitrations, like the present, which are taking place in 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 apply or  where, in respect of a matter, there is a separate provision in  a separate Chapter or Part. Part II deals with 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 the New York Convention and  the Geneva Convention respectively. Part II then contains  provisions for enforcement of \023foreign awards\024 which  necessarily would be different. For that reason special  provisions for enforcement of foreign awards are made in

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Part II. To the extent that Part II provides a separate  definition of an arbitral award and separate provisions for  enforcement of 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 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 \023foreign awards\024. The opening words  of Sections 45 and 54, which are in Part II, read  \023notwithstanding anything contained in Part I\024. Such a non  obstante clause had to be put in because the provisions of  Part I apply to Part II. \023 \02332. To conclude, we hold that the provisions of Part I would  apply to all 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 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 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.\024     \02335. Lastly, it must be stated that the said Act does not  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  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 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 view taken by these High Courts is not  good law.\024  

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 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. 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  in the other States as well. iii)    If the word \023only\024 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  international arbitrations. iv)     As otherwise, no relief can be sought in India even  though the properties and assets are situated in India,

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merely because the arbitration is an international  commercial arbitration. Further, by drawing our attention to the specific conclusion  arrived in paragraphs 32 and 35, he reiterated that the issue  has been very well concluded and the argument based on  paragraph 26 is not acceptable.   12)     Mr. Nariman heavily relied on paragraph 26 of the  judgment in Bhatia International which we have extracted  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 \023Thus Section  44 (in Chapter I) and Section 53 (in Chapter II) define foreign  Awards, as being awards covered by arbitrations under the  New York Convention and the Geneva Convention respectively.   Part II then contains provisions for enforcement of \023foreign  awards\024    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 award and separate  provisions for enforcement of 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 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 \023foreign awards\024.  The opening words  of Sections 45 and 54, which are in Part II, read  \023notwithstanding anything contained in Part I\024.  Such a non  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 out that it is only in the sentence starting at the  bottom of para 26 that the phrase \023it must immediately be  clarified\024 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 specifically states that, \023But if not  so excluded, the provisions of Part I will also apply to all  \023foreign awards\024.  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 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 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 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 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 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  judgment-debtor resides abroad, the award can be enforced  against properties in India through personal compliance of the

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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.  He very much relied on the judgment of this  Court in Oil & Natural Gas Corporation Ltd. vs. Saw Pipes  Ltd. (2003) 5 SCC 705 wherein particularly, in paragraphs 30  and 31, the public policy of India has been defined to include- (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. 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  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 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 the suit filed by the appellant as well as the relevant  provisions of the Act.  The appellant \026VGE filed O.S. No. 80 of  2006 on the file of the Ist 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 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 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 falls in Part I, specifies that  \023this part shall apply to all arbitrations and to all proceedings  relating thereto.\024  It is useful to refer Section 45 which is in  part II of the Act which starts with non obstante clause  namely, \023Notwithstanding anything contained in Part I or in  Code of Civil Procedure\005\005\005\005\024  Section 52 in Chapter I of  Part II of the Act provides that \023Chapter II of this Part shall not  apply in relation to foreign awards to which this Chapter  applies.\024  As rightly pointed out, the said section does not  exclude the applicability of Part I of the Act to such awards.   15)     Part II 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 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 the meaning of Section 44 of the Act would lie to the  \023competent authority of the country in which, or under the law  of which, that award was made\024.  According to him, the phrase  \023the country\005\005under the law of which, that award was made\024  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 Court of the country in which the  foreign award was made.  He also submitted that the said

