Bank of India v Svizera Holdings BV

The Claimant (“BoI”) claims from the Defendant (“Svizera”) USD6,299,789.31 (plus interest) allegedly due to it under a restructured interest rate swap (the “Restructured Swap”) entered into on 29 February 2008 between BoI and Svizera, a company incorporated in the Netherlands which is a wholly owned subsidiary of an Indian company, Maneesh Pharmaceuticals Limited (“MPL”).

The Restructured Swap incorporates the terms of the 1992 ISDA Master Agreement (Multicurrency – Cross Border). As interest rates have remained low, certain payments have allegedly fallen due under the Restructured Swap from Svizera to BoI, and, remaining unpaid over an extended period, BoI purported to exercise its contractual rights under the Restructured Swap to “close out” the Restructured Swap and to crystallise an amount due on close out. This amount, along with contractual interest, is the claim made in these proceedings.

There is no dispute about the closing out of the Restructured Swap or the calculation of the close out amount. However, Svizera contends that the Restructured Swap never became binding on it due to non-fulfilment of an alleged condition precedent.

The Restructured Swap restructured an earlier swap made between the parties (the “Original Swap”). Both Swaps relate to the interest due under a Term Loan Facility (the “Facility”) granted by a syndicate of banks (including BoI) and arranged by Barclays Bank plc (“Barclays”).

Svizera’s case is that the Facility was subject to an express alternatively an implied condition precedent that Barclays would enter an Indian rupee/US dollar currency (“INR/USD”) swap with Svizera and/or MPL, which it is common ground was not entered (the “Currency Swap”). It is alleged that this express alternatively implied condition precedent also applied to the Restructured Swap and that accordingly it never became binding. Further or alternatively, it is alleged that there was an agreement to arrange the Currency Swap to which BoI was party and that BoI is liable for all loss and damage allegedly resulting from the failure to arrange the Currency Swap which can be set off in diminution or extinction of the claim.

BoI is a company incorporated under the laws of India with a branch registered in England and Wales.

Svizera is a company incorporated under the laws of the Netherlands, but whose business is carried out (at least to a significant degree) in India.

Subject to Svizera’s case that no binding contract was made, on or about 23 October 2007 the parties entered into the Original Swap. This was an interest rate swap with a combination of a cap and floors, with an “effective date” of 25 October 2007. The terms of that contract were set out in a Terms Sheet executed by Svizera on 23 October 2007, and which incorporated the terms of the 1992 ISDA Master Agreement. That master agreement was executed by the parties on 29 October 2007 and dated as of 29 October 2007 (the “Master Agreement”), along with a Schedule executed on the same date and dated as of the same date (the “Schedule”).

On or about 29 February 2008 the parties agreed to restructure the terms of the Original Swap, and, subject to Svizera’s case that no binding contract was made, entered into the Restructured Swap on the terms set out in a term sheet (the “Term Sheet”) dated 29 February 2008. The Restructured Swap incorporated the terms of the Master Agreement and Schedule, except to the extent they are inconsistent with the Term Sheet.

The Original Swap and the Restructured Swap were entered into in relation to Svizera’s floating interest rate obligations under the Facility. This was a US$45,000,000 term loan facility dated 24 September 2007 which, subject to Svizera’s case that no binding contract was made, was entered into by Svizera as borrower and a number of lenders, including BoI.

Under the Facility, the Defendant was obliged to pay the lenders a floating interest rate equal to LIBOR plus a margin of 2.15%.

In summary, the terms of the Restructured Swap provided Svizera with interest rate protection in case LIBOR exceeded 6.00% pa. (under the Original Swap, the protection was only provided when LIBOR exceeded 7.00%). In those circumstances, BoI would effectively meet Svizera’s interest rate obligations under the Facility (including the margin of 2.15% pa), and in return Svizera would pay BoI 6.00% pa plus a margin or spread of (at all material times) 3.50% pa – effectively swapping Svizera’s floating interest rate commitment for a commitment to pay 7.35% pa (being the 6.00% pa plus the difference in the margin (or spread) payable under the Restructured Swap of 3.50% pa and the margin payable under the Facility of 2.15% pa).

