Citicorp International Ltd v Shiv-Vani Oil & Gas Exploration Services Ltd
| Jurisdiction | England & Wales |
| Judge | Mr Justice Andrew Smith |
| Judgment Date | 11 February 2014 |
| Neutral Citation | [2014] EWHC 245 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Docket Number | Case No: 2013-1148 |
| Date | 11 February 2014 |
[2014] EWHC 245 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Justice Andrew Smith
Case No: 2013-1148
Ewan McQuater QC and David Allison (instructed by Allen & Overy) for the claimant.
Stuart Cakebread and Duncan Macpherson (instructed by Zaiwalla & Co) for the defendant.
Hearing date: 29 January 2014
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
There are before me two applications: an application made by the claimant, Citicorp International Limited ("Citicorp"), by notice dated 25 September 2013 for summary judgment for US$84,100,000.33, interest and other relief; and an application by the defendant Shiv-Vani Oil & Gas Exploration Limited ("Shiv-Vani") by notice dated 13 December 2013 that Citicorp elect within seven days whether to continue with these proceedings or with proceedings in India, and, if it choose the Indian proceedings, that these be dismissed or stayed pending the outcome in India.
Shiv-Vani, an Indian company, is said in evidence of Mr Etoori Rao, the Head of its Legal Department, to be "one of India's leading on-shore oil and gas integrated services providers, providing onshore Exploration and Production (E&P) services ranging from seismic services, well drilling and work over operations for clients such as India's Oil and Natural Gas Corporation (ONGC), Oil India Ltd. (OIL) and other public and private sector companies". He describes it as "one of the premier and pioneering companies in the field of oil and gas exploration services" and a "viable business and a solvent and running company" with thousands of employees in India, with a turnover as at 31 March 2013 of Rs 1100 crores and with fixed assets valued at 3,300 crores.
Citicorp is the trustee of two series of bonds issued by Shiv-Vani under the terms of a trust deed dated 16 July 2010. Bonds to the value of $75 million were issued on 16 July 2010 and another $5 million of bonds were issued on 12 August 2010.
The trust deed is governed by English law and has a jurisdiction clause in these terms:
"The courts of England and Wales are to have exclusive jurisdiction to settle any disputes which may arise out of or in connection with this Trust Deed, the Agency Agreement, the Conditions or the Bonds and accordingly any legal action or proceedings arising out of or in connection with this Trust Deed, the Conditions or the Bonds (" Proceedings") may be brought in such courts. The Issuer irrevocably submits to the jurisdiction of such courts and waives any objections to Proceedings in such courts on the grounds of venue or on the ground that the Proceedings have been brought in an inconvenient forum. This submission is for the benefit of the Trustee and the Agents shall not limit the right on any of them to take Proceedings in any other court of competent jurisdiction nor shall the taking of Proceedings in any one or more jurisdictions preclude the taking of Proceedings in any other jurisdiction (whether concurrently or not)."
The trust deed also provides that Shiv-Vani irrevocably appoint Law Debenture Services Limited ("Law Debenture") as its authorised agent for service of process in England.
As for the form of the bonds to be issued, the trust deed provides that they would all be represented by a Global Certificate in the aggregate principal amount of all the bonds, which was to be to be delivered to the Common Depositary, Citibank Europe plc in its capacity as common depositary for Euroclear and Clearstream, Luxembourg, and issued in the name of a nominee of the Common Depositary. It was to be deposited on terms that the Common Depositary would hold it for the accounts of those who would otherwise be entitled to receive bond certificates, and Euroclear and Clearstream, Luxembourg were to credit each subscriber's account appropriately. Further, it was provided that "The holders of Bonds evidenced by the Global Certificate(s) shall, subject to the Conditions, in all respects be entitled to the same benefits under this Trust Deed as individual Bonds evidenced by definitive Certificates". Definitive Certificates, if issued, were to be "substantially in the form set out in Schedule 1 [to the trust deed] and endorsed with the Conditions", the Conditions being defined as "the terms and conditions set out in Schedule 1 …".
