REPORTABLE

IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO._____ OF 2010 (Arising out of SLP (Civil) No.9238 of 2010)

Venture Global Engineering ..Appellant(s)

Versus  

Satyam Computer Services Ltd. & Another ..Respondent(s)

J U D G M E N T

GANGULY, J.

1. Leave granted.

2. The judgment and order dated 19th February, 2010 of  

the  Division  Bench  of  the  High  Court  of  Andhra  

Pradesh  in  Civil  Revision  No.5712/2009  has  been  

impugned in this appeal.  

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3. The  material  facts  which  are  required  to  be  

considered  to  resolve  the  controversy  in  this  

appeal, are as follows.

4. The  appellant,  Venture  Global  Engineering,  having  

its principal office in Michigan, USA, entered into  

a  Shareholders  Agreement  and  a  Joint  Venture  

Agreement  on  20th October,  1999  with  the  first  

respondent, for establishing a company called Satyam  

Venture  Engineering  Services  (hereinafter,  “the  

second  respondent”).  As  per  the  terms  of  the  

agreement, the appellant and the first respondent  

each held 50 per cent shareholding in the second  

respondent.

5. Article  VIII  of  the  Shareholders  Agreement  

contemplates certain ‘events of default’, and in the  

event of default, non-defaulting shareholder has the  

option to purchase the defaulter’s shares at book  

value or cause immediate dissolution and liquidation  

of the second respondent.

6. In the year 2000, the second respondent entered into  

an agreement with TRW, a manufacturer and supplier  

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of automotive equipments, to provide engineering and  

IT  services.  They  agreed  to  sub-contract  the  

automotive  engineering  works  to  the  second  

respondent.  The first  respondent levied  US $3  an  

hour  towards  administrative  charges.  According  to  

first respondent, they retained US $859,899 from the  

TRW receipts. The appellant disputed the same and  

alleged  that  Satyam  retained  a  total  of  US  

$2,188,000,  and  also  alleged  concealment  and  

dereliction  of  duty  as  a  joint  venture  partner.  

Thus,  disputes  cropped-up  and  were  referred  to  

arbitration.

7. The sole arbitrator gave his award on 3rd April, 2006  

whereby  the  appellant  is  to  transfer  its  entire  

shareholding in the second respondent to the first  

respondent. The first respondent filed a petition  

for  the recognition  and enforcement  of the  award  

before  the  U.S.  District  Court,  Eastern  District  

Court of Michigan.

8. On 28th April, 2006, the appellant filed a suit (O.S.  

No. 80/2006) seeking a declaration to set aside the  

award  and also  prayed for  a permanent  injunction  

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against the transfer of shares under the arbitral  

award, in the Court of Ist  Additional Chief Judge,  

City  Civil  Court,  Secundrabad.  The  Trial  Court  

dismissed the suit of the appellant on the ground  

that a foreign award could not be challenged under  

Section 34 of the Arbitration & Conciliation Act,  

1996 (herein after, ABC, 1996).

9. The  appellant  appealed  against  the  order  of  the  

Trial Court before the High Court of Andhra Pradesh  

at Hyderabad, and the said appeal was also dismissed  

on 27th February, 2007.  

10. Thereafter,  the  appellant  filed  a  special  leave  

petition before this Court and this Court, vide its  

order  dated  15th May,  2007,  issued  notice  to  the  

respondents and passed an interim order restraining  

the transfer of shares pending the disposal of the  

special leave petition.  

11. This Court then finally heard the matter and allowed  

the  special leave  petition vide  its Judgment  and  

Order  in  Venture  Global  Engineering vs.  Satyam  Computer Services Ltd. and another (2008) 4 SCC 190  

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and held that a foreign award could be challenged  

under Section 34 of ABC, 1996. In the light of this  

finding, this Court remanded the case to the trial  

court and directed that the parties were to maintain  

status quo with respect to transfer of shares. Thus,  

the case of the appellant was transferred to the  

IInd  Additional  Chief  Judge,  City  Civil  Court,  

Hyderabad.