If LIBOR was equal to or less than 6.00% pa, but greater than a lower “barrier” (as defined) then Svizera’s total interest rate commitment would effectively be to pay that floating interest rate plus 2.15% margin (the margin under the Facility) along with an additional margin of 1.35% (being the net effect of Svizera paying BoI the margin (or spread) payable under Restructured Swap of 3.50% pa and the BoI paying Svizera the margin payable under the Term Loan Facility of 2.15% pa).

If, however, LIBOR was below the lower “barrier”, then while BoI agreed to pay Svizera the floating interest (plus margin) due under the Facility, Svizera agreed to pay BoI 5.00% pa plus a margin or spread of (at all material times) 3.50% pa, effectively putting a “floor” on the amount of interest Svizera had to pay in relation to the Facility equal to 6.35% pa (being 5.00% pa plus the difference in the margin (or spread) payable under Restructured Swap of 3.50% pa and the margin payable under the Facility of 2.15% pa).

So far as material, the terms of the Restructured Swap were as follows:

At all material times on and from 29 December 2009, USD-LIBOR-BBA was below the Barrier.

Subject to Svizera’s case that no binding contract was made, the following amounts (after netting off amounts due from BoI to Svizera as described above) fell due for payment by Svizera to BoI pursuant to the Restructured Swap on the following dates:

None of the Required Payments were made by Svizera and they all remain allegedly due and outstanding.

Pursuant to Sections 2(e) and 14 of the Master Agreement, Svizera allegedly became liable to pay interest on each of the Required Payments, at BoI’s cost of funding being 6ML plus 2.50%, plus a margin of 1%.

By letter from or on behalf of BoI dated 5 August 2011 and delivered Svizera by hand, BoI gave Svizera notice that unless payment was received of the Required Payment along with accrued interest as at 31 July 2011 on or before the third Business Day after the Notice was deemed to take effect, then that failure to pay would become an Event of Default under the Master Agreement.

The grace period for payment under that notice expired, and no payment of the Required Payment and Accrued Interest as at 31 July 2011 (or any of it) was received by expiry of that grace period or at all.

Thereafter, by letter from or on behalf of BoI dated 31 August 2011 and delivered to Svizera by hand, BoI purported to serve a Notice of Designation of an Early Termination Date following an Event of Default envisaged under Section 6(a) of the Master Agreement, designating 9 September 2011 as the Early Termination Date (the “Early Termination Date”) in respect of the Restructured Swap.

By letter from or on behalf of BoI dated 14 September 2011 and delivered to Svizera by hand and as envisaged by Section 6(d)(i) of the Master Agreement, BoI notified Svizera that the amount payable under Section 6(e) of the Master Agreement as of the Early Termination Date was in aggregate US$6,299,789.31, Second Method and Market Quotation being the applicable method of calculation as set out in Section 6(e) of the Master Agreement, and including interest (the “Early Termination Statement”). The Early Termination Statement was allegedly effective pursuant to Section 12 of the Master Agreement on17September 2011. Consequently, BoI contends that US$6,299,789.31 was due and payable by Svizera on 17September 2011 pursuant to Section 6(d)(ii) of the Master Agreement.

No payment of that amount (or any of it) was received by that date or at all.

In those circumstances BoI contends that Svizera’s failure and/or refusal to pay US$6,299,789.31 or any part thereof is wrongful, and in breach of the Restructured Swap, the Master Agreement, the Schedule and the Term Sheet.

A letter before action was sent by BoI to Svizera on 4 October 2011. The Claim Form was issued on 19 December 2011 claiming US$6,299,789.31 plus interest.

Svizera’s case is set out in its Defence.

