Asia

Phoenix Commodities chief ordered to pay out to trade finance lender

The executive chairman of collapsed trader Phoenix Commodities has lost a bid to avoid paying US$47.78mn to TransAsia Private Capital under personal guarantees he signed to help secure trade finance facilities.

The High Court of Delhi ruled on July 19 that Gaurav Dhawan must honour the guarantees, which he provided as part of two loans extended by two TransAsia trade finance funds in 2017.

Phoenix, which billed itself as one of the world’s top rice traders, collapsed in April 2020, reportedly owing some US$1.2bn to creditors including HSBC, Emirates NBD and First Abu Dhabi Bank.

A London court in 2020 ordered Dhawan to pay US$47.78mn to TransAsia under the guarantees, and an Indian court affirmed last year that the English judgment is enforceable in India.

Dhawan appealed the 2023 finding, arguing that London’s commercial court did not have jurisdiction to rule on the dispute, and that the judge should have applied Dubai International Financial Centre and Singaporean law, rather than English law.

But in the latest ruling, the High Court of Delhi dismissed all of Dhawan’s arguments and found that the UK judgment in favour of TransAsia was valid.

“We do not find merit in the present appeal,” the judges ruled.

Dhawan could not be reached for comment. TransAsia did not reply to a request for comment. The judgment shows that TransAsia obtained the personal guarantees from Dhawan to help secure two revolving trade finance facilities, which were provided to Phoenix’s UAE entity, Phoenix Global DMCC. Phoenix also furnished two corporate guarantees from its British Virgin Islands entity.

After “there were defaults in repayment of dues” by Phoenix, TransAsia demanded immediate and full repayment, the judgment says. The lender refused Phoenix’s request for more time to find the money.

The judgment does not detail what assets TransAsia may be able to take possession of in order to satisfy the guarantees.

In UK company filings, Dhawan is listed as an Indian national residing in the UAE.

The judgment comes two years after a Dubai court ordered Dhawan and another individual to pay US$19.1mn to Fimbank, a Maltese lender, also pursuant to personal guarantees provided to cover trade finance facilities.

Although Phoenix’s demise left many trade finance creditors nursing losses to the company, trade credit insurers have borne the brunt of the litigation that followed.

In 2022, Tokio Marine subsidiary the Bond and Credit Company was ordered to honour an insurance policy it issued to an Australian trade financier that lost around US$4.9mn when Phoenix collapsed.

Westford Trade Services, which claims to have suffered losses from trading with Phoenix, has sued Dubai Insurance Co. for allegedly failing to honour trade credit policies that covered the deals. The insurer disputes the claim and has alleged in court that some of the transactions between the two companies do not appear genuine. Westford previously won a similar case against another insurer in Malaysia.

Dubai Insurance has also claimed in court filings that Phoenix maintained a sub-ledger of trades that were used to raise funding from financiers but do not appear to correspond to real trading activity.

A similar dispute between the now-defunct Commonwealth Trade Bank and Dubai Insurance was settled before trial last year.