12. Meanwhile, on 7th January, 2009, Mr. Ramalinga Raju,  

Chairman  and  founder  of  the  first  respondent  

confessed  that  the  balance  sheets  of  the  first  

respondent  had  been  fraudulently  inflated  to  the  

tune  of  Rs.7,080/-  crores.  As  a  result,  Price  

Waterhouse  Cooper  (PWC),  auditors  of  the  first  

respondent, declared that the financial statements  

could no longer be considered accurate or reliable.

13. In  the light  of these  developments regarding  the  

first  respondent,  the  appellant  filed  an  interim  

application  before  the  Trial  Court  (I.A.  No.  

1331/2009 dated 12th June, 2009) to bring certain  

facts on record and also filed additional pleadings  

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in respect of the same under Order VIII Rule 9 of  

the Civil Procedure Code, 1908.

14. The Trial Court, vide its Order dated 3rd November,  

2009, allowed the application of the appellant. The  

first respondent challenged the said order of the  

Trial Court by filing a civil revision before the  

High Court.  

15. The High Court, vide its order dated 19th February,  

2010,  allowed the  revision petition  of the  first  

respondent. The High Court, inter alia, held that a  

reading of Section 34(1) and (3) of the ABC, 1996  

indicates  that  a  party  could  only  set  aside  the  

arbitral award if an application for the same is  

made  within  a  period  of  3  months  (extendable  by  

another 30 days) from the date of making the award;  

whereas  in  the  present  case  the  new  grounds  of  

challenge  are  sought  to  be  brought  after  the  

limitation period.  

16. Further,  the  High  Court  also  held  that  an  

application under Order VIII Rule 9 of the Civil  

Procedure  Code,  1908  for  bringing  additional  

pleadings on record would not lie. The High Court  

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held, relying on Rule 12(1) of the Andhra Pradesh  

Arbitration  Rules, 2000,  that Rule  VIII of  Civil  

Procedure Code is not applicable, so a petition for  

additional pleading is not maintainable under Order  

VIII of Civil Procedure Code. Therefore, the High  

Court did not allow the appellant to file additional  

pleadings on record.  

17. Aggrieved by the impugned judgment and order of the  

High Court, the appellant has approached this Court  

by way of filing a special leave petition.

18. In the course of argument before this Court, Mr.  

Harish N. Salve, learned senior counsel appearing  

for  the  respondents  did  not  make  any  attempt  to  

defend the order of the High Court on the question  

of limitation as the learned counsel was obviously  

conscious of the decision of this Court in the State  of  Maharashtra Vs.  M/s  Hindustan  Construction  Company Ltd. – AIR 2010 SC 1299.

19. This Court In  M/s. Hindustan Construction (supra)  made it clear that it cannot be the intention of the  

Legislature to shut out amendments, as a result of  

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which  incorporation  of  relevant  materials  in  a  

pending setting aside proceeding is prevented.  

20. In  M/s. Hindustan Construction (supra) this Court  considered the provision in Section 34(2)(b) of ABC,  

1996  and  while  considering  the  ambit  of  the  

expression  “the  Court  finds  that”  in  Section  

34(2)(b), this Court opined that where application  

under Section 34 has been made within the prescribed  

time,  leave  to  amend   grounds,  in  such  an  

application, if the peculiar circumstances of the  

case and the interest of justice so warrant, can be  

granted.

21. In saying so, this Court in paragraph 25 of the  

report, relied on the decisions of this Court in the  

case of L.J. Leach and Company Ltd. and another Vs.  Jardine  Skinner  and  Co. –  AIR  1957  SC  357  and  Pirgonda Hongonda Patil Vs. Kalgonda Shidgonda Patil  and ors. – AIR 1957 SC 363 and held where it is  required  in  the  interest  of  justice,  the  Court  

always has the power to grant leave to amend and  

this power to grant an  amendment is not affected  

under Section 34.