In the Defence Svizera states that discussions took place in Mumbai during April and May 2007 between Mr Vinay Sapte (a Director of Svizera) and Mr Anuj Kapoor (of Barclays). It alleges that it was agreed during those discussions that Barclays would arrange a term loan facility of up to US$45,000,000 for MPL, Svizera’s parent company. It alleges that it was also agreed that Barclays would provide the Currency Swap in order to convert MPL’s payment obligation under the term loan facility into a payment obligation denominated in Indian Rupees to protect MPL against interest rate fluctuations because its income was largely in Indian Rupees.

Svizera contends that the Currency Swap was a condition of the arrangements for MPL because it had no interest in pursuing the term loan facility if it was not fully protected against interest rate fluctuations.

The Defence states that it was decided in or around September 2007 that the term loan facility should be advanced to Svizera rather than MPL. Svizera alleges that it remained a condition of it entering into the loan that Barclays put the Currency Swap in place.

At the same time, Svizera contends that Barclays required that it also enter into the Original Swap.

Svizera claims that Barclays breached the agreement with it by failing to provide the Currency Swap and that the Original Swap and the Restructured Swap are therefore not binding on it. It denies that any sums fell due or payable by it.

Svizera alleges that Barclays was acting as agent for BoI such that both the Facility and the Restructured Swap were subject to a condition precedent that the Currency Swap be entered. Svizera also alleges that Barclays (as agent for BoI) promised to enter the Currency Swap and that because no currency swap was arranged, BoI was also in breach of that agreement.

Svizera advances a Counterclaim for breach of that agreement, by which it seeks payment of the difference between the Indian Rupee equivalent of the repayments made under the Term Loan Facility and the Indian Rupee equivalent of what would have been payable if the Currency Swap had been put in place.

BoI denies that any agreement was ever reached between MPL and/or Svizera and Barclays and/or BoI whereby it was a condition precedent of Svizera entering into either the Facility, the Original Swap or the Restructured Swap that the Currency Swap be put in place.

BoI contends that the only discussions between MPL and/or Svizera with Barclays was in relation to an entirely different US dollar and Swiss francs swap; that in any case any currency swap was irrelevant to any term loan facility entered into by Svizera since it is a Dutch entity rather than an Indian entity, and the Facility did not include as a condition precedent any currency swap (although it did specifically include an interest rate swap). Further, any agreement between MPL and/or Svizera with Barclays in relation to the Currency Swap did not apply to the Original Swap since Barclays did not act or have authority to act as BoI’s agent in that respect. Finally, even if any condition precedent had applied to the Original Swap, Sizera then entered into the Restructured Swap 4 months later by which time it knew or ought to have known that no Currency Swap had been entered into, with the result that BoI contends that Svizera waived any condition precedent in relation to the Original Swap, or the alleged condition precedent was not in fact a term of the Restructured Swap, or Svizera is estopped from alleging that it is.

The agreed list of issues is as follows:

The CMC Order was made by consent on 11 October 2012. In accordance with that Order the trial date was fixed within seven days thereafter. The trial was fixed with an estimated length of 3-5 days for a trial window commencing in the week of 9 December 2013.

Svizera had been represented by Howard Kennedy LLP throughout the proceedings and its pleadings were settled by counsel. However, on 17 January 2013 Howard Kennedy came off the record.

Thereafter procedural matters were dealt with by Svizera directly and in particular Mr Chakravorty. Disclosure was provided and Progress Monitoring Information Sheets filled in. Witness statements were exchanged. Agreed consent orders were entered into.

All appeared to be proceeding on track for the fixed December 2013 trial date notwithstanding Svizera’s lack of legal representation until 15 November 2013 when Mr Chakravorty emailed BoI’s solicitors, TLT LLP, stating that:

“As Mr Vinay Sapte the director of the defendant and main witnesses is currently busy in certain business issue of the group, and widely travelling and occupied in various other means, we would request that as most of the timetable schedules of the Consent Order has been complied by both parties, it would be genuine situation if we can re-schedule the trial window from December 9 the 2013 to March end or April 2014. Meanwhile we will comply the last activity before trial window i.e. Pre Trial Check List.

