A $7.5 million lawsuit filed by Cantor Fitzgerald, a US-headquartered financial adviser and investment bank, against Mumbai-headquartered Yes Bank in the high court in London failed because the judge agreed with the latter’s interpretation of English grammar. The case hinged on whether the term “Financing” mentioned in the December 2019 agreement between Yes Bank and Cantor Fitzgerald related only to private placements, private offerings or could it also include Follow-on Public Offering (FPO).
Cantor Fitzgerald claimed that the agreement included FPO which would make them eligible to claim their share from Yes Bank’s successful July 2020 FPO which raised $2 billion in total. Based on investments in the FPO from three entities, Tilden Park (US$ 300 million), Hinduja group (US$ 22.7 million) and Amansa (US$ 50 million), Cantor claimed 2 percent ($7.5 million) on the basis that these three were classified as potential investors in its agreement with Yes Bank.
However, Justice Robert Bright in a judgment dated March 31, 2023, ruled that Yes Bank was correct in its surmise that the construction of the term “Financing” could not include the FPO, but was instead restricted to private offerings, terming it as “not an abstruse rule or pattern known only to specialist grammarians.” We shall come to the wordings later.
That’s because the larger case was much more than understanding the placement of gerund and the use of verb participles! The four-day trial in March 2023, which was preceded by case management hearings, provided a window to the hectic parleys and efforts in late 2019 and early 2020 to infuse capital in the beleaguered Yes Bank. The relationship between Yes Bank and Cantor Fitzgerald had come to be because of the personal relationship between the former’s CEO and managing director Ravneet Gill, and the latter’s President Anshu Jain. It must be noted that much of the initial discussions between the two entities were helmed by Gill and Jain, and conducted privately. Cantor’s assistance was formalised by virtue of an Engagement letter in December 2019, which was followed by a further letter in February 2020.
Gill and Jain had once worked at Deutsche Bank, which had led Gill to turn to Jain in his quest to get investors. The brief was simple - Cantor Fitzgerald could be the source to get potential investors from the US, a huge market which could be tapped to benefit Yes Bank. It is clearly evident that Cantor made substantial efforts to get investors, because of Jain’s personal interest and commitment. Around 60 entities, including Hinduja Group, Tilden Park, Amansa, were spelt out as investors.
Accordingly, on March 2-3, 2020, Tilden Park and Amansa, respectively, made non-binding offers to Yes Bank, but the amounts were not large. Gino Ramadi of Tilden Park and Ashwani Mathur of Cantor Fitzgerald were in India to work out the modalities, but on March 5, 2020, the Reserve Bank of India (RBI) intervened, issuing a moratorium. The RBI’s intervention effectively led to the parting of ways between Cantor and Yes Bank. Besides, Gill and other board members at Yes Bank were replaced.
Also read: SBI may look to cut Yes Bank stake once lock-in ends
However, that was the COVID period and both Ramadi and Mathur spent time in India for a few more weeks. It was during this period that Mathur introduced Ramadi to key personnel in State Bank of India (SBI) which took a 49 percent stake in Yes Bank. The involvement of SBI changed the complexity of the situation and in July 2020 a successful FPO was concluded. Clearly, the FPO was not a possible solution initially, and became possible only because Cantor’s efforts to raise capital did not materialise before the intervention of RBI, and SBI taking up stake.
Having failed to impress the court that the July 2020 FPO was within the scope of the Engagement letter, Cantor pleaded that Yes Bank did benefit from the introduction to potential investors it facilitated and hence it would be unfair to not be rewarded. There was no denying that Cantor had made substantial efforts in getting investors for Yes Bank. But that was clearly not enough to get its commission.
Also read: August 2022: Veteran banker Anshu Jain passes away
The judge acknowledged that it could be said that Cantor’s efforts did contribute to Tilden Park making a significant investment, but concluded that Cantor’s right to be paid was contingent on a single result. Besides, the Engagement letter specified that Cantor could get paid only for success. The contract between Cantor and Yes Bank was thus described on an all-or-nothing basis. “Cantor was not being paid by the hour or by reference to the number of introductions made,” the judgment notes, highlighting why it couldn’t rule in Cantor’s favour.
The only consolation for Cantor was that the court awarded payment of $21,195 interest on the $500,000 retainer fee which itself was only paid in September 2021. The non-refundable retainer was to be paid in December 2021 upon the execution of the Engagement letter.
This brings us back to what was the formulation of “Financing” in the December 2019 Engagement letter that brought misery to Cantor and cheer to Yes Bank. The Engagement letter spelt out “Financing” as, “the private placement, offering or other sale of equity instruments…”
Cantor pleaded that the adjective “private” qualifies only “placement” (which immediately follows private), and not “offering or other sale of equity instruments…” The judge used a telling example to uphold Yes Bank’s interpretation which was familiar “to every Tom, Dick and Harry.”
Also read: Yes Bank shares down over 7% as RBI-mandated lock-in ends; analysts expect further distress
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