A company connected to the collapsed finance group Greensill Capital failed to act in good faith by lending hundreds of millions of pounds more than permitted to businesses owned by steel magnate Sanjeev Gupta, the High Court has heard.
The Core of the Legal Dispute
Greensill Bank AG (GBAG) is suing the Department for Business and Trade (DBT) for approximately £331 million in damages. The bank claims the government wrongly terminated guarantees on Covid-19 business loans issued by Greensill Capital UK (GCUK). The government defends its decision, arguing GCUK breached the terms of the loan schemes by exceeding lending limits to Gupta's GFG Alliance, which includes Liberty Steel.
The case centres on the Coronavirus Business Interruption Loan Scheme (CBILS) and the Coronavirus Large Business Interruption Loan Scheme (CLBILS). These initiatives, backed by an 80% government guarantee via the British Business Bank, were designed to support companies during the 2020 pandemic lockdowns.
Allegations of Excessive Lending
In written submissions, Patrick Goodall KC, representing the DBT, stated that between September and October 2020, GCUK issued loans to 11 borrowers under the schemes. Six of the eight CLBILS borrowers were ultimately owned by Sanjeev Gupta.
Goodall argued that GCUK lent a total of £300 million to these Gupta-linked companies, when the sum "ought not to have exceeded £50m" because the borrowers were part of the same corporate group. The DBT alleges GCUK treated the six companies separately to "avoid the restrictions imposed" by the guarantee agreement on lending to groups of firms.
The government terminated the CLBILS guarantees in April 2022 and the CBILS guarantees in September 2023. It claims GCUK did not exercise the required "level of care, control and diligence" and acted in a manner that could bring the scheme into disrepute.
Greensill's Defence and Wider Fallout
Tim Lord KC, representing GBAG, countered that the six companies were not "partner or linked enterprises" and denied that GCUK acted in bad faith. The bank claims the DBT's decision to terminate was "capricious" and a breach of contract, and alleges there was "considerable political pressure" to allow lending to Gupta's businesses.
The collapse of Greensill in 2021 caused severe financial problems for Gupta's GFG Alliance, leading to a scramble for new funding and the loss of several steel and aluminium businesses. The UK's Serious Fraud Office opened an investigation into suspected fraud and money laundering in relation to GFG's financing from GCUK that same year.
The hearing, before Mr Justice Robin Knowles, dealt with procedural matters ahead of a full trial expected to start in late 2027 and last up to eight weeks. Separately, the DBT has issued disqualification proceedings against Lex Greensill himself, which could see him barred from managing a UK company for 12 years.