Accordingly we are writing to request a re-scheduling the timetable.”

TLT responded by email the same day stating that they were taking their clients’ instructions but that their strong advice would be to refuse the request. It pointed out that the date for trial had been known for 13 months, that it is very surprising that Mr Sapte would make other travel plans during the known trial window and that BoI would be prejudiced by any adjournment.

Later the same day Mr Chakravorty replied as follows:

“We wish to clarify that the reason of adjournment of the “trial window” is not solely Mr Sapte’s engagement etc as you read, but at the same time company’s internal facts as well associated with in totality.

This was not apprehended earlier while giving our consent. The reason of changing about three months adjournment is to crystallise few inter related issues. We opted to get some more time as we are Perusing settlement with Barclays PLC, in India in connection with USD 45 million lending from them, and the present case matter with the Claimant “Bank of India” Interest swap is in relation to Barclays loan of USD 45 million. As both issue are inter related and evinced from Barclays USD 45 million lending, we feel that under such circumstances, it is legitimate that three month adjournment will not prejudice interest of your client.”

On 19 November 2013 TLT replied stating that instructions had been taken and that BoI was not prepared to agree to an adjournment. It was pointed out that there was no reason why negotiations with Barclays, in which BoI was not involved, should necessitate an adjournment and that an adjournment would mean that the trial would not be re-listed until October 2014.

On 28 November 2013 Svizera wrote to the Court requesting an adjournment on the grounds that the claim is inter-related with the proceedings involving Barclays which is due for trial at the end of March 2014 and also financial difficulties caused by the freezing order obtained against Svizera and MPL’s liquidity constraints. It concluded with the following “prayer”:

“To allow and permit to adjourn the trial window date of claim no 2011 Folio 1542 and combine with claim no 2012-277 for which trial window date is 31^st March 2014, or latter date if decided by the honourable court.

a)

Both SHBV/MPL are under financial constraint and required justice to them on commercial angle.

b)

The claim no 2011 Folio 1542, Interest Rate Swap and Claim no 2012-277, USD 35 million recovery by Barclays bank are inter related and therefore conducting trial for both the case at one time in 31^st March 2014 or latter if Court decide so as per courts convenience, will not make any alarming harm and prejudice to Claimant.”

On 3 December 2013 TLT wrote to the Court pointing out that Svizera’s letter of 28 November was the third set of reasons given by Svizera within a fortnight for seeking an adjournment. It opposed any requested adjournment and stated that BoI would be significantly prejudiced thereby.

On 6 December 2013 Svizera wrote again to the Court in response to TLT’s letter of 3 December. It set out various points and summarised the reasons that it was seeking an adjournment as follows:

“10)

The adjournment sought by Svizera are on genuine reasons of a) cost part (legal cost) as due to impact on its Business and Economics aspect based on recent developments b) The present case of interest Rate Swap is very much integral part and related to case of Barclays and consortium banks, cases no 2012-277 (as both the cases related to USD 45 million borrowing and common banks are lenders/arrangers).

We hope we have been able to represent our matter and request a three month adjournment with other case matter 2012-277 slated to happen in March 2014.”

On 7 December 2013 Svizera emailed the Court as follows:

“We further like to request that authorised person of Svizera Holdings BV/Maneesh Pharmaceuticals Ltd , won’t be able to attend the oral hearing on 10^th December in a short time due to the fact fulfilment of documentation for Visa for the travelling may not be possible. We further state the Honourable Court to note that TLT was informed since 22^nd April 2012 about Svizera’s directly communicating with the court and discontinued the engagement of existing law firm Ms Howard Kennedy.

