IN THE SUPREME COURT OF INDIA (Civil Appellate Jurisdiction) Special Leave

Petition (Civil) No. 13154 of 2012

Slick Operator plc

… Petitioner
versus
Harish Kamath and another
… Respondents
and

Special Leave Petition (Civil) No. 13167 of 2012

Harish Kamath
… Petitioner
versus
Slick Operator plc and others
… Respondents
________________________________________________________________________

1. Slick Operator plc [“Slick”] is one of the largest oil and gas companies in the world. It
is incorporated in London and its CEO, Mr Josep Stark, had become something of an
icon in business circles for his stewardship of Slick ever since he was appointed in
2004. An important plank of his strategy has been to transform Slick from a
predominantly regional, to a global company with a presence in virtually every country
of commercial significance. Slick did this through alliances as well as acquisitions, and
its holdings are, for business convenience and fiscal advantages, consolidated in a
complex network of group companies. Unsurprisingly, Mr Stark has a strong business
network, and, for deals in India, has in the past worked closely with Mr Harish Kamath.
Mr Kamath, now a consultant based in Chennai and Bangalore, had retired as the
Chairman of one of India’s largest private banks and is widely respected for his
unimpeachable integrity and flair in executing complex deals. After his retirement, he
incorporated a company called India Holding Co Pvt Ltd [”IHCPL”], of which he was
then the CEO, to be used as a vehicle for making strategic investments. Several projects
interested him, but Mr Kamath was initially contemplating a venture capital investment
of about £10 million, through IHCPL, in a promising engineering project in Himachal
Pradesh [“the Himachal Pradesh project”].

