PNB's $45 million fraud claim dismissed by English court

London: The High Court, England, on Thursday dismissed a $45 million fraud claim by the UK subsidiary of Punjab National Bank (PNB) against seven individuals and two companies based in India and the US.

Zaiwalla & Co, the London-based international law firm representing eight of the defendants, argued that the bank had not made out an arguable case in deceit, that England was not the appropriate forum for the claim, that the Bank misled the court on a number of key issues, and that the Bank failed to properly effect service of the claim which was agreed to by the court.

The claim made by PNB against the nine defendants concerned loans made by the bank totalling $45 million for oil re-refining and wind energy generating projects in the US.

The Bank had claimed that it had been misled and defrauded by the actions of the defendants following the grant of loans amounting to $45 million to companies in the US and India controlled by the individual defendants.

It also alleged that money had been siphoned off and payments due had not been made under the loan facilities and guarantees.

The eight defendants were Ravi Srinivasan, Trishe Resources INC (USA), Vathsala Ranganathan, Pesco Beam Environmental Solutions INC (USA), Pesco Beam Environmental Solutions Pvt Ltd, Anantharaman Shankar, Luke Staengl and Anantharam Subramamium.

All the individual defendants (some of whom have guaranteed loans) are resident in India with the exception of the 8th defendant who is resident in the US. The bank had lent the money from England and operated the loan accounts from London.

The bank, at an ex-parte hearing, obtained permission to serve the proceedings commenced before the English Court and served the proceedings by email on various defendants in India and the US.

In his judgment, Chief Master Marsh commented that "the core components of a claim in deceit are absent" and that "the claims in deceit and misrepresentation do not demonstrate a serious issue to be tried".

"The failure to draw to the attention of the court the existence of the foreign claims was a serious breach of the claimant's duty to the court. The proceedings were highly material to the exercise of the court's jurisdiction to give permission to serve out of the jurisdiction" and that "the failures are such that the court should set those orders aside. I do not consider they are failure which can be overlooked," Chief Master Marsh observed.

The court criticized the bank's lawyers for serving substantial amended proceedings which were not approved by the court.

The court decided that the bank has not been able to demonstrate that the English Court is the most appropriate forum for the claims by stating that that there was no good reason why these defendants should be sued in England as well as the US and India.

Reacting to the judgment, Zaiwalla & Co, which represented eight of the nine defendants, commented "The matter raises serious questions about the way bank's claim has been put before the court and served. English Civil Procedure Rules are very strict in practice.

"It is very important that attention is paid and care is taken when claims are prepared to ensure that the rules are fully complied with. The decision serves as a reminder that serious allegations of fraud have to be supported by cogent facts and evidence: speculative claims will not be permitted to proceed to trial. the decision of the court has saved everyone concerned a great deal of time and money by being dismissed at an early stage, although the bank will still face claims for substantial costs as well as having to pay its own costs."