Ultrabulk A/S v Jagatramka [2017] EWHC 2792 (Comm)

Case No CL-2015-000461[2017] EWHC 2792 (Comm)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Venue Royal Courts of Justice, Rolls Building, 7 Rolls Buildings, Fetter Lane, London EC4A 1NLDate 9 November 2017
Before
MR. JUSTICE TEARE
Between
ULTRABULK A/SClaimantARUN KUMAR JAGATRAMKADefendant
Peter Stevenson (instructed by Reed Smith LLP) for Claimant for The Defendant did not attend and was not representedHearing Hearing date: 30 October 2017
JudgmentMr. Justice Teare :
[1]This is the judgment of the court upon the trial of an action upon a personal guarantee. The trial took place in the absence of the Defendant who, it appeared, had chosen not to attend the trial or be represented at it, though, on the morning of the trial, he expressed a wish to “attend” the trial by video link from an undisclosed location in America. For the reasons given by the court on the day of the trial the court decided to proceed with the trial in his absence. The Defendant has the right, pursuant to CPR 39.3(3), to apply to have this judgment set aside.[2]Ultrabulk, the Claimant, is a Danish company engaged in the business of operating and trading ships. It entered into two Cooperation Agreements dated 6 June 2007 and 5 July 2007 with Gujarat NRE Coke Limited (“Gujarat”), a company stated on its web site to be one of the largest producers of coke in India. Mr. Jagatramka is the chairman and managing director of Gujarat. By the end of the first quarter of 2013 Gujarat was indebted to Ultrabulk in the sum of US$4,259,397. By a Deed of Agreement dated 2 July 2013 between Ultrabulk and Gujarat the latter agreed to pay the former the outstanding indebtedness in instalments by 30 December 2013. By a Personal Guarantee also dated 2 July 2013 Mr. Jagatramka stated that he was aware of Gujarat’s debt to Ultrabulk in the sum of US$4,259,395 (“the Gujarat Liabilities”) and guaranteed that if Gujarat did not pay the Gujarat Liabilities by 31 December 2013 he would “on [Ultrabulk’s] first written demand ….pay a sum equivalent to the Gujarat Liabilities plus the interest”. On 16 June 2015 Ultrabulk demanded the sum of US$4,259,395 plus interest under the Personal Guarantee. Mr. Jagatramka has failed to pay any part of that sum.[3]In the course of this action Mr. Jagatramka has defended the claim against him on several grounds. Although Mr. Jagatramka has not appeared at trial the Claimant has addressed these defences. Mr. Stevenson, counsel for Ultrabulk, produced a comprehensive skeleton argument dealing with the suggested defences. A copy of it was supplied to Mr. Jagatramka before the trial. At trial the Claimant adduced oral evidence from Mr. Olesen, the Executive Vice President of Ultrabulk, who attended the negotiations which led to the Personal Guarantee, and also from Mr. Clulow, a partner at Reed Smith, Ultrabulk’s solicitors. In addition a witness statement of Mr. O’Neil, a former partner at Reed Smith, was put in evidence under the Civil Evidence Act. Expert evidence of Indian law was adduced from Mr. Majumdar, an Indian lawyer, who gave evidence by video link from India. Mr. Jagatramka had not served any statement from himself but did serve a witness statement of Mr. Saigal, a broker, who attended the negotiations leading to the Personal Guarantee with Mr. Jagatramka. Although Mr. Saigal was not called to give evidence the court was invited to have regard to his statement. It had been thought that Mr. Jagatramka had instructed Ms. Batra to give evidence of Indian law but when Mr. Majumdar sought to arrange a meeting with her it transpired that she had no instructions from Mr. Jagatramka. Ms. Batra’s short opinion which had been served earlier gives no details of her qualifications and was not verified by a declaration of truth.[4]The first defence advanced by Mr. Jagatramka was that he did not employ lawyers and relied upon and trusted Ultrabulk’s lawyers who drafted the Personal Guarantee.[5]It may be the case that Mr. Jagatramka did not employ lawyers to draft the guarantee but the correspondence makes clear that he was given the opportunity to do so. Mr. Saigal, the broker acting on behalf of Mr. Jagatramka, has stated that at a meeting at Ultrabulk’s lawyers, Reed Smith, on 20 June 2013 it was provisionally agreed that Mr. Jagatramka would provide a guarantee. Following that meeting Reed Smith invited him to provide a draft. On 23 June 2013 Reed Smith said that unless a draft was received the next day they would draft the guarantee. Mr. Saigal wrote saying that Mr. Jagatramka “has been discussing internally and with his legal people”. But no draft was provided and so Reed Smith provided a draft on 24 June 2013. There then followed a period of negotiation at the end of which the guarantee was signed.[6]There is nothing which would give rise to a defence in the circumstance that Mr. Jagatramka did not employ lawyers and signed the guarantee which had been drafted by Ultrabulk’s lawyers as they had taken into account points made on behalf of Mr. Jagatramka in the course of the negotiations. There is nothing which could vitiate his consent to the guarantee.