Gangadhara Brhmendra Srikanth Maroju v Epoch Minerals Pte Ltd

CourtHigh Court Appellate Division (Singapore)
JudgeBelinda Ang Saw Ean JAD
Judgment Date12 October 2022
Neutral Citation[2022] SGHC(A) 35
Citation[2022] SGHC(A) 35
Docket NumberCivil Appeal No 8 of 2022
Published date18 October 2022
Plaintiff CounselChong Chi Chuin Christopher and Josh Samuel Tan Wensu (Drew & Napier LLC)
Defendant CounselJeremy Gan Eng Tong, Tan Eu Shan Kevin and Liew Min Yi, Glenna (Rajah & Tann Singapore LLP)
Subject MatterTort,Conspiracy,Unlawful means,Restitution,Failure of consideration,Total failure of consideration
Hearing Date15 July 2022
Belinda Ang Saw Ean JAD (delivering the grounds of decision of the court):

This was an appeal by Mr Gangadhara Brhmendra Srikanth Maroju (“Mr Maroju”), against the decision of a judge in the General Division (“the Judge”) in Epoch Minerals Pte Ltd v Raffles Asset Management (S) Pte Ltd and others [2021] SGHC 288 (“the Judgment”). The Judge found Mr Maroju jointly and severally liable with two other defendants for conspiring to injure the plaintiff, Epoch Minerals Pte Ltd (“EMPL”), by unlawful means in respect of a total payment of US$600,000 that was given for a purpose that turned out to be untrue. Mr Maroju was also found to be liable for dishonest assistance in aiding the second defendant, AKS Consultants Pte Ltd (“AKS”), in breach of trust in respect of monies from EMPL. The Judge also found that there was total failure of consideration in respect of a sum of US$100,000 that EMPL paid to Mr Maroju, who was consequently made personally liable to repay a sum of US$100,000 to EMPL.

We heard the appeal on 15 July 2022 and dismissed it. We now give our reasons.

The background facts

We begin by briefly setting out the background facts. EMPL was part of the “Lotus” group of companies, in which one Mr Madan Sharma (“Mr Sharma)” was a director. In 2014, Mr Sharma’s business associate introduced him to Mr Maroju, who was at that time a private banker with Standard Chartered Bank. Both individuals subsequently met and Mr Sharma told Mr Maroju that the Lotus group was looking to obtain financing from third parties to expand its business operations. Mr Maroju then informed Mr Sharma that he had extensive contacts and would keep a lookout for potential investors for the Lotus group.

Sometime in September 2016, Mr Maroju informed Mr Sharma that he found a Singapore-based investor for EMPL. This “investor”, which was later ascertained to be Raffles Asset Management (S) Pte Ltd (“RAM”), agreed to provide financing to EMPL. Mr Veerappan Subramaniam (“Mr Veerappan”), a consultant at AKS, had introduced RAM to Mr Maroju. AKS was said to be in the business of providing business and management consultancy services. Mr Veerappan’s wife, Amirthavalli d/o Lekshmanan, was an 80% shareholder of AKS. The remaining 20% shares in AKS were held by Mr Kamil bin Jumat (“Mr Kamil”). Mr Kamil was also the sole director and 100% shareholder of RAM.

EMPL arranged for payments totalling US$700,000 to be made for the purported financing transaction. EMPL pleaded that the payments were made pursuant to the following representations by Mr Maroju around September 2016: (a) the investor will make an investment of US$5m by end-2016 through the issuance of a convertible bond; and (b) the payments were a pre-condition to EMPL securing the financing. The payments comprised the following: (a) US$100,000 as personal commission to Mr Maroju, because the financing was “as good as secured”; (b) US$200,000 in “margin money”, a sum that EMPL had to first put up in order to obtain the required financing; and (c) US$100,000 in fees payable to AKS for AKS’s preparation of a due diligence report for the investor. The margin money was also to be held by AKS as an independent custodian. Sometime in October 2016, the investor agreed to increase the investment in EMPL from US$5m to US$10m. The initial sum of US$200,000 in margin money was therefore also increased to US$500,000, and EMPL subsequently arranged for a further US$300,000 to be paid for the purported financing transaction.

Although Mr Maroju denied making these representations, it appeared from his pleadings that he did actually inform Mr Sharma of the following: (a) the investor was able to provide the required financing; (b) the investor required the payment of a sum of “margin money” for that financing and the margin money was to be placed with it as a deposit; and (c) AKS could assist with a due diligence exercise, for which AKS required advance fees of US$100,000. This followed from Mr Maroju’s claim that he had been informed of these matters by AKS, and he had forwarded the same information to Mr Sharma. It was Mr Maroju’s position that the “investor” referred to in communications with AKS and Mr Sharma between September 2016 and December 2016 was RAM, although it appeared that, at this stage, RAM had not been identified as the “investor” to EMPL (see [7] below). In addition, from the averments in the pleadings, it did not appear to be in dispute that Mr Maroju, who was without doubt EMPL’s only point of contact in the initial stages of the purported financing transaction, did make some representations about an investor (which turned out to be RAM), that the investor required the payment of “margin money” for the transaction, and that AKS required the payment of due diligence fees.