As due to inability of our physical presence on 10^th as explained above, the extract of our written submissions as enclosed herewith (Letter dated 6^th December 2013 with three exhibits), may kindly be treated as our oral submission towards the adjournment of hearing date.

We hope the Honourable court will accede our request on equity and natural justice and treat our above submission of documents for an adjournment of hearing from 10^th December to March 2013 or later depending on Honourable court’s convenience.”

I am prepared to treat Svizera’s communications as a request to adjourn the trial for the various reasons stated.

As made clear at the trial, I refused that application. In my judgment no good reason for a last minute adjournment of the trial has been made out.

In so far as the reason is the overlap with the proceedings involving Barclays, it has not previously been suggested that there is any overlap that would make the joinder of the proceedings desirable, still less necessary. In particular no such suggestion was made at the time of the CMC, at which stage Svizera was legally represented. On the contrary it was stated in the signed Case Management Information Sheet that Svizera could be ready for trial by May 2013. Any overlap with the Barclays proceedings is in any event limited.

In so far as there are representation difficulties, this has been known for a long time, and, as has been pointed out to Svizera, it could apply for permission to be represented by an employee.

In so far as Svizera faces financial constraints, these would have been known about for a considerable period and there has been ample time to explore possibilities of funded representation. There is also no evidence that that financial position will change in the coming months. There appears to be a hope that it will, but that seemingly rests on the speculative aspiration of success in the Barclays action.

In so far as there are difficulties in the availability of witnesses or representatives, Svizera has only itself to blame given the fact that the date of trial has been known since October 2012.

Further, I accept that BoI would be seriously prejudiced by any last minute adjournment. Significant costs would be thrown away and there has been no proposal to meet these costs, or explanation of how they might be met. Given Svizera’s stated financial difficulties any delay in obtaining judgment could be highly prejudicial to BoI, quite apart from the increase in the allegedly outstanding amount which would most likely ensue.

In these circumstances and in the exercise of my discretion I refused the requested adjournment.

The trial accordingly proceeded without the participation of Svizera. BoI was represented by counsel, Mr Yeo, and he drew to my attention the nature of Svizera’s case on the pleadings and the evidence and any points which might be made in support thereof.

The trial took place over two days, 10 and 11 December 2013. During the trial I was taken to the most relevant documents and heard evidence from Mr Kapoor, a director of Barclays investment banking division in Mumbai and Mr Khokrale, the Foreign exchange manager of BoI’s London branch. There were witness statements adduced under the Civil Evidence Act from Mr Khokrale’s predecessors, Mr Bhattacharya and Mr Matta, and also from Mr Sapte, the managing director of MPL and Svizera.

Svizera provided a short witness statement from Mr Sapte. In relation to the pleaded case concerning the allegedly agreed Currency Swap the statement stated as follows:

“The email from Barclays dated 11^th October 2007 clearly mentioned that Barclays who is the lead arranger of the loan was to provide currency swap and had intimated/represented, to Svizera Holding, BV (SH BV) that interest rate swap will be executed first and thereafter the currency swap. In fact the arrangement of interest rate swap was never discussed by Bank of India (BOI) with SHBV/MPL (Maneesh Pharmaceuticals Ltd).

Barclays enforced SH to enter into the ISDA Agreement for interest rate swap with BOI, misrepresenting to them that Barclays would thereafter enter into the currency swap. This clearly shows the connivance between the two banks in selling interest swap to Svizera without any hedging protection for its loan, which was against SHBV’s disadvantage, but booking commercial benefits through such interest swap transactions for their own interest in a tactical manner.”

The email of 11 October 2007 was sent by Mr Kapoor to Mr Sapte. It was in the following terms:

“As discussed, the interest rate swap will be executed today and enclosed below are the final terms (in line with what was discussed earlier).

Kindly review the same and let me know if you have any queries. Post that I will send you the final term sheet (along with Bank of India logo) for signing. Meanwhile, the currency hedge will be executed next week (again in line with what was discussed earlier).”

