India  |  Banking Law

Legal Question

Asked on: 8/28/06, 3:26 pm

Liability of Lead Bank to other members of a consortium of lending banks

A Lead Bank informed other 5 banks that they can share the working capital finance to a company assessed by it. It allotted specific percentage of the finance to be given to the borrower. Lead Bank gave letters to member banks that it holds all the securities it has on account of the borrower on a pari passu charge in favour of member banks. No formal interse paripassu agreement was executed. Can we establish that even in the absence of formal documentation, the Lead Bank is fiduciarily liable as agent for the other members of the consortium. Relevant case law including from U.K.precedents is required. Any book or article on the above subject, author, availability, price etc. may also be given.

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