The trust deed also provides that Citicorp may enforce all claims under it or in respect of the bonds by action in its own name and without joining bondholders to the proceedings, and that at any time after the bonds became due and repayable, Citicorp might take such proceedings against Shiv-Vani as it saw fit to enforce repayment and to enforce the provisions of the deed. And it includes provisions that, as long as any bond was outstanding:
i) Shiv-Vani would comply with, perform and observe the provisions of the trust deed and the "Conditions"; and
ii) Citicorp would be entitled to enforce the obligations of Shiv-Vani under the bonds and the Conditions as if they were set out and contained in the trust deed, which should be read and construed as one document with the bonds.
Schedule 1 to the trust deed is a "Form of Certificate for Definitive Bonds", and it includes conditions governing the certificates. Immediately under the heading "Terms and Conditions of the Bonds" is the statement that, "The following other than the words in italics is the text of the Terms and Conditions of the Bonds which will appear on the reverse of each of the definitive certificates evidencing the Bonds". (I shall refer to these words as the "italics note". These words are themselves in italics except for the article "the" before "words": that curiosity must be a slip and nothing turns on it.) This is followed by terms that run to over thirty pages of small print; it is hard to conceive how they could all have appeared on the reverse of a sensibly sized certificate, but it is common ground, subject to an argument to which I shall come, that they are all the terms and conditions referred to.
The Conditions include these:
i) That the bonds bear interest at 5% pa in arrears payable semi-annually on 16 January and 16 July each year;
ii) That default interest accrue on any overdue sums on a daily basis of 5% pa; and
iii) That a failure by Shiv-Vani to pay any interest when due was an Event of Default, and following an Event of Default Citicorp might give notice that the bonds were immediately due and repayable in an amount described as the Accreted Redemption Amount. The conditions stipulate how the Accreted Redemption Amount should be calculated.
iv) That the bonds, the trust deed, an associated agency agreement and "any non-contractual obligations arising out of or in connection with them are governed by, and are to be construed in accordance with, the laws of England. In relation to any legal action or proceedings arising out of or in connection with them, [Shiv-Vani] has in the Trust Deed irrevocably submitted to the courts of England and in relation thereto has appointed [Law Debenture] as its agent for service of process in England."
At the end of the terms and conditions is this sentence (the "RBI statement") in italic print:
" Under current conditions of the RBI [sc. Reserve Bank of India] applicable to convertible bonds, [Shiv-Vani] would require the prior approval of the RBI before repaying the Bonds before 17 August 2015, including redemptions pursuant to [specified conditions] or acceleration following an event of default prior to 17 August 2015, and such approval may or may not be forthcoming."
On 16 July 2013 interest in the sum of $2 million fell due for repayment under the bonds, but was not paid. On 18 July 2013 Citibank NA, as Principal Agent, gave Shiv-Vani written notice of the default. On 31 July 2013 Citicorp notified Shiv-Vani that an Event of Default had occurred under the Conditions and was continuing, and that the bonds were immediately due and repayable; and it demanded immediate payment of $84.1 million. The demand remaining outstanding, on 23 August 2013 Citicorp brought these proceedings in which it claims the $84.1 million as the Accreted Redemption Amount. On 25 September 2013 it issued its applications with a view to obtaining summary judgment and served them with supporting evidence on Law Debenture in accordance with the trust deed.
On 23 August 2013 Citicorp also issued a winding-up petition against Shiv-Vani in the High Court of Delhi alleging inability to pay its debts. On 13 September 2013 Shiv-Vani applied to set it aside, and on 21 November 2013 Shiv-Vani filed a reply to the petition. Among its "Preliminary Objections" Shiv-Vani pleaded that the winding-up jurisdiction is to be invoked as a last resort and "only after exhausting all alternate remedies available to a party"; and "Since the petitioner has admittedly already initiated civil proceedings before the concerned English court, it is for the said Court to adjudicate the claim of the Petitioner after giving due regard to the terms and conditions of the bonds and the defence of [Shiv-Vani]". The point was reiterated: for example, "the issue whether the entire sum under the Bonds/Trust Deed has become due or not is a subject matter of trial and needs adjudication by the English Court"; and "The Petitioner had filed the present Petition as a substitute to its civil remedies which it is already pursuing in England. The appropriate remedy for the Petitioner therefore lies in the civil courts and not the present jurisdiction. In...
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