[7]The second defence advanced by Mr. Jagatramka was that the guarantee was issued as a comfort letter rather than as an enforceable agreement. There is no evidence of this. On the contrary the language of the guarantee shows that it was intended to be an enforceable agreement. There was a letter of comfort sought from Axis bank by Reed Smith on 20 June 2013 in respect of certain financial information provided by Gujarat NRE Coking Coal Ltd, an Australian company affiliated to Gujarat. But that did not affect the enforceability of the guarantee at all.[8]The third defence advanced by Mr. Jagatramka was that the guarantee was issued in breach of Indian law and was therefore void, invalid or unenforceable. The suggestion is that pursuant to the Indian Foreign Exchange Management Act 1999 (“FEMA”) the prior approval from the Reserve Bank of India is required in order for an Indian resident to issue a guarantee in favour of a foreign entity. Mr. Jagatramka did not have such approval and accordingly asserts the guarantee is void and unenforceable as a matter of Indian law.[9]Assuming that Mr. Jagatramka did not have such approval (as to which there is no evidence) this defence cannot avail him. The expert evidence of Indian law before the court, in the form of the evidence of Mr. Majumdar, which the court accepts, is that the relevant regulation, paragraph 3 of the Guarantees Regulation and Foreign Exchange Management (Guarantees) Regulations does not require the relevant permission to be obtained prior to entering into the guarantee. Further, even if the guarantor fails to obtain permission, either before or after entering the guarantee, the guarantee remains enforceable. Third, the consequence of failing to obtain permission is a fine, not the unenforceability of the guarantee.[10]The fourth defence advanced by Mr. Jagatramka is that Ultrabulk was aware that the guarantee was void and/or invalid as a matter of Indian law and failed to inform him of that. Since the guarantee is not void and/or invalid as a matter of Indian law, this defence cannot avail Mr. Jagatramka. If it is intended to be said that in the absence of the required permission Mr. Jagatramka cannot lawfully pay the sums due under the guarantee this would not provide a defence under English law because the guarantee does not require the guarantee to be honoured in India.[11]The fifth defence advanced by Mr. Jagatramka is that he had no capacity to sign and execute the guarantee. There is no evidence that Mr. Jagatramka lacked capacity to sign and execute the guarantee.[12]The sixth defence advanced by Mr. Jagatramka is that his assets are in India and Indian law does not permit any remittance against a guarantee which is void, invalid or unenforceable in Indian law. There is no evidence that all of Mr. Jagatramka’s assets are in India. Thus this defence cannot avail him.[13]The seventh defence advanced by Mr. Jagatramka is rather different from the earlier defences. Assuming that the guarantee is enforceable he asserts (and Mr. Saigal has stated in his witness statement) that Gujarat has paid US$1.95 million towards the guaranteed liabilities and therefore he is liable for only US$2.31 million plus interest.[14]The assumption underlying this suggested defence is that Mr. Jagatramka’s liability under the guarantee is secondary to that of Gujarat’s liability. The submission made by Mr. Stevenson on behalf of the Ultrbulk is that Mr. Jagatramka’s obligation, in the event that Gujarat fails to discharge its liabilities, is to pay a sum equivalent to US$4,259,395 plus interest. The guarantee therefore provides for a primary liability akin to that under a performance bond.[15]It is necessary to set out the terms of the Personal Guarantee. They are as follows:
“To: Ultrabulk A/S (hereinafter referred to as ‘Beneficiary’) WHEREAS I, Mr Arun Kumar Jagatramka (hereinafter referred to as the ‘Guarantor’) … am aware of the Joint Venture Agreement between the Beneficiary and Gujarat NRE Coke Limited (‘Gujarat’) dated 6 June 2007 and 5 July 2007 (‘the Agreements’) I am also aware of the liability due on date, i.e. USD4,259,395/- to the Beneficiary by Gujarat under the Agreement (the ‘Gujarat Liabilities’). NOW, therefore, I, the Guarantor, hereby unconditionally and irrevocably guarantee that, if for any reason Gujarat do not repay the Gujarat Liabilities latest by 31 December 2013 then I will on the Beneficiary’s first written demand from the Beneficiary, pay a sum equivalent to the Gujarat Liabilities plus the interest based on annual Libor plus 2% to the Beneficiary. … This Guarantee shall be governed exclusively by English law and the English Courts shall have exclusive jurisdiction over all and any disputes arising out of or in relation to this guarantee. I irrevocably confirm that I will not contest and/or defend any application and/or proceedings to enforce this Personal Guarantee in England and Wales or elsewhere including (but not limited to) India and Australia and the Beneficiary shall be entitled to immediate judgment should payment not be made hereunder upon the Beneficiaries first written demand. No issue shall be taken as to jurisdiction and/or enforceability of this Personal Guarantee.”

