Does Part I apply when the seat of arbitration is outside India?

Yes, unless the parties exclude it expressly or by clear implication. This allows remedies like Section 9 and challenges under Section 34, subject to party agreement.

Can Indian courts set aside a foreign arbitral award under Section 34?

A challenge may be maintainable if Part I is not excluded. But enforcement and setting aside follow Section 48 and the competent court of the seat’s jurisdiction.

What did the Shareholders Agreement (SHA) change here?

The SHA had a non-obstante clause that prioritized enforcement in India, affecting how and where the award should be acted upon despite Michigan governing law.

Why is Section 48(1)(e) important?

It links set-aside actions to the courts of the country where, or under whose law, the award was made. That seat jurisdiction’s decision matters for recognition.

What practical lesson should parties take?

State the seat, curial law, and whether Part I is excluded. Align enforcement clauses with the chosen seat to avoid conflicting proceedings.

Venture Global Engineering v. Satyam Computer Services Ltd. (2008)

Quick Summary

Two companies formed a joint venture and agreed to arbitrate disputes. An LCIA arbitrator ordered the US party, Venture Global Engineering, to transfer shares to Satyam Computer Services Ltd.. Venture challenged the award, saying it broke Indian law. The question became: can Indian courts step in and use Part I of the Arbitration and Conciliation Act, 1996, even when the seat is outside India?

The Court explained when Part I applies, how Sections 34 and 9 may be used, and how Section 48 ties set-aside actions to the seat’s courts. A non-obstante clause in the SHA also shaped where enforcement should happen.

Issues

Can Indian courts overturn or interfere with a foreign arbitral award under the 1996 Act?
Does Part I apply when the seat is outside India? Can a party use Sections 34 and 9 against a foreign award?

Rules

Part I applies to all arbitrations—domestic and international—unless the parties clearly exclude it (expressly or by necessary implication).
Section 48(1)(e) & (3): A move to set aside a “foreign award” must be made before the competent authority of the country where, or under whose law, the award was made.

Part I remedies (e.g., Sections 9 and 34) depend on whether Part I is excluded by the agreement and the seat framework.

Facts (Timeline)

Timeline image

JV Formed: Venture Global (USA) and Satyam (India) create Satyam Venture Engineering Services Ltd.

SHA Signed: Disputes to be resolved amicably, else by arbitration.

Alleged Breach: Satyam claims Venture breached the SHA; triggers option to buy Venture’s shares.

LCIA Arbitration: Arbitrator orders Venture to transfer the shares to Satyam.

US Enforcement: Satyam moves the US District Court (E.D. Michigan) to recognize and enforce the award.

Indian Challenge: Venture sues in India to vacate the award; obtains an injunction. On appeal, HC modifies: injunction stayed but share transfer barred.

Further Steps: Satyam seeks dismissal of Venture’s suit; the dispute reaches the Supreme Court of India.

Case timeline: JV, SHA, LCIA award, US enforcement, Indian challenge, Supreme Court

Arguments

Appellant: Venture Global Engineering

Award violates Indian law and public policy; Indian courts should protect the JV structure.
Relief under Part I, including Section 34 (set aside) and Section 9 (interim measures), is available.
SHA provisions mean enforcement must align with the agreed route in India.

Respondents: Satyam & Anr.

Seat outside India; therefore, Indian courts cannot set aside the award.
Recognition sought in the US is proper; Section 48 ties set-aside to the seat’s courts.
Venture’s Indian suit should be dismissed; injunction should not block the award’s effect.

Judgment

Judgment image

The Court held that, unless excluded, Part I applies even to international commercial arbitrations. Thus, parties may seek Section 9 relief and, where maintainable, a Section 34 challenge. Yet, Section 48 connects set-aside actions to the courts of the seat or the law under which the award is made.

Here, the SHA’s non-obstante clause (Section 11.5(c)) gave primacy to enforcement in India despite Michigan governing law. Satyam’s move to pursue execution in the US ran contrary to the agreed route. Consequently, the injunction and the High Court’s order were reversed to align with the agreement and the statute.

Judgment highlights: Part I, Section 34 & 9, Section 48, non-obstante clause

Ratio Decidendi

Part I applies to all arbitrations unless excluded by agreement.
Set-aside forum follows Section 48(1)(e)/(3): competent court of the seat or law of the award.
Contract prevails: A non-obstante clause in the SHA can prioritize enforcement steps in India despite foreign governing law.

Why It Matters

Parties often mix a foreign seat with Indian operations. This ruling shows how Part I can still step in unless excluded, while Section 48 keeps set-aside actions tied to the seat. Clear drafting about seat, curial law, and exclusions avoids costly fights.

Key Takeaways

Say it clearly: If you want to exclude Part I, do it expressly.
Seat decides set-aside: Use Section 48 to identify the right court.
Match clauses: Keep enforcement clauses aligned with seat and governing law.
Use Section 9 wisely: Interim protection in India may be available if Part I is not excluded.

Mnemonic + 3-Step Hook

Mnemonic: “P-S-E: Part–Seat–Enforce”

Part: Part I applies—unless excluded.
Seat: Set-aside goes to the seat’s courts (Section 48).
Enforce: Follow your SHA’s priority clause for enforcement steps.

IRAC Outline

Issue: Scope of Part I over foreign-seated arbitrations; ability of Indian courts to set aside or grant interim relief against a foreign award.

Rule: Part I applies unless excluded; Section 48 anchors set-aside to the seat’s courts.

Application: SHA’s non-obstante clause favored enforcement in India; Satyam’s US route conflicted with the agreed framework; Venture sought Indian relief.

Conclusion: Part I remedies may operate; however, set-aside aligns with the seat under Section 48. Contractual clauses can direct enforcement steps in India.

Glossary

Part I (1996 Act): General framework for arbitration in India; applies unless excluded.
Section 34: Provision to set aside an arbitral award.
Section 9: Interim measures by courts (e.g., status quo, asset protection).
Section 48: Grounds to refuse enforcement of foreign awards; ties set-aside to seat’s courts.
Non-obstante clause: Clause that overrides inconsistent terms elsewhere in the contract.

FAQs

Not always. It applies unless the parties have excluded it clearly—either in words or by the structure of the arbitration clause and seat.

A Section 34 challenge may be invoked if Part I is not excluded, but Section 48 anchors set-aside to the seat’s courts. The two provisions must be read together.

The SHA’s non-obstante clause prioritized enforcement in India, guiding the path to act on the award despite foreign governing law.

Specify the seat, curial law, enforcement forum, and whether Part I is excluded. Make the clauses consistent and unambiguous.

If the SHA prioritizes enforcement in India through a non-obstante clause, choosing a foreign court for execution may conflict with the contract.