INDIA BUSINESS WORLD - JANUARY 1^st - JANUARY 15^th - 2008

GLOBAL ARBITRATION AWARDS CHALLENGEABLE IN INDIA: SUPREME COURT

The Supreme Court has ruled that international arbitration awards are not immune from challenge in the Indian courts of law. The provisions of Indian Arbitration and Conciliation Act will apply even to the international commercial arbitrations held outside the country unless the parties, by agreement, exclude all or any of its provisions. SC ruling set aside an earlier order of the Andhra Pradesh High Court.

HC had ruled that international award cannot be challenged even if it is against public policy and in contravention of statutory provisions.

The apex court passed the verdict on the appeal of an US-based company. Michigan-based Venture Global Engineering had entered into a JV pact with Satyam Computer Services to constitute a company, named as Satyam Venture Engineering Services Ltd.

It was agreed that both the parties will have 50% holding in the JV. According to the shareholders agreement between the two partners, disputes have to be resolved amicably and, failing resolution, such disputes are to be referred to arbitration.

In February 2005, disputes arose between the parties. On July 25, 2005, the Secunderabadbased company filed a request for arbitration with the London Court of International Arbitration. On April 3, 2006, an arbitration award was passed, directing the US firm to transfer shares to Satyam.

On April 14, 2006, a petition to recognise and enforce the award was filed before the Michigan court in the US. The appellant filed a suit in a city court of Secunderabad seeking quashing of the award and permanent injunction on transfer of shares under the award.

The trial court rejected the plea and the order was challenged in HC. On February 27, 2007, HC dismissed it and the company then appealed in the apex court.

An SC bench of Justices Tarun Chatterjee and P Sathasivam said: "The provisions of Part-I of the Act (Arbitration and Conciliation Act, 1996) 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."