High Court · Decided 28 May 2015

Nava Bharat (Singapore) Pte Ltd v Straits Law Practice LLC and another and another suit

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[2015] SGHC 146Case no. Suit Nos 846 and 847 of 2011

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Evidence Act 1893

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Lee Seiu Kin J:
Introduction
[1] These suits concern the plaintiff’s attempt to acquire an interest in a coal mine (“the Mine”) located in Sungai Cuka in Kalimantan, Indonesia (“the Transaction”). The Transaction was beset with difficulties and it eventually failed despite the plaintiff having paid out more than US$3m. In Suit No 847 of 2011 (“S 847/2011”), the plaintiff is suing the counterparty to the Transaction and his solicitor. In Suit No 846 of 2011 (“S 846/2011”), the plaintiff is suing the solicitor and the firm that had acted for it in the Transaction. In a nutshell, the plaintiff’s case is that it was defrauded by the counterparty and his lawyer, and its own lawyers had failed to safeguard its interest.
[2] The trial for both suits, which were heard together, spanned a period of slightly over a year, with three tranches and a total of 41 hearing days. It was a deeply contentious matter with not only many disputes of facts but also a number of legal issues, some of which have not been addressed by the Singapore courts. At the end of the hearing, I reserved judgment. Having considered the matter, I conclude that the plaintiff’s claims in both S 846/2011 and S 847/2011 should be dismissed in their entirety. I will set out the factual background and issues before I give the reasons for my decision. The table of contents that follows would hopefully aid the reader in traversing this lengthy judgment:
Factual background
The parties
[3] The plaintiff in both suits is Nava Bharat (Singapore) Pte Limited (“Nava Bharat”), a company incorporated in Singapore. It is in the business of power generation, ferro alloys, mining and agri-business, among others. It is a wholly-owned subsidiary of Nava Bharat Ventures Limited (“NBVL”), a company incorporated in India and listed on the Indian stock exchanges. Ashwin Devineni (“Ashwin”) is the managing director of Nava Bharat and he was the main representative for Nava Bharat in the Transaction.
[4] The first defendant in S 846/2011 is Straits Law Practice LLC (“SLP”), a limited liability law corporation carrying on the practice as advocates and solicitors in Singapore. The second defendant in S 846/2011 is M Rajaram (“Rajaram”), an advocate and solicitor of the Supreme Court of Singapore and a senior director of SLP. Rajaram was appointed as Nava Bharat’s lawyer for the Transaction.
[5] The first defendant in S 847/2011 is Tan Beng Phiau Dicky (“Dicky Tan”), an Indonesian businessman. At the time of the Transaction, Dicky Tan was the president director and majority shareholder of PT Indoasia Cemerlang (“PTIC”), which was the Indonesian company with the requisite mining concessions to mine coal in the Mine. A mining concession is called “Kuasa Pertambangan” in Indonesia and I shall refer to Dicky Tan’s mining concessions in the Mine as the “KP Concessions”. Dicky Tan was served the writ of summons on 8 March 2012, but he did not enter into appearance. The plaintiff obtained default judgment against him on 26 August 2013. The second defendant in S 847/2011 is Chidambaram Chandrasegar (“Chandra”), an advocate and solicitor of the Supreme Court of Singapore and a senior director of Tan Peng Chin LLC (“TPC”). Chandra was appointed by Dicky Tan to act as his lawyer in respect of the Transaction.
[6] Given the large number of persons and entities involved in this case, I have, for convenience, compiled a list of the names of the key persons and entities as well as the abbreviations (if any) used in this judgment. The list is annexed hereto as Annex A.
The chronology of events
Nava Bharat’s search for coal
[7] In 2008, Nava Bharat was actively seeking to secure a regular supply of coal for NBVL’s power generation business in India. This was because the the power generation business in India of NBVL was expanding and there was a need to source for coal from other countries.
[8] Shortly prior to the Transaction, Nava Bharat had sought to acquire an interest in another coal mine from a different party. On or about 27 September 2008, Nava Bharat entered into a memorandum of understanding for the participatory interest in a coal mine in Central Kalimantan, Indonesia (“the Multi Guna Transaction”). A sum of US$2m was paid. However the Multi Guna Transaction was eventually called off as a result of a dispute between the parties.
[9] Ashwin then found out about the Mine from Bhushan Rao (“Bhushan”). Bhushan was then the managing director of Agora International Trading Pte Ltd (“Agora”), a Singapore-based trading company, whose principal activity is, inter alia, to trade in commodities. On or around 16 September 2008, Bhushan and N Lakshman (“Lakshman”), the then financial director of Agora, entered into discussions with G R K Prasad (“Prasad”), the director of financial and corporate affairs of NBVL, in relation to the Mine. At that time, NBVL conducted a feasibility study on the Mine. There were also preliminary discussions on the general methodology and structure for the Transaction.
[10] Chandra had a role in linking up Dicky Tan with Agora, a fact that was unknown to Ashwin until after the Transaction fell through. Chandra was (and still is) a non-executive director of Agora, and it was he who put Dicky Tan, for whom he had acted in an earlier transaction, in touch with Agora for the purpose of finding a buyer for the Mine. Dicky Tan instructed Chandra around August 2008 to act for him in the Transaction.
[11] As mentioned in [5] above, Dicky Tan was the majority shareholder of PTIC holding 80% of the shares (with the other 20% held by Ridwan Halim as his nominee). PTIC received the KP Concessions from another Indonesian company, PT Batu Hitam Mulia (“PTBHM”). The KP Concessions comprised the following:
(a) A KP exploitasi licence (“KP Exploitasi Licence”) for 191.014 hectares, expiring on 29 September 2010.
(b) A KP transportation and sale licence (“KP Transport and Sale Licence”) relating to the KP Exploitasi Licence, expiring on 29 September 2009.
(c) A KP explorasi licence (“KP Explorasi Licence”) for 936.02 hectares, which has expired on 20 October 2006.
[12] The KP Exploitasi Licence allowed the holder to “mine and remove the coal”, while the KP Explorasi Licence only entitled the holder to explore for coal in the specified area. As the KP Concessions holder, PTIC had the authority to conduct mining operations in the Mine. Therefore, Nava Bharat had to negotiate with Dicky Tan in order to acquire an interest in the Mine.
[13] On 18 September 2008, Chandra wrote to Agora setting out the proposed method of the acquisition for the Mine. The structure envisaged by the parties and set out in Chandra’s letter was as follows:
[14] To discuss the proposed structure set out in Chandra’s letter, Chandra and Lakshman arranged for Nava Bharat, Agora and Dicky Tan to meet on 25 September 2008 at the office of TPC. At the meeting, Nava Bharat was represented by Ashwin and his father, Ashok Devineni (“Ashok”), the chairman of the board of directors of NBVL, and Prasad, while Agora was represented by Bhushan and Lakshman. It is undisputed that Nava Bharat did not have legal representation at the meeting. Dicky Tan was accompanied by his brother, Jason Tan, and his solicitor, Chandra.
[15] Nava Bharat was informed at the meeting that a foreign company like Nava Bharat could not own shares in the company with the KP Concessions for the Mine. Instead, it was proposed that Nava Bharat hold the shares in that company through an Indonesian nominee. Apart from the idea of a nominee arrangement, the parties also discussed the commercial aspects of the Transaction. Specifically, Ashwin was informed that the value of the company could be fixed at US$20m based on a coal reserve of 10m metric tonnes. Ashwin claimed that Dicky Tan had stated categorically that “the Mine was operational and was ready to be operated as soon as the investors moved in”. Further, he alleged that Chandra, although appointed to represent Dicky Tan, was in fact actively advising all parties present at the meeting. This is a major point of contention between the parties, and I will address it later.
Appointment of Rajaram and ABNR
