Legal Correspondent

New Delhi: A suit can be filed in a court in India challenging a foreign award passed by an arbitrator appointed by the London Court of International Arbitration (LCIA) if the award is against public policy and in contravention of statutory provisions, the Supreme Court has held.

Giving this ruling, a Bench of Justices Tarun Chatterjee and P. Sathasivam held that the provisions of the Arbitration and Conciliation Act, 1996, would apply to international commercial arbitrations held out of India.

The Bench said: “The provisions of Part 1 of the A and C 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 1 would compulsorily apply and parties are free to deviate to the extent permitted by the provisions of Part 1.”

Writing the judgment for the Bench, Justice Sathasivam said: “It is also clear that even in the case of international commercial arbitrations held out of India, provisions of Part 1 would apply unless the parties by agreement express or implied, exclude all or any of its provisions.”

The Bench held: “We are also of the view that such an interpretation does not lead to any conflict between any of the provisions of the A and C Act and there is no lacuna as such.”

In the instant case, Venture Global Engineering (VGE) incorporated in the United States of America and Satyam Computer Services Ltd (SCSL) of Hyderabad in Andhra Pradesh entered into a joint venture agreement in 1999 to constitute a company named Satyam Venture Engineering Services Ltd.

In February 2005, disputes arose between the parties.

On a request from SCSL, the LCIA appointed an arbitrator and he passed an award directing VGE to transfer the shares to SCSL.

Aggrieved, the VGE filed a suit in the City Civil Court, Secunderabad, to set aside the award and the court passed an interim order of injunction restraining SCSL from seeking or effecting the transfer of shares under the terms of award or otherwise.

On appeal from SCSL, the Andhra Pradesh High Court suspended the trial court’s order but made it clear that SCSL would not affect the transfer of shares until further orders.

Thereafter, the trial court rejected the suit and the High Court dismissed VGE’s appeal.

The present civil appeal by VGE in the apex court is directed against this order.

Allowing the appeal, the Bench said: “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 [in the lower court].