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SC allows Raju's confession to be used in Satyam - VGE dispute

delhi Updated: Aug 11, 2010 23:06 IST

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The Supreme Court on Wednesday allowed US-based Venture Global Engineering to use fraud-hit Satyam Computers' former chairman B Ramalinga Raju's confessional statement in a shareholding dispute with the IT firm over a 50:50 joint venture, Satyam Venture Engineering.

A bench comprising Justice G S Singhvi and Justice Asok Kumar Ganguly set aside the order of the Hyderabad High Court, which had said that the confessional statement of Raju cannot be used in a city civil court, where VGE has appealed against an arbitration award.

The apex court permitted VGE to amend its plea before the city court and use Raju's confessional statement of January 7, 2009 of fraud tune of Rs 7,000 crore.

Michigan-based VGE had entered into the 50:50 joint venture with Satyam Computers to provide solutions to the automobile industry, but later wanted to sell its stake to a third party due to financial difficulties. However, Satyam contended that as per their agreement, it had the right of first refusal on any shares in case VGE wanted to exit the JV.

The dispute was heard in the London Court of International arbitration and in April 2006, the arbitrator gave an award in favour of Satyam and directed the VGE to transfer its entire shareholding in Satyam Venture Engineering in favour of the IT firm.

After the Satyam scam was unearthed in January, 2009, VGE filed an appeal against the arbitration award in the Secunderabad Civil Court, contending that Raju's confession to cooking books of accounts while at the helm of the IT company had a bearing on their JV.

While the Secunderabad Court had allowed VGE's plea to take on record all subsequent events following Raju's confession of fraud, Satyam filed a petition with the Hyderabad High Court, which on February 19, 2010, held that the confession made by Raju could not be used by the US-based firm to challenge the arbitral award.

Subsequently, VGE filed an appeal against the High Court's judgment in the Supreme Court, which has now overturned the ruling, paving the way for Raju's confession to be allowed in the Secunderabad Civil Court.

However, the Supreme Court said that it would be up to the Secunderabad civil court's discretion whether it wanted to use the confessional statement of Raju or not. The apex court also directed the city court to decide on VGE's plea within four months on merits.