Kasim & ANR. Vs. M/S Paramount Investment Ltd.  INSC 607 (2 August
SUPREME COURT OF INDIA CIVIL ORIGINAL JURISDICTION ARBITRATION PETITION NO. 17
of 2009 Sirajudeen Kasim & Another ..Petitioners(s) Versus M/s.Paramount
Investments Limited ..Respondent(s)
O R D E R
This petition has been filed under Section 11 of the Arbitration and
Conciliation Act, 1996 (hereinafter, "the said
Act") by the Petitioner praying for appointment of an arbitrator to
adjudicate the claims and disputes between the petitioner and the respondent as
the parties have been unable to concur upon the arbitrator.
The first petitioner (hereinafter, P1) is Sirajuddin Kasim, an
Indian, who is the Director, Promoter and shareholder of the second petitioner
holding 75% of issued share capital of the second petitioner (hereinafter P2).
P2 is a company incorporated under the laws of the Republic of Singapore and
inter alia deals and trades in cotton, timber, logging, acquisition, operation
and sale of oil and gas assets, mining of Manganese and other metals. The
respondent on the other hand is a company incorporated under the Laws of
Mauritius. The respondent is engaged inter alia in the business of making
investments by way of equities in private and public companies on a negotiated
The petitioners' case is that the understanding between the
parties was that the respondent would procure farm out transactions of oil and
gas blocks for P2.
farm out transactions, the respondent would be paid a commission separately. On
the date of the Shareholders' 2 Agreement (SHA), P2 was allotted oil and gas
blocks in the Republic of Gabon. There were proposed oil blocks to be procured
by execution of Production Sharing Contract ("PSC") in Brunei as well
as in Tajikistan.
affidavit the respondent admitted this arrangement between the petitioners and
the respondent and also admitted the receipt in the name of Valpro, a sum of US
$ 625,000, claiming that the same was paid by the petitioners for services
rendered in relation to the farm out contracts.
In March, 2006 the respondent was successful in farming out the
oil blocks of P2 through Oil India Limited and Indian Oil Corporation Limited
for which their company Valpro Private Limited was paid a commission of US $
625,000 i.e. 5% of the value of the farm out.
attempts were purported to be made by the respondent to farm out oil and gas
blocks for P2, but the respondent could not procure any farm out transaction.
Between March, 2006 and 23rd April, 2008 3 correspondence was exchanged between
the parties i.e. P1 and P2 and the respondent.
correspondence, it will appear that disputes and differences cropped up between
the parties. Allegations were made by the respondent that P1 was allegedly
falsifying and manipulating the accounts of P2. There were several other
allegations which are not required to be discussed in detail.
The petitioners' case is that the respondent was deliberately
postponing and delaying the holding of the AGMs of P2 and was thereby delaying
the finalization of accounts which was absolutely necessary for submission of
proposals to foreign Governments for procuring oil block. The petitioners'
further case is that the respondent through its representatives, Anshuman
Khanna, Santosh Gadia and their company Seana Energy Pte. Ltd. were making
presentations to prospective purchasers/operators for farming out assets of P2
in breach of the Shareholders' Agreement and was unjustifiably demanding 4
remittances without the desired business for P2. The correspondence exchanged
between the petitioners and the respondent between 28th August, 2006 and 22nd
April, 2008 would show that disputes were brewing between the parties.
On 23rd April, 2008 a Settlement Agreement (Annexure-P8 pg. 116
Vol.1) was executed between P1 and the respondent; Clause C thereof stipulates
that there have been disputes and differences between P1 and the respondent in
relation to SHA and the management of the company and with a view to amicably
resolve the same, P1 agreed to purchase the entire interest of the respondent
Clause 2(c)(i) and (ii) of the Settlement Agreement stipulates:
An amount equal to 10% of the gross amount received by Marvis or any other
company in which Siraj Kasim holds an equity interest, whether directly,
indirectly or deemed (Marvis and such company being referred to herein as the
Siraj Kasim Investments) 5 in relation to or arising or accruing from the
farm-out of part or whole of the participating interest in oil & gas assets
of the Siraj Kasim Investments. The amounts payable under this clause 2(c)
shall be paid within 5 business days of actual receipt of the gross amount by
the Siraj Kasim Investments save and except that (i) if, for any reason
whatsoever, the farm-out does not take place on or before 23rd February 2009,
or (ii) 10% of the gross receipts on account of such farm-outs as on 23rd February
2009, aggregates to less then USD 1,500,000 (USD One Million Five Hundred
Thousand only) the amounts payable under this clause 2(c) shall be USD
1,500,000 (USD One Million Five Hundred Thousand only) which shall he payable
in cash by way of irrevocable wire transfer to PIL's account set out in
Schedule I the wire transfer being for value on a date which is on or before
28th February, 2009.
