ARMADA (SINGAPORE) PTE LIMITED v. ASHAPURA MINECHEM LIMITED

Filing 62

MEMORANDUM Opinion and Order Signed by the Honorable Elaine E. Bucklo on 8/29/2011:Mailed notice(mpj, )

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION

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ARMADA (SINGAPORE) PTE LIMITED,
Plaintiff,
v.
ASHAPURA MINECHEM LIMITED,
Defendant.

No. 10 C 5509

MEMORANDUM OPINION AND ORDER
On August 15, 2011, plaintiff Armada (Singapore) PTE Limited
(“Armada”)

and

AMCOL

International

Corporation,

Volclay

International Corporation and American Colloid Company (the “AMCOL
Garnishees”) presented evidence1 on the following two issues: the
ownership of the excess stock proceeds and the interest due (if
any) on the excess stock proceeds.2
that

the

AMCOL

Garnishees

owe

As explained below, I conclude
the

excess

stock

proceeds

to

Ashapura, not Chetan Shah, and therefore plaintiff is entitled to
payment of the excess stock proceeds.

However, plaintiff has not

1

Both plaintiff and the AMCOL Garnishees submitted posthearing briefs. Because I did not request such briefs and neither
side sought permission to file them, I did not consider them.
2

For a more detailed discussion of the background facts of
this dispute, see my July 13, 2011 minute order.

met its burden with respect to the alleged thirteen percent
interest on the funds.3
Turning first to the issue of ownership of the excess stock
proceeds, I rely on a series of emails4 introduced by Armada at the
hearing to conclude that the AMCOL Garnishees owe the excess stock
proceeds to Ashapura and not Chetan Shah individually. Plaintiff’s
Exhibit 1 at AMC001151 is a January 13, 2010 email from Don
Pearson,

Vice-President

and

Chief

Financial

Officer

at

AMCOL

International Corporation, to Ajay Phalod, Business Development
Manager at Ashapura.

This email from Pearson reads:

As agreed between AMCOL and Ashapura in 2009 and
finalized in December, AMCOL’s 950,000 shares of Ashapura
were sold to Ashapura at Rs38. The price on the open
market at the time of the sale was Rs 69.70. The excess
price above Rs 38, after adjusting for selling costs,
will be transferred to the account identified by
Ashapura. AMCOL will absorb the US tax on the gain.
Ashapura will forward the same amount in USD to AANV,
within four weeks of AMCOL’s initial transmission to the
Ashapura named account, and the amount will be applied to
debt that AANV has to AMCOL’s subsidiary, AMCOL Minerals
Europe Ltd. At today’s exchange rate of 45.6, the amount
approximates USD 653,000. AMCOL will transfer the amount
at the Rs/USD exchange rate at the time of transfer.
This email, which post-dated the sale of stock in December 2009 by
only a few weeks, provides compelling evidence that AMCOL agreed to

3

Plaintiff has the burden of proving that the garnishees
possess property belonging to the defendant. See K/S A/S SEA Team
v. Colocotronis (Greece) S.A., No. 76 Civ. 4019, 1978 LEXIS 16786,
at *11 (S.D.N.Y. July 5, 1978).
4

There was no written agreement documenting the agreement
reached concerning the sale of the Ashapura stock. 8/15/11 Trans.
at 9.
2

pay the excess stock proceeds to Ashapura.

Chetan Shah is never

mentioned in this email as a potential recipient of the proceeds.
There is other documentary evidence that AMCOL owed the excess
stock proceeds to Ashapura, and not Chetan Shah.

In Plaintiff’s

Exhibit 2, after a series of emails in July 2010 between Pearson
and Phalod concerning the precise amount of the excess stock
proceeds, Pearson then emailed Sejal Ghia at AMCOL asking “Can you
confirm what the excess Ashapura proceeds is at this point, $635K
or $643K?”

Ghia responds, “Excess due to AML for Dec 2009 share

sale = Rs 30,006,782 at today’s fx rate 0.02141 = 642,445.”
AMC000779.

See

In this email exchange, Ghia stated that the excess

stock proceeds were due to AML (Ashapura Minechem Limited), and
there is no mention of the proceeds being due to Shah.

Likewise,

a memorandum entitled “AMCOL and Ashapura Excess Share Purchase” at
AMC000756-57, which was an internal AMCOL document created at
Pearson’s direction, contained multiple references to Ashapura as
the entity which was owed the excess share proceeds.