[16] Having discussed the key commercial terms of the Transaction, Nava Bharat decided to proceed with the Transaction and, after the meeting on 25 September 2008, indicated that it would have to appoint its own lawyers to obtain legal advice and prepare the necessary documents to execute the Transaction. To this end, Nava Bharat approached Chew Chin of Baker & McKenzie. Chew Chin attended the meeting on 29 September 2008 with Ashwin and Bhushan. At this meeting, the parties discussed the possible structures that could be put in place for the Transaction.
[17] Notwithstanding that, Nava Bharat eventually appointed Rajaram instead of Chew Chin as its lawyer for the Transaction. There is no dispute that Rajaram was recommended by Chandra. However, the parties do not agree on the facts which led to Chandra’s recommendation of Rajaram. According to Nava Bharat, Chandra told Ashwin and Bhushan immediately after the meeting that the deal was “unlikely to progress very far” if they continued with Baker & McKenzie, and recommended that Nava Bharat appoint Rajaram instead. Chandra, on the other hand, said that Bhushan had asked him to recommend another Singapore law firm because Nava Bharat wanted a comparison, and it was in those circumstances that he recommended Rajaram to Bhushan.
[18] Bhushan, who was acquainted with Rajaram, then called the latter to brief him on the Transaction. Among other things, it was made known to Rajaram that Nava Bharat was already considering Baker & McKenzie. Following the call from Bhushan, Rajaram attended the meeting on 3 October 2008 and was introduced to Ashwin.
[19] At around the same time, Nava Bharat was also considering which Indonesian law firm to appoint for the Transaction. On 6 October 2008, Ashwin sent an email to Rajaram stating that it is “important” that Indonesian lawyers would be engaged to do the legal due diligence. Rajaram agreed and provided a list of five Indonesian law firms, including Ali Budiardjo, Nugroho, Reksodiputro (“ABNR”). While the parties agree that ABNR was appointed on or about 9 October 2008, they disagree on who appointed ABNR. Nava Bharat says it was Rajaram, while Rajaram points to Nava Bharat.
The Heads of Agreement
[20] The negotiations between Nava Bharat and Dicky Tan were already in progress when Rajaram and ABNR were appointed. As mentioned earlier, Nava Bharat and Dicky Tan met up on 25 September 2008 to discuss the proposed structure set out in Chandra’s letter dated 18 September 2008 (see [20] above). Following that, on 2 October 2008, Chandra sent an email to Ashwin and Bhushan attaching the clean and marked copies of a draft document entitled “Heads of Agreement”. The draft Heads of Agreement was sent to Prasad, and he replied with his “corrections” on the same day.
[21] A meeting was scheduled and held at ABNR’s office in Jakarta on 13 October 2008. Rajaram met with Woody Pananto (“Woody”) and Nafis Adwani (“Nafis”) of ABNR, and Chandra joined them about an hour later, followed by Dicky Tan and Ashwin later in the day. The Heads of Agreement was signed by Nava Bharat, Dicky Tan and PTIC on the same day. As agreed under the Heads of Agreement, Nava Bharat paid US$100,000 into the stakeholding account of TPC.
[22] The structure contemplated under the Heads of Agreement can be summarised as follows:
(a) PTBHM, the original holder of the KP Concessions for the Mine, will transfer the KP Concessions to PTIC.
(b) Nava Bharat, Dicky Tan and PTIC were required to procure the incorporation of a holding company (“the Holding Company”), which would wholly own a foreign-owned Indonesian company, also known as a Penanaman Modal Asing company (“the PMA Company”).
(c) In the first phase of the acquisition, Nava Bharat was to acquire 15% of the equity and effective economic interest in the Holding Company by payment of US$3m (less deposit of US$100,000 held by TPC as stakeholders) to Dicky Tan. Nava Bharat had the right to acquire up to 90% of the equity and effective economic interest in the Holding Company.
(d) The PMA Company would enter into a mine operating service agreement with PTIC. This would entitle the PMA Company to operate the Mine and extract, transport and sell the coal to any customer.
(e) The PMA Company would enter into an off-take agreement with the Holding Company for the supply of coal extracted from the Mine. This would oblige the PMA Company to supply the coal extracted to the Holding Company.
(f) Nava Bharat would enter into a back-to-back off-take agreement with the Holding Company for the supply of coal. This would oblige the Holding Company to supply the coal extracted to Nava Bharat (which would be obtained by the Holding Company pursuant to the off-take agreement that it was to enter into with the PMA Company as set out above).
(g) Nava Bharat was entitled to withdraw its participation at any time within ten months of the initial completion date stipulated in the Heads of Agreement.
[23] The 15% of the Holding Company was valued at US$3m in the following manner:
(a) The only subsisting licences within the KP Concessions were the KP Exploitasi License and the KP Transportation and Sale Licence (see [11] above).
(b) Nava Bharat, Dicky Tan and PTIC agreed that valuation of the KP Exploitasi License and the KP Transportation and Sale Licence was US$20m, based on Dicky Tan’s representation that the Mine had a coal reserve of 10m metric tonnes (cll 4.1 and 4.2 of the Heads of Agreement).
(c) 15% of the valuation of US$20m amounted to US$3m.
Due diligence and change in Indonesian mining laws
[24] On 14 October 2008, the day after the Heads of Agreement was signed, Ashwin received an email from Prasad with his comments on the Heads of Agreement. Ashwin forwarded the email to Rajaram and Lakshman for their advice. In Rajaram’s reply on 15 October 2008, he emphasised that the Heads of Agreement was an “interim agreement”, and was “not intended to encompass all the legal rights and obligations of the parties”. He further listed a series of separate agreements would have to be prepared by SLP and ABNR, and informed Ashwin that SLP would be “obtaining the inputs of Indonesian Lawyers at all stages.” Ashwin responded with a short email which simply stated “Ok ... sounds good”. This was conveyed to Woody and Nafis of ABNR in Rajaram’s email which was sent on the same day.
[25] In the meantime, Rajaram worked on the draft agreements for the Transaction. On 20 October 2008, Rajaram sent an email to Ashwin and Chandra with the first draft of the agreements for their comments. Rajaram also sent a separate email with the draft agreements to Woody for his comments.
[26] At about the same time, ABNR embarked on the due diligence checks. On 16 October 2008, Vincent Ariesta Lie (“Vincent”) of ABNR sent a list of issues and required documents for the purpose of the due diligence exercise to Dicky Tan and Tanakorn Pitisatien (“Tanakorn”). Tanakorn is Dicky Tan’s assistant who handled his day-to-day affairs in Indonesia, including matters related to the Mine. Chandra informed Vincent on the next day that the list was sent to the wrong emails, and stated that “[a]ll emails to the seller” should be sent to Tanakorn and Chandra. This led to Rajaram’s two emails on 17 October 2008 stating that ABNR should correspond only with him and not Chandra. This was acknowledged by Chandra and ABNR.
[27] On 26 October 2008, Woody sent an email attaching a copy of the draft due diligence report (“ABNR’s First Draft Report”) to Rajaram. It was stated in the ABNR’s First Draft Report that Dicky Tan and Ridwan Halim were the shareholders of PTIC. Woody also highlighted several issues in his email, including the fact that a lend-use permit from the Ministry of Forestry (“Forestry Licence”) would have to be obtained before mining operations could be carried out. Woody also explained the procedure to obtain the Forestry Licence in its email. Despite the earlier reminder from Rajaram (see [26] above), Chandra’s secretary was copied in Woody’s email dated 26 October 2008. Rajaram pointed this out, and Woody explained that the email was inadvertently copied to Chandra’s secretary on the mistaken belief that she was one of Rajaram’s colleagues.
[28] Rajaram forwarded the ABNR’s First Draft Report to Ashwin on 28 October 2008. Rajaram explained in his email that he plans to meet ABNR (and subsequently Dicky Tan and Chandra) to discuss the matters raised in the ABNR’s First Draft Report the next day or the day after that, and then leave it to Ashwin to make a “commercial call”. The proposed meeting did not occur as Chandra informed Rajaram that Dicky Tan would “have to make a commercial call” on whether he wishes to proceed with the deal.
[29] On 31 October 2008, Prasad sent an email to Rajaram requesting for a legal opinion to confirm that the proposed structure for the Transaction was enforceable under Indonesian law in order to satisfy the Indian banks financing the Transaction. The opinion was sent to Prasad on 7 November 2008, stating that the Transaction was valid and enforceable under Indonesian law.
