Judicial notice of Satyam Scam of inflated profits:
B. Ramalinga Raju, Chairman, Satyam Computer Services Ltd. wrote a letter admitting inflated profits an bank/cash balances in financial statements which was addressed to the board of directors, SEBI and financial institutions; if could be admitted in evidence without formal proof?
Conclusion of Supreme Court:
The aforesaid letter, its contents and signature of the author of the letter – Mr. Raju, were never in dispute and nor at any point of time anyone questioned it. In other words, the existence of letter, its contents and signature of Mr. Raju on the letter were never doubted and nor its author (Mr. Raju) at any point of time retracted from his confessional statement made therein or denied having written such letter.
In my opinion, therefore, the letter in question was rightly received in evidence without requiring any further formal proof to corroborate its existence and contents. That apart, it being a “notorious fact” being in the knowledge of the whole World and especially those in the trade, the Courts could take judicial notice of such evidence as held by this Court in the case of Onkar Nath & Ors. Vs. Delhi Administration, (1977) 2 SCC 611. It is appropriate to quote the words of the leaned Judge- Justice Y.V.Chandrachud (as His Lordship then was), who speaking for the Bench held as under:
“6. One of the points urged before us is whether the courts below were justified in taking judicial notice of the fact that on the date when the appellants delivered their speeches a railway strike was imminent and that such a strike was in fact launched on May 8, 1974. Section 56 of the Evidence Act provides that no fact of which the Court will take judicial notice need be proved. Section 57 enumerates facts of which the Court “shall” take judicial notice and states that on all matters of public history, literature, science or art the Court may resort for its aid to appropriate books or documents of reference. The list of facts mentioned in Section 57 of which the Court can take judicial notice is not exhaustive and indeed the purpose of the section is to provide that the Court shall take judicial notice of certain facts rather than exhaust the category of facts of which the Court may in appropriate cases take judicial notice. Recognition of facts without formal proof is a matter of expediency and no one has ever questioned the need and wisdom of accepting the existence of matters which are unquestionably within public knowledge. (See Taylor, 11th Edn., pp. 3-12; Wigmore, Section 2571, footnote; Stephen’s Digest, notes to Article 58; Whitley Stokes’ Anglo-Indian Codes, Vol. II, p. 887.) Shutting the judicial eye to the existence of such facts and matters is in a sense an insult to commonsense and would tend to reduce the judicial process to a meaningless and wasteful ritual. No court therefore insists on formal proof, by evidence, of notorious facts of history, past or present. The date of poll, the passing away of a man of eminence and events that have rocked the nation need no proof and are judicially noticed. Judicial notice, in such matters, takes the place of proof and is of equal force. In fact, as a means of establishing notorious and widely known facts it is superior to formal means of proof. Accordingly, the courts below were justified in assuming, without formal evidence, that the Railway strike was imminent on May 5, 1974 and that a strike paralysing the civic life of the Nation was undertaken by a section of workers on May 8, 1974.”
I apply the aforementioned principle of law to the facts of this case and hold that letter dated 07.01.2006 of Mr. Raju did not require any more formal proof.
On reading its contents, I am of the view that the acts of Mr. Raju, in the affairs of Satyam, were essentially in the nature of manipulating and fabricating the accounts books/balance-sheets of Satyam. These acts were done by Mr. Raju without knowledge to all the stakeholders of Satyam including Venture. These acts were detrimental to the interest of all the stakeholders who were/are directly and indirectly dealing and involved in the affairs of Satyam and its affiliates at all material times.
Effect of fraud on Arbitration proceedings:
It is a well settled principle of law that commission of fraud, misrepresentation, suppression of material facts from the adversary in the judicial proceedings and the Court/Arbitrator result in vitiating the entire judicial/arbitral proceedings including judgment/order/award passed thereon once come to the knowledge of the party concerned. On proving existence of commission of fraud, misrepresentation, suppression of material facts by the party concern, the judicial/arbitral proceedings are rendered illegal and void ab initio. This principle applies to arbitral proceedings in question and to Award dated 03.04.2006 and thus renders both void ab initio. I accordingly hold so.
125. Seventh, the Award dated 03.04.2006 is also against the public policy of India in the light of law laid down by this Court in the case of Associate builder’s case quoted supra, It is, therefore, liable to be set aside for the reasons that it is proved that the Award was obtained by Satyam against Venture by misrepresentation and suppression of material facts having bearing over the proceedings; second, the acts of Mr. Raju, in the affairs of Satyam, as its Chairman violated several sections of IPC, Companies Act and FEMA; and third, the arbitral proceedings in question due to this reason, which came to knowledge to all stakeholders of Satyam including Venture subsequent to passing of the Award could not be said to have been held fairly or reasonably but were concluded to the detriment of the interest of Venture causing them prejudice while defending their interest before the learned Arbitrator. It also deprived Venture from exercising their contractual right for want of knowledge of these acts of Mr. Raju against Satyam at appropriate stage in court of law in terms of agreement. All this occurred obviously due to Satyam concealing these major events at all relevant time from Venture.
126. As taken note of above, once the fraud, misrepresentation or suppression of fact, if found to have been done by the party in any judicial proceedings is later discovered or disclosed then it would relate back to the date of its actual commission and would necessarily result in vitiating such judicial proceedings. Such is the case here.
127. The Award of an arbitral Tribunal can be set aside only on the grounds specified in Section 34 of the AAC Act and on no other ground. The Court cannot act as an Appellate Court to examine the legality of Award nor it can examine the merits of claim by entering in factual arena like an Appellate Court. It has to confine its enquiry only to the limited issue as to whether any ground specified in Section 34 of AAC Act is made out or not. Once the ground under Section 34 of the AAC Act is made out, the Award then has to be set aside. In the case on hand, in my view, a ground under Section 34(2)(b)(ii) read with Explanation I (i)(ii) and (iii) is made out. I accordingly hold so.
128. In the light of foregoing discussion, I am of the opinion that the arbitral proceedings including the Award in question was passed in violation of public policy of India under Section 34(2)(b)(ii) read with Explanation 1(i), (ii) and (iii) of the AAC Act and thus not legally sustainable. I accordingly hold so.