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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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