The memo

stated,
On December 30, 2009, Ashapura purchased 950,000 shares
from AMCOL at a total price of 69.70 rupees before Rs
129,725 in fees. As agreed by the parties, for any price
greater than Rs 38, e.g., Rs 31.70 net of fees, AMCOL
would forward this amount to Ashapura, who would then
remit the amount to AANV to pay down debt by AANV to
AMCOL. This amount totals Rs 30,006,782 and is referred
to as the excess amount or excess proceeds. The share
sale proceeds remain with Sharekhan, AMCOL’s broker. Our
agreement with Ashapura, requires payment upon receipt of
the funds from the broker. There have been technical
difficulties whereby the broker has not released the
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funds. Ashapura borrowed funds to purchase the shares at
13%. AMCOL has an old note from Ashapura, relating to
AVL, the note had been paid down to $109,619, however,
interested [sic] had not been accrued since September
2007. After adjusting for missing accrued interest at
one month libor plus 100 bps, the current balance at June
30, 2010 is $130,500. Considering the delay in receiving
the funding for the share proceeds from the broker, AMCOL
suggested that it credit Ashapura against the $130,500
note for the interest Ashapura is incurring on its
borrowing for the purchase of the excess share price.
This internal AMCOL memorandum clearly states that Ashapura is owed
the excess stock proceeds and no where mentions that these funds
should go to Shah personally.
Finally, in Plaintiff’s Exhibit 4, a July 14, 2010 email from
Sejal

Ghia

to

Pearson

and

others

at

AMCOL,

Ghia

once

again

references the “net amount due to AML” (with AML referencing
Ashapura Minechem Limited).

This email also references the fact

(as confirmed by the testimony of Pearson) that AMCOL’s own
internal accounting system listed “AML,” not Shah, as the entity to
whom the excess stock proceeds were owed.5
Further support for plaintiff’s position can be found in
Pearson’s emails, in which he suggested that, instead of AMCOL
making any cash payments to Ashapura for interest owed on the
excess amount, AMCOL could instead reduce the amount Ashapura owed
AMCOL on an outstanding note for $109,000.

5

AMCOL has not put

In addition, I note that all the emails received by Pearson
and others at AMCOL were from Ashapura employees requesting that the
excess stock proceeds be paid, and none were from Shah himself. This
further supports the notion that Ashapura was due the excess proceeds.

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forward any explanation as to why Shah, if he were indeed owed both
the excess proceeds and the interest personally, would agree to
allow AMCOL to reduce Ashapura’s corporate debt.

This suggestion

by Pearson more logically supports the notion that AMCOL owed
Ashapura, and not Shah, the excess stock proceeds.
In reaching this conclusion, I was not convinced by the
testimony of Don Pearson.

Pearson testified that the AMCOL

Garnishees were obligated to pay the excess stock proceeds to Shah,
as it was Shah who purchased the shares and borrowed the funds to
effectuate the stock purchase.

Over and over again, Pearson

reviewed the numerous emails he authored which explicitly stated
that Ashapura was owed the excess stock proceeds, and testified
that those references to Ashapura were shorthand references to
Shah. Put simply, in light of the number of references to Ashapura
by

multiple

parties

and

the

fact

that

AMCOL’s

own

internal

accounting system reflected the fact that the proceeds were owed to
Ashapura, I did not credit Pearson’s testimony.6
To counter plaintiff’s evidence, the AMCOL Garnishees point to:
(1) a September 29, 2009 email from Larry Washow (former CEO of AMCOL)
to Don Pearson; and (2) a transcript of a January 22, 2010 quarterly
analyst call.

Turning first to the email, Washow stated, “Don[,] the

6

Also noteworthy is the fact that Pearson’s company would
benefit greatly from a determination that the excess stock proceeds
are not due to Ashapura. Testimony at the hearing revealed that
Shah is no longer demanding return of the excess stock proceeds,
and that the AMCOL Garnishees would keep this amount if plaintiff
failed to prove its entitlement to the funds.
5

price difference I guess is actually Chetan’s money so we probably
can’t do much but if it could be used to offset a bit of the Antwerp
loan or if there is some way we could keep the difference that would
be good.

Larry.”

Even assuming I could properly consider Washow’s

statement, I do not read this email as providing conclusive evidence
that the excess stock proceeds were owed to Shah personally.

The most

obvious problem with its reliability is Washow’s use of the qualifier,
“I guess.”

Given Washow’s own obvious uncertainty, this email does

not conclusively support the AMCOL Garnishees’ position, especially in
light of all the post-sale emails discussed above.
Second, the AMCOL Garnishees point to a transcript of a January
22, 2010 quarterly analyst call as support.

Putting aside any issues

of admissibility of this document, even if I did consider it, it also
does not provide strong support for the AMCOL Garnishees.

In this

transcript,

shares,

after

being

Washow responds, “Yeah.

asked

about

the

sale

of

Ashapura

We did go through the open market.

owner ended up buying the shares as a block.”

AMC001124.

The other
Once again,

Washow’s reference to “the other owner” does not establish that Shah
was owed the excess stock proceeds.

This reference is too vague to

establish anything.
Finally, AMCOL points to a number of pre-stock sale emails which
reference negotiations over the stock sale with Shah.

