BNP Paribas has initiated legal action in London against Sharjah-based oil trader, Gulf Petrochem, alleging that the company utilised false invoices to fraudulently obtain letters of credit (L/Cs) and other financing facilities.

The bank is now seeking repayment of approximately £108 million (US$132 million) in loans and interest from the oil trader's managing director Prerit Goel, who lives in London and is the son of Ashok Goel, cofounder and chairman of Gulf Petrochem.

Global pursuit

This legal action in London is in pursuit of an amount similar to a penalty imposed by a decree from the Sharjah Federal Court that ordered Ashok Goel to pay nearly US$119 million plus interest to the bank.

BNP Paribas is reportedly also continuing to seek to enforce the Sharjah decree against Ashok Goel and his family through legal proceedings in India.

False invoices and L/Cs

Gulf Petrochem is accused of creating counterfeit invoices to present fictitious transactions. These invoices were submitted to BNP Paribas as part of the documentation required for securing L/Cs.

Based on the fraudulent invoices, BNP Paribas issued L/Cs, believing they were backing legitimate trade deals. These financial instruments were intended to guarantee payment to Gulf Petrochem.

Diversion of funds

But the oil trader told its customers to pay those funds into different bank accounts according to the London court filing.

So once the L/Cs were issued, Gulf Petrochem allegedly diverted the funds for unauthorised purposes, rather than conducting genuine trade transactions. This misappropriation led to significant financial exposure for BNP Paribas.

Financial difficulties

Despite its efforts, BNP Paribas may face significant challenges recouping its losses in this matter because Gulf Petrochem has encountered significant financial and legal challenges, including debt defaults and restructuring efforts over recent years.

In 2020, Gulf Petrochem, rebranded as GP Global, began restructuring its finances following a substantial decline in oil prices exacerbated by the Covid-19 pandemic. GP Global sold its terminal in Fujairah, to repay secured lenders and reduce outstanding debt from approximately US$1.5 billion to US$600 million.

Effective personal guarantees

In November 2024, Emirates NBD secured a US$11 million judgment against members of the Goel family.

That ruling underscored the legal obligations of guarantors to fulfil debt commitments when the primary borrower defaults and sets a precedent for financial institutions in the UAE to enforce personal guarantees through legal channels effectively.

This article represents the views of the author and not necessarily those of the ICC or Coastline Solutions.