In this summary judgment Cargill succeeded in arguing that an interest rate applicable to late payment did not operate as an unenforceable penalty.
The parties had contractually agreed a rate of one month LIBOR plus 12%. This was expressed in the relevant clause as “default compensation” to be applied to any payments which were missed by Uttam and accruing before and after judgment.
The judge agreed with Cargill that it had a legitimate interest in applying this interest rate, finding that the rate itself was not out of proportion, exorbitant or unconscionable. In fact the rate seemed to be in alignment with the market rate for similar scenarios (in other words, an Indian rate which applied following default on an unsecured loan).
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