Judgment was handed down on Thursday 28 February 2019 in Cargill International Trading Pte Ltd v Uttam Galva Steels Ltd  2 WLUK 473. Mr Justice Bryan, sitting in the Commercial Court, granted summary judgment in favour of the claimant and held that Cargill was entitled under the terms of a contract to default interest at a rate of one-month LIBOR plus 12% p.a.
Cargill and Uttam Galva had entered into two advance payment and steel supply agreements in 2015, under which Cargill as buyer could make advance payments for steel from Uttam Galva as seller, and Uttam Galva was then obliged either to sell steel of the requisite value or to repay the advance. The parties had been dealing with each other on similar terms for about 10 years. Uttam Galva drew down the full amount of the advance facilities, totalling US$61.8 million, but did not repay the advances by the time of the maturity dates. In an earlier judgment, Cargill International Trading Pte Ltd v Uttam Galva Steels Ltd  EWHC 2977 (Comm), Mr Justice Teare granted summary judgment for Cargill’s claim that it was owed a debt of US$61.8 million, and held that there was no reasonable prospect of success in Uttam Galva’s arguments that Cargill had itself been in breach of the agreements and that there had been an estoppel by convention between the two parties.
In a subsequent hearing, Uttam Galva resisted Cargill’s claim to be entitled to a default interest rate of one-month LIBOR plus 12% p.a. Mr Justice Bryan found that:
- The default interest rate was not a penalty, because Cargill had a legitimate interest in repayment of the advances in accordance with Uttam Galva’s contractual undertaking, and the increase in the interest rate following default was commercially justified as Uttam Galva was known after default to be a greater credit risk. The default interest rate was not exorbitant or unconscionable by comparison with rates for unsecured loans in the Indian market.
- The provision had been validly incorporated into the contract because the contract had been stamped and signed on every page by Uttam Galva to signify acceptance of the terms, and Uttam Galva was bound even if it had not read the terms.
- The contractual provision was not illegal under Indian law because the Indian regulations relied upon by Uttam Galva did not, by their ordinary and natural meaning, apply to the rate payable upon default. In any event, illegality according to Indian law was irrelevant under the rule in Ralli Bros because the contracts required Uttam Galva to perform its payment obligations in Singapore and not in India.
Jackie McArthur appeared for the claimant in the second hearing, instructed by Tom Snelling of Freshfields Bruckhaus Deringer.