The IDBI Bank has secured a record 239 million dollars judgment against a Cypriot subsidiary of the Essar Shipping Group in a UK court.
UK law firm TLT has secured a US$239 million judgment for IDBI Bank against a Cypriot subsidiary of Indian-based Essar Shipping Group.
“This is one of the largest ever debt judgments obtained by an Indian bank in the English courts,” said a spokesperson for the UK law firm TLT that represented the IDBI Bank.
The result “demonstrates the ability of Indian banks to pursue defaulting borrowers and guarantors in the UK.”
IDBI had given out loans totalling 148 million dollars to two Singaporean registered companies—Varada Drilling One Pte Ltd and Varada Drilling Two Pte Ltd—for the construction of two jack-up drilling rigs in March 2013, according to a note from TLT.
IDH International Drilling Holdco Ltd (IDH), the Cypriot-registered parent company of the borrowers, gave a corporate guarantee in respect of the loan. The dispute over the loan arose in an English court because it was agreed that the loan and guarantee would be governed by English law and would be subject to the jurisdiction of the English courts.
IDBI served a formal demand for repayment of the principal amount in July 2017, after the borrowers failed to make scheduled repayments. IDBI also sought contractual interest, default interest and fees.
In the face of continuing non-payment, the borrowers entered liquidation in Singapore. TLT began legal proceedings in the UK on behalf of IDBI in January last year. Following that, IDBI, IDH and Essar Capital Holdings Limited, another Essar Shipping Group company, entered into a “one-time settlement” agreement.
IDBI then agreed it would accept partial payment by way of full and final settlement of the debt, but on condition that the sum was paid on or before February 28 this year.
No such payment was received, however, and, on March 2021, IDBI applied for summary judgment. It was argued on behalf of IDBI that “there was no real prospect of IDH successfully defending the claim at trial,” TLT said. The case was heard in the Commercial Court on May 21 by deputy High Court judge Leigh-Ann Mulcahy, QC.
“The judge rejected IDH’s allegations that the demand on the borrowers was not validly served such that no sums were due.” TLT said. “She found there was credible evidence that the demands had been sent in accordance with the contractual provisions, noting there was no evidence provided by IDH to the contrary.”
The judge also rejected IDH’s arguments that the sums claimed were wrong and that further demands should have been made for default interest and fees accruing after the date of the formal demand, not least on the basis that this bore no relation to commercial reality, TLT said.
“This is an important judgment both in terms of its size and the message it sends to defaulters that Indian banks are willing and able to recover outstanding debts through the English courts,” says Nick Curling, legal director at TLT. "We are pleased to have once again acted for IDBI and secured this judgment for them."
The TLT team included Indian banking litigation specialists Paul Gair (partner), Nick Curling (legal director) and Alex Morris (solicitor), based in London.
Meanwhile, an Essar spokesperson said, "IDH is disappointed with the judgment as it had consistently argued that this debt was subject to a settlement arrangement reached with the lenders in 2020 and which is in the process of being implemented (and that remains the case). An affiliate of IDH has already paid 10 percent down payment pursuant to that settlement arrangement and is confident of implementing the final stages of this settlement in next few months on completion of certain outstanding conditions."
The spokesperson added: "IDH is considering its position with regard to an appeal of this judgment."
The Essar spokesperson added that the company has over the last two years repaid over Rs 140,000 crore to its lenders. "Such a repayment plan represents one of the largest debt repayment exercises undertaken by any corporate in India."
In April 2021, TLT secured a 45 million dollar debt judgment for Bank of Baroda (Dubai), Bank of India (London), Union Bank of India (Hong Kong) and Export-Import Bank of India (Mumbai) against a borrower based in the British Virgin Islands, a corporate guarantor based in Nigeria and a personal guarantor and promoter of the wider Sandesara group, Mr Nitin Sandesara.
The order against the Essar group can have a strong bearing on the Mallya case by way of establishing a significant legal precedent. TLT is currently representing a consortium of 13 Indian banks led by the State Bank of India in seeking to enforce a 1.6 billion dollar debt recovery judgment against Indian businessman Vijay Mallya.
The next hearing, in that case, is due in the London High Court on July 26 this year. Last week Mallya lost a bid to secure a part of the proceeds from the sale of a property in France for payment of his legal fees in India.
— London Eye is a weekly column by CNBC-TV18’s Sanjay Suri, which gives a peek at business-as-unusual from London and around.
Read his other columns here
(Edited by: By Ajay Vaishnav)
First Published: IST