Case: Venture Global Engineering Vs. Satyam Computer Services Ltd

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: "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 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. 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 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 Lloyds 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.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 appellants plea for setting aside the award.

Court's decision (1 = petition accepted / positive for appellant, 0 = rejected / negative): 1

Reasoning from the judgment:
1[ds]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 appellants 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.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, paragraphs6. 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 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 Storys 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.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 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.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, ParaThis 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.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.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 appellants plea for setting aside the award.