Mr Arun Kumar Jagatramka (hereinafter referred to as the ‘Guarantor’) …

[16]There is no dispute that Gujarat did not pay the Gujarat Liabilities, namely, US$4,259,395 by 31 December 2013. The question which arises is whether, in that event, on the true construction of the guarantee Mr. Jagatramka is obliged to pay a sum equivalent to US$4,259,395 or that sum, less US$1.95 million. That depends upon whether the guarantee provides for a primary liability arising upon demand or whether the guarantee is a true guarantee which provides for a secondary liability in the sense that the guarantor’s liability mirrors the liability of the principal debtor. Whilst there is authority for the proposition that there is a presumption against construing an instrument as an on demand bond where it is not given by a bank or other financial institution (see Autoridad del Canal de Panama v Sacyr SA [2017] EWHC 2228 at paragraph 81(4) per Blair J.) there is no doubt, in my judgment, that the instrument signed by Mr. Jagatramka provided for an on demand bond and that if such demand was validly made Mr. Jagatramka was bound to pay “a sum equal to US$4,259,395”, not such sum as Gujarat was in fact liable to pay at that time. The following parts of the guarantee lead to that conclusion: i) Mr. Jagatramka agreed to pay “a sum equivalent to” the “Gujarat Liabilities” which were defined as being US$4,259,395. Mr. Jagatramka did not agree to pay a sum of money to be determined by reference to Gujarat’s actual liability at the material time. ii) He “unconditionally and irrevocably” guaranteed that if Gujarat did not pay the Gujarat Liabilities by 31 December 2013 he would, on demand, pay a sum equivalent to the Gujarat Liabilities. Such language is indicative of a primary liability. iii) He “irrevocably confirms that he will not contest and/or defend any application and/or proceedings to enforce” the guarantee. Again, such language is consistent with a primary liability and inconsistent with his liability being coextensive with that of Gujarat.[17]Mr. Stevenson had two alternative arguments in the event that the court did not accept that Mr. Jagatramka was liable, pursuant to the guarantee, to pay a sum equal to the Gujarat Liabilities, namely, US$4,259,395. The first alternative argument was if Mr. Jagatramka’s liability was coextensive with Gujarat’s liabilities then those liabilities were those which arose under the Cooperation Agreements which currently exceed US$20 million. If that were wrong and Mr. Jagatramka’s liability was coextensive with Gujarat’s liability under the Deed of Agreement then the further alternative argument is that, having regard to the manner in which sums paid by Gujarat were appropriated, both by Ultrabulk and Gujarat, the liability of Mr. Jagatramka is in fact US$3,259,492.43. This further alternative argument is explained in a supplementary skeleton argument which I asked Mr. Stevenson to provide. It is to be noted that Mr. Stevenson and those instructing him very properly reviewed the documentation and concluded that the sums paid by Gujarat in fact totalled US$2,452,471 (rather more than Mr. Jagatramka said had been paid) and further that by an email dated 9 July 2013 from Mr. Saigal some US$499,975 had been appropriated to the sums due under the Deed of Agreement.[18]In view of my conclusion that Mr. Jagatramka is liable under the guarantee for the sum of US$4,259,395 plus interest it is unnecessary for the court to consider the two alternative submissions made by Mr. Stevenson.[19]Ultrabulk is accordingly entitled to judgment in the sum of US$ 4,259,395 plus interest (at the rate of LIBOR plus 2% in accordance with the terms of the guarantee) calculated up to the date on which formally hands down judgment. No doubt Mr. Stevenson will produce an updated schedule of interest on that date.[20]Finally, Ultrabulk seek a final anti-suit injunction. The basis of this injunction was set out in the evidence of Mr. Clulow and the injunction was granted on an interim basis by me (ex parte) and subsequently continued by HHJ Waksman on the return date. There is no reason why the injunction should not be made final. Mr. Jagatramka has not amended his Defence to deny Ultrabulk’s claim for a final injunction.

Cited in 2 later judgments