[30] On 2 December 2008, Rajaram received an email from Vincent attaching a revised due diligence report (“ABNR’s Second Draft Report”).
[31] Another meeting was held on 12 December 2008. Ashwin, Bhushan, Lakshman, Rajaram, Dicky Tan and Chandra met to discuss, inter alia, the transfer of the KP Concessions, which were originally held by PTBHM, to PTIC as required under the Heads of Agreement (see [22] above). Upon receiving a copy of the transfer on 17 December 2008, Rajaram forwarded it to Woody for verification with the relevant authorities in Indonesia. In the same email, Rajaram informed Woody that Nava Bharat was “in a position to complete the matter” and wanted a confirmation that “the title documents and all other required permits [a]re valid and that there are no other issues that needs to be resolved”.
[32] On or about 16 December 2008, a new mining law was passed in Indonesia. The next day, Prasad wrote to ABNR and Rajaram asking them to check on the impact of the new mining law on the proposed structure for the Transaction. Nafis replied on the same day pointing out that the new mining law was passed by the House of Representatives and had not been enacted yet (since the law will only be enacted within 30 days from the date on which the law was passed). This change in the mining law essentially introduced a new type of licence, namely, the mining business licence, also known as the Izin Usaha Pertambangan (“IUP Licence”), but it was silent on the status of the KP Concessions which were issued earlier.
[33] A meeting was held on 19 December 2008. The meeting was attended by Ashwin, Rajaram, Chandra and others. At this meeting, Ashwin arranged for Mohana Sundaram Paranjothy (“Bob Sundaram”) to address the meeting via tele-conference on the issue of the Forestry Licence. Bob Sundaram was, at the material time, the director of two subsidiaries of Nava Bharat (namely, PT Nava Bharat Sungai Cuka (“NBSC”) and PT Nava Bharat Indonesia) and he was acting as Nava Bharat’s “focal point on the ground in Indonesia”. Bob Sundaram reported that the Mine had a KP Exploitasi Licence for 191.014 hectares but since the Mine was located in a convertible production forest, also known as Hutan Produksi Konversi (“HPK Forest”), it was necessary to have a Forestry Licence in order to operate the Mine. Dicky Tan and Jason Tan then joined in the meeting via tele-conference. At the meeting, Dicky Tan took the position that the Forestry Licence was not required. According to Rajaram, Dicky Tan threatened to “walk away from the deal” due to Ashwin’s insistence for him to obtain the Forestry Licence, but Ashwin eventually agreed, after some discussion, to proceed with initial completion on the basis that Dicky Tan gave his undertaking to obtain the Forestry Licence if it was required. Nava Bharat denies this. This is a major factual dispute between the parties, and I will discuss this point later.
[34] After the meeting on 19 December 2008, Rajaram sent an email to Nafis for ABNR’s approval on the amended draft agreements (which were attached to the email), and for an update on the due diligence exercise. Shortly after the email was sent, Nafis and Rajaram arranged to discuss the matter over the telephone.
[35] On the same day, Bob Sundaram sent an email to Ashwin discussing the issue of Forestry Licence. This was forwarded to Rajaram. Ashwin also forwarded to Rajaram a “Newsalert” prepared by PricewaterhouseCoopers Indonesia on the new mining law. Bob Sundaram sent another email to Ashwin on the next day, 20 December 2008, to reiterate that the Mine is located within the HPK Forest (such that the Forestry Licence is necessary), and in this email, he attached a due diligence report prepared by Thamotharhan Karupiah (“Karupiah”) to support his position. Karupiah was, at the material time, the operations manager of Nava Bharat in Indonesia. Bob Sundaram’s email dated 20 December 2008 with the report by Karupiah attached was also forwarded to Rajaram. A few days later, on 23 December 2008, Ashwin and Prasad communicated over email on the issue of Forestry Licence.
[36] On 22 December 2008, ABNR sent an email to Rajaram, copied to Ashwin and Prasad, attaching the draft due diligence report (“ABNR’s Third Draft Report”). In the same email, ABNR advised on, inter alia, the possible implications of the new mining law. Prasad, having read the ABNR’s Third Draft Report, raised several points and said that it is “advisable to prepare a roadmap and indemnities before [Nava Bharat] conclude the Agreements”.
[37] Also on 22 December 2008, Chandra informed Rajaram that Jason Tan wanted the agreements to be executed before Christmas, ie, 25 December 2008. Rajaram forwarded the email to Ashwin on 24 December 2008, and stated that Nava Bharat’s interest might be affected if the issues on the validity of the structure raised by ABNR in view of the new mining law were not resolved. At the same time, Rajaram wrote to Woody for his opinion on whether a new structure was required to protect Nava Bharat’s interest in light of the new mining law. Woody replied on 29 December 2008 to say that it was difficult to give a clear opinion due to the uncertainties in the new mining law and suggested that a meeting might be useful to discuss the issues and explore any possible alternative structures. Rajaram wrote back on 30 December 2008 and proposed to have the meeting on 5 January 2009. On the same day, Rajaram and Ashwin met to discuss on the possibility of using an alternative structure for the Transaction.
Changes to the structure for the Transaction
[38] Notwithstanding that there was mention of calling off the deal in early January 2009, Nava Bharat and Dicky Tan decided to go back to negotiations. On 12 January 2009, the parties met. At the meeting, Ashwin requested to “keep the communication lines open” so that they can resolve any problems “by discussion rather than by coming to unilateral decisions”. In particular, it was noted in the minutes of the meeting that Rajaram and Chandra would work on the agreements to “meet the new revised circumstances” and the new completion date would be determined upon receiving ABNR’s approval.
[39] Dicky Tan also informed the meeting that the jetty facilities were owned by PTBHM and he was in the process of procuring the transfer of the ownership over to another one of his companies, namely, PT Adiperkasa Ekabakti Industry (“PTAEI”). Later that day, Prasad sent an email to Ashwin stating that Rajaram should ask Dicky Tan to include the jetty facilities as an integral element to the Mine and give a revised legal opinion in light of the new mining law.
[40] On 15 January 2009, Chandra wrote to Lakshman and copied to Bhushan, Ashwin and Rajaram, to inform them that “the deal is on”, and that Dicky Tan was “bending backwards to make the deal happen”. Chandra also emphasised in the same email that the deal must be closed by the following week with “a definite date given to all parties”. Rajaram responded to Chandra’s email stating that it was Nava Bharat that was bending backwards to accommodate Dicky Tan, and that he would be sending out the proposed new structure later that day. The proposed new structure in Rajaram’s email dated 15 January 2009 can be summarised as follows:
(a) There would be a loan agreement between Nava Bharat and PTIC/PTAEI for the sum of US$4.5m. All the shares in PTIC and PTAEI would be pledged to Nava Bharat as security for the loan.
(b) The ownership of the jetty facilities will be transferred from PTBHM to PTAEI within four weeks of the initial completion date.
(c) PTAEI would be converted to a PMA company within four weeks of the acquisition of the jetty facilities.
(d) The failure to acquire the jetty facilities or convert PTAEI into a PMA company within the stipulated time would constitute an event of default.
(e) If the new mining law permits foreign ownership of the Mine, then Nava Bharat shall have the option of converting its entire loan into an equity interest in PTIC.
(f) In the event of default, Nava Bharat would have the option of recovering its loan by way of an off-take agreement at an agreed price to be determined.
[41] The next day, Rajaram wrote to Woody to ask for advice on the legality of the proposed new structure and the due diligence in respect of the jetty facilities which were due to be submitted. Rajaram also asked for the final due diligence report and ABNR’s advice on the final documentation to be in place for the proposed new structure. On the same day, Rajaram wrote to Chandra objecting to Dicky Tan’s demand for the Transaction to be completed before the Chinese New Year, ie, 26 January 2009.