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principle is recognized internationally 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 : (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 & Co., KG,  a foreign corporation, 87 F.3d 844 (3)     Yusuf Ahmed Alghanim & Sons vs. Toys \023R\024 US. INC.  Thr. (HK) Ltd. 126 F.3d 15 (4)     Karaha Bodas Co. L.L.C. vs. Perusahaan  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,  pointed out that all the Indian High Courts except the Gujarat  High Court in Nirma Ltd. vs. Lurgi Energie Und Entsorgung  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)     Inventa Fischer Gmbh & Co., K.G. vs. Polygenta  Technologies Ltd.,  2005 (2) Bom C.R. 364 (c)     Trusuns Chemical Industry Ltd. vs. Tata  International Ltd. AIR 2004 Gujarat. 274 (d)     Bharat Aluminium Co. Ltd. vs. Kaiser Aluminium  Technical Services, AIR 2005 Chhatisgarh 21 (e)     Bulk Trading SA vs. Dalmia Cement (Bharat)  Limited,  (2006) 1 Arb.LR 38(Delhi) 17)    On close scrutiny of the materials and the dictum laid  down in three-Judge Bench decision in Bhatia International  (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 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 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 concluded by the three-Judge Bench decision in Bhatia  International (supra).  18)     Learned senior counsel for the respondent based on para  26 submitted that in the case of foreign award which was  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 not applicable to foreign awards.  It is only in the  sentence starting at the bottom of para 26 that the phrase \023it  must immediately be clarified\024 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 states: \023But if not so excluded,  the provisions of Part I will also apply to all \023foreign awards\024.   This exception which is carved out, based on agreement of the  parties, in para 21 (placitum (e) to (f) is extracted below:  \023By omitting to provide that Part I will not apply to  international commercial arbitrations which take place

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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 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 agreement may be express  or implied.\024 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 Section 34 to foreign international awards would not be  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 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 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 - (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 enforcement.       20)     Mr. K.K.Venugopal also highlighted that in Company  Law, the word \021transfer\022 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,  1999 (FEMA): i)      Obtaining a Share Transfer Form 7-B and having it  endorsed by the prescribed authority under the  Companies Act, 1956 in compliance with Section 108. ii)     Execution of Share Transfer Form 7-B by the appellant  and respondent. iii)    Payment of stamp duty on the transfer of shares. iv)     Sending duly executed Share Transfer Form 7-B 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 under  Section 111A. vi)     Compliance with Rules and Regulations, completing  prescribed forms, giving relevant undertakings in  accordance with Indian foreign exchange laws and  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  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 agree with the submission of Mr. K.K.Venugopal.  21)    As rightly pointed out the effort of respondent No.1   was

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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 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 \021ownership  interests\022 shall be made in India under the laws of India as set  out above; (c) all the steps 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 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 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 of the legal position derived from Bhatia  International (supra), we are unable to accept Mr. Nariman\022s  argument.  It is relevant 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 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 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.  23)     Mr. K.K. Venugopal, learned senior counsel, next  contended that the overriding section 11.05 (c) of the  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 between the parties read as follows: \023(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 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  accordance with the Companies Act and other applicable  Acts/Rules being in force, in India at any time.\024 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  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 other applicable Acts/Rules being in force

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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 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 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 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 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, if the  Court in question 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  not have pursued the enforcement proceedings in the District  Court in Michigan, USA 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 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 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 \023appellant (i.e. respondent  No.1) shall not effect the transfer of shares of the respondents  pending further orders\024 was in effect from 27.06.2006 till  28.12.2006.  The judgment of 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) \023shall not effect the transfer of shares of the  respondents pending further orders.\024  The first respondent  pursued his enforcement suit in Michigan District Courts to  have a decree passed directing \026 \023\005 VGE shall deliver to  Satyam or its designee, share certificates in a form suitable for  immediate transfer to Satyam evidencing all of the appellant\022s  ownership interest in Satyam Ventures Engineering Services  (SVES), the party\022s joint venture company.\024  Further, the \023VGE  (appellant herein) shall do all that may otherwise be necessary  to effect the transfer of its ownership interest in SVES to  Satyam (or its designee)\024.  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 contempt of the High Court but  would render all proceedings before the US courts a brutum  fulmen, 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, Secunderabad, after the

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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.              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 between the parties which is relevant has already  been extracted in para 23. The non-obstante clause would override the entirety of the  agreement including sub-section (b) which deals with  settlement of the dispute by arbitration.  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 other applicable  Acts/Rules being in force in India at any time.  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 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) are not acceptable.  As rightly pointed out  and observed earlier, 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, necessarily enforcement has to be in  India as declared by the very section which over rides every  other section.  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  Agreement (SHA), conduct of the parties have not been  properly 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 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 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 Award, we request the concerned Court to  dispose of the suit 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.