England and Wales High Court (Commercial Court) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT

		Royal Courts of Justice 7 Rolls Building, Fetter Lane London, EC4A 1NL
		12 June 2014

The Hon. Mr Justice Popplewell:

Introduction

1. The Claimant ("BMIC") is a wholly owned subsidiary of the Bahrain Telecommunications Company B.S.C. ("Batelco"). Batelco is an international telecommunications provider with headquarters in Bahrain.
2. The First Defendant, Mr Sivasankaran is a successful Indian entrepreneur. He is the non-executive Chairman of the Siva Group of companies ("Siva Group") and the ultimate beneficial owner of the Second Defendant ("Siva Limited") which is a member of the Siva Group. The Siva Group is an industrial conglomerate with headquarters in India. I shall refer to the Defendants collectively, as the parties did, as "Siva".
3. In this action BMIC brings a claim against Siva jointly and severally for US$184,793,000, together with a further US$30,000 per day from 1 November 2012, as being due under a Settlement Agreement dated 30 November 2011 ("the Settlement Agreement").
4. It is common ground that under the express terms of the Settlement Agreement the amount claimed would be due from Siva. The Defendants' case is that they are under no liability by reason of certain oral assurances said to have been given on behalf of BMIC and Batelco during the course of pre-contract negotiations on 19 October 2011. The assurances are said to amount to, or to give rise to, a collateral agreement or collateral terms or a promissory or equitable estoppel.

Background to the 30 November 2011 agreements

5. The Settlement Agreement was one of three agreements executed together on 30 November 2011. The relationship between them is at the heart of the dispute. The negotiation and conclusion of the agreements arose in the following circumstances.
6. During 2009 BMIC subscribed US$174,489,797 to acquire 42.7% of S Tel Private Limited ("S Tel"), a telecommunications company registered in India. In January 2008 the Indian Government had awarded 2G mobile telecommunications licences to S Tel, amongst others. Following this subscription, S Tel was a joint venture between Batelco (as minority partner) and the Siva Group (as majority partner) to exploit those licences.
7. An Option Agreement executed on 8 May 2009 ("the Option Agreement") granted BMIC a conditional put option to require Siva (that is to say both Defendants jointly and severally) to purchase BMIC's 42.7% shareholding in S Tel for the same amount as BMIC had subscribed for those shares. BMIC was entitled to exercise the put option in the event that a "Liquidity Event" occurred and was not cured within 90 days after BMIC had notified Siva of its occurrence by serving a "Liquidity Event Notice". Liquidity Events included:

(1) a failure by S Tel to secure debt finance on terms acceptable to BMIC in the sum of $103,000,000 (clause 2.1); and

(2) an event that threatened the licences granted to S Tel by the Indian Government for any reason whatsoever (clause 2.2).