2. In 2001, Slick’s management was concerned that its business had somewhat stagnated
in recent years. Its CEO at the time, Mr Gaunt, appointed a new CFO, Caroline Brooks,
with responsibility to raise further capital, improve trading volumes in Slick shares,
and build relationships with financial institutions to raise debt at cheaper rates. Mrs
Brooks was also placed in charge of Slick’s investment department. Unusually for the
industry, her package included a bonus component calculated as a share of additional
profits, a lump sum of £5 million annually for every £200 million raised as fresh capital
 and a 10% share of any annualized return in excess of 20% on investments made at her
direction. One of Mrs Brooks’ first decisions was to invest a sum of £3 billion in the
shares of an offshore company that was owned by a Swiss bank. Initial apprehension
as to the propriety of this investment was somewhat allayed when the bank declared a
substantial dividend for the years 2002 and 2003. More investments of this kind were
made, taking the total to about £10 billion. The Board was informed by Mrs Brooks
that all these offshore companies were owned by respected financial institutions whose
names could not be publicly disclosed; that an annualised return of atleast 30% was
guaranteed, and that the companies in question would return the £10 billion investment
with a premium of 35% by 2013.
3. Unsurprisingly, Mrs Brooks spared no effort in trying to raise funds for Slick to expand,
and established contact with several companies and financial institutions. Mr Kamath,
whose working relationship with Slick had started in 2000, was among those
approached to make a substantial investment in Slick. He indicated to Mrs Brooks that
if he did decide to invest in Slick, he would, for reasons of tax mitigation and
administrative convenience, use IHCPL as the investment vehicle. Slick had no
objection to this, since many investors used this model. A standard brochure was
prepared personally by Mrs Brooks, but, for reasons of confidentiality, not emailed or
sent by post to the potential investors. Instead, Slick arranged for investors, including
Mr Kamath (along with two other IHCPL Directors), to visit London and read the only
available copy of the brochure in Mrs Brooks’ office. The brochure made the following
three representations: (i) Slick had entered into an agreement with the Saudi Arabian
Government under which, for a payment of £150 million per year, it would have first
option to operate any oil field in that country after 2015 (when existing agreements
would come to an end); (ii) the said agreement would be disclosed to the market once
operations began in 2015 and (iii) exercise of this option was expected to result in an
increase of atleast 45% in its revenues, some of which would be passed on to
shareholders as dividend, subject to legal restrictions at the relevant time. Slick offered
to allot shares (a minimum of 50,000) at £50 per share, which was higher than the
market price. Some investors, including Mr Kamath, asked for a copy of the agreement,
but were told that this was a “take it or leave it deal” offered to them as a goodwill
gesture and that the agreement could not be publicly disclosed until the first year of
operations.
4. Mr Kamath was in something of a dilemma because he had to choose between the
Himachal Pradesh project and the Slick investment, because he did not have enough
money to invest in both. On the strength of the representations in the brochure, he (as
did many other wealthy investors around the world) eventually decided to invest in
Slick by purchasing 200,000 shares. He caused IHCPL to issue equity shares to
generate capital equivalent to this amount (£ 10 million), all of which were allotted to
him. IHCPL, after receiving these funds, instructed its agent to purchase 200,000 shares
from Slick as a private placement, at the agreed price of £50 per share. IHCPL
transferred the necessary amount to the agent’s client account in Chennai, and the agent
 purchased the shares on 24 April, 2004.1 IHCPL was unwilling to give up the Himachal
Pradesh project, because the potential returns were very high, and decided to make that
investment by borrowing funds. It was expected that the eventual returns would leave
it a considerable profit, even after paying interest. Accordingly, IHCPL borrowed a
sum of £10 million from Barclays Bank, at 16 % interest, which would otherwise have
been provided by Mr Kamath, without interest. Necessary regulatory approvals for the
borrowing have been obtained, and the legality of this borrowing is not in doubt.
5. In late 2005, with the economy in robust shape, Mr Kamath decided that the time was
ripe for making substantial investments in global blue-chip companies. He did not have
the financial wherewithal to make these investments himself, but his considerable
reputation for investment management made it easy for him to raise funds, both as
equity and debt. IHCPL was his preferred investment vehicle. IHCPL shares were
issued to the equity investors, and the interests of those who invested through debt were
safeguarded by appointing lenders’ representatives to the Board of Directors. There
were five equity investors - Mr Stark, who personally invested a considerable sum, two
companies that he introduced [“the Stark companies”], and two venture capital funds
that invested because of Mr Kamath’s reputation [“the VC Funds”]. Three large
American banks invested through debt [“the American banks”], after obtaining the
necessary regulatory approvals or dispensations (the validity of which are not in doubt).
Naturally, Mr Kamath’s holding in IHCPL was diluted, but he was content with this,
because his loss of control was more than compensated by the fact that his shares would
benefit from any appreciation in value arising out of the investments made by IHCPL.
As of date, the shareholding pattern in IHCPL is: (a) Mr Kamath – 30 %; (b) Mr Stark
and the Stark companies together – 40 %; (c) the VC Funds – 30 %. The Board consists
of eleven directors – three appointed by the American banks, four by Mr Stark and the
Stark companies and two each by Mr Kamath and the VC Funds. Although Mr Kamath
is not himself a Director, he has been employed by IHCPL as the Head of the
Investment Department.
6. IHCPL’s investment portfolio began to show impressive returns on its investments,
including the Slick shares, which rose steadily, if not spectacularly, between 2004 and
2007. By this time, it was well-known in the industry that Slick was on the lookout for
major acquisitions, because it could complete these at a knock-down price in view of
the downturn in the economy, using its sizeable cash reserves. In 2008, it was rumored
that the Government of India was open to selling its stake in Smooth Oil and Gas
Corporation [“SOGC”]. SOGC is one of Asia’s largest companies, with a market
capitalization of nearly £28 billion. In June 2008, the Government confirmed that it
would invite offers for its 76% stake in SOGC, but made it clear that this would be no
ordinary bidding process. A global tender would be floated and offers would be invited