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22. We are of the opinion that in dealing with a prayer  

for amendment, Courts normally prefer substance to  

form and techniques and the interest of justice is  

one of most relevant considerations. Therefore, if a  

party  is entitled  to amend  its pleadings,  having  

regard to the justice of the case, the right of the  

party to amend cannot be defeated just because a  

wrong Section or a wrong provision has been quoted  

in the amendment petition. The approach of the High  

Court  in this  case, in  rejecting the  appellant’s  

prayer for amendment, inter alia, on the ground that  

a wrong provision has been quoted in the amendment  

petition, is obviously a very hyper technical one.  

Mr. Salve rightly did not even try to defend the  

impugned  order  on  the  aforesaid  technical  ground  

adopted by the High Court.

23. Mr.  Salve,  learned  senior  counsel  argued  on  a  

different line.  The learned counsel submitted that  

the grounds which are sought to be incorporated by  

way of amendment are not relevant and do not come  

within the concept of public policy which has been  

explained in the Explanation to Section 34 of ABC,  

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1996. The learned counsel took us through the award  

and tried to demonstrate that the facts which are  

sought to be brought on record, even if they are  

accepted to be true, have no bearing on the material  

facts  on  which  the  award  is  based.  The  learned  

counsel urged that the Explanation under Section 34  

of ABC, 1996 has to be strictly construed and the  

expression  “in  the  making  of  the  award”  must  be  

confined  to  mean  any  fraud  committed  before  the  

arbitrator  in  the  course  of  the  arbitral  

proceedings. According to the learned counsel that  

expression will not take within its sweep anything  

which happened after the making of the award. In  

other  words  the  learned  counsel  repeatedly  urged  

that the expression “making of the award” must be  

confined to facts anterior to the delivery of the  

award and not anything which happened subsequent to  

that.

24. Mr. K.K. Venugopal, learned senior counsel appearing  

for the appellant and contradicting the aforesaid  

contentions submitted that facts which are sought to  

be incorporated by amendment are only those which  

have been disclosed by the first respondent on its  

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own.  Prior  to  such  disclosure,  they  were  not  in  

public domain and naturally could not be included in  

the  original  petition  to  set  aside  the  award.  

Without  disclosure  of  those  facts  by  the  first  

respondent, the appellant could not have known them.  

It is submitted that in any event those facts are  

relevant for the purpose of being put on record by  

amendment.

25. Learned counsel further submitted that the award has  

been obtained by the first respondent by suppressing  

those  facts,  which  on  disclosure  show  a  clear  

connection with the facts in issue, in the award.  

In such a case fraud as is understood in civil law,  

has been committed in the making of the award.  It  

was further submitted that the interest of justice  

in such a case would demand that amendment should be  

allowed.   

26. These  are basically  the rival  contentions of  the  

parties.

27.  Now let us consider the facts which the appellant  

wanted to incorporate by way of amendment in the  

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petition for additional pleading filed in the Court  

of  Additional  Chief  Judge,  City  Civil  Court  at  

Hyderabad (I.A. No. 1331/2009).  Those facts are:

a) On or after 7th January, 2009, a letter was written  by B. Ramalinga Raju, CEO of respondent no. 1 to  the Board of respondent no. 1, wherein Mr. Raju  confessed that the financial statements and books  of accounts of respondent no. 1 were exaggerated  and  overstated.  Along  with  the  application  for  additional pleading, relevant paragraphs of Raju’s  statements have been enclosed.

b) On 7.1.2009, it was reported that the Securities  and  Exchange  Board  of  India  (SEBI)  directed  an  investigation in the entire matter. Along with the  additional  pleadings  were  annexed  extracts  from  press  clippings  about  the  said  investigation  by  SEBI.

c) On  8.1.2009,  Government  of  India  directed  an  inspection of the financial statements and books  of  8  subsidiaries  of  first  respondent.  Such  inspection was to be conducted in accordance with  section 209A of the Companies Act, and the second  respondent is one of those subsidiaries in respect  of which inspection was thus ordered.

