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You are here: BAILII >> Databases >> England and Wales High Court (Commercial Court) Decisions >> Bank of Baroda & Ors v GVK & Ors [2023] EWHC 2662 (Comm) (19 October 2023) URL: https://www.bailii.org/ew/cases/EWHC/Comm/2023/2662.html Cite as: [2023] EWHC 2662 (Comm) |
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KING'S BENCH DIVISION
COMMERCIAL COURT
Fetter Lane, London, EC4A 1NL |
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B e f o r e :
Sitting as a Judge of the High Court
____________________
Bank of Baroda and others |
Claimants |
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- and - |
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GVK and others |
Defendants |
____________________
Hearing dates: 19th October 2023
____________________
Crown Copyright ©
Dame Clare Moulder:
Non-attendance of the Defendants at trial
"When a trial is not attended by the one of the parties, there is still an obligation of fair presentation on the Claimant. Cresswell J in Braspetro Oil Services v FPSO Construction Inc [2007] EWHC 1359 (Comm), [33], held that the Claimant was required to draw to the attention of the Court "points factual or legal that might be to the benefit of the Defendant". I am satisfied that this has been done. I have adopted the same approach in this case as HHJ Waksman QC (as he then was) did in CMOC Sales & Marketing Ltd v Persons Unknown [2018] EWHC 2230 (Comm), [14], namely carefully examining GASL's evidence to establish whether it had made out its case to the requisite standard. This has been no "rubber-stamping" exercise."
"Where the Court proceeds with a trial in the absence of a party (Rule 39.3) who has filed witness statements, those statements are not hearsay evidence put in by them. Absent proper hearsay notice in accordance with CPR Part 33, the Court is not obliged to take account of them (Williams v Hinton [2011] EWCA Civ 1123 (where the judge took into account such evidence but the Court of Appeal stated he was not obliged to do so).)"
Indian law evidence
Quantum evidence
Background
"Pursuant to clause 8 and clause10
of the Facility Agreement, the Company was required to repay (a) the Loans by way of ten approximately equal semi-annual instalments and (b) interest as and when such interest amounts are due.
From 9 February 2015, the Company has failed to make payments of these amounts in full or at all, as required under the Facility Agreement. As a result, in accordance with Clause10.6
(Interest on overdue amounts) of the Facility Agreement, these unpaid sums have been accruing interest at the default rate since the respective due dates, along with certain fees (the "Outstanding Amount").
As of September 30, 2020 the Outstanding Amount is US$1,522,229,227.75 and remains due, owing and unpaid from the Company and interest continues to accrue at the default rate accordingly thereon. As a result of the Company's failure to pay the Outstanding Amount, an Event of Default has occurred and is continuing under clause 22.2 ("Non-payment of the Facility Agreement")."
"In accordance with Clause 22.28 (Acceleration) of the Facility Agreement, we on behalf of the Majority Lenders hereby give you notice that the Loans, together with accrued interest (including default interest) and all other amounts accrued or outstanding under each of the Finance Documents are immediately due and payable. Further, we on behalf of the Majority Lenders hereby demand that the Loans all accrued interest up and to including the date of payment (including default interest) and each such other amount due and owing under the Finance Documents be repaid immediately."
"From May 6, 2015, the Company has failed to make payment of these amounts as required under the Facility Agreement. As a result, in accordance with clause 8.4 (Interest on overdue amounts) of the Facility Agreement, these unpaid sums have been accruing interest at the default rate since the respective due dates (the "Outstanding Amount"). As of September 30, 2020, the outstanding amount is US$220,979,648.31 and remains due, owing and payable by the Company and interest continues to accrue at the default rate accordingly thereon."
"with the accounts of the Company being classed as non-performing, the Lenders agreed to enter into negotiations with the Company to try to come to a commercial solution in light of the large and growing sums that were due and payable to the Lenders under the Facility Agreements ("a Comprehensive Resolution")… As a first step in this direction, the Lenders entered into the Interim Solution Undertaking (the "ISU") in March 2017.
One of the key terms of the ISU was that it contained the Framework Solution… This set out a general framework for a Comprehensive Resolution, and … the Lenders and members of the GVK Group had a series of meetings where they tried to reach a Comprehensive Resolution.
However, the parties were not able to reach agreement towards a Comprehensive Resolution. Throughout the period of time that negotiations were ongoing towards the ISU and then towards a Comprehensive Resolution, the Company failed to meet its obligations as set out in the Agreements to repay the loan amounts disbursed… The parties entered into the ISU allowing the Obligors to complete the [Bangalore] sale. A portion of the funds received … following this sale were used to satisfied some of the amounts outstanding under the [Facility] Agreements."