8. The details of the terms of the joint venture agreements executed in 2009, and their negotiation from the latter part of 2008, are for the most part irrelevant. One aspect of potential relevance was in dispute before me. Mr Sivasankaran's evidence was that his agreement to be a party to the Option Agreement was by way of a "personal guarantee" of Batelco's investment in S Tel; and that he had been persuaded to give such a guarantee by an assurance from the Chairman of Batelco, Shaikh Hamad Abdulla Mohamed Al Khalifa that it would "be purely cosmetic and symbolic and for optical purposes and that he would never call on it". Mr Sivasankaran said that Shaikh Hamad gave him this assurance at a one-on-one meeting during a wider dinner meeting in Bahrain on 3 December 2008, and that the personal guarantee was to assist him in persuading Batelco's board to support BMIC's proposed investment in S Tel. Shaikh Hamad denies that he had any such one-on-one meeting or gave Mr Sivasankaran any such assurance. Mr Kaliaropoulos (then Batelco's Group CEO) gave evidence that there was no one-on-one meeting during the dinner and that at that stage of negotiations consideration had not yet been given to the question whether Mr Sivasankaran ought to be party to any agreements to be entered in to between the parties. It was not suggested by Mr Sivasankaran, or in argument on his behalf, that Shaikh Hamad's assurance prevented his personal obligations under the Option Agreement from being legally binding and enforceable, nor those under the subsequent Settlement Agreement. It was merely put forward to explain his subsequent behaviour. I do not find it necessary to reach a conclusion on whether Shaikh Hamad made any such statement in order to resolve the issues in the action.
9. In 2011 BMIC purported to exercise the put option in circumstances arising out of allegations of impropriety in the process by which the Government of India had granted the 2G licences. The allegations were not specific to S Tel. Challenges were made by the Comptroller and Auditor General of India and in the Supreme Court of India, and an investigation launched by the Indian Central Bureau of Investigation. These events were given widespread media coverage and were referred to colloquially as "the 2G scam".
10. On 5 April 2011, BMIC served the first of two Liquidity Event Notices on Siva pursuant to the Option Agreement based on S Tel's alleged failure to secure debt finance in a total amount of US$281 million. In its response dated 27 April 2011, Siva denied that a Liquidity Event had occurred, stating that the funding had been secured by arranging binding facility agreements with a number of banks. The facilities had in part been drawn on, but the problem was that the banks had not been prepared to continue to permit drawdown because of the 2G scam allegations. On 18 May 2011 BMIC served a second Liquidity Event Notice on Siva based on a threat to S Tel's 2G licences. In its response dated 14 July 2011, Siva again denied that a Liquidity Event had occurred. On the basis that neither of the two alleged Liquidity Events was cured within its respective 90 day cure period specified by the Option Agreement, BMIC served notices dated 14 August 2011 and 1 September 2011 of its intention to exercise its put option in relation to the whole of its shareholding in S Tel.
11. Meanwhile, in about June 2011, the parties commenced negotiations to settle the put option dispute. These continued in parallel to the formal notices and correspondence in relation to the Option Agreement, culminating in the execution of the Settlement Agreement and two share purchase agreements (SPAs) on 30 November 2011. These negotiations took place against the background of BMIC's threat to refer its claim to be entitled to exercise the put option to LCIA arbitration. One of the factors which persuaded Mr Sivasankaran to conclude a settlement was his disappointment at having lost an unrelated arbitration.
12. Three agreements were signed on 30 November 2011. They were a package, in the sense that together they were intended to represent a single deal to resolve the dispute under the Option Agreement. The essential shape of the deal was that BMIC's right to sell its S Tel shares to Siva for US$174.5 million (the original subscription price was rounded up) was preserved, but Siva was given the right to settle its obligation either in cash or by transferring 79 million shares held by a Siva Group company in Tata Teleservices Ltd ("TTSL"), an Indian telecoms company. The TTSL shares were at that stage encumbered, both by a pledge to the bank and by pre-emption rights in favour of other shareholders; Siva was to be given 11 months, until a long stop date of 31 October 2012, within which to remove the encumbrances. What was envisaged was that if the encumbrances were removed in time, the S Tel shares would be sold for US$174.5m and transferred by BMIC to a Siva company, and that a Batelco company would purchase the TTSL shares also for US$174.5m. If the share transfers were not completed by the long stop date, BMIC was to be entitled to cash, comprising US$ 174.5 million, and a further amount of US$10,293,000 to compensate for the delay.
13. The bargain came to be reflected in three separate agreements for regulatory reasons. The proposed settlement was potentially subject to oversight by two Indian regulatory bodies, the Foreign Investment Promotion Board ("FIPB") and the Reserve Bank of India ("RBI"). An Indian resident who wishes to swap shares with a non-resident must obtain the prior approval of the FIPB to ensure that the swap does not take place at an under or over value. In contrast, an Indian resident may purchase shares from, or sell shares to, a non-resident without prior regulatory approval, but subject to subsequent review by the RBI, again to ensure that the sale was not at an undervalue or the purchase at an overvalue. The parties agreed that they would not enter into a transaction which required prior approval of the FIPB and accordingly would not enter into a straightforward share swap agreement. The potential penalty for breaching the FIPB regulatory requirements was ten times the transaction value (i.e. around US$1.75 billion), and could be imposed on either party. It was therefore of importance to both parties that the transaction be structured in a way which could not be interpreted as a share swap which triggered the requirement for prior FIPB approval.
14. This was why the structure agreed upon was two independent share sale and purchase agreements, one for the S Tel shares and the other for the TTSL shares, each at the same price, with different group companies as seller and buyer in each case, and with the purchase price being transferred in each case.

The SPAs and Settlement Agreement of 30 November 2011

15. The share purchase agreement for the S Tel shares ("the S Tel SPA") was entered into between BMIC and SkyCity Foundations Private Limited ("SkyCity"), a member of the Siva Group. SkyCity had the right, but not the obligation, to purchase BMIC's S Tel shares for US$ 174.5m on a completion date to be determined by SkyCity but no later than 31 October 2012. If completion did not take place on or before 31 October 2012, BMIC had a right to terminate the agreement. There were escrow provisions by which the purchase price and the shares were to be held by Barclays to ensure that the transfer of one did not occur without transfer of the other. The S Tel SPA included "no modification" and "entire agreement" clauses in the following terms:

"9.6 No modification, representation, promise or agreement in connection with the subject matter of this Agreement shall be valid unless made in writing and signed by the parties.

9.7 This Agreement constitutes the entire Agreement and understanding between the Parties hereto with respect to the subject matter hereof and supersedes all previous agreements in this regard between the Parties. Any modifications to this Agreement shall not be effective unless it is in writing and shall be signed by a duly authorised representative of each Party."