1
IHCPL obtained permission from the Reserve Bank of India and the legality of this purchase is
not in issue in these proceedings.
 only from companies with global assets of atleast £20 billion. Each bidder would be
required to submit a detailed proposal as to the integration of SOGC’s business with its
own, and other matters relevant to a qualitative assessment of the bid. The Government
clarified that it would select a winner based on both quantitative (highest bidder) and
qualitative (strength of proposals) criteria, and, in accordance with a direction of the
Supreme Court on the exploitation of natural resources, subject each applicant to a “fit
and proper person” test.
7. Slick was interested in acquiring SOGC, but realised that there were formidable
obstacles, not least of which was a recent comment that Slick’s reporting practices in
respect of investments were not entirely transparent. Slick contacted Mr Kamath, who
confirmed that Slick would, in addition to being among the highest bidders, need a
qualitative proposal of the highest order to overcome these disadvantages. After several
discussions, Mr Stark asked Mr Kamath to facilitate the acquisition. Mr Kamath’s reply
to this email, dated 19 June, 2008, is set out at Annexure – I.
8. Shortly before Mr Stark and Mr Kamath met in London, Slick incorporated three
wholly owned subsidiaries in the Cayman Islands, the British Virgin Islands and
Mauritius, respectively. Of these, Slick Consolidated Holdings Ltd [“SCHL”], the
Cayman entity, was intended to be used to create a more efficient structure for the
acquisition of SOGC. The memorandum of association provided that its business was
confined to holding shares of companies in which the Slick group is interested. It has
taken a small office on lease in the Cayman Islands, for which the rent is paid by Slick
to the owner. SCHL’s articles of association provide that: (i) any vote available to
SCHL in respect of shares it holds in companies which Slick is interested shall be
exercised solely on Slick’s directions; (ii) the maximum level of expenditure it may
incur is £25,000 a month, beyond which it requires the prior written approval of Slick;
(iii) the Board of Directors of SCHL shall be entirely nominated by Slick and that (iv)
any profit earned by SCHL shall be wholly repatriated to Slick. These provisions are
not inconsistent with the company legislation in the Cayman Islands.
Mr Stark and Mr Kamath met in London soon after, and concluded the Facilitation and
Acquisition Agreement [“FAA”] on 16 July, 2008. The parties to the FAA were Mr
Stark, Slick and Mr Kamath. Under the FAA, which was stated to be governed by
Indian law, Mr Stark and Mr Kamath agreed to incorporate a Special Purpose Vehicle,
Slick Investments Pvt Ltd [“SIPL”] in Chennai. Clause 8.6 of the FAA provided that
Slick or any group company chosen by Slick would be allotted 90% of the issued shares
of SIPL for a payment of £900,000, while 10% would be allotted to Mr Kamath or any
company chosen by him, for a payment of £100,000. It was agreed that Mr Kamath’s
£100,000 contribution would be borne by Slick. The FAA provided that Mr Kamath
would, in consideration of this 1/10th stake, use his best endeavors to facilitate the
successful acquisition by Slick of the Government’s stake in SOGC in the manner
prescribed in the FAA. This included the preparation of the reports needed for the
qualitative assessment, making presentations and representations to the Government,
highlighting Slick’s track record etc., at Mr Kamath’s expense. The FAA indicated that
Slick would submit a bid of around £30 billion.
10. It was clear at the outset that Slick did not wish to fund the acquisition from its own
funds, because the sheer size of SOGC would stretch its resources to breaking point
and make any other acquisition impossible in the near future. Accordingly, the FAA
provided that Slick would contribute no more than £1 billion towards the acquisition,
in the form of preference shares or equity shares in SIPL (in which Mr Kamath would
take his 1/10th share, without payment). It was Mr Kamath’s responsibility to find
external investors for raising the remaining £29 billion, partly as equity, and partly as
debt (to ensure that Slick did not lose control). The parties were concerned that a
leveraged buy-out could adversely affect the bid’s qualitative assessment, but went
ahead because the Government had not expressly restricted this, and because it was
expected that only a small portion of SOGC’s assets would be leveraged.
11. After the FAA was signed, Mr Kamath undertook extensive work to facilitate the
acquisition. He prepared detailed reports about Slick’s proposals for integrating SOGC
with its business, its track record, labor relations etc., and made a number of
representations and presentations to various Government officials. He also supervised
a public relations campaign that emphasized the close links between Slick and India,
and the large number of Indians on Slick’s rolls. It is accepted by both parties to this
appeal that Mr Kamath’s work was of the highest quality.
12. Mr Kamath also managed to find external investors, but most of them refused to
subscribe to equity in SIPL, preferring debt with a charge over the property of SOGC
or other appropriate security. Even with these investors, Mr Kamath had a shortfall of
about £8 billion, since Slick was to contribute no more than £1 billion. Slick, along
with three other shortlisted companies, was asked to submit its final proposal for
qualitative assessment (including financing plans) by December 2008. By this time, it
was also common knowledge that Slick’s competitors were proposing to finance the
deal through their own reserves, with little or no debt.
13. By October 2008, Mr Kamath had to accept that he could not raise funds from external
investors, particularly because even the investors he had found would, at best, invest as
creditors, not shareholders. Slick did not wish to lose this deal, and, left with no
alternative, indicated to Mr Kamath that it would raise the funds needed for the
acquisition. Mr Stark approached Slick’s largest lenders in Australia and England, and
at short notice managed to raise loans of £15 billion secured by Slick’s immovable
property in those countries. Slick contributed £15 billion from its own funds.
As a result, however, the acquisition structure had to be substantially modified. A new
SPV, Slick Holdings India Ltd [“SHIL”] was incorporated in New Delhi, and its shares
were held by Slick (49%) and SCHL (51%). Mr Kamath was not allotted any shares in
SHIL. When he wrote to Mr Stark asking about this, Mr Stark assured him that he
would be appropriately compensated, but that nothing should be done to jeopardize the
deal at this late stage. Mr Kamath continued to undertake extensive work to ensure the
success of the bid. The bid was submitted in accordance with the tender conditions,
with SHIL as the purchaser. It was accepted by the Government of India on 12 January,
2009, and SHIL acquired control over SOGC. The parties to this appeal do not dispute
that Mr Kamath’s efforts were instrumental in persuading the Government to accept
the revised bid with SHIL as the vehicle.
15. The SOGC acquisition was well-received in the Indian press, again due in no small
measure to the efforts of Mr Kamath. SHIL was now a valuable business because it
was obvious that it had acquired one of the most profitable companies in Asia. In March
2009, Mr Kamath raised the question of his fee. Mrs Roberts, Slick’s Finance Director,
replied to this by an email dated 21 March, 2009, which is set out at Annexure – II.
Mr Kamath rejected this offer out of hand and negotiations continued.
16. In August 2009, the Financial Times ran a sensational story accusing Mrs Brooks of
having practiced a fraud on Slick in 2003 and 2004, by investing about £10 billion in
offshore companies that appeared to be in the control of Swiss banks. It was reported
that these companies were actually controlled by the Government of Iran, through the
Swiss banks, which under Swiss law were entitled to not disclose the identity of the
ultimate owner; that Mrs Brooks was not only aware of this but had been promised a
fee by the Government of Iran for every investment she brought in; that she had
collected this fee from the Government of Iran and also claimed bonus payments from
Slick; and that the new Government which had come to power in Iran in the recent
elections had resolved not to pay any debt owed to a list of “imperialist multi-national
companies”, of which Slick was one. The Financial Times predicted that Slick would
have to write off the entire investment because prospects of enforcing any judgment
against the Government of Iran were virtually non-existent. Slick immediately placed
Mrs Brooks on suspension and soon after dispensed with her services. But the panic
that ensued in the market was catastrophic for its investors, many of whom lost their
life-savings when the share price plummeted.