[42] On 18 January 2009, Woody wrote to Rajaram and Chandra stating, in essence, that while the proposed new structure in Rajaram’s email dated 15 January 2009 was generally feasible, it might be difficult for PTBHM to transfer the jetty facilities to PTAEI because the primary business of PTAEI was in the field of “industry” and not coal mining. Rajaram noticed that Woody’s email was sent to Chandra despite his previous instructions not to do so (see [26] above), and he sent an email to remind ABNR that all correspondence should be addressed only to him (and not Chandra). Woody’s email on 18 January 2009 was forwarded by Ashwin to Bob Sundaram. In response, Bob Sundaram said that they are also preparing a “comprehensive due diligence report” and asked Ashwin to review the reports separately so that the report by ABNR can be “scrutinized”. On 20 January 2009, Bob Sundaram sent the due diligence report prepared by Karupiah to Ashwin and copied to Rajaram. As a result of the uncertainty in relation to the transfer of the jetty facilities to PTAEI, Nava Bharat and Dicky Tan decided to proceed with a loan amount of US$3m as opposed to the original sum of US$4.5m (of which US$1.5m was meant to be consideration for the transfer of the jetty facilities). Accordingly, the pledge for the loan would only cover the shares of PTIC and not PTAEI.
[43] Sometime in January 2009, Rajaram, Chandra and ABNR worked on the draft agreements for the Transaction. On 19 January 2009, Chandra sent an email to Rajaram with a series of agreements attached to it. On 20 January 2009, Woody sent an email to Rajaram, attaching templates for the pledge of shares agreements, the power of attorney to sell the shares in PTIC and the power of attorney to vote in PTIC (“the Pledge Documents”). Rajaram then sent a copy of the draft master agreement (“Master Agreement”) and draft Loan Agreement for ABNR’s input. To ensure that everyone was “on the same page”, Rajaram sent a schematic diagram of the proposed new structure for the Transaction to Woody for his input on the legality of the structure in the context of Indonesian law, and to Prasad and Ashwin for their comments in the context of the financing scheme. A copy was sent to Chandra as well. The schematic diagram is reproduced below:
[44] Woody, in his reply on the same day, expressed the view that, subject to certain assumptions and qualifications mainly in relation to the new mining law, the “transaction structure would work”. He also pointed out that the schematic diagram by Rajaram showed that the debtor for the Loan Agreement should have been PTIC, instead of Dicky Tan as stated in the draft Loan Agreement which was sent.
[45] On 21 January 2009, Rajaram met with Chandra to finalise the draft agreements for the Transaction. After the meeting, Rajaram sent the draft agreements to Ashwin and Prasad for their review and input. Both Ashwin and Prasad gave their comments on the draft agreements on the same day. At the same time, Rajaram sent the draft agreements to ABNR for their review and liaised with Chandra on the outstanding issues. In Rajaram’s email to Chandra, he stated that:
[46] On the same day, at 11.20pm, Rajaram sent the draft agreements for the Transaction to Chandra, Ashwin and ABNR. These include the draft agreements that were supposed to be signed the next day, namely, the Master Agreement, the Loan Agreement and the Pledge Documents. In the email, Rajaram had also asked ABNR to check that the “Indonesian Documents” were in accordance with Indonesian law.
Indonesian leg of the initial completion
[47] On the morning of 22 January 2009, at 7.22am, Woody sent an email to Rajaram stating that ABNR was still “not fully clear” about the structure for the Transaction. In particular, ABNR’s email highlighted the issue with the identity of the debtor for the Loan Agreement (which it had raised previously, see [44] above):
[48] At 8.30am, Rajaram responded to the queries raised by Woody in his earlier emails (see [44] and [47] above):
[49] On 22 January 2009, at about 12.00pm (Jakarta time), the following agreements (“the Security Documents”), which were governed by Indonesian law, were executed by the parties, with Bob Sundaram signing on behalf of Nava Bharat:
(a) The loan agreement between Nava Bharat and Dicky Tan, which recorded Nava Bharat’s loan of US$3m to Dicky Tan (“the Loan Agreement”).
(b) The pledge of shares agreement between Nava Bharat, Ridwan Halim and PTIC, in which Ridwan Halim agreed to pledge all of his shares in PTIC to Nava Bharat as security for the due performance of Dicky Tan’s obligations and liabilities under, inter alia, the Loan Agreement.
(c) The pledge of shares agreement between Nava Bharat, Dicky Tan and PTIC, in which Dicky Tan agreed to pledge all of his shares in PTIC to Nava Bharat as security for the due performance of Dicky Tan’s obligations and liabilities under, inter alia, the Loan Agreement.
(d) The irrevocable power of attorney to vote shares between Nava Bharat and Ridwan Halim, which conferred upon Nava Bharat the right to vote in PTIC (with respect to Ridwan Halim’s shares).
(e) The irrevocable power of attorney to vote shares between Nava Bharat and Dicky Tan, which conferred upon Nava Bharat the right to vote in PTIC (with respect to Dicky Tan’s shares).
(f) The irrevocable power of attorney to sell shares between Nava Bharat and Ridwan Halim, which conferred upon Nava Bharat the right to sell Ridwan Halim’s shares in PTIC in the event that Dicky Tan defaulted on his obligations under, inter alia, the Loan Agreement.
(g) The irrevocable power of attorney to sell shares between Nava Bharat and Dicky Tan, which conferred upon Nava Bharat the right to sell Dicky Tan’s shares in PTIC in the event that Dicky Tan defaulted on his obligations under, inter alia, the Loan Agreement.
[50] The next day, Woody sent Rajaram a copy of ABNR’s draft opinion on the agreements, and stated that he will send the draft opinion on the structure later. Prasad wrote to ABNR on the same day stating that the opinion should cover the issue of whether Nava Bharat or its nominee has the authority to mine, sell and export coal from Indonesia. This was to satisfy Nava Bharat’s lender for the Transaction. Rajaram assured Prasad that he would look into it. This was followed by an exchange of emails between Rajaram and ABNR on the requirement of Nava Bharat’s lender.
Singapore leg of the initial completion
[51] On 28 January 2009, ABNR issued its opinion on the structure of the Transaction and its opinion on the Loan Agreement together with the pledge of shares agreements and powers of attorney (“ABNR’s Advice on Structure” and “ABNR’s Advice on Loan Agreement” respectively).
[52] It was originally agreed that the documents for the Singapore leg of the initial completion would be signed at 4.00pm, but Rajaram asked for an extension of time because ABNR’s opinions were not ready yet. After receiving the ABNR’s Advice on Structure and the ABNR’s Advice on Loan Agreement (see [51] above), Nava Bharat and Dicky Tan executed the following documents at SLP’s office:
(a) The master agreement, which sets out the framework for Nava Bharat’s participation in the Holding Company (ie, Indo Coal Ventures Pte Ltd) and the PMA Company (ie, NBSC) (“the Master Agreement”).
(b) The mine operating service agreement, which provides for the appointment of the PMA Company as PTIC’s mining operator (“the Mine Operating Service Agreement”).
(c) The personal guarantee of Dicky Tan, under which Dicky Tan guaranteed to pay and satisfy Nava Bharat on demand as principal debtor all amounts due and owing under the Loan Agreement.
(d) The corporate guarantee of Saraburi Resources Pte Ltd (“Saraburi”) (ie, one of Dicky Tan’s companies), under which Saraburi guaranteed to pay and satisfy Nava Bharat on demand as principal debtor all amounts due and owing under the Loan Agreement.
(e) The option to purchase shares agreement dated 28 January 2009, which granted Nava Bharat an option to purchase the shares in PTAEI.
(f) The Holding Company off-take agreement, under which PTIC agreed to sell and the Holding Company agreed to buy all of the coal extracted from the Mine for a period of ten years (“the Holding Company Off-take Agreement”).
(g) The Nava Bharat off-take agreement, under which Nava Bharat agreed to buy all coal supplied to the Holding Company under the Holding Company Off-take Agreement for a period of ten years.
