British unit of Punjab National Bank wins legal battle over unpaid loans

The Punjab National Bank International Limited (PNBIL) won a great victory in the UK High Court in its lawsuit for roughly $ 22 million in unpaid loans, setting a precedent for other enforcement cases brought by Indian banks against promoters or guarantors in English courts.

The case of the UK subsidiary of PNB is seen as a landmark decision for similar cases involving willful defaulters who reside or have assets in the UK, or where the financing arrangements are subject to English law and jurisdiction.

However, legal experts have pointed out that there is no direct connection between the outcome of this case and that being pursued by a consortium of 13 Indian banks, led by the State Bank of India (SBI), against the tycoon of alcohol Vijay Mallya before the High Court overdue loans to the defunct Kingfisher Airlines.

PNBIL’s action to secure execution by the UK High Court dates back to 2012 and 2013, when it loaned money for the purchase and charter of the cruise ship MV Delphin.

The buyer was Vishal Cruises Ltd, which would be backed by warranties and / or indemnities from businessman Pradeep Agrawal, president of Superior Drinks Pvt Ltd and manufacturer of Coca-Cola drinks in India, and Superior Industries Limited ( SIL), also said to be associated with Agrawal.

In a two-day hearing before the Commercial Division of the High Court in London last month, held at bay due to coronavirus lockdown restrictions, Judge Sara Cockerill found the case to have jurisdiction in the UK and ordered an interim payment for the bank’s charges of £ 70,000.

This is a significant victory for PNBIL as it means it can now pursue its enforcement action against the defendants in English courts, said Paul Gair, partner at TLT LLP, the law firm which also advises the 13 Indian banks on their estimate of GBP. UK 1.05 billion debt collection action against Mallya.

This is also a landmark decision for similar cases, as the defendants’ arguments are usually raised by sureties based in India. It follows a series of similar cases in which Indian banks have successfully prosecuted willful violators in English courts who reside or have assets in the UK, or where financing arrangements are subject to law and law. English jurisdiction, ”Gair said.

“This shows that it can be a successful avenue of application when pursued correctly and under the right circumstances,” he added.

After the borrowers defaulted on their loans, the PNB initiated proceedings and served them in India.

The defendants, while accepting that they had subscribed to the various guarantees, sought to argue that the test for authorization to serve outside the UK had not been met, citing various grounds, all of which were considered by the judge.

Justice Cockerill’s judgment is seen as a useful precedent, especially his dismissal of the argument that the guarantees were invalid due to a lack of regulatory approval by the Reserve Bank of India (RBI).

On whether a certificate of good service from a foreign judicial authority (in this case Indian) can be validly served for English legal proceedings, Judge Cockerill also concluded that there is a strong presumption of service and that ‘an applicant does not need to look beyond the certificate.

Agrawal and SIL filed petitions with the UK Court of Appeal earlier this month, seeking leave to appeal Judge Cockerill’s ruling.

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