Dame Clare Moulder in the high court in London ruled that the Bank of Baroda, Bank of India, Canara Bank, ICICI Bank, Indian Overseas Bank and Axis Bank are entitled to $1 billion in interest and $1.1 billion of the principal sum owing.
The Indian banks (apart from Axis Bank which is the security agent) in September 2011 provided GVK Coal Developers (Singapore) with a $1 billion loan, a $35 million letter of credit facility and in March 2014, a $250 million loan. GVK drew down on the $1 billion, took $160 million from the 2014 loan, and then breached its payment obligations.
After demands for payment were unsuccessful, the six banks brought the case against GVK Coal Developers in the commercial court of the high court as well as against various companies within the GVK Group in Singapore and India – Black Gold Ventures, Cool Water Ventures and Harmony Waters – which are all the guarantors of the loan.
The court heard that GVK had intended to use the loans to part-finance coal mining projects in Australia but failed to obtain a mining licence. In its defence, GVK said that “the deterioration in the market for coal, the lack of third party investment and legal challenges to the mining projects in the courts of Queensland meant that very little progress was made to develop the Hancock Companies’ mining assets”. It also blamed the downturn in the Indian infrastructure sector at the time.
Karishma Vora, barrister for the banks, and Gautam Bhattacharyya, partner at Reed Smith – the solicitors representing the banks – said, “We are delighted to have secured a resounding and landmark victory for our Indian banking clients in a matter of such commercial significance.”