The purported financing was initially promised to come through by end of 2016, but in the event, it did not. Mr Sharma then chased Mr Maroju to expedite the financing and eventually Mr Maroju informed him that the investor would provide the financing in three tranches in January 2017, with payments to be made on the 9th, 16th, and 23rd. Then, on or around 2 January 2017, Mr Maroju e-mailed Mr Sharma a draft version of the term sheet for the financing transaction. The draft term sheet provided for different payment timelines from what Mr Maroju had earlier promised Mr Sharma. It provided for payment to be made in two equal tranches, with the first payment made by or on 31 January 2017, and the second payment to be made on or after 30 days from the first payment. The draft term sheet was also the first document identifying RAM as the investor. Later, on or around 13 January 2017, a copy of this term sheet signed by Mr Kamil on behalf of RAM was provided to Mr Sharma through Mr Maroju (“the Term Sheet”). The Term Sheet was largely similar to the draft term sheet save that it provided for a slightly different payment timeline. It stated that: (a) RAM would provide financing of US$5m to EMPL by 31 January 2017 and a further US$5m by 24 February 2017; and (b) the margin money (which had since been increased to US$500,000) would be set off against EMPL’s repayment of the financing. In connection with the purported financing, Mr Kamil also visited offices of the Lotus group to perform a due diligence exercise.

In early March 2017, the promised financing was still not provided. Mr Sharma (on behalf of EMPL) then gave instructions to Mr Maroju for the financing transaction to be cancelled and for the margin money to be refunded. However, the margin money was never refunded. Mr Sharma then repeated his instructions to Mr Maroju on two further occasions (7 March 2017 and 10 March 2017). On the latter occasion, Mr Maroju informed Mr Sharma that the refund would be made by 15 March 2017. Another of the Lotus group’s director, Mr Amarpreet Singh (“Mr Singh”), who was based overseas, arranged to travel to Singapore on 15 March 2017 to oversee the refund. However, at the last minute, Mr Maroju told Mr Amarpreet to hold off his visit until 17 March 2017.

On 17 March 2017, RAM informed EMPL by way of a letter signed by Mr Kamil that RAM was withdrawing from the financing transaction, and that it was applying to its “principal” for a refund of the margin money (“the 17 March 2017 Letter”). RAM’s stated reason for its withdrawal was EMPL’s inability to fulfil the conditions as set out in the Term Sheet. EMPL pleaded that this was the first time it came to know that the margin money was no longer held by AKS and that it had been transferred to a third party without EMPL’s notice and consent. It would also have been at this time that EMPL learnt for the first time that the funding was to be provided by some entity other than RAM itself, contrary to what EMPL learnt from the Term Sheet, which identified RAM (and there was no reference to any “principal”) as the investor. In any event, despite the 17 March 2017 Letter, the margin money was never refunded.

As it turned out, AKS had, on 9 November 2016, transferred the margin money to one Michael J Schiff (“Mr Schiff”), who was the escrow agent of a Nevada-incorporated company called Clear Point Enterprise Inc (“Clear Point”). The transfer of the margin money to Mr Schiff was pursuant to a contract entered into between AKS and Clear Point on 4 November 2016 (“the Clear Point Contract”), under which AKS agreed to provide Clear Point with US$500,000 in escrow in exchange for Clear Point paying AKS a guaranteed sum of US$1.75m per week for 40 weeks starting from the date Mr Schiff receives AKS’s payment. Later, on 27 January 2017, the margin money was transferred from Mr Schiff to one H Cy Schaffer (“Mr Schaffer”), who was the escrow agent for another company, Salt Lake Ore AG (“SLO”). This was done pursuant to a contract entered between AKS and SLO on 26 January 2017 (“the SLO Contract”), under which AKS was to transfer the margin money to Mr Schaffer as SLO’s escrow agent in exchange for SLO providing financing of US$13.5m to AKS.

EMPL sued RAM, AKS, Mr Kamil and Mr Maroju on 24 January 2018. EMPL’s action against the first defendant, RAM, was stayed on account of an arbitration clause found in the Term Sheet. EMPL therefore continued with the proceedings against the other three defendants, AKS, Mr Kamil and Mr Maroju. EMPL contended that Mr Maroju had made representations to it in connection with the purported financing transaction, all of which were untrue, as part of a conspiracy with the other defendants to defraud it of the US$700,000 that it had arranged to be paid. EMPL also contended that there was never any legitimate financing transaction in existence, that the due diligence exercise had merely been a façade, and the purpose of the defendants’ scheme had simply been to defraud EMPL of the margin money and the due diligence fee. EMPL pleaded that AKS held the margin money on trust, and that AKS had acted in breach of trust by transferring...

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