NEWS & ARTICLES
Orexim Trading Ltd vs Mahavir Port and Terminal Private Ltd.
This is a dispute for more than seven million dollars involving facts that emanate both from the shipping and the trading side of the commodity business. This case concerns a shipment of 10.000 Mts of Ukrainian sunflower seed oil traded on FOSFA terms where one of the parties acted, in clear breach, to say the least, to obtain considerable advantage of the situation and make a substantial profit leaving another party with the consequences of an alleged fraud.
In many aspects this case looks like the classic mess arising out of the delivery of goods in the absence of the production of a bill of lading. Sometimes, the use of LOIs to obtain the delivery of goods at the port of destination result in a similar scenario, i.e. a party is unable to obtain payment, commonly an unpaid Seller or a commodity finance bank, other times it is the carriers who must stomach the consequences of delivering the goods in breach of the presentation rule. In this case, however, the delivery of goods was procured not against a LOI but against alleged forged bills of lading.
The facts of the case are worthy of study or consideration as they would not be difficult to repeat or replicate in the future, and some lessons can be learned.
As alleged by the claimants, the judgment quotes the following facts:
On 5th December 2013 Orexim entered into a written agreement with Atlantis Middle East FZE (“Atlantis”) for the sale and delivery by Orexim to Atlantis of 10,000 metric tonnes of crude Ukrainian sunflower seed oil (“the Goods”)
Unknown to Orexim, on or about 25th November 2013 Atlantis had entered into an agreement with Global International Imex Private Limited (“Global”) to sell the Goods to Global, and Global had, in turn, agreed to sell the Goods to Tose-E Tejarat Beynolmelal Zarrin Persia Omid PJS (“Zarrin Persia”);
On the insistence of Atlantis, Orexim agreed to charter the MT Bon Vent (“the Vessel”) from MPT to transport the Goods. A charterparty for the charter of the Vessel was concluded between Orexim and MPT on or about 19th December 2013 (“the Charterparty”). The bills of lading named Bandar Abbas in Iran as the port of discharge;
Contrary to the clear instructions of Orexim and in full knowledge of the fact that Orexim had not been paid the balance of the purchase price of the Goods, the Vessel unloaded the Goods into tanks at Bandar Imam Khomeini. MPT justifies this conduct by reference to an order it obtained from the Bombay High Court permitting it to discharge the Goods into tanks at Bandar Imam Khomeini and granting it a lien over the Goods;
On 20th March 2014 MPT commenced arbitration proceedings against Orexim in India claiming demurrage and damages and obtained an order from the Bombay High Court appointing Mr Rahul Narichania as the sole arbitrator (“the Indian Arbitration proceedings”);
On or about 30th April 2014 Orexim commenced criminal proceedings for fraud in Ukraine against MPT and its employees. Pursuant to these criminal proceedings the Vessel was arrested on 2nd May, 9th May and 2nd June 2014 in the port of Yuzhny in Ukraine. On each occasion the arrest was discharged by the Ukrainian courts;
On 15th May 2014 Mr Budnyk attended a meeting with representatives of Atlantis, Zarrin Persia and MPT at the offices of Atlantis in Istanbul. Rajesh Lihala attended the meeting on behalf of MPT. Mr Budnyk’s evidence is that during the meeting it was acknowledged that Zarrin Persia had paid Global for the Goods and agreed that Orexim had to be paid the balance of the price of the Goods, which was US$7,694,700
Prior to the meeting in Istanbul no one at Orexim had been aware of a link between MPT and Global. However, Mr Budnyk states in his affidavit that during the meeting he was informed by Rajesh Lihala that (a) Global was Rajesh Lihala’s company, (b) Atlantis owed around US$5 million to Rajesh Lihala in respect of unpaid freight on other deals and Rajesh Lihala wanted to keep the monies paid by Zarrin Persia to Global to discharge that debt.
At the conclusion of the meeting Orexim, Atlantis and MPT executed the Settlement Agreement compromising all the claims and disputes between them and providing for payment of Orexim. The following were, inter alia, express terms of the Settlement Agreement:
“Parties have agreed to settle their disputes in terms of this Settlement Agreement and to file the same before the sole arbitrator, the Bombay High Court and FOSFA and inviting orders of the sole arbitrator and Bombay High Court in terms of this Settlement Agreement”(clause 1);
“[MPT] shall cause Global International Imex Pvt. Ltd (“Global”) to deposit on behalf of Atlantis as part of monies payable by Global to Atlantis, an amount of USD7,391,600… with the Bombay High Court…” (clause 2.i.);
“Orexim shall withdraw the total amount stated under paragraph 2.i. on release of the Vessel from arrest and withdrawal of the criminal proceedings…” …” (clause 2.vi.);
“Each of the Parties warrants and undertakes to the other Party that it has full right, power and entitlement to enter into this Settlement Agreement and to perform its terms without reference to any other person …”(clause 3);
“This Agreement shall be subject to English law and any dispute arising out of or in connection with this Agreement shall be referred to High Court of Justice of England and Wales” (clause 7).
Global failed to deposit any monies with the High Court in Bombay, but on 25th June 2014 MPT caused Global to pay US$466,364.80 to Orexim;
At the end of June 2014 Orexim learned that Zarrin Persia had obtained forged bills of lading and was using these documents to remove the Goods from the tanks at Bandar Imam Khomeini. Orexim commenced proceedings in Iran to prevent the removal of the Goods, but the Iranian court dismissed those proceedings on the basis, inter alia, that Zarrin Persia had paid Global for the Goods. Thus, the Goods have been delivered to Zarrin Persia notwithstanding that Orexim has not been paid the balance of the purchase price (US$7,694,700);
It is Orexim’s case that it has been the victim of a fraud. Orexim contends that MPT and its director, Rajesh Lihala, have played a key role in perpetrating that fraud. In particular, Orexim contends that Rajesh Lihala:
- Has an interest in Global and negotiated the Global Sale Contract with Atlantis and the separate contract between Global and Zarrin Persia; and
- Was involved in the production of the forged bills of lading.
Whilst it is common ground between the parties that Zarrin Persia obtained forged bills of lading, MPT and Rajesh Lihala deny any involvement in the production of those bills of lading or any fraud. Furthermore, Rajesh Lihala denies that he has any interest in Global and/or that he had any involvement in the negotiation of the Global Sale Contract.
For those willing to read the case in full and learn from its procedural aspects, the full judgment is reachable here. For those others chartering ships to trade goods internationally this case shows the substantial risks their activity may face where their counter party is both involved in the sale and purchase of the goods as well as in the chartering of the ship. Additionally, it is clear that in some jurisdictions it is very difficult to cater for the risks of trading goods unless collateral guarantees are requested from your counter parties once the situation becomes unclear.
Arizon Abogados S.L.P