Mr Kapoor’s statement evidence, which was confirmed in oral evidence, was to the following effect.

By way of background, he explained that the main purpose of the Facility was to finance Svizera’s acquisition of 51% of the shares in Tillomed Holdings Limited (“Tillomed”) and 40% of the shares in Nostrum Laboratories Inc (“Nostrum”). Tillomed is an English registered company, while Nostrum is an US company. It was understood from discussions with MPL/Svizera that the foreign currency income stream generated from the acquisition of these two overseas companies and other overseas entities within the MPL group of companies would be used to repay the loan. Furthermore, a significant portion of MPL’s revenue was attributable to export revenue which is a form of foreign currency income, which could serve as another means of repayment for the loan.

Funds were originally to be provided to MPL as an external commercial borrowing from the Reserve Bank of India. This, however, required a number of approvals and permits from the Reserve Bank of India before funds could be made available and the necessary approvals were unable to be obtained in time for MPL to make its first tranche of payments for its acquisitions.

Barclays offered a bridge loan of USD$14 million for three months to MPL to enable it to meet its acquisition obligations. However, as a company incorporated in the Republic of India, MPL was not in a position to avail itself of such a loan given its short period and denomination in foreign currency. It was therefore agreed that the bridge loan would be made to Svizera instead, with MPL acting as guarantor.

Discussions were had with Mr. Sapte regarding a change in the structure of the Facility. He requested that it also be converted to an offshore loan, with Svizera again acting as the borrower in place of MPL. Again, the main reason for this change was due to the time pressure of finalising the Facility, and to avoid issues with ECB guidelines and to minimise tax leakages. The resulting structure was such that the Facility would be serviced by an overseas, non-INR income stream generated by Svizera through various investments in offshore subsidiaries, in particular Nostrum in the US and Tillomed in the UK.

It was against this background, that the Facility was entered into on 24 September 2007 with Svizera as the borrower, and BoI (New York Branch), State Bank of India (Nassau Branch), Barclays, and Export-Import Bank of India as the syndicated lenders.

In relation to hedging, Mr Kapoor accepted that he had preliminary discussions with Mr. Sapte in relation to currency hedging and exchange rate risks (although not expressly about an INR/USD hedge), but that these discussions did not progress beyond a preliminary stage because Barclays were not comfortable with any further incremental credit exposure beyond the loan and such proposals were very unlikely to get credit approval from Barclays.

He said that in this case MPL/Svizera had no need for any currency hedging because the facility was to be used for international acquisitions which would generate significant non-INR revenues. Since such revenue should be sufficient to cover any loan repayments and associated fees, no appreciable risks arose. Furthermore, MPL had significant foreign currency income through its exports so there was no requirement to arrange for any hedging from its perspective.

Further, it was Mr Kapoor’s evidence that Mr Sapte did not want any currency hedging because Svizera would have incurred fees associated with putting such a facility in place. His recollection was that Svizera/MPL were in no mood to incur any such fees, which could have been 7-8% per annum of the amount hedged. They were generally cost conscious and regularly asked for a reduction in fees.

Mr Sapte was nevertheless keen to reduce the cost of the loan and in this connection a cost reduction option was proposed which involved a currency swap from USD to Swiss Francs (“CHF”).

As Mr Kapoor explained in evidence, USD/CHF or USD/Japanese Yen swaps were popular at the time for Indian companies because the interest rate in Switzerland and Japan were lower than they were for borrowing USD and so borrowing costs could (assuming the interest rate differential continued) be reduced by swapping a USD loan into CHF or JPY – a saving in the region of 1.5% or 1.6% at the time.

Mr Kapoor stated that it was made clear throughout the discussions with Svizera that Barclays did not have the risk appetite to execute the USD/CHF swap with it. He explained to Mr. Sapte that Barclays could assist only by providing possible structures to Mr. Sapte, but that he would then have to approach the other banks to transact. It was on that basis that Barclays showed a number of structures to Mr. Sapte. However, he did not attempt to seek credit approval for the structure because it was not a structure Barclays would proceed with.

