SIRAJUDEEN KASIM & ANR.versusM/S PARAMOUNT INVESTMENTS LTD.

                       [201 O] 9 S.C.R. 444


A                   SIRAJUDEEN KASIM & ANR.
                                   v.
              MIS PARAMOUNT INVESTMENTS LTD.
                (Arbitration Petition No. 17 of 2009)

                          AUGUST 2, 2010
B
                   [ASOK KUMAR GANGULY, J.]

        Arbitration and Conciliation Act, 1996:

c         ss. 2(f}, (h) and 11 - International commercial arbitration
    - Party - Appointment of arbitrator - Shareholders'
    Agreement (SHA) between P1 and P2 on one side and R on
    the other for procuring farm out transactions of oil and gas
    blocks for P2 - Later, disputes arose and a settlement
    agreement entered into between P1 and R - Further disputes
0
    arose - Notice by P1 invoking arbitration clause of SHA -
    Suit by R in foreign court in terms of settlement agreement -
    HELD: From a perusal of clause 10 of Settlement Agreement
    and the arbitration clause in SHA, it does not appear prima
    facie that the rights of both P1 and P2 under SHA have been
E   superseded by Settlement Agreement - Further, the question
    whether the rights of P1 and P2 under SHA have been
    superseded is an arbitrable issue which can be examined by
    the arbitrator - Besides, admittedly, P2 is not a party to
    settlement agreement, therefore, its rights under the arbitration
F   clause are prima-facie not superseded by the settlement
    agreement - P2 is a party to the arbitration agreement within
    the meaning of s. 2(h) byt-it is not a party to the settlement
    agreement - Therefore, whether its rights have been
    superseded by settlement agreement- sfso may be an
G   arbitrable issue to be examined by the arbitrator - Prior to
    filing of suit, the settlement agreement and the Power of
    Attorney had been revoked and request to appoint an
     arbitrator had been reiterated - Besides, P2 is not a party to

H                                 444
    SIRAJUDEEN KASIM & ANR. v. PARAMOUNT                       445
              INVESTMENTS LTD.

the suit - Thus, there are disputes between the parties and           A
there is a valid arbitration clause which 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, the arbitrator is appointed.
                                                                      8
     National Insurance Company Ltd. vs. Boghara Polyfab
Pvt. Ltd. 2008 (13) SCR 638 = (2009) 1 SCC 267 - relied
on.

     Sukanya Holdings (P) Ltd. vs. Jayesh H. Pandya and
Anr. 2003 (3) SCR 558 =(2003) 5 SCC 531 - distinguished.              t
                       Case Law Reference:
     2003 (3) SCR 558           distinguished        para 21
     2008 (13) SCR 638           relied on           para 25          D
    CIVIL ORIGINAL JURISDICTION : Arbitration Petition No.
17 of 2009.
     Rajeev Kumar, Ajay Sharma for the Petitioners.
                                                                      E
    C.A. Sundaram, Nikhil Nayyar, T.V.S. Raghavendra
Sreyas, Zafar lnayat, Abhishek Gupta, Anand Kaur, Rohini
Musa for the Respondent.

     The order of the Court was delivered by
                                                                      F
                              ORDER

      GANGULY, J. 1. 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            G
arbitrator to adjudicate the claims and disputes between the
petitioner and the respondent as the parties have been unable
to concur upon the arbitrator.

     2. The first petitioner (hereinafter, P1) is Sirajuddin Kasim,
an Indian, who is the Director, Promoter and shareholder of the       H
    446     SUPREME COURT REPORTS                   [2010] 9 S.C.R.


A 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
B 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 basis.
c      3. 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. For such farm out
  transactions, the respondent would be paid a commission
  separately. On the date of the Shareholders' Agreement (SHA),
D 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. In their affidavit the respondent admitted this
  arrangement between the petitioners and the respondent and
E 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.

        4. In March, 2006 the respondent was successful in
F 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. Subsequently, 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
G out transaction. Between March, 2006 and 23rd April, 2008
  correspondence was exchanged between the parties i.e. P1
  and P2 and the respondent. From that correspondence, it will
  appear that disputes and differences cropped up between the
   parties. Allegations were made by the respondent that P1 was
H
   SIRAJUDEEN KASIM & ANR. v. PARAMOUNT                    447
 INVESTMENTS LTD. [ASOK KUMAR GANGULY, J.]
allegedly falsifying and manipulating the accounts of P2. There    A
were several other allegations which are not required to be
discussed in detail.

     5. The petitioners' case is that the respondent was
deliberately postponing and delaying the holding of the AGMs
                                                                   B
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          C
purchasers/operators for farming out assets of P2 in breach of
the Shareholders' Agreement and was unjustifiably demanding
remittances without the desired business for P2. The
correspondence exchanged between the petitioners and the
respondent between 28th August, 2006 and 22nd April, 2008          D
would show that disputes were brewing between the parties.

     6. 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        E
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 in P2.

     7. Clause 2(c)(i) and (ii) of the Settlement Agreement        F
stipulates:

    "2(c) 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     G
    (Marvis and such company being referred to herein as the
    Siraj Kasim Investments) 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       H
    448       SUPREME COURT REPORTS                   [2010] 9 S.C.R.


