June 29, 2020

Success in US $17 million cross border banking claim with several High Court hearings taking place by Skype

In Punjab National Bank (International) Ltd v MBL Highway Developments Company Ltd, Milan Kapadia of Royds Withy King, acting with Justina Stewart of Outer Temple Chambers, represented the bank in a claim against the Defendant which was an established Indian company specialising in the delivery of large-scale 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 the highway (and another toll road by a further group company). To protect itself, the bank took security in the form of several other documentation, which included 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 and security documentation in favour of the bank.

The Indian government was also unsurprisingly involved as it had to sanction the construction of the highway and accordingly granted a concession agreement to the Defendant to do so. In the claim, the Bank argued that, as a result of several breaches, including failure to pay sums due under the credit facility and as a result of breaches under the concession agreement granted by the Indian government, the sums advanced under the facility fell due following these ‘events of default’.

The bank issued the claim and took several steps to serve the case documents on the Defendant and its contractual service agent. As a result of the Defendant failing to acknowledge or defend the claim, the bank sought permission to apply for summary judgment, and, for summary judgment itself.

The Defendant then belatedly attempted to get involved in the case in 2020, some two years after the claim was first issued. Over the course of several hearings this year, the Defendant raised several points in opposition – both factual and legal, including that the English High Court proceedings ought to be stayed (under s.9 of the Arbitration Act 1996) on the basis that an arbitration clause in an agreement connected with the main facility agreement displaced the High Court’s jurisdiction. Aside from arguing issues pertaining to English law, we had to utilise our network of foreign lawyers to deal with foreign law issues at short notice.

In decisions given by Mr Justice Foxton, the Bank obtained summary judgment and indemnity costs.

The case raised a number of interesting issues:

Service – Hague Convention on Service / CPR rule 6.15 / non-existence of contractual service agent

  • whether the court was entitled to enter judgment under Article 15 of the Hague Convention on Service, even though the Indian Ministry of Law and Justice had provided a letter stating that, despite an “extensive search”, it had found no record of numerous letters and the claim documents sent by the Foreign Process Service (FPS), despite evidence from the FPS to the contrary;
  • whether an applicant for alternative (retrospective) service under CPR r.6.15 needs to show “good reason” or “exceptional circumstances” given that India is a signatory to the Hague Convention on Service and has objected to the applicability of  Article 10;
  • whether the Bank could rely upon service within the jurisdiction under a contractual service clause in circumstances in which the agent no longer existed at the time of service;

Inconsistent dispute resolution clauses

  • whether a connected agreement, which provided for dispute resolution in accordance with the Rules of Arbitration of the Indian Council of Arbitration and subject to the Arbitration and Conciliation Act 1996, meant that the English proceedings ought to be stayed.  Mr Justice Foxton relied upon the decision in Albion Energy Ltd v Energy Investments Global BRL [2020] EWHC 301 (Comm);

Concurrent proceedings

  • whether it was appropriate to bring proceedings in England in view of two extant proceedings in India (a petition under different security documentation and arbitration proceedings under a different contract);

Banking law

  • questions of contractual interpretation in relation to a non-recourse loan and whether the fact that certification that the ‘Commercial Operation Date’ of the highway / toll road had not been achieved affected the Bank’s ability to rely on an ‘Event of Default’ and serve a notice, accelerating all payments due;
  • whether the Bank was entitled to rely upon a calculation based on 365 rather than 360 days in relation to 6 month USD LIBOR; the contract specifying the former, but this clearly being a mistake as the latter was the market norm, and the parties had conducted themselves on that basis;

Insolvency & restructuring

  • whether, under Indian Law, the defendant could rely upon its parent company entering the Indian corporate insolvency resolution process (CIRP);

Indian enforcement issues and coronavirus

  • the extent to which the court should and will grant a party indulgence in light of Covid-19 (particularly relevant as the  Indian lockdown at the time was especially restrictive); and
  • the advantage of allowing a respondent to a summary judgment application latitude by giving it time to respond, and more time than it would normally be entitled to for a summary judgment application. One reason being foreign criteria to bear in mind when enforcing UK orders and awards in foreign jurisdictions.

The key message to take from this decision is that, even when faced with numerous, complex arguments in opposition to a summary judgment application, in appropriate cases and where the applicant has methodically and logically unravelled those arguments, the Commercial Court will not hesitate to engage with the issues and take a robust approach.

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