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d) On  13.1.2009,  Price  Waterhouse  Coopers  (PWC),  which acted as the statutory auditor of the first  respondent,  wrote  to  the  Board  of  the  first  respondent that in the light of statements made by  Mr. Raju, the financial statements for the period  from June 2000 to 30th September, 2008 could no  longer be considered reliable. Extracts from the  said  opinion  of  PwC  are  also  enclosed  with  the  additional pleading.

e) On 13.1.2009, the Government of India directed the  Serious  Fraud  Investigation  Office  (SFIO)  to  investigate the matter. SFIO is a multi-functional  investigating agency representing the Ministry of  Home  Affairs,  Enforcement  Directorate  and  the  Intelligence Department.  

f) Such  order  by  Government  of  India  came  on  the  basis of a report from the Registrar of Companies,  Hyderabad.

g) On  21.1.2009,  Mr.  Raju  reportedly  admitted  diversion  of  funds  from  the  first  respondent,  which  was  widely  published  in  newspapers  across  India. Mr. Raju confessed diversion of funds of  the first respondent to two real estate firms held  by his family and others.  

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h) On  being  questioned  by  criminal  investigation  department of the Andhra Pradesh police, Mr. Raju  reportedly  admitted  to  using  Satyam  (respondent  no.1) money for buying prime land in and around  Hyderabad  and  Mr.  Raju  admitted  in  answer  to  interrogation that funds of the first respondent  were being diverted for the last 4-5 years.

i) It was reported on 25.1.2009, that partners of PWC  (statutory  auditors  of  the  first  and  second  respondent) were arrested for their alleged role  in the misstatement of the accounts of the first  respondent.

j) On 27.1.2009, the Income Tax department reportedly  directed an investigation in the operations of the  first respondent. In this matter the Income Tax  department was making an independent probe about  the alleged fraud of about Rs. 7800 crores in the  first respondent.

k) On 8.2.2009, it was reported that a confession was  made  by  PWC  before  the  police  that  Mr.  Raju  employed  an  elaborate  scheme  to  exaggerate  the  accounts of the first respondent.  

l) Mr.  Talluri  Srinivas  and  S.  Gopalakrishnan,  two  persons  associated  with  PWC,  and  arrested  in  connection with the Satyam scam, admitted to the  

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police that meetings were arranged at the instance  of  the  first  respondent  with  the  motive  of  falsifying  accounts,  and  such  meetings  were  chaired by Mr. Raju himself.

m) On  17.2.2009,  Central  Bureau  of  Investigation  (CBI) was asked to probe the Satyam scam.

n) On 22.3.2009, it was reported that the extent of  fraud relating to the first respondent could be  over Rs. 9600 crores.  

o) On 5.4.2009, it was reported that the Enforcement  Directorate also directed an investigation in the  matter for alleged money laundering.  

p) On 7.4.2009, CBI filed its charge sheet against  several  persons,  including  Mr.  Raju,  Mr.  Gopalakrishnan and Mr. Talluri.

q) Mr. Gopalakrishnan is alleged to be a partner of  the firm PWC Bangalore.  

r) On  13.4.2009,  SFIO  submitted  its  report  to  the  Government of India.

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s) On 17.4.2009, it was reported in the press that  PwC is guilty of wrong doing in the multi-crore  Satyam scam.  

t) On 20.4.2009, SFIO alleged to have found evidence  that  the  first  respondent  diverted  foreign  earnings  even  before  they  reached  India.  Such  diversion was made to tax havens like Mauritius  before  routing  it  back  to  Maytas  Infrastructure  and  other  entities  owned  by  Mr.  Raju  and  his  relations.

28. Relying on the aforesaid materials which were sought  

to be incorporated by way of amendment, it was urged  

by the appellant that the aforesaid materials go to  

show that the very basis of the fiduciary duties of  

the first respondent to the appellant was breached,  

even prior to the Shareholders Agreement between the  

parties.  The  first  respondent  on  concealment  of  

these facts induced the appellant to enter into an  

agreement with it.

29. It appears that the first respondent did not make  

available  to  the  appellant  verified  financial  

statements to show the amount of TRW revenue which  

was diverted, and the appellant was thus left to  

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assess such amount based on various representations  

of  the  financial  statements  made  by  the  first  

respondent to the appellant. But the facts which the  

appellant  wanted  to  bring  on  record  by  way  of  

amendment would show that the representations made  

by the first respondent about its financial position  

were prima facie unreliable.

