In a high-profile legal battle, Green Hill Bank AG (GBAG) has accused the UK’s Department for Business and Trade (DBT) of wrongfully terminating loan guarantees it had agreed with Green Hill Capital UK (GCUK) on Covid-19 support loans issued to businesses owned by steel magnate Sanjeev Gupta.
GBAG, which was part of the now-collapsed Green Hill Group, is seeking over £331 million in damages, claiming the government breached its contract with GCUK and acted “capriciously” in terminating the guarantees. However, the government argues that GCUK failed to act in good faith by lending £250 million more than it should have to Gupta’s businesses, which were ultimately owned by the same group.
The case centres around the Coronavirus Business Interruption Loan Scheme (CBILS) and the Coronavirus Large Business Interruption Loan Scheme (CLBILS), which were designed to provide financial support to companies during the pandemic. While the loans were to be repaid in full by the borrowers, they were backed by an 80% government guarantee through the British Business Bank.
According to the government’s barrister, Patrick Goodall KC, GCUK issued loans to three borrowers under CBILS and eight others under CLBILS between September and October 2020. However, in April 2022, the government terminated the CLBILS guarantees for six of the eight borrowers, as they were “ultimately owned” by Gupta.
Goodall argued that this meant GCUK lent £300 million to those companies when the sum “ought not to have exceeded £50 million, given that the borrowers were part of the same group.” He said the DBT “lawfully determined that GCUK failed to act in good faith” by treating the six companies separately to “avoid the restrictions imposed” by the guarantee agreement on lending to groups of firms.
In response, Tim Lord KC, representing GBAG, said the six companies linked to Gupta were not “partner or linked enterprises,” and that GCUK “did not act in bad faith and there is no basis to suggest otherwise.” He also claimed there was “considerable political pressure” from the DBT to allow GCUK to lend money to Gupta’s companies.
The high-profile case, which is expected to begin in late 2027 and could last up to eight weeks, comes as the Serious Fraud Office continues its investigation into suspected fraud, fraudulent trading, and money laundering in relation to GFG Alliance’s financing from GCUK. The collapse of the Green Hill Group has caused severe problems for Gupta’s steel and aluminium businesses across the UK, Europe, and Australia.