16. The share purchase agreement for the TTSL shares ("the TTSL SPA") provided that Siva Industries and Holdings Limited ("SIHL"), a Siva Group company, had the right, but not the obligation, to sell to IBGI Limited ("IBGI"), a Batelco company, 79 million TTSL shares for US$174.5 million on a completion date to be determined by SIHL but no later than 31 October 2012. SIHL could only trigger completion by giving a completion notice if it had satisfied the conditions precedent of removing the encumbrances on the shares. If the agreement had not completed by 31 October 2012, IBGI had a right to cancel it. It had similar escrow provisions to those in the S Tel SPA. Clauses 13.6 and 13.7 were in the same terms as clauses 9.6 and 9.7 of the S Tel SPA.
17. The Settlement Agreement provided that all disputes under the Option Agreement and the Notices given thereunder were compromised on terms that in the event that the transfer of shares under the S Tel SPA had not occurred by 31 October 2012, Siva would pay BMIC US$174.5m plus US$10,293,000, and a further US$30,000 per day for any delay in such payment. It contained at clause 5.7 a no modification clause in the same terms as clause 9.6 of the S Tel SPA and clause 13.6 of the TTSL SPA, but no equivalent of the entire agreement clauses at clauses 9.7 and 13.7 respectively of the SPAs.
18. All three agreements were governed by English law and provided for English jurisdiction.
19. Six aspects of the agreements as signed deserve emphasis. First, the order within which the two SPAs were to be completed was within the control of the Siva Group. Transfer was to be triggered by a completion notice from SkyCity and SIHL respectively. Accordingly Siva was in a position to ensure that it was not required to purchase the S Tel shares without BMIC being obliged to pay for the TTSL shares. Provided the encumbrances from the TTSL shares were removed in time, Siva could ensure that it triggered completion of the TTSL sale before having to purchase the S Tel shares. Secondly, and as a result of this, the burden of funding the two SPAs fell on the Batelco Group. Each SPA required the actual payment of the price in cash, a requirement included to prevent the adverse regulatory consequences of the deal being treated by the FIPB as a share swap. Because Siva could trigger the TTSL SPA first, the Batelco Group would have to raise the funds to transfer the price to SIHL before SkyCity would have to pay for the S Tel shares. Thirdly, the timing of completion under the two SPAs was not linked. Under the terms of the agreements, Siva might trigger the TTSL SPA as soon as it had removed the encumbrances, which could be up to 11 months prior to the time when it chose to trigger completion of the S Tel SPA. If it did so it would be free to use the proceeds as it wished. There were no escrow or security arrangements agreed under which the cash in cash out nature of the two SPAs was linked or which secured the sum paid for the TTSL shares from Batelco's point of view. Fourthly, the Siva Group retained the benefit of any movements in the market value of TTSL shares between the date of the agreements and 31 October 2012. If they fell in value, IBGI would still be obliged to purchase them at the SPA price. If they rose, the Siva Group could keep them and either buy the S Tel shares, or pay the sum due under the Settlement Agreement. Fifthly, the Settlement Agreement made no reference to the TTSL SPA, and the obligation to pay approximately $185m thereunder would arise if the S Tel SPA failed to complete for any reason. This aspect was the subject matter of discussion at the meeting of 19 October 2011 to which I shall return. Sixthly, in the event that the SPAs did not complete and the sum of approximately $185 million became payable under the Settlement Agreement, the agreements did not, perhaps surprisingly, make provision that the S Tel shares were to be returned to the Siva Group.

Subsequent events

20. On 2 February 2012 the Supreme Court of India gave judgment on a claim which had challenged the validity of all the 2G licences awarded by the Indian Government in 2008. All of the licences, including S Tel's licences, were cancelled. The result was that the value of the S Tel shares dropped to such an extent that, as soon became apparent to the parties, it would not be possible to complete the S Tel SPA as signed, because the shares were not capable of being valued at the contractual price at the date of completion as required by RBI regulatory requirements for purchase by an Indian company from a non Indian company.
21. The parties entered into discussions with each other and Barclays to try to agree a revised structure for both the S Tel share transfer and the TTSL share transfer. A number of different structures were discussed between the parties. On 23 April 2012 Siva proposed a new structure to BMIC/Batelco, which provided that the simple transfer of the TTSL shares from SIHL to IBGI specified under the TTSL SPA would not take place and instead the shares would first be transferred within the Siva Group to an unnamed Indian company, designated Indco in the documents at that stage, and then from Indco to IBGI. The interposition of Indco facilitated a number of further transactions that were designed to overcome the regulatory bar on transferring the S Tel shares for US$174.5m. The revised structure document prepared by Siva assumed that the TTSL share transfer would take place before the transfer of the S Tel shares, and hence that IBGI would pay US$174,500,000 to finance the whole structure before any member of the Siva Group was required to make any payment. It was however, silent as to the source from which IBGI would obtain those funds. At the time, the expectation was that the funding would be provided by means of a short term loan from Barclays, although it was apparent that Barclays would require the money to be retained within the Barclays system.
22. By 20 June 2012, agreement had been reached in principle on a further revised structure which the legal advisers to the parties considered would satisfy the regulatory requirements. It involved a complex series of transactions, funded by Barclays, under which the TTSL shares would now be transferred by SIHL to Rocana Infrastructure Private Limited ("Rocana") as the designated vehicle on the Siva side, prior to transfer to IBGI. However on 18 July 2012, Barclays notified Batelco that it was no longer prepared to fund such a revised deal because of regulatory concerns. This came as a surprise to both parties. Although the revised structure had been agreed in principle, there was much left to be negotiated and agreed in detail, including new share sale and purchase agreements. It was common ground before me that the restructuring discussions had not given rise to a binding legal agreement which altered the parties' existing rights and obligations.
23. Despite efforts on both sides to investigate further funding options, no further agreement was reached before the long stop date of 31 October 2012. The S Tel SPA had not completed by that date. Accordingly BMIC sought to enforce its right to the sum of approximately $185 million under the terms of the Settlement Agreement as signed.