17. Mr Kamath immediately wrote to Mr Stark expressing his dismay at the loss he had
suffered on his investment in Slick, and sought assurances that this would not affect
the Saudi Arabian contract that was to commence in 2015. Mr Kamath was shocked to
learn that Mr Stark was himself unaware of any such contract, and IHCPL sold its
200,000 Slick shares on 19 August, 2009, at £5 per share. The sale was ratified by the
Board. He instructed his solicitors to more closely examine the circumstances in which
the Slick shares had been acquired. On their advice, he contacted the Directors and
other shareholders of IHCPL and urged them to initiate legal proceedings against Slick
to recover damages for this loss. Mr Stark indicated that he would not vote, but the
Stark companies and the VC Funds informed Mr Kamath that they were not keen to
bring any such claim, because it was not in the company’s long term interest to become
embroiled in acrimonious litigation involving an important business partner. As a
result, Mr Kamath wrote to IHCPL and Slick, calling upon Slick to compensate IHCPL
for the loss caused to it by Slick’s deceit, measured by the difference between purchase
and sale price, and for all consequential losses. He received no response, and
negotiations as to his fee for the SOGC acquisition also completely broke down in the
turmoil.
18. Mrs Brooks had been arrested and was the subject of a Serious Fraud Office
investigation, and it emerged that Slick, at her direction, had also transferred assets to
group companies in other jurisdictions, including SCHL. Although there was no doubt
that Mr Stark had not been party to the fraud practised on Slick by Mrs Brooks,
questions were raised about the lack of supervision by the Board and the CEO, and Mr
Stark resigned. With the informal approval of the Government of India, which did not
wish a Slick group company to be associated with SOGC, the Slick group sold its
interest in SOGC to an American company, at a profit.
19. Mr Kamath filed two suits in the Madras High Court, C.S. No. 19 and C.S. No. 20 of
2010. Leave to sue was granted under the Letters Patent because part of the cause of
action had arisen within the jurisdiction of the court. In C.S. 19 of 2010 [“the first
suit”], Mr Kamath sought a decree in his favour, for the benefit of IHCPL, holding
Slick liable to pay damages for the tort of deceit, measured by the difference between
the purchase price (£50) and the sale price (£5), plus the interest IHCPL had paid
Barclays Bank on the £10 million loan (as a consequential loss). In C.S. No. 20 of
2010, Mr Kamath sought a quantum meruit decree holding Slick, SCHL and Mr Stark
jointly and severally liable to pay him for the services he had rendered in facilitating
the acquisition of SOGC. He sought the equivalent of 1/10 th of the value of the SPV
(SHIL), and, in the alternative, £200 million. In view of the importance of these
actions, the High Court ordered the trial of both suits to be expedited, and evidence to
be taken on a day-to-day basis. Mr Stark, who had insubstantial assets, took no part in
these proceedings and Mr Kamath’s focus was to obtain decrees against Slick and
SCHL. Written statements were filed by Slick in the first suit, and by Slick and SCHL
in the second suit.
20. In the first suit, the judge heard testimony from all relevant witnesses. Slick could not
seriously contest that the three representations in the brochure were false, and were
known by Mrs Brooks to have been false. The judge decreed the suit on 14 March,
2011 in Mr Kamath’s favour (for the benefit of IHCPL), finding that:
a. Mr Kamath is entitled to bring a derivative action against Slick in the
circumstances of this case.
b. The tort is in this case “located” in India, not England. Therefore it is
unnecessary to apply a choice of law rule, and Indian domestic law applies.
c. Under the Indian law of damages for deceit, Mr Kamath is entitled to recover
the difference between the purchase price and the real value of the shares on
the date of purchase, but not the difference between the purchase price and the
sale price. He is also not entitled to recover the interest paid to Barclays Bank,
because this is a consequential loss.