30. It was also urged that the valuation of the shares  

of the second respondent is fundamentally important  

in  the  decision-making  process  relating  to  the  

award.  Such  valuation  is  based  on  unreliable  

financial statements.  

31. Under these circumstances, a prayer was made in the  

amendment petition to bring the aforesaid facts on  

record in the pending proceeding for setting aside  

the award.  

32. Learned counsel for the appellants also urged that  

in  the  statement  of  claim  filed  by  the  first  

respondent,  it  has  been  stated  that  the  first  

respondent is a “solvent shareholder” as defined in  

the  agreement,  and  on  that  statement,  the  first  

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respondent claimed that they have either: (a) the  

right  of  purchasing  the  shares  held  by  the  

appellants, or (b) causing immediate liquidation of  

the second respondent.  

33. Learned counsel contended that the aforesaid claim  

of  the  first  respondent  that  it  is  a  solvent  

shareholder  is based  on concealment  of the  facts  

stated above. He further submitted that any person,  

on  a  bonafide  consideration  of  the  facts  stated  

above would prima facie form an opinion that the  

claim of the respondents as a solvent shareholder is  

fraudulent. The award has been obtained by the first  

respondent on the basis of such fraudulent claim.  

Therefore,  in the  interest of  justice and  having  

regard to the public policy of India, the High Court  

should  have allowed  the appellant  to bring  those  

facts on record by way of amendment, in the pending  

proceeding for setting aside the award.

34. In the context of the aforesaid issues involved in  

this appeal, the provision of Section 34 of ABC,  

1996,  especially  explanation  to  Section  

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34(2)(b)(ii),  calls  for  interpretation  by  this  

court.

35. Section  34  of  ABC,  1996,  has  four  sub-sections.  

In this case we are not concerned with sub-sections  

(3) and (4).

36. Sub-section  (1)  provides  for  an  application  for  

setting  aside  arbitral  award.  Sub-section  (2)(a)  

provides  for  the  grounds  for  setting  aside  an  

arbitral award as grounds (i) to (v).

37. Section 34(2)(b), with which we are concerned here,  

provides as follows:  

“34. Application  for  setting  aside  arbitral award.-  (1) xxx (2) xxx

(a) xxx (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.-Without  prejudice  to  the  generality  of  sub-clause  (ii)  it  is  hereby declared, for the avoidance of any  doubt, that an award is in conflict with  

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the public policy of India if the making  of the award was induced or affected by  fraud or corruption or was in violation  of section 75 or section 81.”

38. The explanation is very crucial in the context of  

the present case.

39. The concept of public policy, in view of century old  

decision of Lord Justice Burrough in Richardson vs.  Mellish (1824-34) All E.R. 258, conjures up to our  mind an equine image of a high and unruly horse. The  

consensus of opinion amongst judges is that concept  

of public policy is incapable of precise definition.

40. In  Central Inland Water Transport Corporation Ltd.  and  another vs.  Brojo  Nath  Ganguly  and  another  reported in AIR 1986 SC 1571 at 1612, this Court  

discussed the concept of public policy elaborately  

in the context of Section 23 of the Contract Act.  

The discussion, however, was not confined to Section  

23  of  Contract  Act  alone  but  was  on  a  general  

jurisprudential  concept  of  public  policy,  and  it  

referred to the opinion of Lord Denning, where the  

Master of Rolls said with characteristic clarity-  

“With a good man in the saddle, the unruly horse can  

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be kept in control. It can jump over obstacles.”  

(See  Enderby Town Football Club Ltd. vs.  Football  Association  Ltd. –  1971 Chancery  Division 591  at  606).

41. A three judge Bench in Renusagar Power Co. Ltd. vs.  General Electric Co. reported in AIR 1994 SC 860,  after referring to  Brojo Nath (supra), dealt with  the concept of public policy while construing the  

provisions  of  Foreign  Awards  (Recognition  and  

Enforcement) Act, 1961.

42. It  may  be  mentioned  in  this  connection  that  the  

present ABC, 1996 is a consolidating statute and it  

has also repealed the aforesaid 1961 Act (Section 85  

of ABC, 1996). Therefore, the discussion on public  

policy in Renusagar (supra) is of some relevance in  the present context.