[53] Thereafter, pursuant to cl 14.1 of the Master Agreement, Ashwin made arrangements for US$2.9m to be released to Dicky Tan. Dicky Tan authorised the payment to be made by way of two cheques: a cheque of US$1.7m in the name of Jason Tan and a cheque of US$1.2m in the name of Saraburi. The remaining US$100,000, which was held by TPC as stakeholders (see [21] above), was also released to Dicky Tan.
After initial completion
[54] On 29 January 2009, a day after the initial completion, Ashwin sent an email to various parties, including Chandra and Rajaram, in which he stated that even though the process took “longer than expected”, it was “much needed for us to feel safe and secure, and run our operations without fear”. On the same day, Rajaram wrote to Ashwin and Prasad:
[55] On the same day, Rajaram circulated a closing agenda in respect of the Transaction to the parties, including Ashwin. At around the same time, Rajaram also worked towards finalising a legal opinion which was meant for the lender that was financing the Transaction. The arrangement was that NBVL would borrow from the lender and then channel the funds for the Transaction to Nava Bharat. Prasad requested that the legal opinion cover, inter alia, the structure of the Transaction, the enforceability of the structure under Indonesian law and whether Nava Bharat could hypothecate its rights to the lender as security. A draft opinion was sent to Ashwin and Prasad in the evening on 29 January 2009. Rajaram continued to work on the opinion that he had sent to Ashwin and Prasad on 29 January 2009. On 6 February 2009, Rajaram issued a legal opinion on the validity of the structure of the Transaction (“SLP’s Advice on Structure”).
Delay in obtaining the Forestry Licence
[56] On 2 February 2009, Rajaram sent an email to Chandra requesting for an update on the issue regarding the Forestry Licence. Chandra replied a day later stating that the Forestry Licence was a condition subsequent that would be obtained if it was required.
[57] On 3 Feburary 2009, Ashwin received news from Lakshman, who visited the Mine with Bob Sundaram, that the equipment of a contractor of an adjoining mine was confiscated because they did not have the Forestry Licence. Lakshman also stated that Tanakorn had maintained that the Forestry Licence was not required. Having received this email from Lakshman as well, Rajaram wrote to Chandra asking him to “impress upon Dicky that he has represented that all approvals for mining are in place”. Chandra acknowledged.
[58] A few days later, on 6 February 2009, Ashwin met with Dicky Tan. Following the meeting, Ashwin sent an email to Chandra and Rajaram to inform them that he had instructed Nava Bharat’s Indonesian team to “do the upmost to start extracting coal ASAP” and that he hoped to start by “mid to end of March”.
[59] In anticipation of commencing mining operations, Nava Bharat’s Indonesian team took steps to engage mining contractors. On 11 February 2009, Bob Sundaram sent a draft coal mining agreement to Ashwin (“the draft Coal Mining Agreement”). For this, Bob Sundaram sought the advice of Rajaram. Bob Sundaram also approached Susanto, Rajasa & Associates, an Indonesian law firm, to advise on the enforceability of the draft Coal Mining Agreement.
[60] To ensure that Nava Bharat would be extracting coal from the Mine by early April 2009 (instead of the original plan for “mid to end of March” (see [58] above)), Ashwin wrote to Nava Bharat’s Indonesian team (headed by Bob Sundaram) on 2 March 2009 to request for a weekly update and tele-conference. Ashwin received the first weekly update on 10 March 2009, which highlighted, inter alia, that the Forestry Licence was required before the mining operations can commence. Ashwin forwarded the first weekly report to Rajaram and said that they need to clarify the issue with Dicky Tan as soon as possible. Ashwin proposed a meeting before the end of the week to address the issue. Rajaram wrote to Chandra on the next day asking for a meeting to be convened. Later in the day, Rajaram sent another email to Chandra stating, inter alia, that “an urgent meeting [was] imperative”. Ashwin wanted to meet on the same week, while Dicky Tan was only able to meet on Friday (ie, 13 March 2009) in Jakarta or the following Monday (ie, 16 March 2009) in Singapore. On 12 March 2009, Rajaram wrote to Chandra (not copied to Ashwin) to reiterate the issue of the Forestry Licence and to ask Chandra to urge Dicky Tan to remedy the situation as soon as possible. Chandra replied that a meeting was being arranged. Rajaram then explained that he was aware that a meeting was being arranged but wrote the email so that Dicky Tan would know about the issue and attend to it, if possible, before the meeting with Ashwin. Even though Dicky Tan could not make it, a meeting (attended by Ashwin, Chandra, Rajaram, Bhushan and Lakshman) was convened on 12 March 2009. During the meeting, it was agreed that a Forestry Licence had to be obtained. It was disclosed that an application for the Forestry Licence was made in the name of PTBHM and the application was still being processed. It was also recorded in the minutes of the meeting that Dicky Tan had made arrangements for the Forestry Licence to be transferred to PTIC once it has been issued.
[61] The next meeting was fixed on 16 March 2009. This was attended by Ashwin, Bhushan, Dicky Tan, Chandra, Rajaram and Tanakorn. At the meeting, Dicky Tan explained that the delay in obtaining the Forestry Licence was because he was “out of funds”, but assured Ashwin that the Forestry Licence would be obtained soon. To resolve the issue, Nava Bharat expressed that it was willing to provide an advance of the monies required to procure the Forestry Licence, subject to the approval of its board of directors. The handwritten minutes of the meeting was typed out and sent to Ashwin and Bhushan by way of email dated 20 March 2009.
[62] To follow up, on 23 March 2009, Chandra sent an email to Rajaram elaborating on the timing and fees involved for obtaining the Forestry Licence:
[63] Rajaram and Chandra arranged for a meeting at SLP’s office on the next day to discuss the issue of the Forestry Licence. During the meeting on 24 March 2009, Dicky Tan explained that with sufficient funds he should be able to obtain the Forestry Licence within two to three months. It was eventually agreed that Dicky Tan would start mining immediately (without the Forestry Licence) for a period of four months. In addition, Nava Bharat and Dicky Tan would share profits during the four-month period and Dicky Tan would obtain the Forestry Licence (through the profits he would receive throughout the period) by the end of the four-month period. Dicky Tan would not be entitled to the profits during the four-month period if he failed to obtain the Forestry Licence within four months.
[64] After the meeting, Chandra sent an email to Rajaram setting out the points that were discussed and, in particular, the plan to have an agreement to vary the Master Agreement (“the Variation Agreement”) in order to reflect the arrangement agreed upon during the meeting.
[65] The parties met again on 25 March 2009. Rajaram was not able to attend but arranged for Narayanan Sreenivasan (“Sreenivasan”), the managing director of SLP, to assist on the matter in his absence. At the meeting, it was reiterated that the parties have agreed to enter into the Variation Agreement. It was further agreed that the mining operations during the four-month period would be conducted in accordance with the plan drafted by Nava Bharat’s staff, Vishvanathan (“the Mining Plan”). Chandra sent a first draft of the Variation Agreement in the evening and Sreenivasan responded with his comments which were expressly subject to the approval of Rajaram and Nava Bharat.
[66] The Variation Agreement was executed by the parties on 26 March 2009. The key terms of the Variation Agreement are as follows:
[68] On 21 April 2009, Dicky Tan on behalf of PTIC took up a loan of US$200,000 from Belfield International (Hong Kong) Limited (“Belfield”) for “working capital requirements” (“the Belfield Loan”). According to Chandra, Dicky Tan had told him that the sum was used to procure the Forestry Licence, and that the loan was eventually repaid in full.
[69] On 12 May 2009, Rajaram wrote to Chandra pointing out that the Variation Agreement was concluded to enable Dicky Tan to obtain the Forestry Licence, “an issue that was not deliberated and attended to at the Initial Completion Date”, and requesting that Dicky Tan provide a “detailed progress report”. At that time, Dicky Tan had commenced mining operations at the Mine, and Rajaram emphasised in his email that Ashwin needed the progress report to facilitate his planning and mobilisation of resources for the mining operations. Chandra’s response came on 20 May 2009. In his email, Chandra assured Rajaram that the Forestry Licence was “well on track” and that Dicky Tan was “very confident that he [would] be able to swing it by the first week of July or thereabouts”. Chandra’s response was forwarded to Ashwin.
