AMIRA C FOODS INTERNATIONAL DMCC v IDBI BANK [2020] DIFC CFI 027 — Post-judgment orders on security instruments, interest, and costs (22 January 2020)

This order by Justice Roger Giles resolves ancillary disputes following the substantive judgment in CFI 027/2018, specifically addressing the retention of security cheques, the calculation of damages interest, and the allocation of legal costs between the parties.

What was the specific dispute regarding the security cheques held by IDBI Bank in Amira C Foods International DMCC v IDBI Bank [2020] DIFC CFI 027?

The litigation centered on the Bank’s attempt to present security cheques provided by Amira C Foods International DMCC as collateral for credit facilities. Amira sought an injunction to restrain the Bank from presenting these instruments, arguing that no default had occurred under the facilities agreement. Despite receiving notice of the claim, the Bank proceeded to present the cheques, which led the Court to order that the instruments be held by the Bank’s legal counsel, Allen & Overy LLP, subject to the Court’s direction.

Following the substantive judgment, the parties disputed the final status of these cheques. Amira argued that the Bank’s unauthorized presentation constituted a breach of the security interest, entitling Amira to the return of the instruments. The Bank, conversely, sought their immediate return. Justice Giles rejected both extremes, holding that while the Bank was not entitled to present the cheques at the time it did, the presentation did not terminate the underlying facilities agreement or the security relationship. Consequently, the Court maintained its control over the instruments to ensure they remained available should a future default occur or should the pending appeal alter the Bank's rights.

It follows from the judgment that the Bank was not entitled to present the cheques.

Which judge presided over the post-judgment hearing in CFI 027/2018 and when was the order issued?

Justice Roger Giles presided over the matter in the DIFC Court of First Instance. The order, which addressed the outstanding questions of cheques, interest, and costs following the substantive judgment of 7 October 2019, was issued on 22 January 2020.

What were the competing arguments regarding legal costs and interest rates between Amira C Foods International DMCC and IDBI Bank?

Amira, represented alongside Mr. Karan A Chanana, sought an order for costs on the basis that they were the successful party, despite not succeeding on every individual point of the claim. They submitted a costs schedule totaling USD 864,258.19 and requested a payment on account pursuant to RDC 38.13. The Bank contested the extent of the costs and argued for a lower interest rate on damages, proposing EIBOR (3 month) plus 1%, citing GFH Capital Ltd v Haigh.

Amira countered the Bank’s interest proposal by suggesting the application of a debt rate by analogy, specifically the prime rate for non-bank borrowers in New York, given the lack of a published prime rate for USD in the DIFC. Amira argued that the Bank’s non-default rate was inappropriate for calculating damages, as the Bank’s own claims against Amira included interest that Amira would have otherwise avoided had it not been for the Bank's breach.

Secondly, Amira submitted that the Bank should be ordered to make a payment on account, pursuant to RDC 38.13, and provided a costs schedule in a total sum of USD 864,258.19.

What was the precise doctrinal issue the Court had to resolve regarding the applicable interest rate for damages under DIFC Law?

The Court was tasked with determining the appropriate interest rate for damages where no specific rate is prescribed by statute. While Article 17(2) of the Law of Damages and Remedies (DIFC Law No. 7 of 2005) provides a rate for the failure to pay a debt, it is silent on the rate for damages. The Court had to decide whether to apply a conventional inter-bank rate, such as EIBOR, or to adopt a more bespoke rate based on the commercial relationship between the parties, effectively exercising its discretion under Article 39 of the DIFC Court Law.

How did Justice Roger Giles determine the appropriate interest rate for the judgment sum?

Justice Giles rejected the application of a rigid inter-bank rate like EIBOR, noting that while such rates can be suitable, they did not reflect the specific circumstances of the loss suffered by Amira. Instead, the Court adopted the approach used in Al Khorafi v Bank Sarasin-Alpen (ME) Ltd, which focuses on the rate the bank would charge its own commercial customers of good standing. The Court reasoned that this provided a more "measured" reflection of the cost of capital for the claimant.

The damages exceed the USD 7.3 million, making the Bank’s non-default rate in fact chargeable to Amira inappropriate across the board , and the better course in my view, emulating Justice Sir John Chadwick in Al Khorafi, is the rate from time to time charged by the Bank to commercial customers of good standing.

Which specific DIFC statutes and rules were applied to resolve the interest and costs disputes?

The Court relied on Article 18 of the Law of Damages and Remedies (DIFC Law No. 7 of 2005) to establish that interest runs from the date of the Bank’s breach. Regarding the Court’s discretion to set interest rates, Justice Giles cited Article 39 of the DIFC Court Law (DIFC Law No. 10 of 2004). For the procedural handling of costs, the Court applied RDC 38.13, which governs payments on account of costs.

As the Bank correctly submitted, the Court retains a discretion to order interest at a lesser rate (see Article 39 of the DIFC Court Law, being DIFC Law No. 10 of 2004).

How did the Court utilize precedent in determining the interest rate and costs allocation?

The Court utilized GFH Capital Ltd v Haigh [2014] DIFC CFI 020 to acknowledge the Bank’s argument for EIBOR + 1% but ultimately distinguished it in favor of the approach in Al Khorafi v Bank Sarasin-Alpen (ME) Ltd [2009] DIFC CFI 026. By following Al Khorafi, Justice Giles prioritized the "rate from time to time charged by the Bank to commercial customers of good standing" over the inter-bank rate, viewing it as a more equitable compensation for the claimant's loss of use of funds.

Article 17(2) of the Law specifies the rate applicable to a failure to pay a debt, but no rate is specified for damages.

What was the final disposition regarding costs and the monetary relief ordered by the Court?

The Court ordered the Bank to pay 95% of the costs incurred by Amira and Mr. Karan A Chanana. To facilitate this, the Court ordered the Bank to pay USD 410,500 within 21 days as a payment on account. Additionally, the Court directed that the costs previously ordered to be paid by Amira on 7 October 2019 be set off against the costs payable by the Bank under this order.

The costs ordered to be paid by Amira on 7 October 2019 to be set off against the costs payable pursuant to Order 4.

What are the practical implications for DIFC practitioners regarding security instruments and interest calculations?

This order reinforces that the DIFC Court will maintain strict supervisory control over disputed security instruments, such as cheques, even after a substantive judgment, particularly where there is a pending appeal. Practitioners should note that the Court is unlikely to order the return of security instruments if there is a possibility that the underlying security interest remains valid or if the instruments may be required for future enforcement. Furthermore, the ruling clarifies that when statutory interest rates are absent for damages, the Court will favor a "measured" rate—often linked to the bank's own commercial lending rates—rather than defaulting to standard inter-bank rates like EIBOR, provided the claimant can justify the rate as a fair reflection of their loss.

Subject to the questions of Mr Chanana’s costs and the experts’ reports, see below, in my view Amira is entitled to all its costs even though it did not succeed on every point or to the full extent claimed.

Where can I read the full judgment in Amira C Foods International DMCC v IDBI Bank [2020] DIFC CFI 027?

The full judgment can be accessed via the DIFC Courts website: https://www.difccourts.ae/rules-decisions/judgments-orders/court-first-instance/cfi-0272018-1-amira-c-foods-international-dmcc-2-k-global-business-fze-v-idbi-bank-limited-and-karan-chanana-1

Cases referred to in this judgment:

Legislation referenced:

• Law of Damages and Remedies (DIFC Law No. 7 of 2005), Article 17(2), Article 18
• DIFC Court Law (DIFC Law No. 10 of 2004), Article 39
• Rules of the DIFC Courts (RDC), Rule 38.13