Issues for determination of liability
a. whether the acceleration notices were valid;
b. the effect of the RBI circulars;
c. force majeure;
d. liability under the guarantees;
e. the limitation period for interest;
f. default interest.
a. the sending of the acceleration notices and demands under the guarantees by the Facility Agent and security agent to addresses of the lenders in India.
b. the incorporation of the lenders in India.
c. the insolvency proceedings currently taking place in relation to the Sixth Defendant in separate proceedings.
d. the RBI circulars.
e. that the ISU was registered in India.
f. that Indian parties cannot contract out of Indian law.
"Therefore, the question whether two Indian companies could enter into an agreement to be governed by the laws of another country would not arise in this case. So long as the obligations arising under the Agreement-I subsist and the American Company is not discharged of its obligations under the Agreement-I there is a "foreign element" therein and the dispute arising therefrom. The autonomy of the parties in such a case to choose the governing law is well recognised in law. In fact section 28(1)(b) of the 1996 Act expressly recognises such autonomy."
Acceleration Notices
i. The lenders would not be entitled to enforce the Defendants' payment obligations under or connected to the 2011 and 2014 Facility Agreements until 29 March 2022, being the long-stop date under clause 4.1(b)(i) of the ISU for a listing of the shares of GVK ADL, GVK AHPL or MIAL.
ii. Alternatively, the lenders would only be entitled to enforce the Defendants' payment obligations on reasonable notice and in particular, having regard to the purpose and terms of the ISU, a reasonable period was not less than 12 months.
"If on a reading of the document as a whole it can fairly be deduced from the words actually used therein that the parties had agreed on a particular term, there is nothing in law which prevents them from setting up that term. The terms of a contract can be express or implied from what has been expressed."
i. that it must be reasonable and equitable;
ii. necessary to give business efficacy to the contract;
iii. it goes without saying, ie the Officious Bystander test;
iv. capable of clear expression; and
v. must not contradict any express term of the contract.
"The terms and conditions stated in this Interim Solution Undertaking are solely in respect of the Interim Solution, shall be without prejudice to (a) the obligations of GVKCD in relation to the payment obligations of GVKCD pursuant to the Hancock Facility Agreement and the 2014 Facility Agreement and (b) any other transaction/dispute and, subject to subclause 2.3 and 8.5(f) above, shall not be construed as an acknowledgement or waiver by any Bank or 2014 Facility Bank of their rights under the Hancock Facility Agreement and the 2014 Facility Agreement or any other transaction which has otherwise been or may be entered into by the Banks."
The "Hancock Facility Agreement" is there a reference to the 2011 Facility Agreement.
RBI Moratorium
In the circular dated 27 March 2020:
"In respect of all term loans … all commercial banks … are permitted to grant a moratorium of three months on payment of all instalments falling due between March 1, 2020 and March 31, 2020. The repayment schedule for such loans, as also the residual tenor, will be shifted across the board by three months after the moratorium period. Interest shall continue to accrue on the outstanding portion of the term loans during the moratorium period."
The circular dated 23 May 2020 provided:
"In view of the extension of lockdown and continuing disruption on account of COVID-19, all commercial banks … are permitted to extend the moratorium by another three months, ie from June 1, 2020, to August 31, 2020, on payment of all instalments in respect of term loans…
Accordingly, the repayment schedule for such loans, as also the residual tenor, will be shifted across the board. Interest shall continue to accrue on the outstanding portion of the term loans during the moratorium period."
"As interpreted by the Indian Supreme Court, these moratoriums applied mandatorily to all commercial banks and financial institutions regulated by the RBI (whether in India or not). This includes all the Claimants."
"The effect of the RBI moratoriums was that:
(1) No commercial banks or financial institutions could declare an event of default within the moratorium period;
(2) No asset could be downgraded to a non-performing asset during the moratorium period; and
(3) The moratoriums also banned the charging of: (a) default interest; (b) penal interest or (c) compound interest, during the moratorium period."
[Emphasis added]
"…It was an implied term of the 2011 and 2014 Agreements that the Claimants were all regulated by and had to adhere to the Reserve Bank of India regulations for the purpose of the instant contracts. Such implied term [was that]:
"The Claimants, whether their branches are located in India or abroad, are subject to the regulatory oversight of the Reserve Bank of India and/or Government of India. The Claimants must abide by any circulars the Reserve Bank of India might issue from time to time or any other mandatory Indian law unless they have specific permission from the Reserve Bank of India or the Indian Government to derogate from those circulars or other law."
"the Claimants are all banks incorporated in India, having registered offices in India, and as such are Indian entities and the foreign branches cannot constitute separate legal entities. The Claimants are therefore bound by all RBI circulars. All business concerns carrying out banking functions fall under the ambit of the Banking Regulations Act, the provisions of which have to be complied with."
"it is a cardinal rule of Indian corporate law that branches are parts of the principal entity... The mere fact that any Claimant transacts business through one of its branches located outside India would not change the nature of the obligation on the main entity; a branch is not a separate legal entity."
Discussion
"…Each lending institution is best placed to assess the requirements of its customers and therefore the discretion was left to the lending institutions concerned."