21. In the second suit, the judge heard all relevant testimony. An expert witness on
investment banking testified that the market value for the services Mr Kamath
 rendered was around £100 million, bearing in mind the complexity of the deal, but that
ordinarily consultants were not given an equity stake as fees. The accuracy of this
testimony is not challenged by Mr Kamath. The judge reserved orders and decreed the
suit against all the defendants on 16 April, 2011, with the following findings:
a. Slick is liable in restitution, for it enjoyed the benefit of Mr Kamath’s services.
Although there can be no contractual claim under the FAA since an entirely
different structure was used, the cost of the 1/10th share of the investment
vehicle in return for which Mr Kamath was “requested” to render his services
can be taken into account as the measure of Slick’s enrichment.
b. SCHL is jointly and severally liable to make restitution in this amount,
although it was not a party to the FAA, because:
i. Once the corporate veil is lifted, SCHL is deemed to have been a party
to the FAA, since Slick was a party, and hence made a request;
ii. In any case, even if it is not deemed to be a party, SCHL enjoyed the
benefit of Mr Kamath’s services for the purposes of the Indian law of
restitution;
22. First appeals were filed challenging these decrees. In respect of the first suit, the
Division Bench dismissed Slick’s appeal and allowed Mr Kamath’s appeal on 11
December, 2011, finding that:
a. The trial judge correctly held that Mr Kamath is entitled to bring a derivative
action.
b. The tort is “located” in England. It is therefore necessary to apply the Indian
choice of law rule.
c. Applying the law mandated by that rule, Mr Kamath is entitled to a decree (for
the benefit of IHCPL) for £45 per share plus the interest on the £10 million
loan, because:
i. The plaintiff has shown that deceit is actionable in principle in both the
forum (India) and England. It is not necessary to establish he is entitled
to the same damages in both countries in order to sue on a foreign tort;
ii. Heads of damages are not a matter of procedure. Further, the court is
entitled to apply the “flexible exception” in favor of the lex loci delicti
since this issue has “the most significant relationship” with England;
iii. In any event, Indian law also allows Mr Kamath to recover £45 per
share, as well as interest on the £10 million, and the trial judge erred in
holding that it does not.
23. On the second suit, the Division Bench, on 19 January, 2012, held that:
 a. Slick is liable to make restitution. But the FAA is irrelevant as a measure of the
enrichment because it was abandoned. The measure of enrichment would
ordinarily be £100 million, but the Court is entitled to take into account the offer
of £200 million as the value the defendant placed on the service rendered.
Therefore Mr Kamath is entitled to a decree against Slick for £200 million.