Siva's case

24. Siva's case is that two assurances were given at a negotiating meeting at Mumbai on 19 October 2011, about a month before conclusion of the written agreements, whose legal effect is pleaded at paragraphs 24.2 and 24.3 of the Defence in the following terms:

(1) "Batelco and BMIC undertook not to enforce the S Tel SPA and the Settlement Agreement without also causing a Batelco nominee company to purchase 79m TTSL shares from a Siva group nominee company for $174.5m provided Mr Sivasankaran/Siva group made those shares available unencumbered by 30 October 2012 for transfer to Batelco's nominee company."

(2) "Batelco undertook to arrange a "float" of US$174.5m to provide funds for the [two SPAs] which would be used first for the purchase by Batelco's nominee company of the TTSL shares and then by Skycity for the purchase of BMIC's shareholding in S Tel."

25. I shall refer to these, as the parties did, as the package assurance and the funding assurance respectively.

The package assurance

26. BMIC's principal negotiators were Mr Kaliaropoulos, and Ian Kelly, Batelco's Group Director, Mergers & Acquisitions. Siva was principally represented by Vaidyanathan Srinivasan, Group CEO of Siva Group and Kalyanasundaram Sethuraman, Vice President and General Counsel of the Siva Group. Mr Kaliaropoulos and Mr Kelly reported to the boards of BMIC and Batelco. Neither were members of either board. Mr Sivasankaran had no direct involvement in any of the negotiations (either in 2011 or subsequently). Mr Sethuraman reported to Mr Srinivasan and Mr Srinivasan reported to Mr Sivasankaran.
27. BMIC's Indian lawyers, Khaitan & Co, had circulated the first drafts of the settlement documentation on 12 August 2011. These contained the basic structure which was carried into the agreements as signed.
28. In late August 2011 Siva attempted to improve the deal from its point of view by making it conditional on Batelco agreeing to purchase an additional US$125 million worth of TTSL shares. Batelco refused and it looked for a while as though negotiations had broken down and the Option Agreement dispute would go to arbitration. Siva backed down and there were further negotiations by email during late September/early October 2011, following which the parties agreed to meet in Mumbai on 18 and 19 October 2011 to seek to agree terms of settlement.
29. By the time of the Mumbai meetings certain aspects were already agreed, including the structure of two SPAs with cash transfers in order to avoid FIPB regulation, Siva's right to have the TTSL transaction complete first so that the Batelco Group would have to find the funding, the number of TTSL shares agreed to be worth US$174.5m, and the principle of a long stop date within which Siva would have to have removed the encumbrances to enable the two SPAs to be used to complete the transaction, rather than paying cash.
30. No progress was made on 18 October 2011. Early on 19 October 2011, Khaitan & Co provided Siva with a revised draft of the Settlement Agreement, now including an undertaking (at clause 4.1.2) by Siva to pay BMIC US$174.5m and a further (unspecified) sum in the event that completion of the S Tel SPA did not occur by the long stop date now defined as 31 October 2012.
31. Later the same morning, Siva proposed amendments to that draft to record (at recital E) that the two SPAs were "interlinked" and (at clause 4.1.2) that Siva would only be obliged to pay BMIC US$174.5m and the other sums due to it if completion of the S Tel SPA did not occur by the long stop date "for reasons attributable to [Siva]". At the meeting BMIC/Batelco rejected these proposed amendments and they were not included in subsequent drafts or the executed agreement. BMIC/Batelco also rejected Siva's proposal for a supplementary agreement or side letter to record that the two SPAs were linked.
32. During the course of the meeting, Mr Kaliaropoulos and Mr Srinivasan had a break out meeting at which they had a one to one discussion in the absence of their respective negotiating teams. It lasted about 10 to 15 minutes. It is what Mr Kaliaropoulos said during this one-on-one conversation that Siva alleges amounted to the package assurance. What I find happened during the one-on-one discussion is as follows.
33. Mr Srinivasan spoke first and articulated his concerns about the structure of the agreements and their not being explicitly linked. His expressed concern was the risk that the Siva Group might obtain the release of the TTSL shares from the pledge and make them available for acquisition by Batelco's nominee company, only to find that that company refused to complete the purchase whilst BMIC nevertheless insisted that SkyCity complete the purchase of BMIC's 42.7% shareholding in S Tel.
34. Mr Kaliaropoulos then stated Batelco's position. Mr Kaliaropoulos confirmed that if Siva had not completed the share purchase transactions by the long stop date of 31 October 2012 specified in the draft agreements, Batelco would seek full payment in cash, the board having lost patience with Siva after its unsuccessful attempt to change the terms of settlement in its favour by requiring Batelco to purchase an additional US$125m worth of TTSL shares. Batelco were not prepared to wait any longer if the share agreements had not been completed for any reason whatever, even if there were a nuclear war. He explained that their lawyers had advised against any reference to the share purchases being referred to as linked in the documents. He made clear that Batelco's position on this was not negotiable, that Batelco's board would not risk a breach of Indian law and that it would if necessary proceed with an arbitration of the put option dispute. He told Mr Srinivasan that Batelco were commercial people who had taken the decision to accept the TTSL shares by way of settlement instead of exercising the put option and that this had the approval of the Batelco board of directors who were on board with respect to the transaction. He told Mr Srinivasan that Batelco were acting in good faith and that Mr Sivasankaran and the Siva Group would have "nothing to worry about" and would have "no problem" provided that they could make available by 30 October 2012 the unencumbered TTSL shares for purchase by Batelco's nominee company. Mr Kaliaropoulos sought to give Mr Srinivasan further comfort by saying that Batelco were prepared to put the S Tel shares in escrow.
35. By the conclusion of the evidence the important aspects of the conversation were not substantially in dispute. Mr Kaliaropoulos said that he spoke in terms of "no risk", rather than no worry or no problem if Siva could make available the unencumbered TTSL shares for purchase by Batelco's nominee company by 30 October 2012. Mr Srinivasan's evidence was that Mr Kaliaropoulos referred to the agreements as a "package deal", which the latter denied. Mr Kaliaropoulos may have used the term, but if he did it added nothing to what he was conveying in what I have recorded above. The package aspect under discussion was the completion of the TTSL SPA first and Mr Srinivasan's concern that Siva needed the funds from it in order to be able to complete the S Tel SPA.
36. I have little hesitation in concluding that there was nothing in this discussion which meant or was understood to mean that Batelco's or BMIC's legal obligations would be other than those contained in the written agreements which were to be signed and which would retain the structure Batelco was insisting upon. What Mr Srinivasan received was no more than comfort that the Batelco side would comply with the obligations it was to undertake under the terms of the TTSL SPA and complete the purchase as it would be obliged to do if and when the Siva side was in a position to trigger completion by removing the encumbrances. That was his worry, and Mr Kaliaropoulos' assurance was that the Batelco side would meet those obligations, but that the Siva side would just have to trust them to do so because the obligations under the other agreements could not be linked to, or made dependent upon, Batelco doing so.
37. The problem which eventuated with the completion of the S Tel SPA was not one which was in the minds of either Mr Kaliaropoulos or Mr Srinivasan at the time of their discussion. The particular "risk", "worry" or "problem" which they were discussing, which might prevent the S Tel SPA being completed and cause the cash sum to become due under the Settlement Agreement even if the TTSL shares were available unencumbered, was the failure of the Batelco side to fulfil its obligation to transfer the price of the TTSL shares so as to enable the Siva side to pay for the S Tel shares. That was the only aspect on which Mr Kaliaropoulos gave any assurances. The assurances amounted to no more than that the Batelco side would do what it subsequently undertook to do under the terms of the written agreements as signed, which was not materially different from what the draft TTSL SPA then on the table required.
38. That is reflected in the report Mr Srinivasan made by email that evening to Mr Sivasankaran. He said:

"Further to my mail and your response, we had a good meeting with Batelco Team today. The following points were resolved to mutual satisfaction:

a) There is no summary judgment and it has been agreed that Batelco will bide its time for 12 months to complete this transaction.

b) As regards the existence of the shares of S Tel, it has been agreed that the shares constituting 42.7% shall be deposited in Escrow with a person of our choice. It will be delivered to us on our transferring 79 million shares of TTSL.

c) By agreeing to 12 months & depositing the shares of S Tel, they have proposed that in the event that we do not transfer the TTSL shares by 31st October 2012, there will not be any arbitration process but would enable Batelco to move an English Court and seek summary judgment for the $ 174.5 million. He can seek injunctive reliefs too in the jurisdiction of where the citus of the matter is viz., Mauritius, Bermuda or even India. In short, there will be an additional document by way of settlement today which will give him that additional rights for specific performance.

d) There is no discussion on valuations either way and both upside or downside scenarios will not arise and that has now been resolved. This is a big gain from our side.

The point of argument today was what is the risk involved for both parties. As per the Indian law any swap of the shares requires FIPB approval. We have overcome this by the cash-in cash-out method. Batelco will put $ 174.5 million in cash in the account of SIHL which would sell the TTSL shares. This money would then be used to purchase the S Tel shares held by Batelco. As stated earlier, in view of the regulatory environment, we cannot link any document with each other. The Settlement Document, the TTSL SPA and S Tel SPA would all be stand alone documents.

The two parties carry the following risk:

a) If Batelco does not choose to honour the TTSL SPA at the end of 12 months for whatever reason, we are stuck as there will no be inflow from Batelco for us to purchase S Tel

b) On the other hand, if TTSL SPA is honoured and money flows, Batelco takes the risk of waiting for the $ 174.5 million which we need to pay back to purchase the S Tel shares.

Considering these two scenarios, we tried convincing Batelco that we should have a supplementary agreement or at least a side letter in whatever form. Batelco does not wish to take that risk because, linking these two documents in any manner results in SWAP and the penalty is 10 times. Batelco has therefore clearly stated that they would not lose US$ 1.8 billion to save $ 174.5 million. Our counsel feels that as there is a cash in and cash out method, no way can the deal be construed as a SWAP. But as we have seen even an iota of risk taken by us has affected us.

I had a one on one chat with Peter and he told me that Batelco was in no mood to take the regulatory risk seeing the current situation and said it is a good faith settlement where both parties are carrying a risk and we should not insist on linking the documents. For us, if Batelco chooses to not honour the TTSL SPA and go after the S Tel SPA, we have to fight the case in Court and the Court may or may not agree to whatever we have agreed. By rule of law, the documents are independent and we may have to pay up to $ 174.5 million for S Tel shares.