43. In  Renusagar (supra),  after  a  fairly  elaborate  consideration of concept of public policy in various  

jurisdictions, this Court came to hold that an award  

is considered contrary to public policy if it is  

opposed to: (a) fundamental policy of India law, (b)  

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interests of India and (c) justice or morality (See  

paragraph 86 on page 888).

44. This  concept  of  public  policy,  in  the  realm  of  

arbitration law, is a rather vexed concept, in the  

sense  that  different  countries  have  different  

concepts of public policy. Say for instance, some  

countries  which  do  not  countenance  gambling,  an  

award arising out of a gambling dispute may be set  

aside on the ground that it offends public policy of  

the  State.  But  in  a  country  where  gambling  is  

legalized in some form, the award will not offend  

public  policy.  Similarly,  a  dispute  between  a  

producer of wine and its distributor is arbitrable  

in  countries  which  are  not  governed  by  a  strict  

Islamic Code. But a country with such a Code may  

hold the award contrary to public policy.

45. In view of such varying standards of public policy  

in different countries, an attempt is made to arrive  

at a somewhat acceptable standard by construing that  

something is opposed to public policy where there is  

an excess of jurisdiction and a lack of due process.  

(See  Redfern  and  Hunter  on  International  

Arbitration, 5th Edition, paragraphs 10-80 to 10-86).

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46. The concept of public policy in ABC, 1996 as given  

in  the  explanation  has  virtually  adopted  the  

aforesaid international standard, namely if anything  

is found in excess of jurisdiction and depicts a  

lack of due process, it will be opposed to public  

policy  of  India.  When  an  award  is  induced  or  

affected by fraud or corruption, the same will fall  

within  the  aforesaid  grounds  of  excess  of  

jurisdiction and a lack of due process. Therefore,  

if we may say so, the explanation to Section 34 of  

ABC is like ‘a stable man in the saddle’ on the  

unruly horse of public policy.  

47. It  is  well  known  that  fraud  cannot  be  put  in  a  

strait jacket and it has a very wide connotation in  

legal parlance.

48. In  the  decision  of  the  House  of  Lords  in  Frank  Reddaway and Co. Ltd. vs. George Banham, 1896 Appeal  Cases  199,  Lord  Macnaghten  explained  the  

multifarious  aspects  of  fraud  very  lucidly,  and  

which we quote: “But fraud is infinite in variety;  

sometimes it is audacious and unblushing; sometimes  

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it pays a sort of homage to virtue, and then it is  

modest and retiring; it would be honesty itself if  

it could only afford it. But fraud is fraud all the  

same; and it is the fraud, not the manner of it,  

which  calls for  the interposition  of the  Court.”  

(Page 221 of the report).

49. The aforesaid elucidation by the learned Law Lord  

has  also been  accepted in  celebrated treaties  on  

fraud (see Kerr on Fraud and Mistake, 7th Edition,  

pg. 1). Kerr has also referred to Story’s Equity  

Jurisprudence and defined fraud as: “Fraud, in the  

contemplation of a civil court of justice, may be  

said to include properly all acts, omissions, and  

concealments  which  involve  a  breach  of  legal  or  

equitable duty, trust or confidence, justly reposed,  

and are injurious to another, or by which an undue  

or unconscientious advantage is taken of another.”

50. In Indian law, namely the Indian Contract Act, the  

said  common  law  doctrine  of  fraud  has  been  

assimilated in Section 17 of the said Act. A very  

wide definition of fraud has been given, which is as  

under:

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“17.  ‘Fraud’  defined.-‘Fraud’  means  and  includes  any  of  the  following  acts  committed by a party to a contract, or  with  his  connivance,  or  by  his  agent,  with  intent  to  deceive  another  party  thereto or his agent, or to induce him to  enter into the contract:-

(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.  

Explanation.-Mere  silence  as  to  facts likely to affect the willingness of  a person to enter into a contract is not  fraud,  unless  the  circumstances  of  the  case are such that, regard being had to  them,  it  is  the  duty  of  the  person  keeping silence to speak, or unless his  silence,  is,  in  itself,  equivalent  to  speech.