Proposed structures for such a swap were put forward by Barclays, although in the event these were not followed through by Svizera. It was Mr Kapoor’s evidence that it was this proposed swap that was being referred to in the email of 11 October 2007. This is borne out by the fact that there were no documents evidencing a proposal of any other currency swap, and in particular an INR/USD swap.

The statement evidence of Mr Mattaand Mr Bhattacharya, as summarised (with their approval) by Mr Khokrale, and confirmed by him in oral evidence, was that Svizera never mentioned any INR/USD currency swap to them; never queried why no currency swap (whether INR/USD or CHF/USD) had been put in place; never required that any currency swap be a condition precedent to the Restructured Swap and at no stage during the negotiations for the Restructured Swap, asserted that the Original Swap was not binding.

Although the Defence was verified by a statement of truth it is not evidence at trial – see CPR Part 32.6. The only evidence put forward at trial to support the Defence case was Mr Sapte’s brief statement. Aside from referring to the 11 October 2007 email that evidence consisted of a general assertion of misrepresentation by Barclays that it would enter into the Currency Swap. No particulars are given as to when, where, how, by whom or between whom the representation/agreement was made. Nor are particulars given as to the terms of the alleged Currency Swap. No explanation is given as to why there are no documents relating to the alleged Currency Swap other than (allegedly) the 11 October 2007 email. No evidence is given as to the proposed USD/CHF swap nor is the evidence that this is the swap which is being referred to in the 11 October email addressed. No explanation is given as to why it was not until February 2012 that the allegation that the Facility and related agreements were not binding was first made. Svizera bears the burden of proving its alleged condition precedent/agreement and its own evidence falls well short of so doing.

In any event I accept the evidence of Mr Kapoor. In particular I accept his evidence that the only currency swap proposed was the USD/CHF swap and that it is this which is referred to in the 11 October 2007 email. I accept his evidence that there was no representation made by Barclays that there would be an INR/USD currency swap, nor any agreement to that effect.

Mr Kapoor’s evidence is also borne out by the inherent probabilities. As he explained in evidence, MPL neither needed nor wanted a USD/INR currency swap.

It was not needed because (i) Svizera was a non-Indian company; (ii) MPL/Svizera wanted funding for “international acquisition” and in fact used the Term Loan Agreement to purchase shares in two companies, one in the UK and one in the US and was therefore likely to have non-INR income from those investments; and (iii) a significant portion of the revenue of MPL came from non-INR sources.

It was not wanted because of the costs and fees involved in such a transaction.

Mr Kapoor’s evidence is further borne out by the documentation evidencing the USD/CHF swap proposal, and the complete absence of any documentation evidencing the alleged INR/USD proposal.

I also accept the evidence of Mr Matta, Mr Bhattacharya and Mr Khokrale, and in particular their evidence that Svizera never mentioned any INR/USD currency swap to them; never queried why no currency swap (whether INR/USD or CHF/USD) had been put in place; never required that any currency swap be a condition precedent to the Restructured Swap and at no stage during the negotiations for the Restructured Swap, asserted that the Original Swap was not binding.

Moreover, at no time in any of the contemporaneous documents evidencing the discussions between MPI/Svizera and BoI over unpaid amounts spanning a period of almost 2 years from December 2009 is there any mention by Svizera of the absence of any INR/USD swap.

On the contrary, there is ample evidence of both parties treating the Original Swap and the Restructured Swap as being valid and binding agreements. Indeed the whole premise of the negotiations and agreement for the Restructured Swap was that there was an existing, binding swap agreement in place. Indeed this is clearly stated in Svizera’s request for a variation in its letter of 28 February 2012 which stated: “We had entered into a hedge on the same loan with your-selves” and then “We wish to modify the hedge...”. That is a clear statement and acknowledgment that the Original Swap was a binding agreement and it was on that basis that the Restructured Swap was negotiated and agreed.