However remote may be the possibility of Batelco frustrating the contract, I thought I should bring it to your notice. However as Batelco is also carrying a risk of our not performing on the second leg of transaction, we can take this calculated risk a go ahead.

I do not want to keep this matter open any longer as they are not only contemplating initiation of arbitration but also attempting to obtain injunctive interim orders from courts in London, Mauritius, Seychelles against Siva Limited and you personally from disposing of or alienating any assets. Even if this may be hard to come by, this may create a lot of nuisance value and media ripple."

39. This is also supported by the email sent the following morning by Mr Srinivasan to Mr Kaliaropolous referring to the discussions on the previous day. It stated:

"Firstly, thanks for taking the initiative to come down to Mumbai and discussing all issues towards an amicable settlement for the Siva Group and Batelco. Through the one and half days we spent together, I think we are positive that the intention of both parties is to close the deal latest by 31^st October 2012.

In this regard, you may proceed to instruct your lawyers to send the documents for our final review before we sign off by the end of this month. I have also had a talk with my investment committee and Mr Siva regarding the linking of the two SPAs and the risks associated with it for both parties. There was a lot of deliberation on the TTSL SPA as it remains a stand alone document not linked to any of the other two documents viz., the settlement document or the S Tel SPA. Post our one on one discussion, I felt comfortable and I expressed the good intentions of Batelco and was able to convince the committee and Mr. Siva that the whole thing is a packaged deal and that we need to believe and respect the sentiments expressed by you for and on behalf of Batelco.

One other point that I wanted to confirm is that, in the S Tel SPA you can appropriately word the document to put the shares in Escrow with KCO which would help me to state even if am not able to close the TTSL SPA for whatsoever reason, I will have the S Tel shares on paying the US$ 174.5 million."

