Barclays Bank Plc v Svizera Holdings BV & Anor

Judgment

The Honourable Mr Justice Flaux:

Introduction

The claimant bank (to which I will refer as “Barclays”) acted as the Agent and Offshore Security Trustee under a Facility Agreement dated 24 September 2007 with the defendants whereby a syndicate of lenders which included Barclays Capital, the investment bank division of Barclays, lent US$45 million to the second defendant (“Svizera”). Svizera is a Dutch company and is a wholly owned subsidiary of the first defendant (“Maneesh”) an Indian pharmaceutical company. Maneesh acted as guarantor under the Facility Agreement.

Under the Facility Agreement there was a 30 month moratorium on repayment of principal so that during that period, only interest was payable. Svizera duly made payments of interest as they fell due during the period between 31 October 2007 and 31 December 2010. It also repaid the first two instalments of principal, each of US$2.25 million on the due dates of 31 March 2010 and 29 September 2010. However, thereafter, the instalment due on 28 March 2011 of US$10,125,000 was only part paid late, US$5,500,000 being paid on 7 June 2011 and the instalment of US$10,125,000 due to be paid on 28 September 2011 was not paid at all. On 3 February 2012, Barclays served an Acceleration Notice on Svizera pursuant to the terms of the Facility Agreement, but Svizera did not pay the outstanding balance. On 21 February 2012, Barclays served a demand on Maneesh as guarantor, but Maneesh did not honour that demand. It is evident that the failure of the defendants to honour their obligations was due to impecuniosity.

On 29 February 2012, Maneesh wrote to Barclays stating, inter alia: “As the money raised would have been in INR [Indian Rupees] so it was an understanding that 100% FC [foreign currency] loan would be covered by currency hedging…[an] email from Barclays Capital [of] 11 October 2007 confers the process of concluding interest hedging and currency hedging will be executed in a week’s time. However Barclays did not allow our company Maneesh … to do currency hedging.” This was the first time since the Facility Agreement was entered into that the defendants had raised the issue which is central to their Defence and Counterclaim in the current proceedings, that Barclays had been under an obligation to obtain for the defendants an INR/USD currency swap. It is notable that, in that letter, Maneesh did not suggest that the Facility Agreement was somehow rendered invalid by the failure to procur