[70] As mentioned earlier (see [65] above), Dicky Tan was supposed to extract coal from the Mine in accordance with the Mining Plan. However, Bob Sundaram visited the site on 19 and 20 May 2009 and discovered that Dicky Tan had not acted in accordance with the Mining Plan. Nava Bharat’s Indonesian team then prepared a site visit report and an incident report which was sent to Rajaram on 26 May 2009. Ashwin, through Rajaram, requested for a meeting with Dicky Tan and Chandra to resolve the matter. Accordingly, Rajaram sent an email to Chandra to inform him of Ashwin’s concerns and asked for a meeting to be arranged. This led to the meeting on 4 June 2009.
[72] One day after the meeting, Ashwin wrote to inform Chandra, Rajaram, Lakshman and Jason Tan of Nava Bharat’s findings on the AIP. A check was done with the Forestry Minister’s office and it was confirmed that the AIP is a letter containing a list of obligations which must be fulfilled before the Forestry Licence could be issued, and that it would not be possible to commence mining legally with just the AIP. As such, Ashwin insisted that they stick to the arrangement under the Variation Agreement, ie, for Dicky Tan to obtain the Forestry Licence by the end of the four-month period.
[73] On 12 June 2009, Ashwin, having been briefed by Bob Sundaram, wrote to Rajaram to ask for a meeting with Dicky Tan as the situation was “going from bad to worse”. Rajaram then wrote to Chandra expressing Ashwin’s concerns and requesting for an urgent meeting to resolve the matter. As a result, Dicky Tan, Chandra, Ashwin and Rajaram met on 23 June 2009. Rajaram asked Dicky Tan to provide a firm deadline by which he would obtain the Forestry Licence, and Nava Bharat would not hesitate to exercise its right to exit from the Transaction if the deadline was not met. Dicky Tan assured that he would obtain the AIP by 30 July 2009. In response, Ashwin stated that Nava Bharat would exercise the exit option if the Forestry Licence was not obtained by 30 July 2009.
[74] The next day, Chandra wrote to Rajaram suggesting several modifications to the proposals made during the 23 June 2009 meeting. According to the email, Dicky Tan would obtain the AIP by 30 July 2009, and following, that Nava Bharat will pay to PTIC a sum of US$1m which would be credited as an equity contribution. After that, Dicky Tan would continue to take steps to obtain the Forestry Licence, and Nava Bharat shall have the right to exercise its exit option if the Forestry Licence was not obtained within six months from the issue date of the AIP.
[75] On 29 June 2009, Dicky Tan met with Ashwin and others to discuss the issue of the Forestry Licence. Ashwin refused to take control of the Mine until the Forestry Licence has been obtained. Dicky Tan then assured that the Forestry Licence would be obtained by the end of July 2009. It was again stated that if the Forestry Licence was not obtained by the end of July 2009 as Dicky Tan had promised, then Nava Bharat would seriously consider exercising its exit option. The next day, Chandra sent an email to Rajaram setting out the issues that were discussed during the meeting and the proposals arising from those discussions. Rajaram responded with the comments from Ashwin and Bhushan. Following this, Ashwin met Rajaram, Chandra, Bhushan and Lakshman on 1 July 2009 to discuss the points listed in Chandra’s email.
[76] On 15 July 2009, Chandra provided Rajaram with an update on the status of the various licences and approvals that had to be obtained or renewed, such as the KP Transportation and Sale Licence (see [11] above) and the AIP. In his response, Rajaram asked for acknowledgement from the government bodies that they have received the letters which were attached to Chandra’s email. As requested, Chandra sent an email to Rajaram on 28 July 2009 attaching the various letters from Dicky Tan to the government bodies and their responses.
[77] Rajaram further requested that Chandra send him a draft supplemental agreement to vary the Master Agreement as soon as possible because Ashwin wanted to sign it before 17 July 2009. On 21 July 2009, Chandra sent a copy of the draft supplemental agreement to Rajaram. This was forwarded to Ashwin who replied with his comments on 24 July 2009.
[78] Four months after the Variation Agreement was signed (see [66] above), there was no sign of the Forestry Licence or the AIP.
First Notice of Default
[79] On 31 July 2009, Rajaram wrote to Chandra on the various defaults by Dicky Tan (“the First Notice of Default”).
[80] On 3 August 2009, Chandra wrote to Rajaram to ask for an extension of one month to obtain the AIP. Rajaram responded, stating that Nava Bharat was agreeable to the extension of time on certain conditions:
[81] In an email from Bhushan to Ashwin dated 13 August 2009, which was forwarded to Rajaram, it was stated that Dicky Tan had suggested, with a view to resolving the issues, certain changes to the arrangement in return for a reduction in the overall valuation of the Mine by US$1m.
[82] On 19 August 2009, Chandra forwarded a “copy of the AIP” to Rajaram, and explained that the original will be issued “within 3 weeks from release of moneys”. The representatives of Nava Bharat and PTIC, including Bob Sundaram and Tanakorn, met on the next day to discuss, inter alia, the AIP. Tanakorn explained that the AIP was “in place and waiting for the Minister to sign”. He also added that the Minister will be back on 4 September 2009 and PTIC had fulfilled all of the requirements for the issuance of the AIP.
Addendum Agreement and Supplemental Master Agreement
[83] Between 25 and 27 August 2009, Rajaram and Chandra worked on the drafts for the agreements to reflect the arrangement discussed between Ashwin and Dicky Tan (see [80]-[81] above). On 25 August 2009, Ashwin sent an email to Rajaram setting out his comments on the draft agreements. On 28 August 2009, Nava Bharat, Dicky Tan and PTIC executed the agreements, namely the supplemental master agreement (“Supplemental Master Agreement”) and the addendum agreement (“Addendum Agreement”).
[84] The key terms of the Supplemental Master Agreement, which varied the Master Agreement, are as follows:
[85] The key terms of the Addendum Agreement, which varied the Variation Agreement, are as follows:
[86] On 2 September 2009, Jason Tan sent an email informing Chandra that he was in the process of converting the KP Concessions which, under the new mining law, would be merged into the IUP Licence. On 5 September 2009, Jason Tan sent an email to Chandra with a copy of the IUP Licence. This was forwarded to Rajaram on 7 September 2009.
Concerns over Dicky Tan’s mining contractors
[87] Under cl 3.1 of the Addendum Agreement (see [85] above), PTIC was obliged to appoint a mining contractor that was “acceptable to Nava Bharat”, and the payment of the sum of US$250,000 by Nava Bharat was contingent on the appointment of an acceptable mining contractor. In this regard, PTIC proposed the use of mining equipment from two mining contractors.
[88] On 5 September 2009, Ashwin received the due diligence report by Thangarajan Paranjoti (“Paranjoti”), a member of Nava Bharat’s Indonesian team, which stated that there were problems with the equipment of Dicky Tan’s mining contractors. The report was forwarded to Rajaram on 7 September 2009. Rajaram then sent an email to Chandra to request for Dicky Tan’s urgent input on the situation as well as an update on the status of the application for the AIP. Chandra replied on the same day stating that the AIP should be out by next week, and that Dicky Tan would produce the requisite tonnage as required.
[89] Notwithstanding Paranjoti’s due diligence report, Ashwin sent an email to Rajaram on 7 September 2009 stating that Nava Bharat is willing to accept Dicky Tan’s mining contractors. Accordingly, Rajaram replied to Chandra’s email on the same day with Ashwin’s instructions and highlighted to Chandra that Nava Bharat would look to Dicky Tan if he fell short in terms of the coal production.
Delays in obtaining AIP
