UBS argues the director of collapsed commodity trader Vincom breached his duties when he wrote off debts and authorised payments to companies controlled by relatives, in a trial that began in London this week. 

The lender told London’s High Court of Justice it was owed nearly US$14mn from unpaid trade finance facilities when London-headquartered metals and petrochemicals trader Vincom was wound up in November 2017. 

The case cites eight sales of nickel products to a Singapore-based buyer, Donald McArthy Trading (DMT), between 2014 and 2017. Rather than taking payment from DMT, Vincom director Anil Kumar issued credit notes, stating that the cargoes were rejected or contaminated during transit. 

UBS argues there was “no proper justification” for issuing those credit notes, and that claims of contamination are not supported by evidence. 

The bank also takes issue with payments totalling around US$5.5mn made to one of Vincom’s suppliers, AST Metals. It claims the transactions were made after Kumar was aware of the winding-up petition, and questions whether the underlying transactions relate to genuine sales of goods. 

Noting that directors of both DMT and AST Metals are Kumar’s family members, the lender told the court it believes his conduct caused loss to Vincom and its creditors, and that he was therefore in breach of his duties as a director. 

Kumar, representing himself in court, denies the claims. He argues that the credit notes were issued legitimately and represented only a small proportion of its overall business with DMT. 

Kumar also says the payments to AST Metals were authorised two days before the winding-up petition arrived, and that he believed the petition itself – filed by another apparent creditor, Israel Discount Bank – was “misconceived” as it was not owed any money by Vincom. 


Contaminated shipments 

Prior to its collapse, Vincom was involved in back-to-back commodity trades. It would obtain finance from lenders to purchase petrochemical products and metals from suppliers, before immediately selling those cargoes onto other buyers. 

Kumar says of around 4,0000 shipments between 2014 and 2017, it issued approximately 20-25 credit notes arising from shortages or quality issues. 

Of the eight credit notes disputed by UBS, the first relates to the purchase of nickel scrap from AST Metals, which would then be sold onto DMT. The transaction took place in September 2014. 

Vincom wrote off just over US$900,000 owed by DMT, claiming that delivery was delayed by four months after documents were lost by financing bank BCP. 

UBS disputes that account, arguing there is no evidence that documents were lost, nor that there was any delay in delivery. It says the carrier of the goods confirmed containers arrived at their destination in October 2014 returned empty the following month. 

Representatives for UBS argued in court on March 11 that subsequent claims – that after the goods were rejected by DMT, they were sold as salvage to India-based Softel – are also implausible. 

The bank says that means the cargo would have left Jebel Ali on September 19, before being rejected in Singapore and returned to Jebel Ali, and then shipped to Kolkata by September 22 – an impossible timeline. 

Kumar’s defence argues that BCP did lose title documents, that the batch of nickel then spent months in a container awaiting shipment in Singapore, and that the bank did not take up the option to inspect the goods once they were rejected by DMT. 

For the other nickel shipments, UBS casts doubt on the claims cargo was contaminated. It says there are no documents from carriers, shippers or warehouse keepers that show the nickel was damaged by exposure to acid or seawater, as Kumar claims. 

It also argues it is “highly unlikely” the nickel would be unfit for purpose even if in contact with acid or seawater, citing evidence from a witness specialising in metallurgy and cargo contamination. 

Kumar says he is not an expert in contamination issues, and instead “relayed what I was advised and had no reason not to believe my long-standing customer”. He added in court that DMT relied on high-quality nickel inputs to be used in manufacturing, so impurities would be expected to result in cargo rejection. 

He also accused the bank in court of “cherry-picking” transactions that went wrong, when the vast majority of back-to-back trades involving AST Metals and DMT were paid for. 


Disputed trades 

UBS’ case also argues that once it was clear Vincom was likely to be wound up, Kumar effectively emptied the company’s bank account by making what it claims were illegitimate payments to AST Metals. 

It says Vincom was informed of the winding-up petition on the morning of November 24, at which point Kumar sought urgent legal advice. That afternoon, two payments totalling around US$4.6mn were made to AST, based on purchases of nickel scrap that was then sold onto a Singapore buyer, Du Trade. 

The bank says payment was never received from Du Trade, and Du Trade’s transaction records could not be recovered by liquidators. 

According to UBS’ claim, there are therefore “no documents corroborating Mr Kumar’s account that these invoices were the result of genuine sales of goods”. It also argues prices “were artificially inflated in order to justify the draining of Vincom’s current account”. 

Representatives told the court UBS does not believe AST Metals was genuinely owed money by Vincom, and even if it was, Kumar’s decision to enter into a high-risk trade with limited potential upside was a breach of his directorial duties. 

Kumar argues that all payments were “for existing shipments and transaction[s] where Vincom had an obligation to pay to unsecured creditors who shipped the cargo in good faith”. 

He also says the payments were authorised two days before receiving the winding-up petition, and his legal advice was that he could pay all existing commitments as long as Vincom did not enter into any new business. 

Pricing “is more an art than a science”, his defence adds. 

More broadly, UBS representatives took issue with the fact AST Metals is controlled by one of Kumar’s brothers, while DMT’s directors include another of Kumar’s brothers as well as his sister-in-law. 

Around 90% of Vincom’s revenue was generated from trade with companies controlled or managed by Kumar’s family members, filings show. 

One witness from UBS told the court on Monday he was “shocked” to learn of the companies’ family connections, and said the bank would not have financed the trades if it had been aware. 

The trial continues.