40. Following the meeting, the detail of the agreements was negotiated over the following weeks. None of the detail involved any relevant change to the structure contained in the drafts forwarded by Batelco's lawyers on the morning of 19 October 2011. The essential allocation of risk remained that upon which Batelco had been insisting.
41. I conclude therefore that nothing said by Mr Kaliaropoulos at the one-on-one meeting in Mumbai on 19 October 2011 is inconsistent with the written agreements executed by the parties on 30 November 2011, or was meant or understood to mean that the agreement between the parties would be other than that reflected in such agreements.
42. In the course of cross-examination, and in his written oral closing, Mr White QC reformulated the content of the package assurance as having been that provided the Siva Group could make the 79m TTSL shares available unencumbered by 31 October 2012 for transfer to Batelco's nominee company both share purchase transactions would proceed. This differs from the pleaded case in that it purports to be an assurance which places upon Batelco the risk of the S Tel SPA not completing for any reason other than Siva's failure to remove the encumbrances from the TTSL shares. Mr White sought permission to amend the Defence to plead this allegation. I would refuse permission because the amendment raises issues as to allocation of risk which were not those which Batelco came to trial to meet and which would have required new avenues of evidence to be explored, such as for example whether it was possible by 31 October 2012 to complete the S Tel and TTSL SPAs by any means which would fulfil the regulatory requirements or which anyone would have been prepared to finance. But the allegation in any event fails on the evidence, not on a pleading point. Mr Kaliaropoulos made clear that the settlement sum would be payable if the SPAs had not completed by the long stop date even in the event of a nuclear war. The new formulation of the assurance simply does not reflect what Mr Kaliaropoulos said or could reasonably have been understood to have said at the one-on-one meeting, which was focused solely on Siva's concern that the Batelco side would not perform the obligations it was going to undertake in the TTSL SPA. An assurance in the newly formulated terms would be tantamount to his having accepted the new amendments to the wording of clause 4 of the Settlement Agreement proposed by Siva on the morning of 19 October 2011 which sought to restrict the circumstances in which the settlement sum became payable to non completion of the SPAs due to Siva's fault, an amendment which was firmly and clearly rejected by Batelco at the meeting and removed from all further drafts of the agreement up to and including the executed version.
43. This is sufficient to dispose of Siva's package assurance defence. The package assurance defence also fails for each of three additional reasons.
44. First, any assurance was conditional upon the Siva Group making the TTSL shares available unencumbered. That could only have meant and been understood to mean that it was conditional on SIHL satisfying the completion requirements in accordance with the terms of the TTSL SPA then under negotiation. Mr Srinivasan accepted that the statements of Mr Kaliaropoulos referred to the performance of the TTSL SPA, and his email to Mr Sivasankaran that evening described the risk to Siva in terms of Batelco choosing "not to honour the TTSL SPA at the end of 12 months for whatever reason". The Supreme Court Judgment did not prevent the TTSL SPA being capable of fulfilment and it remained binding in accordance with its terms. But SIHL did not seek to complete the TTSL SPA prior to the long stop date. IBGI was never called on to pay for the TTSL shares. Instead Siva sought to persuade Batelco to accept the TTSL shares under a different structure which never became one by which BMIC, IBGI or any other Batelco company was legally bound. The pleaded condition to the package assurance, as understood by Mr Srinivasan at the time, was not fulfilled. Moreover even if the condition is to be interpreted as the shares being available by 31 October 2012 to meet the revised structure agreed in principle in 2012, Siva did not comply with the condition. Freedom from the rights of pre-emption was procured in favour of Rocana, and the unencumbered shares were not in the hands of Rocana until 5 November 2012, after the long stop date had passed.
45. Secondly, no assurance given at the one-on-one meeting was, objectively viewed, intended to be legally binding. This is a required ingredient for promissory or equitable estoppel as much as for a collateral term or contract: Baird Textile Holdings Ltd v Marks & Spencer Plc [2001] EWCA Civ 274 per Mance LJ at [92]. The purpose of a written and formally executed agreement is to avoid the disputes which commonly arise when the parties' bargain is not completely recorded in writing. In a case like this, in which the parties contemplate that their agreement will be reduced to lengthy written agreements, drafted and advised on by lawyers, and formally executed, there is a strong presumption (quite apart from any entire agreement clause) that the parties do not intend to be bound by anything not recorded in their written agreement. See Lewison The Interpretation of Contracts 5th Edn at p121, citing Gillespie v Cheney Egar & Co [1896] 2 QB 59 per Ld Russell; Heilbut Symons v Buckleton [1913] AC 30, 47 per Ld Moulton; Mileform Ltd v Interserve Security Ltd [2013] EWHC 3386 (Comm) per Gloster LJ at [94]-[97]. Both sides intended their agreement to be embodied in detailed and signed written documents which on the Batelco side would have to be put before the board for approval, and on the Siva side would have to be approved and executed by Mr Sivasankaran. Mr Srinivasan regularly referred to these during the course of the negotiations as the "definitive agreements". Any assurance given at the one-on-one meeting was no more than comfort being provided as to what was intended in circumstances where it was understood on both sides that the written agreements would be definitive of the parties' rights and obligations.
46. Thirdly, Mr Kaliaropoulos had no authority to bind BMIC or Batelco to any assurances given at the one-on-one meeting. As Siva knew, the written agreements could only be executed on the express authority of the boards of BMIC and Batelco. Mr Kaliaropoulos and Mr Kelly were authorised to negotiate with Siva, but not to bind the companies to any collateral agreements or equitable derogations from the written terms. Their position in this respect was identical to that of Mr Srinivasan who was negotiating on behalf of Mr Sivasankaran and who similarly had no authority to commit Mr Sivasankaran to any arrangement without his express approval. Mr Kaliaropoulos therefore had no actual authority on behalf of BMIC or any Batelco company orally to agree a significant derogation from its rights under the executed agreements; and neither he nor Mr Kelly had actual authority to commit BMIC/Batelco to providing finance for the transactions. Ostensible authority was excluded by the known requirement for Board approval of the agreements. Siva had no reason to believe that the Boards of BMIC and Batelco had approved anything outside the written agreements or that they had agreed to give Mr Kaliaropoulos and Mr Kelly authority to agree terms that derogated from the written agreements that the Boards themselves had approved. Mr White argued that ostensible authority was created by Mr Kaliaropoulos' assertion at the one-on-one meeting that the board had approved what he was saying. This cannot assist Siva because an agent cannot bind his principal to an unauthorised act by holding himself out as having authority to do a specific thing which the other party knows he has no general authority to do: see The Ocean Frost [1986] AC 717 and Kelly v Fraser [2013] 1 AC 450 per Ld Sumption at [12] to [15].
47. BMIC also relied on the no modification clause in the Settlement Agreement and additionally the entire agreement clauses in the SPAs. I do not need to express a view on what their impact would have been on the package assurance defence, framed in terms of collateral contract or estoppel, had I come to different conclusions on the evidence.

