Mumbai: A Ludhiana district court has authorized Axis Bank Ltd to enforce its derivatives contract with the yarn-to-steel Nahar Industrial Enterprises Ltd.
Derivatives is a financial contract whose value is designed to track the return on stocks, bonds, currencies or some other benchmark.
The Ludhiana-based company had filed a lawsuit against Axis Bank for allegedly mis-selling exotic derivative products to it.
“The company had approached the local court seeking a permanent injunction on the derivative contract entered with Axis Bank, preventing the bank from enforcing the contract when they fall due for payment,” a person familiar with the development said.
Breather: A Ludhiana-based firm had filed a lawsuit against Axis Bank for allegedly mis-selling exotic derivative products to it. Rajeev Dabral / Mint
“The company had repudiated six contracts. With this order we can now move to debt recovery tribunal.”
Axis Bank is fighting another legal case with Coimbatore-based Rajshree Sugars and Chemicals Ltd.
Many private sector banks such as ICICI Bank Ltd, HDFC Bank Ltd, Kotak Mahindra Bank Ltd and Yes Bank Ltd are facing litigations related to alleged mis-selling of foreign exchange derivatives to companies.
Banks operating in India had Rs127.86 trillion of derivatives on their books as on 31 December 2007, said a statement tabled in the Rajya Sabha by finance minister P. Chidambaram in March.
Among Indian banks, ICICI Bank Ltd had the largest exposure at Rs7.67 trillion. HDFC Bank Ltd had an exposure of Rs5.04 trillion and state-run State Bank of India Rs4.68 trillion.