"You may opt for the postponement of interest and principal instalments falling due between March 1, 2020, to May 31, 2020. If you wish to opt for the moratorium facility, please revert to your Relationship Manager on email latest by April 5, 2020."
"Once the payment of instalment is deferred, as per circular dated 27 March 2020, non-payment of the instalment during the moratorium period cannot be said to be wilful and therefore there is no justification to charge the interest on interest, compound interest, penal interest for the period during the moratorium."
Force Majeure
"In large part to the catastrophic impact on its receivables as a direct result of COVID-19."
"The Government of India has not yet declared the COVID-19 force majeure events to be over. Accordingly, the Claimants' notices of default and accelerations were (a) invalid since they were issued during a period when the parties' rights and obligations were suspended by virtue of the COVID-19 force majeure event and (b) they were premature and in any event did not represent the sums that might have been said to be due by the Defendants. Accordingly, the notices of demand and acceleration are invalid."
"the impossibility referred to in section 56 is not only physical or literal impossibility, but also extends to events which strike at the basis of the contract so as to frustrate the practical purpose of the contract."
"would have to assess the conduct of the parties prior to the outbreak, the deadlines that were imposed in the contract, the steps that were to be taken, the various compliances that were required to be made and only then assess as to whether genuinely a party was presented or is able to justify its non-performance due to theepidemic/pandemic."
"It is the settled position in law that a force majeure clause is to be interpreted narrowly and not broadly. Parties ought to be compelled to adhere to contractual terms and conditions and excusing non-performance would be only in exceptional situations. As observed in Energy Watchdog, it is not in the domain of Courts to absolve parties from performing their part of the contract. It is also not the duty of Courts to provide a shelter for justifying non-performance. There has to be a "real reason" and a "real justification" which the Court would consider in order to invoke a Force Majeure clause."
Liability under the Guarantees
"(ii)…whenever each Obligor does not pay any amount when due under or in connection with any Finance Document, that Guarantor must immediately on demand by the Facility Agent pay that amount as if it were the principal obligor in respect of that amount."
"agrees with each Finance Party that if, for any reason, any amount claimed by a Finance Party is not recoverable from that Guarantor on the basis of a guarantee then that Guarantor will be liable as a principal debtor and primary obligor to indemnify that Finance Party in respect of any loss it incurs as a result of a Guarantor failing to pay any amount expressed to be payable by it under a Finance Document on the date when it ought to have been paid."
Identical provisions appear in Clause 17.1(b) in relation to the obligations of GVK PIL and GVK NRL (expect that the obligations are several and not joint and are expressly subject to the cap in Clause 17.9).
Interest - Limitation
Default interest
"on the true construction of clause10.6
of the 2011 Facility Agreement the Lenders have no automatic right to Default Interest …. The Company's liability to pay Default Interest is conditional upon (1) Default Interest being calculated and applied in accordance with clause
10.6
that is to say during the Terms for the overdue amount and not retrospectively and (2) a demand being made by the Facility Agent for the payment of Default Interest…."
"If an Obligor fails to any amount payable by it under the Finance Documents, it must immediately on demand by the Facility Agent pay interest on the overdue amount from its due date up to the date of actual payment, both before, on and after judgment…
... the Facility Agent may (acting reasonably): (i) select successive terms of any duration of not less than one month and not more than three months; and (ii) determine the appropriate Rate Fixing Day for that Term."
i. "it must immediately on demand by the Facility Agent pay interest on the overdue amount";
ii. "from its due date up to the date of actual payment, both before, on and after judgment."
"Interest on an overdue amount is payable at a rate which subject to paragraph (c) below is 2% per annum above the rate which would have been payable if the overdue amount had during the period of non-payment constituted a loan in the currency of the overdue amount."
"Rates of interest charged by banking companies not to be subject to scrutiny by Courts: Notwithstanding anything contained in the Usurious Loans Act 1918 or any other law relating to indebtedness in force in any State, a transaction between a banking company and its debtor shall not be reopened by any Court on the ground that the rate of interest charged by the banking company in respect of such transaction is excessive."
Quantum
"32.1 Accounts maintained by a Lender in connection with the Agreement are prima facie evidence of the matters to which they relate for the purpose of any litigation proceedings.
32.2 Any certification or determination by a Lender of a rate or amount under the Agreement will be, in the absence of manifest error, conclusive evidence of the matters to which it relates."
An identical provision is contained in Clause 31 of the 2014 Facility Agreement.
Principal
"The Defendants had also paid certain payments out of the sale proceeds of BIAL amounting to US$27 million. These payments were adjusted by the Claimants against both principal and to some balance of interest payable. I observe that principally there is no dispute in terms of this repayment."
Interest
"I observe that there is a difference in payment of adjusted amounts considered by the Claimants and the amounts of interest that were paid by the Defendants and the amounts of interest that are acknowledged by the Claimants to have been paid by the Defendants. To the extent that the Claimants' claim for interest has been overstated by US$8,648,445."
Agency Fees
Conclusion