The funding assurance

48. The background is that by an email dated 3 August 2011, Mr Kelly stated that the settlement could only proceed on the basis that BMIC's sale of its S Tel shares to a Siva Group company would proceed first, followed by the purchase of the TTSL shares by a Batelco Group company. Mr Srinivasan replied on 5 August 2011 with a request that Batelco ask its bankers to organise "float" funds to enable the transactions to proceed without either party needing to finance them. As a result of this, Batelco asked its bankers Barclays whether it might be able to assist.
49. The most recent funding proposal prior to the Mumbai meeting was a document which Barclays provided to BMIC and BMIC provided to Siva on 25 August 2011 headed: "Potential Transaction Structure". It was prefaced by the rubric "For discussion purposes only and subject to contract". The proposed structure will need to be reviewed by external legal counsel including local counsel in India and are subject to further internal approval within the Barclays group. Barclays reserves the right to amend this proposed structure based on internal requirements and advice from external counsel.
50. Mr Srinivasan's evidence was that at the wider meeting in Mumbai on 19 October 2011, after the one-on-one meeting, both Mr Kelly and Mr Kaliaropoulos reiterated that Batelco would, through Barclays, arrange the "float" of US$174.5 million required for the transaction and that Barclays were willing to arrange the float funds provided the Siva Group arranged for the TTSL shares to be unencumbered and available for transfer to Batelco's nominee company by 31 October 2012. I accept this evidence. There was no dispute that there was some discussion of the funding and that at that stage it was envisaged that there would be float funding by Barclays for the transactions in the terms which were under discussion. I cannot however accept his further evidence that it was agreed that the Siva Group would bear the costs of Barclays arranging the float funds. The transaction costs would no doubt have been significant. No agreement by the Siva Group to pay them is referred to in any document. It is not included in Mr Srinivasan's summary email to Mr Sivasankaran on the evening of 19 October 2011 or his email to Mr Kaliaropoulos the following morning. It is not referred to in any document passing between the parties during the subsequent negotiations. It is not referred to in any internal Siva documents, including notably the formal transaction Approval Notes produced for signing off internally on the Siva side to summarise the transaction before it was entered into, although the latter did record Siva's obligation to pay $20,000 to Barclays for the latter's escrow services in relation to each SPA. It is not included in the executed agreements, although there is no regulatory or other reason why it could not have been.
51. What was said by Mr Kaliaropoulos and Mr Kelly was not meant or understood to mean that Batelco was giving some commitment to provide funding from a particular source or on particular terms. That was why it was not contained in the written agreements executed between the parties which they intended to be their "definitive agreements." It was no more than an explanation of how Batelco then intended to perform its obligations under the agreements which it was envisaged would require Batelco to fund the cash in cash out structure. Mr Srinivasan came close to accepting that this was so: he described it as "their action item" rather than a legally binding agreement. The particular mechanism employed by the written agreements to impose the funding obligation on the Batelco side, which was already in the drafts which both sides were proposing on 19 October 2011, was to include terms giving the Siva side control over the order of completion of the two SPAs. The means by which Batelco was intending to fulfil the obligation to pay for the TTSL shares might have been a matter of interest to Siva but was not something which required a legal commitment in narrower terms than the obligations already contained in the agreed draft terms. There was no benefit to Siva in having a narrower commitment, that funding would be from a specific source, than the wider obligation that payment should be made whatever the source of funding. Moreover the funding assurance would not have made any sense as a legal obligation rather than statement of intent. Siva had been kept informed of the proposals and knew that Barclays had not made a legal commitment, it all being subject to credit committee approval and documentation. Nor would it make any sense for Batelco to restrict themselves to funding from a particular lender, which provided no benefit to Siva, rather than from another lender or their own considerable funds, which Mr Kaliaropoulos said would have been sufficient. Mr Sethuraman's evidence was that he did not understand Batelco to have undertaken any funding obligation. That is why it was not referred to in any of the documents summarising the deal, including in particular the email from Mr Srinivasan to Mr Sivasankaran on the evening of the meeting, his email to Mr Kaliaropoulos the next day and the internal Siva Approval Notes, nor in the transaction documentation itself.
52. In my judgment the real reason why the Barclays funding was being discussed with Siva lies in the description "float funds". What was contemplated by the discussions prior to 19 October 2011 was a short term transfer of cash in both directions, with the money held in accounts within the control of Barclays. This would be for the benefit of the bank and, potentially, Batelco, rather than Siva. It would obviate or reduce the risk of the TTSL SPA completing and then, when it came to the S Tel SPA completing, Siva defaulting on payment of the price, leaving the Batelco side having bought and paid for the TTSL shares but being left with the S Tel shares. If such float funding were to be agreed, it would require cooperation on the Siva side to the mechanics of securing the funds once received from IBGI. In the event it was not agreed that the share transfers would have to complete within days of each other, or that Batelco's commitment to fund them would be short term or involve a "float". As I have pointed out, the allocation of risk in the agreements as executed (and as in draft as at 19 October 2011) was that Siva could insist on completion of the TTSL SPA up to almost a year before it would be obliged to complete the S Tel SPA and was entitled to free use of the price in cash in the meantime.
53. This is sufficient to dispose of the funding assurance defence. The funding assurance defence also fails for each of the following additional reasons:

(1) It could only have been an assurance as to the funding of the two SPAs structured as then envisaged and executed in November 2011. Mr Srinivasan accepted that this was so. This cannot assist Siva, who need to rely upon it as applicable to the circumstances in which the parties found themselves in 2012, when the S Tel SPA was not capable of completion in accordance with its terms following the Supreme Court Judgment in February 2012, and in circumstances where SIHL did not seek to complete the TTSL SPA in accordance with its terms. It would need to be "transplanted" to be applicable to the complicated structure which was under discussion in 2012 or to meet the difficulty Siva found themselves in after Barclays' withdrawal in July 2012. That is not what is pleaded: on a proper reading of paragraphs 12 and 24.3 of the Defence what is alleged is an assurance as to the funding of the two SPAs structured as then envisaged and executed in November 2011. But this is not just a pleading point. What was said at the meeting in October 2011 could not have been meant or understood to mean that Batelco would procure funding from Barclays for some different and complex structure made necessary by a turn of events no one contemplated and which would require new and different SPAs and separate regulatory consideration.

(2) It was not intended to be legally binding. Similar considerations apply here as apply to the package assurance allegation.

(3) It was not made with actual or ostensible authority. Once more similar considerations apply here as apply to the package assurance allegation.

54. Again I do not need to express a view on what the impact would have been of the no modification and entire agreement clauses on the funding assurance defence had I come to different conclusions on the evidence.

Conclusion

55. The claim succeeds.