b. SCHL is not liable to make restitution, because:

i. It did not enjoy the benefit of Mr Kamath’s services for the purposes
of the Indian law of restitution.
ii. Although the trial judge rightly lifted the corporate veil as between
SCHL and Slick, this does not make SCHL a party to the FAA, and it
cannot be said that it made any “request”. In any event, the FAA is
irrelevant since it was abandoned.
Therefore SCHL’s appeal is allowed and the decree against it is set
aside.

24. Special Leave Petitions were filed against these orders. In view of the importance of
these questions of law, the Supreme Court, on February 3, 2012, passed an order
tagging the SLPs, and directed that these be listed for final hearing on a non-
miscellaneous day in September. The Court has indicated that counsel should address
the following issues:
a. First Suit
i. Whether Mr Kamath is entitled to bring a derivative action in the
circumstances of this case?
ii. Whether the tort of deceit is in this case “located” in India or England,
and whether the application of the law mandated by the Indian choice
of law rule entitles Mr Kamath to recover, for the benefit of IHCPL:
1. £45 per share?
2. Interest paid on the £10 million loan?

b. Second Suit
i. Whether the measure of Slick’s enrichment is the pre-acquisition cost
of a 1/10th stake in SHIL, or £200 million, or £100 million?
ii. Whether SCHL is at all liable to make restitution, and in particular:
1. Whether SCHL was enriched?
2. Whether, in any event, the consequence of lifting the corporate
veil is that SCHL is deemed to have been a party to the FAA?
 Annexure – I

Subject: Facilitation of SOGC Acquisition

Date: Thu, 19 Jun 2008 11:03:00
From: hk@kamathconsultants.in
To: jstark@slick.co.uk

Dear Josep

Thank you for confirming that you wish to compete for the acquisition of SOGC. I will, as
ever, be pleased to assist you, but I am sure you will understand that this is no ordinary
deal. It is the biggest acquisition you have attempted to date, and both of us know the
challenges ahead. If I am to act as your consultant to facilitate this, I would expect that we
agree an equity package. I am sure you will agree that this is not the sort of deal in which
facilitation is compensated by mere commission.

I look forward to hearing from you.

With kind regards

Harish

Subject: Re: Facilitation of SOGC Acquisition

Date: Thu, 19 Jun 2008 15:17:00
From: jstark@slick.co.uk
To: rc@kamathconsultants.in

Dear Harish

Certainly. Let us conclude an agreement on that basis when we meet in London.

Yours
Josep
 Annexure – II

Subject: Fee proposals

Date: Sat, 21 Mar 2009 10:14:00
From: hroberts@slick.co.uk
To: hk@kamathconsultants.in
Cc: josep@slick.co.uk

Dear Mr Kamath

Josep has asked me to respond to your email concerning your fee, and I do so on his behalf
and under his authority.

At the outset, I would like to take this opportunity to thank you for all your efforts in doing
this deal. We recognise that we would have been unable to acquire SOGC without your
assistance.

I conveyed your request for a fee equivalent to the cost of a 1/10th stake in SHIL to Josep.
While our Agreement did provide that you would receive a 1/10 th stake in SIPL, I am sure
you will agree that the structure of the deal fundamentally changed. Our original agreement
was that you would be responsible for raising funds to complete the acquisition. In the
event, the entire £30 billion either came from Slick or was raised by Slick. Without
intending to undermine your efforts in this matter, we are of the view that the Agreement
is of no assistance in arriving at what fee should be paid to you.

We are willing to pay you £200 million, which I hope you will agree is considerably higher
than what consultants instructed by the purchaser ordinarily charge for facilitating a deal
of this type. I look forward to your response, and to our continued cooperation in the future.

With kind regards,

Helen