India Infrastructure Finance Company (UK) Limited v Reliance Naval & Engineering Limited & Ors

On an application for summary judgment, the claimant must show that the defendant has no real prospect of successfully defending the claim and that there is no other compelling reason for a trial. The defendant need not show that it would win at trial.

Guarantees remain effective according to their terms despite changes in the borrower’s management, creditor meetings, restructuring arrangements or a lender’s consideration of refinancing, unless the relevant conduct legally releases or discharges the guarantor. Participation in lenders’ meetings does not make a lender party to a restructuring agreement. A request for fresh interim security for further advances does not undermine guarantees securing sums already advanced.

The claimant sought summary judgment against the second, third and fourth defendants under corporate and personal guarantees securing a loan made to the first defendant. The first defendant took part in an Indian corporate debt restructuring process, later changed ownership and management, and underwent refinancing.

The defendants argued that the claimant had become bound by the restructuring arrangements, had failed to obtain alternative security, or had otherwise released them from their guarantees. The claimant maintained that it was not party to the restructuring agreement and that the guarantees remained valid and enforceable. The central issue was whether the defendants had any real prospect of successfully defending the guarantee claim.

1. Summary judgment. Applying Civil Procedure Rules 1998, r.24.2, the claimant had to show that the defendants had no real prospect of successfully defending the claim and that there was no other compelling reason for trial. The defendants did not have to establish that they would succeed at trial; a fanciful prospect was insufficient.
2. The alleged collusion between the claimant and other lenders was unsupported assertion and had no real prospect of success. The obligation to provide alternative security rested on Reliance Defence, not the claimant. The guarantees expressly preserved liability despite changes in the first defendant’s management.
3. The claimant’s attendance and participation in lenders’ meetings did not make it a CDR lender or party to the Master Restructuring Agreement, nor did it discharge the guarantees. The Inter Creditor Agreement contemplated information-sharing and meetings between lenders. The claimant’s interest in the borrower’s financial condition was therefore consistent with its rights as a lender.
4. The claimant was outside the restructuring scheme. The later refinancing did not involve or emanate from the claimant, no further money was advanced, and no concluded refinancing agreement replaced the original facility agreement. The original facility agreement and 2014 guarantees remained in force.
5. The claimant was entitled to seek fresh interim guarantees before making further advances. That request did not show that the existing guarantees securing money already advanced had ceased to operate.
6. Summary judgment was therefore entered for the claimant against the second, third and fourth defendants.