full payment of any of the above amounts is not received in the due date for
such payment, the amount unpaid shall bear simple interest at the rate of 12%
p.a. from the due date of payment to the date of actual payment, as well after
as before judgment (the interest)."
It is submitted by the petitioners that all rights of P1 and the
respondent under the SHA 6 were to remain operative despite the Settlement
Clause 4C of the Settlement Agreement gave an option to the
respondent to acquire 10% participating interest of P2 in the asset named
Shakthi in Gabon.
Further disputes cropped up between the parties out of the SHA
between 23rd April, 2008 and 17th April, 2009. To various letters written by
the petitioners, the respondent by its letter dated 8th May, 2009 replied to
the petitioners' letter dated 15th April, 2009 and 17th April, 2009; and the
respondent by its letter dated 8th May, 2009 called upon the petitioners to
appoint an independent accounting firm for a thorough investigation of the
The notice invoking the arbitration clause was given by the
petitioner No.1 on 15th April, 2009 and in the said letter, it was contended by
petitioner No.1 that the name of Mr. Gadia be deleted as an arbitrator from 7
the SHA, as he has acted on behalf of the respondent. Therefore, a prayer was
made for the appointment of an impartial arbitrator.
Another letter dated 17th April, 2009 was written by the advocate
of petitioner No.1 to the respondent and Mr. Anshuman Khanna, representative of
the respondent. In the said letter a further request was made for the
appointment of an independent arbitrator and it was reiterated that petitioner
No.1, by its previous letter dated 15th April, 2009 terminated the Settlement
Agreement dated 23rd April, 2008 and the Power of Attorney of the same date.
Thereafter, on 14th May, 2009 the respondent filed a suit against
P1 before the High Court of Republic of Singapore, claiming damages to the
extent of USD 4,850,000/- and interest at the rate of 12% and prayed for
specific performance of the Settlement Agreement dated 23rd April, 2008.
The case of the Respondent is that the Settlement Agreement has no
arbitration clause. On the other hand, Clause 10 of the said agreement provides
Agreement shall be governed by the Singapore law. Notwithstanding any provision
in the Shareholders Agreement, the parties agree that in relation to any legal
action or proceedings arising out of or in connection with this Agreement, each
of the parties hereby irrevocably submits to the non-exclusive jurisdiction of
the courts of Singapore and any party who is not resident or in the case of a
corporation, not incorporated, in Singapore hereby consents to service of
process by post or in other manner permitted by the relevant law."
It may be noted that the said Settlement Agreement is between
petitioner No.1 and respondent and petitioner No.2 is not a party to this
The respondent's case is that only after the Singapore Court
decreed the suit and the same was confirmed in appeal, the petitioner sought to
invoke the arbitration clause under the SHA.
In the conspectus of these facts, the question is whether the
arbitration clause in the SHA still survives. The arbitration clause in SHA
runs as under:
any dispute, difference or question shall, at any time hereinafter arise
between the parties in respect of the construction of this Agreement, or
concerning anything contained or arising out of these presents as to rights,
liabilities or duties of the said parties hereunder, which cannot be mutually
resolved by the parties within a period of thirty days, the same shall be
referred to arbitration in accordance with ... ...
resolved by a sole arbitrator in accordance with the provisions of the Model
Law of Arbitration adopted by the United Nations Commission on International
Trade Laws. The sole arbitrator shall be Mr. Santosh Gadia, Chartered
Accountant having address at F-45, Bhagat Singh Market, New Delhi- 110001,
India or in case of his inability to act as such, such sole arbitrator shall be
appointed jointly by the parties. The seat of arbitration shall be New Delhi.
The arbitration proceedings shall be conducted in English."
