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Trade finance fund manager wins US$18.6mn judgement against coal mine supplier

A UAE mining supplier and its directors are appealing a judgement ordering them to pay a trade finance fund manager US$18.6mn after failing to repay a loan for a coal mining joint venture in India.

Hong Kong firm TransAsia Private Capital, manager of the Asian Trade Finance Fund 2, won the judgement in the Dubai International Financial Centre Courts on December 20 last year against Mados Trading Company, Mados Global and three directors who guaranteed the loan.

The defendants have lodged an application for permission to appeal the ruling, a Mados Global spokesperson tells GTR.

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TransAsia provides trade, supply chain and project financing, capitalising on “pre-existing middle market financing gaps left by the banking sector in the Asia Pacific region”, according to its website.

The financier extended a US$11mn facility to Mados in March 2019, although disbursement of funds began in December the previous year shortly after a term sheet was signed, according to the judgement. The facility was used by a joint venture company in the Mados group which had been awarded a coal mining contract in India by Eastern Coal Fields.

Since then, Mados has repaid only around US$60,000 of the principal under a short-lived payment deed, according to the judgement handed down by Justice Michael Black.

In addition to the almost US$10.94mn disbursed, the judgement shows the borrowers also owe US$7.75mn in interest accrued up to December 14, 2022.

TransAsia sought an immediate judgement in January 2022 ordering Mados to repay the funds, and in December the same year Mados applied to have the immediate judgement application adjourned.

Kamath also filed a comprehensive defence to TransAsia’s claims, which describe a rocky relationship between TransAsia and its borrowers from the outset, with no “meeting of minds” over the facility. However, Justice Black ultimately rebuffed the defence.

Mados’ arguments include alleged delays in disbursement by TransAsia, that a framework agreement mentioned in the facility agreement was never seen or signed, that monsoon flooding and Covid-19 constituted disruption events and that TransAsia breached the agreement by turning to an Abu Dhabi court to obtain the freezing order.

Justice Black found there is no evidence of delayed disbursement, which Mados said had triggered penalties by Eastern Coal Fields.

Arguments that the non-existent framework agreement varied the terms of the facility are “hopeless”, the judge found, and the facility agreement only referred to disruption events that hampered communications or payment systems.

Mados’ claim regarding TransAsia allegedly breaching the jurisdictional clause of the facility agreement was meritless and in any case was not a defence against non-payment, the judge ruled.

“There was a telling exchange between [Mados Global CEO] Mr [Rajesh] Kamath and the Court,” Justice Black wrote. “He said that it was his wish to renegotiate the loan and had tried to obtain refinancing. That is far from saying the loan is irrecoverable.”

The judgement shows that TransAsia granted Mados a repayment extension of three months — instead of the six months Mados requested — and that the company unsuccessfully attempted to refinance the loan with Indian lenders and a private fund in Switzerland, according to the defence.

The signing of a payment deed in early 2022 and evidence from Kamath about attempts to settle the loan together likely “amount to an admission of liability on the part of all of the defendants”, Justice Black wrote.

“In all the circumstances, I find that none of the defendants has a real (or any) prospect of successfully defending the claimants’ claims,” the judge concluded.

Mados also attempted to have the TransAsia application adjourned because it said that the freezing of its Bank of Baroda accounts by the financier meant that it could not afford to instruct lawyers to represent it. TransAsia also breached UAE rules in obtaining the freezing order and not disclosing it to the defendants, Mados alleged.

But Justice Black found that those accounts had paltry balances and had been inactive for years. “I do not accept that the defendants’ failure to instruct legal representatives in this court is anything but a device in an attempt to win more time by adjourning the claimants’ application,” he wrote.

The defendants will have legal representation for the planned appeal, the Mados spokesperson says. TransAsia did not respond to requests for comment.

The post Trade finance fund manager wins US$18.6mn judgement against coal mine supplier appeared first on Global Trade Review (GTR).

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