U.K. Court Denies Summary Judgment On Chinese Banks’ Claim Against Anil Ambani

The England and Wales High Court of Justice has dismissed Industrial and Commercial Bank of China’s application for summary judgment against Anil Ambani in connection with the loans extended by it to Reliance Communications Ltd.

The court, however, has passed a “conditional order”, noting that Ambani’s defence was “inexplicably incomplete” and hence, the outcome of the case will be subject to further evidence and submissions presented to it during the trial.

Three Chinese lenders moved the English court pursuant to the terms of a “written facility agreement” under which they had extended a loan of $925 million to the debt-ridden telecom company. The banks said Ambani had extended a personal guarantee against the loan, which they sought to enforce. Ambani, however, denied making any such guarantee.

Case Background

Reliance Communications borrowed $925 million in February 2012 from three Chinese lenders to repay foreign currency convertible bonds that were due to mature in 2012. The loan was extended on the back of a written facility agreement between the parties.

The telecom company delayed payments and defaulted on its payment obligations between February and November 2017, after which the lender accelerated the recovery process. It moved the England High Court seeking summary judgment on the guarantee or an order directing Ambani to repay the amount due.

Anil Ambani’s Defence

Anil Ambani’s counsel denied banks’ claim on personal guarantee on the following grounds:

• He had no knowledge of any guarantee towards the loan till the receipt of letters from the banks in 2017.
• Reliance Communications’ authorized signatory signed the written facility agreement pursuant to a power of attorney signed by Ambani, which didn’t contain the document incorporating the guarantee. As a result, he won’t be bound by any personal guarantee for the loans.
• Ambani had extended a “comfort letter” to the bank as per the preliminary discussions. However, he was never made aware of any personal guarantee. He wasn’t a party to the discussions or emails between Reliance Communications and the banks.
• Ambani was unaware that the bank was seeking a personal guarantee for the loan.

Banks’ Arguments

Counsel representing the banks said that:

• Primary discussions between the banks and Reliance Communications indicated the need for a personal guarantee by Ambani in favour of the lenders. A term-sheet signed prior to the finalising the facility agreement stated that Ambani would provide a personal guarantee governed under English law in a specified format.
• The personal guarantee was referred to as a “support letter” in the power of attorney to maintain confidentiality. The parties agreed to include the guarantee, coded in the form of a support letter as an annexure to the power of attorney that was signed by Ambani. Hence, he was aware of the personal guarantee.
• The copy of power of attorney agreement received by it didn’t contain the guarantee as an annexure.

Why Did The High Court Deny Summary Judgement

The court noted that as per the English law, a summary judgment is granted only when there’s no other compelling reason for a trial. It noted that Ambani had established a “prospect of successful defence”, even if it was “only just”. The outcome of the case would depend on further submissions and evidences put forth by the parties during trial.

What The Parties Said

A spokesperson for Ambani said in a statement that “Mr Ambani’s position that the claim made by Chinese banks in relation to his alleged guarantee for corporate loans availed by Reliance Communications Limited (RCom) couldn’t be granted by way of a summary judgement has been duly upheld by the UK High Court”.

Banks said that they “welcome the grant of a conditional order against Mr Anil Ambani as we have always said his defence is not credible”. “This is a straightforward debt claim to recover outstanding loans made to RCom in good faith and secured by a binding personal guarantee given by Mr. Ambani,” the banks said in a statement. “We now look forward to the swift resolution of the case at trial.”