CL-2025-000062 - [2025] EWHC 1506 (Comm)

In early October 2024, Mr Mammen sought the Bondholders’ consent for the release of $20m to repay the loan to Oyster Bay. The Bondholders provided that consent and the current evidence is that they did so on condition that: (1) the full $20m would be used solely to repay the loan from Oyster Bay; and (in the case of Selvi) (2) the Unutilised Proceeds would not be released until the Collateral was in place.

Thereafter on 23 October 2024, Elara sent Eraaya two draft fund transfer instructions for the transfer of the proceeds of the Second Bond Issue. One of these was for US$ 20 million (which was an instruction to pay Eraaya at an account held by it with Yes Bank in India). Eraaya signed the first payment instruction on the same day (23 October 2024) and returned it to Elara. GLAS then released US$ 20 million to Eraaya. It appears that the US$ 20m was not used in its entirety to pay off the Oyster Bay loan; only US$ 12.5m of the US$20m was used to repay Oyster Bay. What happened to the rest of the money is not currently clear, though it appears from an email from VLL exhibited to Mr McDonald’s evidence that US$ 2m may have been remitted to VLL on 31 October 2024.

The second payment instruction was for US$ 40 million (which was an instruction to pay an entity called Pershing Securities Ltd (“Pershing”) at an account held by it with Citibank USA). Eraaya amended this so as to provide for payment to its Yes Bank account in India (i.e. the account to which the US$ 20 million and the net proceeds of the First Bond Issue had already been paid).

On 31 October 2024, Ms Vasudha Aggarwal on behalf of Eraaya requested that the Unutilised Proceeds be released. On 5 November 2024, Mr Mammen replied stating: “as discussed with the principals the remaining funds are to be remitted post completion of the security pledge and other conditions precedent to the Offering”.

On 6 November 2024 Eraaya wrote to Elara in the following terms:

“Whereas we have received the remittance of US$ 20 Million on Date 30/10/2024, we are yet to receive an update on the remittance of the US$ 40 Million. We are under tremendous pressure from the regulatory authorities and the AD Bank in respect to the schedule and statutory filings in regard to the pending transaction, kindly advise the schedule of the remittance of the US$ 40 Million…”

On the same date Elara responded, claiming that it was withholding its confirmation for these reasons:

“[t]here are still certain conditions pertaining to the Offering which are pending, mainly the execution of documents for the creation of the security pledge. As per terms of the Settlement Agreement dated 01 October 2024. Elara Capital PLC will confirm in writing once we are able to transfer the funds on completion of the conditions. Kindly refer to Clause 3.4 of the attached Settlement Agreement executed by Eraaya […]

We request GLAS to kindly retain the funds in the mean time.”

There are also at around this time Whatsapp messages and calls with Mr Gupta, referring to Clause 3.4 of the Second Settlement Agency Agreement.

Ms Aggarwal on behalf of Eraaya sent an email to Mr Mammen (among others) on 4 December 2024 stating that, owing to litigation initiated in India, it would not be possible for Eraaya to grant a pledge over Ebix’s shares until the “final outcome of aforesaid litigations”. (It is not clear whether this reflects the commencement of the “Status Quo” proceedings mentioned below).

On 12 December 2024 the (eleventh) draft of the Pledge Agreement was circulated. For the first time it introduced an Effective Date provision whereby the pledge was not to be effective until the entire purchase moneys, in other words the US$42 million had been transferred or credited to Eraaya. GLA’s response to this draft (sent to Linklaters on 27 December) noted:

“We note that there have been quite a number of substantive changes to both the STA and US Pledge Agreement. Our understanding is that the bonds were already issued. Please be reminded that the terms and conditions of any issued bonds cannot be changed without Bondholders' consent and therefore please ensure that the latest proposed changes are permitted under, and are consistent with, the terms and conditions of the Bonds.”

On 19 December 2025, MGF wrote to Elara in its capacity as Eraaya’s financial advisor in relation to the Issuance: (1) setting out Eraaya’s alleged breaches of the T&Cs (failure to execute pledge, representation as to equity ownership, board structure); (2) alleging that the proceeds of the Bonds had been improperly utilised for purposes other than those specified in the Offering Circular; (3) stating that any further release of funds without the Bondholders’ consent would be in breach of Elara’s fiduciary duties; and (4) noting that it may take legal action to protect its interests. That letter was not sent to Eraaya. Eraaya relies on this heavily saying that it had no idea until after it issued the Injunction Application that any of the Bondholders’ alleged claims even existed.

On 17 January 2025, negotiations between Eraaya and GLAS concerning the pledge terms ended without resolution. In particular GLAS conveyed Elara’s clear refusal to accept the Effective Date provision. There seem to have been no further communications on the draft Pledge Agreement.

Accordingly, based on the evidence at this hearing, while it is certainly strictly accurate to say that the Bondholder’s detailed arguments were not explained to Eraaya before these proceedings, the history of the re-negotiation of Clause 3.4 and (separately) the discussions over the release of funds and the pledge had made it quite clear that the Bondholders (the “principals” to whom Elara had referred) considered themselves entitled to a pledge before the Unutilised Funds were released.

On 13 February 2025, the National Company Law Tribunal (NCLT) in New Delhi made an order in proceedings that 104 minority shareholders led by a Mr Sunil Aggarwal brought against Eraaya (“the Status Quo Order”). It provides: “The Respondent Nos. 1 to 14 [which includes Eraaya] to maintain Status Quo with regard to all transactions in regard to the Offering Circular dated 23.08.2024, till the pendency of the present petition”.

It appears that one issue in that case relates to Board Constitution:

Eraaya has tried and failed to have the Status Quo Order varied. It appears that the Status Quo Order is still in force.

Eraaya did not pay the 9.5% coupon on the Bonds when it fell due on 23 February 2025. Instead, Eraaya issued a notice which asserts a right to defer payment of accrued interest on the Bonds until they mature on 25 August 2031.