[90] Under cl 4.1 of the Addendum Agreement (see [85] above), the AIP was due on 18 September 2009. One day before the deadline, at a meeting between Nava Bharat and PTIC in Indonesia, Hariman of PTIC informed Nava Bharat’s Indonesian team that “they [would] receive a letter confirming the in principle forestry license status”. He added that the letter would be given to the management of Nava Bharat. On the same day, Jason Tan wrote to Chandra stating that the application for the AIP was in process but “delayed due to the bureaucracy” and the “long Ramadhan festive holiday”. In this regard, Jason Tan attached a letter from the director of forestry area usage to PTIC as proof to Nava Bharat that the application was “really under process”. Chandra forwarded the email to Rajaram who in turn forwarded it to Ashwin. Bob Sundaram, who translated the letter into English, confirmed that the letter was “only a technical consideration”, and not the AIP. Ashwin informed Rajaram about this.
[91] At this point in time, Rajaram advised Ashwin of Nava Bharat’s rights under the Addendum Agreement and suggested that a notice of default be issued. After consulting with Bhushan, Ashwin decided not to follow Rajaram’s recommendation. Instead, he chose to negotiate an off-take agreement under which PTIC will be responsible for “supplying/exporting” coal from the Mine.
[92] On 16 October 2009, Jason Tan informed Chandra that, notwithstanding the difficulties in procuring the AIP, he hoped that it would be signed no later than the next working day, ie, 19 October 2009 (which was the last working day for the Minister). There was no sign of the AIP on 19 October 2009.
[93] One week later, on 26 October 2009, Rajaram received an email from Chandra explaining that there was further delay to the AIP because “there has been a change in the cabinet” and Dicky Tan proposed for 50% of the funds in escrow to be released “upon production of copy of a duly executed AIP by the relevant Minister” and the balance to be released upon receipt of the original. Bob Sundaram then wrote an email to Rajaram on 27 October 2009, copied to Ashwin, suggesting that Dicky Tan was lying when he said that the AIP would be obtained soon. Rajaram replied to Bob Sundaram, copied to Ashwin, stating that “Ashwin [would] have to make the call” and in the meantime Nava Bharat should extract as much coal as possible to minimise their exposure.
[94] At around this time, Ashwin got Bill Sullivan (“Bill”) of Christian Teo & Associates into the picture. On 23 October 2009, Ashwin received an email from Bill with a write up on the new mining law in Indonesia. Subsequently, on 29 October 2009, Bob Sundaram met Bill. Ashwin forwarded the write up and the minutes of the meeting to Rajaram.
[95] On 6 November 2009, Bob Sundaram informed Ashwin that there was an ongoing “power struggle between the Indonesian Police and the Anti-Corruption agencies” which involved the Forestry Ministry and that it was likely to cause further delays to the grant of the AIP. This was forwarded to Rajaram on the same day. Rajaram then arranged for a meeting with Ashwin and Bhushan to discuss Dicky Tan’s repeated defaults. The meeting took place in SLP’s office on 9 November 2009. The next day, Ashwin instructed Rajaram to go ahead with the issuance of the second notice of default, stating that Nava Bharat could “use this to [Nava Bharat’s] advantage while negotiating” with Dicky Tan.
Second Notice of Default
[96] With Ashwin’s go-ahead, Rajaram wrote to Chandra on 10 November 2009 to give notice of the various defaults by Dicky Tan and PTIC (“Second Notice of Default”).
[97] After the Second Notice of Default was issued, there was a series of emails arranging for a meeting between the parties. Dicky Tan could not make it for the meeting, and Rajaram suggested that Chandra could attend and bring back the proposal for Dicky Tan to decide. Bhushan, who was copied in the email, then wrote to Rajaram to suggest that they should meet before the meeting with Chandra to work out their position:
Rajaram agreed. Ashwin was copied in both emails.
The “without prejudice” proposal and draft Tripartite Agreement
[98] On 16 November 2009, Rajaram wrote to Chandra with a “without prejudice” proposal as an attempt to salvage the Transaction, and asked for a meeting on the next day. The material terms of Nava Bharat’s “without prejudice” proposal are as follows:
(a) that all agreements, including supplemental agreements and addendum agreements, be terminated in consideration of the parties entering into a fresh agreement; and
(b) that the fresh agreement would have the following pertinent agreements/arrangements:
(i) the Mine valuation was to be revisited taking into consideration present market conditions and valuations;
(ii) the royalty for coal that was agreed between parties would be renegotiated;
(iii) PTIC would be converted into a PMA Company, and Nava Bharat to be issued shares in it as consideration for payments; and
(iv) all penalties and price reductions agreed to in the previous agreements would remain effective in the fresh agreement.
[99] The “without prejudice” proposal also specified that the agreement should be finalised and signed by 20 November 2009.
[100] The meeting eventually took place on 16 December 2009, and it was attended by Jason Tan, Bhushan, Ashwin and Rajaram. The parties agreed at the meeting that, inter alia, a different class of shares in PTIC with exclusive rights over the KP Exploitasi Licence should be created and held by TPC as stakeholders to be released to Nava Bharat upon payment (this would later form the core of the draft Tripartite Agreement).
[101] Ashwin received some materials on the new mining law from Bill on 5 and 12 January 2010, and he forwarded them to Rajaram. Sometime in December 2009 to January 2010, Rajaram had also been in communication with John Dick (“John”) of Freehills (now known as Hebert Smith Freehills) over the issue of converting PTIC into a PMA Company. Ashwin and Rajaram met with John on 21 January 2010, and on the next day, John provided a preliminary advice stating, inter alia, that:
[102] A meeting with Dicky Tan was fixed on 27 January 2010. At this meeting, which was attended by Dicky Tan, Ashwin, Rajaram, Chandra and Bhushan, the issue of converting PTIC into a PMA Company and the status of the AIP and Forestry Licence were discussed.
[103] On 11 February 2010, in an email to Rajaram and Bill, Ashwin informed Rajaram that Nava Bharat had decided to engage Bill as its “Indonesian legal counsel for the PTIC deal”, and introduced Rajaram to Bill as Nava Bharat’s “Singapore legal counsel”. Bill sent his preliminary advice to Rajaram, copied to Ashwin, on 15 February 2010. On 26 February 2010, Chandra sent an email to Rajaram attaching the draft Tripartite Agreement (reflecting the arrangement discussed above at [100]). Rajaram forwarded the draft to Bill for his inputs on 1 March 2010, and Bill responded with his comments on the same day. In essence, Bill proposed for the KP Explorasi Licence to be transferred to another of Dicky Tan’s company (since the Transaction only concerned the KP Exploitasi Licence), and to convert PTIC into a PMA Company (so that Nava Bharat can own shares in it). In the meantime, Bill suggested that the shares of PTIC, to the extent that it had been paid by Nava Bharat, should be transferred to Nava Bharat’s Indonesian nominee, Gunawan Sukardis Subur (“Gunawan”).
[104] As a result of Bill’s input, there was another round of discussion in March 2010 and the structure contemplated under the “without prejudice” proposal (see [98] above) and draft Tripartite Agreement (see [103] above) was abandoned. The agreements necessary to transfer the PTIC shares from Dicky Tan to Gunawan were signed between 24 and 26 March 2010. However, the transfer did not occur as the shareholders’ resolution and spousal consent, which were necessary for the transfer, were not signed.
[105] The AIP was finally obtained on 23 March 2010. Bill confirmed on the next day that the AIP had been “issued and recorded” by the Ministry of Forestry, and added that the Forestry Licence would be issued if PTIC carried out its obligations under the AIP.
[106] On 23 March 2010, unknown to Nava Bharat, Jason Tan obtained an order from the Central Jakarta District Court to revert Dicky Tan’s shares in PTIC to the previous shareholders, ie, Sofwan Rahman and Suhendra on the basis that Dicky Tan did not pay for the shares (see [124] below). Sofwan Rahman and Suhendra each held 50% of the shares in PTIC before the shares were transferred to Dicky Tan and Ridwan Halim around 2008.
[107] On 9 April 2009, Rajaram sent an email to Chandra stating, inter alia, that the PTIC shares had not been transferred to Gunawan and that he should confirm that it would be “done immediately”.
The Settlement Agreement
[108] On 4 June 2010, Ashwin sent an email to Rajaram setting out the points of agreement that were reached by the parties on the way forward. Shortly after Ashwin’s email, Rajaram received an email from Chandra with essentially the same points. The arrangement, in essence, was that:
(a) Nava Bharat would release a sum of US$6m against compliance with the following conditions (within 14 days of receipt of written evidence):
(i) issue of the Forestry Licence;
(ii) split and transfer the 745.006 hectares of non-exploitable land (with the KP Explorasi Licence) to another company owned by Dicky Tan and associates;
(iii) terminate the existing contractor that was appointed by PTIC;
(iv) transfer the shares in PTIC to Nava Bharat’s Indonesian nominee to reflect an equity payment of US$9.25m (ie, US$6m to be paid out against compliance with the aforesaid items and US$3.25m as the sum paid to date);
(b) Nava Bharat would increase its equity stake in PTIC up to 90% within one month from the date of issue of the Forestry Licence and all other conditions being fulfilled, including the conversion to IUP Licence.
(c) PTIC would give up its claims over the 150,000 metric tonnes of exposed coal upon payment of a sum of US$650,000 by Nava Bharat.
(d) PTIC would not insist on the payment of US$500,000 for the AIP and the payment of US$310,000 for the split and transfer of the KP Explorasi Licence, which would be fully financed by PTIC.
[109] On 11 June 2010, Rajaram sent an email to Ashwin attaching the term sheet setting out the proposal for discussion. On the same day, Rajaram also replied to Chandra informing him that Nava Bharat was agreeable in principle to the proposal. Later, on 18 June 2010, Rajaram sent a draft settlement agreement to Chandra for Dicky Tan’s comments.
[110] On 6 July 2010, Ashwin was informed by Bhushan that he was told by Jason Tan and Chandra that the Forestry Licence was “on the table of the minister” and they were “very hopeful of the signature” even though they anticipated some delay due to “political issues”. Bhushan added that Dicky Tan had applied for the KP Exploitasi Licence and KP Explorasi Licence to be split, and was ready and willing to transfer the PTIC shares to Gunawan. At around the same time, Chandra wrote to inform Rajaram of the same. Despite that, the Forestry Licence was only obtained some time later, in October 2010 (see [121] below).
[111] Rajaram sent another copy of the draft settlement agreement, together with the other documents, to Chandra on 27 July 2010 for his comments. Chandra responded on 10 August 2010 and stated that there was no issue with the document but requested for the transfer of the PTIC shares to be effected after the execution of the settlement agreement.
[112] Towards the end of August 2010, Ashwin decided to ask Bob Sundaram to try and secure the Forestry Licence. On 24 August 2010, Rajaram wrote to inform Chandra of Ashwin’s decision. Chandra replied on the same day explaining that he had not been able to contact Dicky Tan or Jason Tan. On 1 September 2010, Bob Sundaram informed Ashwin that he had been assured that the Forestry Licence would be issued by 18 September 2010. He sent another email to Ashwin on 7 September 2010 to confirm the same. At this point, Bhushan repeated Rajaram’s suggestion for Nava Bharat to take over the Mine “as is where is”, now that the Forestry Licence is assured, and ask for a discount on the price.
[113] On 16 September 2010, Chandra sent the draft settlement agreement, together with the other documents, to Rajaram. The next day, the documents, except for the draft settlement agreement, were signed and returned.
[114] Rajaram wrote to Chandra on 23 September 2010 pointing out that Dicky Tan had failed to transfer the PTIC shares to Gunawan even though he had agreed to do so. To resolve this, a meeting was arranged on 1 October 2010. At the meeting, Jason Tan explained that Dicky Tan (who was not present) had been stripped of his powers in PTIC and was therefore unable to act on behalf of PTIC. He added that Dicky Tan owed money to the previous shareholders of PTIC (ie, Sofwan Rahman and Suhendra), and suggested that any outstanding money due to Dicky Tan could be paid to them to resolve the matter. Ashwin suggested that Nava Bharat is ready to pay, and Rajaram then proposed that an escrow account be created for the payment to the previous shareholders, subject to Dicky Tan executing the share transfer.
[115] The settlement agreement was never concluded by the parties.
[116] Sometime in early October 2010, Tansree Tjandra (“Tansree”) announced that he would be taking over the negotiations with respect to the Mine because Dicky Tan owed money to Tansree and the rest of the family. A meeting was held between Tansree and Ashwin on 13 October 2010. After the meeting, Jason Tan sent an email to Chandra stating that Tansree wanted to have the negotiations after the Forestry Licence was issued. However, Tansree passed away shortly thereafter.
Third Notice of Default and exercise of the share pledges
[117] Sometime in October 2010, Nava Bharat decided to exercise its rights under the Loan Agreement and the share pledges. As Rajaram was out of Singapore working on another matter, Sreenivasan was asked to assist in getting advice from Indonesian lawyers on exercising the share pledges.
[118] On or about 4 October 2010, Muralli Rajaram (“Muralli”), a senior associate from SLP who was assisting Sreenivasan, wrote to Suria Nataadmadja (“Suria”) of Suria Nataadmadja & Associates, a law firm in Indonesia, to enquire on the exercise of the share pledges. Suria replied on 7 October 2010 with the view that it was possible but “a bit complicated since the documents have no exact amount of money guaranteed by the pledge”. Muralli then wrote to Rajaram and Sreenivasan to inform them that Suria had suggested for Nava Bharat to go back to ABNR to assist in the exercise of rights under the Loan Agreement and the share pledges. On the same day, Sreenivasan wrote to Ashwin stating that Nava Bharat should exercise the share pledges and “talk from a position of strength”. Sreenivasan also pointed out that this would spark off a civil suit if there was no “commercial settlement”, but Nava Bharat should go ahead as it would “tie up their shares”.
[119] Muralli also wrote to Nafis, copied to Woody, on 8 October 2010 to enquire on the exercise of the share pledges. Woody replied on 12 October 2010 stating that even though the “creation of pledge of shares and the related powers of attorney to sell and to vote to support the pledge of shares [is] very common”, the exercise of the pledge without the cooperation of the pledgors is “not really common” and “may always be subject to challenge by the pledgors”. On the same day, Rajaram responded to Woody stating that another law firm had a different interpretation of the situation and would be appointed to assist on the exercise of the share pledges. Rajaram also added that “[their] mutual client is unhappy at the turn of events and [ABNR’s] present stand”. Woody responded on 13 October 2010 and stated that there was no basis for Nava Bharat to be unhappy with ABNR’s stand given that it had “very clearly stated some qualifications on the enforceability of the pledge and powers of attorney”.
[120] On 18 October 2010, Rajaram on behalf of Nava Bharat issued another notice of default to PTIC and Dicky Tan (“Third Notice of Default”). One of the defaults identified in the Third Notice of Default was that Dicky Tan had failed to obtain the Forestry Licence on time. Dicky Tan and PTIC did not respond to the Third Notice of Default.
[121] One day later, on 19 October 2010, the Forestry Licence was signed by the Minister.
[122] A few days later, on 26 October 2010, Rajaram wrote to Chandra to notify Dicky Tan that Nava Bharat had exercised its rights pursuant to the Loan Agreement and share pledges. After exercising the share pledges, Nava Bharat transferred the PTIC shares to its Indonesian nominees Gunawan and Debora Viseka (“Debora”) in the respective shareholding of 80% and 20%.

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Nava Bharat (Singapore) Pte Ltd v Straits Law Practice LLC and another and another suit

Laws this judgment relies on

Grounds of decision

Introduction

Factual background

The parties

The chronology of events

Nava Bharat’s search for coal

Appointment of Rajaram and ABNR

The Heads of Agreement

Due diligence and change in Indonesian mining laws

Changes to the structure for the Transaction

Indonesian leg of the initial completion

Singapore leg of the initial completion

After initial completion

Delay in obtaining the Forestry Licence

First Notice of Default

Addendum Agreement and Supplemental Master Agreement

Concerns over Dicky Tan’s mining contractors

Delays in obtaining AIP

Second Notice of Default

The “without prejudice” proposal and draft Tripartite Agreement

The Settlement Agreement

Third Notice of Default and exercise of the share pledges