For example, in

a June 26, 2009 email from Jayesh Doshi (former CFO of Ashapura) to
Washow and Pearson, Doshi stated that “we have been discussing to
purchase your shares either by Mr. Chetan Shah or family members or
any other potential buyer.

We have been able to procure some funding

for purchase of shares and after my discussion with Mr. Chetan Shah,

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we can look at buying the

entire

Garnishees’ Exhibit 1 at AMC000546.

quantity at around Rs. 35/-.”
This email presents no definitive

evidence of who/which entity purchased the shares, as it refers to
Shah, his family members, or “any other potential buyer.”
complicating matters is Doshi’s use of the word “we.”

Further

Since Doshi is

employed by Ashapura, it is certainly conceivable that “we” refers to
Ashapura and the reference to Shah (as Chairman of Ashapura) is to his
role as negotiator for Ashapura.

Nor am I convinced by the other

emails identified by the AMCOL Garnishees which refer to Shah by name
in the negotiations of the stock sale.

See, e.g.,

AMC000545 (“I

think Mr. Chetan Shah’s offer at this rate is fair to AMCOL”);

id.

(“if Chetan wanted to buy at least half of the stock at that price we
could sell the rest in the open market”);
would

put

us

in

reasonable

shape

when

AMC000542 (“I think that
the

SEC

comes

back

with

questions – might also raise the pressure a bit on Chetan to buy it if
he really wants to control more.”; AMC000538 (“He said that Chetan can
purchase the shares within a few days of us letting him know we are
ready to sell.”);

AMC000547 (“if we sell at 38 rupees and the market

is higher Chetan will pay us the market price then we need to somehow
rebate

the

difference

back

to

him”).

Given

Shah’s

controlling

interest in Ashapura and his job as Chairman, it makes sense that
AMCOL would refer to the individual negotiating on Ashapura’s behalf.
In

addition,

even

if

these

emails

suggested

a

more

personal

involvement by Shah in the stock deal, all of these emails were sent
prior to the date of the sale.

As noted above, there are numerous

emails, sent after the sale was completed, which state that Ashapura
was the buyer of the stock and was owed the excess proceeds.

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Given

that there is no written document to refer to here, I conclude that
the

emails

which

post-date

the

sale

more

accurately

reflect

the

agreement concerning the stock sale and the excess proceeds.
With

respect

to

the

interest

payments

on

the

excess

proceeds, I conclude that plaintiff has not met its burden.

stock
In his

testimony, Pearson acknowledged that AMCOL offered to pay Ashapura
thirteen

percent

Trans. at 25.

interest

on

the

excess

stock

proceeds.

8/15/11

The internal AMCOL memorandum makes clear that AMCOL’s

offer to pay interest was to make Ashapura whole for the thirteen
percent interest it was incurring as a result of the loan it took out
to buy back the shares from AMCOL.
no

evidence

that

a

final

Garnishees and Ashapura.

AMC000756-57.

agreement

was

reached

However, there is
between

the

AMCOL

In an August 30, 2010 email from Pearson to

Phalod, Pearson stated, “On the excess shares, AMCOL was willing to
compensate

Ashapura

through July.

for

cost

of

interest,

approximately

$49K

I recommended simply reducing the balance on the note

receivable from Ashapura.
exchange.

the

You noted that you may require a cash

I can do either, but require your decision.”

AMC000748.

While this email suggests that the parties were close to an agreement,
it also indicates that their were certain terms which were still being
negotiated and were not final.

Without more, I cannot conclude that

there was an agreement concerning interest payments.
Turning to the final calculation of funds owed to plaintiff, I
conclude

that

plaintiff.

the
This

AMCOL
figure

Garnishees
represents

must

turn

over

$669,151.23

in

$687,356.52
excess

to

stock

proceeds (30,006,782 Rupees at the exchange rate in effect on April 6,
2011, the day that the excess stock proceeds were transferred from

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India to the AMCOL Garnishees), see AMC000756-57, and the $18,205.29
owed by the AMCOL Garnishees to Ashapura, see 7/13/11 Minute Order.
Plaintiff’s motion to recognize, confirm, enter judgment on, and
enforce

foreign

arbitral

awards

[38]

is

therefore

granted

to

the

extent described herein, without prejudice to plaintiff’s right to
pursue recognition, confirmation, judgment on, and enforcement of the
awards in any other actions for the outstanding balance of the awards.
I direct that the property to be turned over by the AMCOL Garnishees
to

the

plaintiff’s

attorneys

attachment or restraint.
plaintiff’s

attorneys,

shall

not

be

subject

to

any

further

Upon turnover by the AMCOL Garnishees to

Bond

Number

105483459,

dated

September

17,

2010, shall be cancelled.

ENTER ORDER:

____________________________
Elaine E. Bucklo
United States District Judge
DATED: August 29, 2011

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