From a perusal of clause 10 of the Settlement Agreement and the
Arbitration Clause in SHA, both set out hereinabove, it does not appear 10
prima facie that the rights of the petitioners - both petitioner Nos.1 and 2,
under SHA have been superseded by the arbitration clause. In any event the
question whether the rights of the petitioners under SHA have been superseded
is an arbitrable dispute.
Admittedly, petitioner No.2 is not a party to the settlement
agreement. Therefore, its rights under the arbitration clause are prima facie
not superseded by the settlement agreement. Under Section 2 (h) of the Arbitration and
Conciliation Act, 1996 party means a party to an
petitioner No.2 is a party to an arbitration agreement within the meaning of
Section 2(h) but he is not a party to the settlement agreement. Therefore,
whether his rights have been superseded by the settlement agreement also may be
an arbitrable dispute.
the sequence of events discussed above, prima facie, it appears that respondent
filed 11 a suit on 14th May 2009 before the High Court of Republic of
Singapore, inter alia, claiming damages after receiving the letters of the
petitioner dated 15th April, 2009 and 17th April, 2009, whereunder the
arbitration clause has been invoked. It also appears that prior to the filing
of the suit, the settlement agreement dated 23rd April, 2008, as also the Power
of Attorney dated 23rd April, 2008, were revoked by the letters dated 15th and
17th April, 2009 and the request to appoint an impartial arbitrator in terms of
clause 8.4 of SHA was made in the letter dated 15.4.2009 and then reiterated in
the letter dated 17.04.2009.
The learned counsel for the respondent, in view of the facts
stated above and in view of his subsequent suit filed by them, argued that the
rights of the petitioners under the arbitration agreement does not survive and
in support of his contention reliance was placed on the decision rendered in
Sukanya Holdings 12 (P) Ltd. vs. Jayesh H. Pandya and another reported in
(2003) 5 SCC 531.
This Court is of the opinion that the reliance by the respondent
on Sukanya Holdings (supra) is not of much help to the respondent in the facts
and circumstances of the case. First of all in the instant case Section 8 of Arbitration and
Conciliation Act is not attracted. It is nobody's
case that matter was placed before the judicial authority before invoking the
arbitration clause. In the instant case arbitration clause was invoked earlier
than the filing of a suit as noted above. On the other hand the ratio in the
case of Sukanya Holdings (supra) is against the contention of the respondent in
as much as it has been held,
in paragraph 16 at 536 of the report, that it would be difficult
to give an interpretation to Section 8 of the Act for bifurcation of the cause
of action between the Civil Court and the arbitral forum.
In the case of Sukanya Holdings (supra) the dispute was over
dissolution of the partnership firm and over accounts filed by one partner
against the defendants who were admittedly not partners in the firm.
the Court held that the meaning of the term "in a matter" must
indicate that the entire subject matter of the suit should be subject to
In the instant case admittedly petitioner No.2 is neither a party
to the settlement agreement nor was he impleaded in the suit.
the ratio in Sukanya Holdings (supra) does not help the respondent.
In the instant case the petitioners have alleged that there was
economic duress in the matter of execution of the settlement agreement.
Therefore, following the ratio of this Court in the case of National Insurance
Company Ltd. vs. Boghara Polyfab Pvt. Ltd.
in (2009) 1 SCC 267, this Court is of the opinion whether rights of the parties
14 under SHA have been superseded by the subsequent settlement agreement may be
an arbitrable issue and that issue can be examined by the arbitrator.
In this case there are disputes between the parties and there is a
valid arbitration clause and the clause has been invoked prior to the filing of
the suit. It is also not in dispute that the arbitration procedure between the
parties has failed. Therefore, this Court cannot accept the contention of the
respondent as there is valid invocation of the arbitration clause prior to the
filing of suit by the respondent.
In that view of the matter, this Court appoints Justice S.B.
Sinha, a former Judge of this Court, the sole learned arbitrator in this case.
The learned arbitrator is requested to decide the dispute as early as possible
and preferably within a period of four months from the date of entering upon
the reference. The remuneration of the 15 learned arbitrator and all the
incidental costs are left to be decided by learned arbitrator and are to be
jointly shared by the parties.
The petition for appointment of an arbitrator is thus allowed. No
order as to costs.