A         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,
B
                 or

                 (ii) 10% of the gross receipts on account of such
                 farm-outs as on 23rd February 2009, aggregates
                 to less then USO 1,500,000 (USO One Million Five
c                Hundred Thousand only)

                 the amounts payable under this clause 2(c) shall be
          USO 1,500,000 (USO One Million Five Hundred Thousand
          only) which shall he payable in cash by way of irrevocable
          wire transfer to Pl L's account set out in Schedule I the wire
0
          transfer being for value on a date which is on or before
          28th February, 2009.

                Where full payment of any of the above amounts is
          not received in the due date for such payment, the amount
E         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)."

         8. It is submitted by the petitioners that all rights of P1 and
F   the respondent under the SHA were to remain operative despite
    the Settlement Agreement.

         9. 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.
G
          10. 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
H
   SIRAJUDEEN KASIM & ANR. v. PARAMOUNT                      449
 INVESTMENTS LTD. [ASOK KUMAR GANGULY, J.]
15th April, 2009 and 17th April, 2009; and the respondent by         A
its letter dated 8th May, 2009 called upon the petitioners to
appoint an independent accounting firm for a thorough
investigation of the accounts.

     11. The notice invoking the arbitration clause was given        B
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 the SHA, as he has acted on
behalf of the respondent. Therefore, a prayer was made for the
appointment of an impartial arbitrator.
                                                                     c
     12. 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,   D
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.

      13. Thereafter, on 14th May, 2009 the respondent filed a
                                                                     E
suit against P1 before the High Court of Republic of Singapore,
claiming damages to the extent of USO 4,850,000/- and interest
at the rate of 12% and prayed for specific performance of the
Settlement Agreement dated 23rd April, 2008.

    14. The case of the Respondent is that the Settlement            F
Agreement has no arbitration clause. On the other hand, Clause
10 of the said agreement provides as follows:

     "This Agreement shall be governed by the Singapore law.
     Notwithstanding any provision in the Shareholders               c;
     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
    450       SUPREME COURT REPORTS                  [2010] 9 S.C.R.


A         of a corporation, not incorporated, in Singapore hereby
          consents to service of process by post or in other manner
          permitted by the relevant law."

         15. It may be noted that the said Settlement Agreement is
8   between petitioner No.1 and respondent and petitioner No.2
    is not a party to this Agreement.

       16. 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
C SHA.

         17. 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:
D
          "If 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 parti€3 hereunder, which
E         cannot be mutually resolved by the parties within a period
          of thirty days, the same shall be referred to arbitration in
          accordance with . . . . .. shall be resolved by a sole
          arbitrator in accordance with the provisions of the Model
          Law of Arbitration adopted by the United Nations
F         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
G         the parties. The seat of arbitration shall be New Delhi. The
          arbitration proceedings shall be conducted in English."

      18. From a perusal of clause 1O of the Settlement
  Agreement and the Arbitration Clause in SHA, both set out
H hereinabove, it does not appear prima facie that the rights of
   SIRAJUDEEN KASIM & ANR. v. PARAMOUNT                     451
 INVESTMENTS LTD. [ASOK KUMAR GANGULY, J.]
the petitioners - both petitioner Nos.1 and 2, under SHA have       A
been superseded by the settlement agreement. In any event the
question whether the rights of the petitioners under SHA have
been superseded is an arbitrable dispute.

      19. Admittedly, petitioner No.2 is not a party to the
                                                                    B
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 arbitration
agreement. The petitioner No.2 is a party to an arbitration
agreement within the meaning of Section 2(h) but he is not a        C
party to the settlement agreement. Therefore, whether his rights
have been superseded by the settlement agreement also may
be an arbitrable dispute.

     20. From the sequence of events discussed above, prima         o
facie, it appears that respondent filed 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     E
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
                                                                    F
and then reiterated in the letter dated 17.04.2009.

     21. 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        G
contention reliance was placed on the decision rendered in
Sukanya Holdings (P) Ltd. vs. Jayesh H. Pandya and another
reported in (2003) 5. SC:C 531.

     22. This Court is of the opinion that the reliance by the      H
    452      SUPREME COURT REPORTS                  [201 OJ 9 S.C.R.


A 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
8 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
C 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.

        23. In the case of Sukanya Holdings (supra) the dispute
  was over dissolution of the partnership firm and over accounts
D filed by one partner against the defendants who were admittedly
  not partners in the firm. Therefore, 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 arbitration
  agreement.
E
         24. In the instant case admittedly petitioner No.2 is neither
    a party to the settlement agreement nor was he impleaded in
    the suit. Therefore, the ratio in Sukanya Holdings (supra) does
    not help the respondent.

F      25. 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. reported in (2009) 1 SCC 267, this
G Court is of the opinion whether rights of the parties under SHA
  have been superseded by the subsequent settlement
  agreement may be an arbitrable issue and that issue can be
  examined by the arbitrator.

          26. In this case there are disputes between the parties and
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   SIRAJUDEEN KASIM & ANR. v. PARAMOUNT                           453
 INVESTMENTS LTD. [ASOK KUMAR GANGULY, J.]
there is a valid arbitration clause and the clause has been               A
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.                            B

     27. 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             C
a period of four months from the date of entering upon the
reference. The remuneration of the learned arbitrator and all the
incidental costs are left to be decided by learned arbitrator and
are to be jointly shared by the parties.

     28. The petition for appointment of an arbitrator is thus            D
allowed. No order as to costs.

R.D.                                   Arbitration petition allowed.