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11 November 2020 0 Comments
Posted in Financial Services, Opinion

A ‘drive’ in the right direction

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Punjab National Bank (International) Ltd v MBL Highway Development Company Ltd: Success in US $17 million cross border banking claim

Indian-highway

Milan Kapadia, Partners at Royds Withy King’s Financial Services team, acting with Justina Stewart of Outer Temple Chambers, represented the bank in a claim against the Defendant, an established Indian company specialising in the delivery of largescale infrastructure projects, and in this instance, the construction of a highway in India.

The bank entered into a credit loan facility to finance the construction of a highway in addition to another toll road by a further group company. In order to protect itself the bank took several forms of security, one of which was the right to replace the borrower company if it did not comply with the spirit of the project or indeed the terms of the facility agreement and security documentation held in favour of the bank.

Given the scale of the project and the requirement for the Indian Government to approve and monitor the project, it granted a concession agreement to the Defendant. The Bank argued that, as a result of several breaches under the concession agreement and non-payment of the facility itself, the sum advanced under the facility fell due following ‘events of default’.

The legal action commenced by the bank, and which ultimately concluded in a hard fought but successful summary judgment application, raised several interesting issues:

  • Following service of the claim in on a dissolved process agent, and in accordance with the Hague Service Convention and the Brussels Recast Regulation, receipt of a letter from the Indian Ministry of Justice asserting that it had never received documents from the English Foreign Process Section, and an application declaring steps taken to serve document were valid, the court heard detailed argument and did declare certain steps taken to serve the claim were valid.
  • That the Hague Service Convention gave the court authority to grant judgment following service of the claim and following up with the Indian authorities about service reports.
  • That service of the claim within the summary judgment application would have also been sufficient to be classified as good service.
  • Whether an arbitration clause in the related agreements ousted the English jurisdiction clause in the facility, with the latter taking precedence in this case.
  • The appropriateness of related Indian proceedings halting UK proceedings, which was rejected in these proceedings.
  • The requirement for a non-recourse loan to be triggered by compliance with a precondition where there were Events of Default including non-payment.
  • Market norms for the number of days in the year used in LIBOR reference rate calculations.
  • Whether Indian Corporate Insolvency Resolution Process of a parent company affected the English proceedings.
  • And the indulgence granted by the court to the defendant due to Covid-19.

The Defendant also raised further legal and factual arguments during the hearing and without substantiated facts and evidence which were given short shrift by the Judge.

Following lengthy proceedings and a number of remote hearings held by Skype, summary judgment was successfully awarded in favour of the bank in what can only be described as a welcome break for banking institutions. As an added bonus the bank was awarded all of its legal costs (on the indemnity basis), which is becoming increasingly rare

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