Thereafter the parties conducted themselves on the basis that the Restructured Swap was valid and binding. Thus BoI entered into a back to back agreement for a restructured swap with Barclays and the parties accounted and corresponded on the basis of amounts being due under the Restructured Swap. So, for example, on 10 June 2010 Svizera acknowledged that the December 2009 payment under the Restructured Swap was “due”. On 9 September 2010 it acknowledged that it had incurred “forward derivative losses”. On 13 April 2011 it appears to have acknowledged, or at least not challenged, the assertion that it had unpaid liabilities under the Restructured Swap since December 2009.

In summary, there is no reliable evidence to support the allegation that there was any representation or agreement that there would be the alleged Currency Swap, and there is overwhelming evidence that no such representation/agreement was made, and I so find.

Further, even if there had been any such representation/agreement, and it had the alleged effect of meaning that the Restructured Swap was not valid and binding, Svizera would be estopped by convention from so contending.

Estoppel by convention arises where “both parties to a transaction act on an assumed state of facts or law, the assumption being either shared by both or made by one and acquiesced in by the other. The parties are then precluded from denying the truth of that assumption, if it would be unjust or unconscionable to allow them (or one of them) to go back on it” - Chitty on Contracts (31^st ed) para 3-107.

In this case, in entering into the Restructured Swap the parties acted on the common assumption that the Original Swap was valid and binding, and in their dealings with each other in relation to the Restructured Swap from 29 February 2008 (the date it was entered into) until February 2012 (when it was first asserted that the agreement was not valid and binding) were on the common assumption that the Restructured Swap was valid and binding. It would clearly be unjust and unconscionable to allow Svizera to go back on that shared assumption, not least because BoI has acted on the basis of it by entering into a back to back transaction with Barclays and refraining from taking any other steps to protect its position throughout that period. In all the circumstances, the factual requirements for an estoppel by convention are clearly satisfied in this case.

For all these reasons the Defence case that there was a condition precedent and collateral contract or agreement as alleged or at all is rejected.

For completeness I shall briefly address certain unpleaded complaints made in Mr Sapte’s statement. Since none of these matters have been pleaded they cannot be advanced as a defence at trial.

The complaints foreshadowed in Mr Sapte’s witness statement would appear to be that the Original Swap and the Restructured Swap were allegedly complex; that Svizera/MPL allegedly had no experience of interest rate swaps, and that Svizera was allegedly required by BoI and Barclays to enter into the Original Swap. There is no substance to these complaints.

As set out in Mr Khokrale’s second witness statement and confirmed in evidence, Svizera and/or MPL clearly had extensive experience in entering both plain vanilla and more structured swaps with a number of international investment banks and Indian domestic banks. Further, the terms of the ISDA Master Agreement and associated documentation which Svizera signed make it plain that it was responsible for obtaining its own advice about the swaps. Indeed, Svizera showed a degree of familiarity with swaps when it approached BoI requesting the restructure of the Original Swap in a fashion more favourable to itself, which became the Restructured Swap.

Further, there was no requirement on Svizera to enter into the Original Swap with BoI (or indeed with any other particular bank); it was merely a condition precedent that Svizera enter into an interest rating swap with some bank (clause 21.16). Svizera chose to enter the Original Swap with BoI. Moreover, Svizera then chose to seek a restructure of the Original Swap and enter into the Restructured Swap.

In the light of my findings the answers to the Issues set out in the List of Issues are as follows:

For the reasons set out above the Defence and counterclaim based on the alleged condition precedent/agreement that Barclays would provide a Currency Swap is rejected. It follows that there is no defence to the claim made, the basis and calculation of which is otherwise not disputed.

BoI is accordingly entitled to judgment for the full sum claimed plus interest on the basis set out in the Particulars of Claim, with the interest being updated to the date of judgment.