51. Therefore,  this  Court  is  unable  to  accept  the  

contention of the learned counsel for the respondent  

that  the  expression  ‘fraud  in  the  making  of  the  

award’  has  to  be  narrowly  construed.  This  Court  

cannot  do  so  primarily  because  fraud  being  of  

‘infinite  variety’  may  take  many  forms,  and  

secondly, the expression ‘the making of the award’  

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will have to be read in conjunction with whether the  

award ‘was induced or affected by fraud’.  

52. 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 principle of due process and would  

be  opposed  to  the  concept  of  public  policy  

incorporated in the explanation.

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53. In  English  Arbitration  Law,  a  somewhat  similar  

provision for challenging an award is contained in  

Section 68(2)(g) of the 1996 Arbitration Act, which  

reads as follows:

“68(2)(g).- The award being obtained by  fraud or the way in which it was procured  being contrary to public policy.”

54. Commenting on the said provision, Russell (Russell  

on Arbitration, 23rd Edition) stated that an “award  

will  be  obtained  by  fraud  if  the  consequence  of  

deliberate concealment is an award in favour of the  

concealing party.” (P. 497, Para 8-100)

55. In Elektrim S.A. vs. Vivendi Universal S.A. and Ors.  (2007) EWHC 11 (Comm), Mr. Justice Aikens held that  

the words ‘obtained by fraud’ must refer to an award  

being obtained by the fraud of the party to the  

arbitration or by the fraud of another to which the  

party to the arbitration was a privy. The learned  

Judge at page 82 of the report held that “an award  

will only be obtained by fraud if the party which  

has deliberately concealed the document has, as a  

consequence of that concealment, obtained an award  

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in its favour. The party relying on Section 68(2)(g)  

must therefore also prove a causative link between  

the  deliberate concealment  of the  document and  a  

decision  in  the  award  in  favour  of  the  other  

successful party.”

56. In Profilati Italia S.R.L. vs. Painewebber Inc. and  Anr. [(2001)  1  Lloyd’s  Law  Reports  715],  while  construing  Section  68(2)(g)  of  the  English  

Arbitration  Act,  it  has  been  held  that  where  an  

important document which should have been disclosed  

has  been  deliberately  withheld  resulting  in  the  

party withholding obtaining the award, the Court may  

consider that the award was ‘procured’ in a manner  

contrary to public policy and such conduct is not  

far removed from fraud. (para 19, pg. 720)

57. 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  constituting  or  

inducing the award, such facts are relevant in a  

setting aside proceeding and award may be set aside  

as affected or induced by fraud.

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58. The  question  in  this  case,  is  therefore  one  of  

relevance of the materials which the appellant wants  

to bring on record by way of amendment in its plea  

for setting aside the award.  

59. Whether the award will be set aside or not is a  

different question and that has to be decided by the  

appropriate  Court. In  this appeal,  this Court  is  

concerned only with the question whether by allowing  

the amendment, as prayed for by the appellant, the  

Court will allow material facts to be brought on  

record in the pending setting aside proceeding.  

60. Judging the case from this angle, this Court is of  

the  opinion  that  in  the  interest  of  justice  and  

considering  the  fairness  of  procedure,  the  Court  

should allow the appellant to bring those materials  

on  record  as  those  materials  are  not  wholly  

irrelevant  or  they  may  have  a  bearing  on  the  

appellant’s plea for setting aside the award.

61. Nothing said in this judgment will be construed as  

even remotely expressing any opinion on the legality  

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of the award. That question will be decided by the  

Court  where  setting  aside  proceeding  is  pending.  

The proceeding for setting aside the award may be  

disposed of as early as possible, preferably within  

4 months.

62. For the reasons aforesaid, this appeal succeeds. The  

order of the High Court is set aside and that of the  

court below is restored. No order as to costs.

.....................J. (P. SATHASIVAM)

.....................J. (ASOK KUMAR GANGULY)

New Delhi   August 11, 2010  

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