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Danish shipping firm Torm has won a victory in its long-running battle to recoup US$14.9mn it had to pay French bank Natixis when stricken oil trader Gulf Petrochem failed to honour a letter of indemnity two years ago.

The dispute arose after Natixis accused Torm of mis-delivering, at the behest of Gulf Petrochem, a US$11mn shipment of 40,533 metric tons of jet fuel in May 2020. Torm was forced to pay Natixis a security to cover the bank’s claim, and sued Gulf Petrochem in early 2021 to recover the money.

As part of that suit, Justice Amit Bansal issued an injunction in the High Court of Delhi on May 6, preventing UAE-headquartered Gulf Petrochem and its four shareholders, who are believed to reside in India, from disposing of their assets and requiring disclosure of their finances.

A UK judge separately granted Torm a summary judgement against Gulf Petrochem in January this year, finding that the trader had no reasonably arguable defence to the shipper’s lawsuit that it had violated the terms of a letter of indemnity.

But Torm is continuing the suit in India in an attempt to claw back the funds from Gulf Petrochem’s four shareholders, who it alleges have “siphoned off” the company’s assets.

According to the Indian judgement, and others handed down at London’s High Court since 2020, Natixis financed and held the bill of lading for the jet fuel, which was loaded in Saudi Arabia and was supposed to be delivered to Rotterdam, when Natixis would be repaid.

Instead, Gulf Petrochem diverted the tanker, the MT Torm Hardrada, to the UAE, where it sold the fuel to oil trader Vitol without presenting the bill of lading. Gulf Petrochem issued a letter of indemnity to Torm, promising to pay if the delivery without a bill of lading caused problems with Natixis.

When Natixis realised the cargo had not been delivered as planned and no payment was forthcoming from Gulf Petrochem, the lender issued a claim against Torm for mis-delivery and won a US court order for the ship’s arrest.

To avoid the vessel’s detention Torm’s insurers paid US$14.9mn to Natixis. But when Torm asked Gulf Petrochem to honour the letter of indemnity and furnish it with the value of the cargo plus interest and costs, it failed to do so.

“The entire transaction involving the purchase and on-sale of cargo by the defendant no. 5 company [Gulf Petrochem] and procurement of trade finance from Natixis was a fraudulent act and the victim of the aforesaid fraud were the plaintiffs [Torm],” Torm alleges, according to the judgement.

“There has been no explanation as to why the aforesaid cargo was diverted, why the terms of the [letter of indemnity] were not honoured, where the consideration, once received from Vitol Bahrain E.C, went and why the same was not paid to Natixis,” he wrote.

Gulf Petrochem’s parent company, GP Global, appointed a chief restructuring officer in July 2020 after it encountered financial difficulties the company has blamed partly on alleged fraud by rogue employees.

The restructuring officer, Rod Sutton of FTI Consulting, has said in court documents that he found evidence of “irregular commodity trades and/or fictitious trades where there was no actual transfer of any underlying cargo”.

Court documents show that the company’s four shareholders belong to the Goel family. While the Goels are co-operating with Sutton, they do not have day-to-day control of GP Global or its subsidiaries, according to UK court judgements in the case.

Prerit Goel is listed in the Delhi judgement as the first defendant and Manan Goel as the fourth defendant, but the other shareholders are not named.

Prerit Goel, Sutton, Torm and Natixis did not respond to requests for comment from GTR.

Gulf Petrochem has also failed to honour a letter of indemnity it issued to shipping company Euronav in 2020 for a shipment of oil. The financier of that cargo, Italy’s UniCredit, recently failed in its attempt to claim its US$24.7mn loss on the trade from Euronav.

 

Legal wrangling

Torm’s win in Delhi comes after almost two years of legal battles. When, in 2020, Torm first asked a UK court to order Gulf Petrochem to honour the letter of indemnity and pay Natixis for the cargo, the trader argued that it was financially and legally impossible for it to do so.

But a UK judge dismissed those arguments, finding that Gulf Petrochem’s lawyers had not proven that there would be legal repercussions from honouring the letter of indemnity and that there was insufficient evidence to prove that the company was unable to come up with the money to pay Torm’s claim.

In December last year Gulf Petrochem sought to avert a summary judgement being handed down against it in London’s High Court, saying it had a reasonable chance of defending the suit in a trial by arguing that the letter of indemnity issued to Torm was non-binding because the employee who signed it was not authorised to do so.

But the same UK judge, when granting a summary judgement in favour of Torm, found that argument “inherently implausible” and said that the company’s lawyers had not provided enough evidence to substantiate it.

The judge also dismissed further evidence provided by the company to support its claim that it is unable to pay the funds demanded by the shipping firm, finding that the financial information provided to the court by Gulf Petrochem was insufficient and shows that the company is able to meet costs relating to its oil storage facility of between US$500,000 and US$600,000 per month “while… maintaining that the defendant had no funds available to comply with the court orders”.

In opposing Torm’s claim in India, Gulf Petrochem, the Goels and the other co-defendants argued that the Delhi High Court had no jurisdiction to hear the case, but Justice Bansal disagreed, finding that there were sufficient indicators that enough of the defendants were residing in India and that Gulf Petrochem conducts business at an address near Delhi’s international airport.

Justice Bansal also found there was “no merit” in the shareholders’ arguments that they can only be held liable for Gulf Petrochem’s debts in the UAE – where the company is incorporated – or in England, the jurisdiction of the letter of indemnity.

This story has been amended to reflect that Justice Amit Bansal was referencing the plaintiffs’ case when describing Gulf Petrochem’s procurement of trade finance from Natixis as a fraud, and not making a finding of the court.