Six banks join Grant Thornton in legal fight against Winsome's Mehtas

At least half a dozen banks in India have staked their claims on the future spoils of a complex legal battle – the first of its kind that local lenders are experiencing – in a London court spearheaded by Grant Thornton UK against Jatin Mehta and his family, the promoters of one of the country’s largest wilful defaulters Winsome group.

IDBI Bank, Axis Bank, Exim, Bank of Maharashtra, Standard Chartered Bank and State Bank of Mauritius are among the financial institutions which have registered their claims in an arrangement under which GT, after collecting a generous success fee, would pay the Indian lenders pari passu in relation to the value of their claims, two persons familiar with the development told ET.

Litigation funding

Very few Indian lenders have been part of such a mechanism to salvage lost loans. Under the arrangement, the banks will make no upfront payment, and GT, receiving litigation funding from an associate firm, has the first claim on the amount it manages to recover while agreeing to distribute the balance.

Canara Bank and Punjab National Bank (PNB) have not registered their claims. The officials of PNB, which has the largest exposure to Winsome group, declined to comment on the matter. “Only two banks have not submitted their claims. All others have in the last six months,” said a person involved in the legal proceedings.

On money trail
Winsome has emerged as one of the intriguing stories for Indian bankers. The saga began with a chain of defaults in the summer of 2013. The Mehtas said that their companies were unable to pay as their customers in the UAE had suffered a billion dollar loss on currency derivative bets. Winsome and group company Forever together owe over Rs 6,000 crore to about 10 Indian lenders which never bought the ‘derivative loss’ story.

Interestingly, the counterparties to these over-the-counter derivative transactions were allegedly linked to six UK companies currently under liquidation. Nicholas Stewart Wood of GT UK, is the liquidator to the six companies – Harrington & Charles Trading, Bramhall & Lonsdale, Holdwave Trading, OC305234 LLP, Oceanroad Global and Connecor.

“GT is following the money, trying to probe where the money went from these companies. While banks in India know it’s a long haul, most of them may have registered their claims as they don’t have to spend anything now or bear the legal expenses in London,” said another person.