1. What the Clause Says

Standard LMA wording:

Misrepresentation: Any representation or warranty made or deemed to be made by an Obligor in the Finance Documents or in any certificate or statement delivered under them is incorrect or misleading in any material respect when made or deemed made.

Indian retail/commercial version:

Borrower commits breach or any misrepresentation to Bank or fails to furnish information - shall be deemed Event of Default

3 layers:

1. Representation: Statement of fact at signing - e.g. no litigation, no default, financial statements true, authority, ownership of assets.
2. Deemed Repeated: Repeating Representations are deemed repeated on each Utilisation Date, Interest Payment Date etc. LMA Guide: "These are statements of fact made on day of signing and generally repeated or deemed to be repeated at certain points during term" - So a false statement today can become EoD 2 years later when deemed repeated.
3. Materiality: Most agreements say "in any material respect" or "material adverse effect". If not qualified, any incorrect statement = EoD.

Effect if Triggered: Lender can:

• Cancel commitments
• Declare acceleration - all loans immediately due
• Enforce security
• Clause 9.2 type - Event of Default if default in payment

2. Why Lenders Insist on It

Loan is priced on information asymmetry. Lender cannot diligently verify every fact. Misrepresentation EoD protects lender where borrower induced credit decision by false information, even if loan is being serviced on time. It is forward-looking risk signal.

As noted in iPleaders analysis: Lender should ensure loan agreement specifically provides that any misrepresentation shall be considered as event of default

3. Elements to Trigger

Lender must prove:

a) Representation or warranty was made by Borrower/Obligor
b) It was incorrect or misleading when made or deemed repeated - not when discovered
c) Materiality qualifier satisfied
d) No cure / grace period - Most LMA agreements give NO grace period for misrepresentation, unlike payment default which gets 3-5 days. Immediate EoD.

Common Repeating Representations that trigger:

• No misleading information - Para (g) which is Repeating Representation
• No litigation, no default, financial statements true and fair
• Information Memorandum true

4. Case Laws

Case 1: Lombard North Central plc v European Skyjets Ltd EWHC 728 (QB) - Waiver of EoD

Clause 9.1(a) provided EoD if owner defaulted in payment. Lender had sent reservation of rights letters but continued to act as if facility continued.[2022]

Held: Lender had waived its right to rely on EoD through conduct, notwithstanding "no waiver" language.

Lesson for Misrepresentation: If lender knows of misrepresentation and continues to allow drawdowns without reserving rights properly, it may be deemed to have waived misrepresentation EoD.

Case 2: Leeds City Council and others v Barclays Bank EWHC 363 (Comm) - What is Misrepresentation?

Councils claimed Barclays made implied fraudulent misrepresentations as to LIBOR tainting loans.[2021]

Held by Cockerill J: To establish misrepresentation, claimant must establish awareness - active appreciation - of representation. Absence fatal. Claim struck out.

Also Marme Inversiones 2007 v NatWest Markets EWHC 366 - same principle - no misrepresentation where no discussion of future lending.[2019]

Application: For borrower to claim lender misrepresented (or for lender to claim borrower misrepresented), must show representation was actually communicated and understood.

Case 3: Ahuja Investments Ltd v Victorygame Ltd EWHC 2382 (Ch)

Court rejected claim for misrepresentation, finding although fraudulent misrepresentation had been made, it had not induced claimant to enter transaction.[2021]

Principle: Two limbs for common law misrepresentation - false statement + inducement. But for contractual EoD for misrepresentation, inducement not required - clause is strict: if statement false, EoD triggered even if lender would have lent anyway. That is why it is powerful.

Case 4: Bank of India v Riat - Guarantor Misrepresentation Defence

Bank sought to enforce guarantees for facilities to Globepark Developments. Defendant claimed entitled to rescind guarantees on grounds of misrepresentation.

Court examined whether guarantee induced by misrepresentation. Important for EOD: If underlying guarantee void for misrepresentation, lender loses ability to trigger cross-default via guarantee.

Case 5: 10443204 Canada Inc. v 2701835 Ontario Inc. 2022 ONCA 745 - Entire Agreement Cannot Exclude Fraudulent Misrepresentation

Ontario Court of Appeal held existence of entire agreement clause and opportunities to discover truth cannot preclude party from raising fraudulent misrepresentation to answer breach.

For LMA: Many facility agreements have entire agreement clause. Borrower cannot contract out of liability for fraudulent misrepresentation, but for innocent/negligent misrepresentation, entire agreement + non-reliance clause may prevent borrower suing lender, while lender can still rely on misrepresentation EoD against borrower.

Case 6: ASIC v Bendigo and Adelaide Bank FCA 716 - Unfair EoD Terms

Federal Court Australia declared event of default clauses unfair because they allowed bank to take action disproportionately severe to event of default.[2020]

Relevance: Indian courts under Section 23 Contract Act and RBI Fair Practices Code may examine if misrepresentation EoD without materiality or cure is unfair, especially in retail/MSME loans. In syndicated commercial, courts uphold.

5. Defences / Negotiation Points for Borrower

If you are reviewing clause:

1. Materiality: Add "material respect" and "material adverse effect"
2. Knowledge Qualifier: "to best of knowledge" for factual reps like litigation
3. No Deemed Repetition for all reps: Limit repeating reps to 4-5 core reps (no default, no misleading info, no material litigation). Don't make business plan or projections repeating.
4. Cure Period: 15-30 days to remedy if capable of remedy, except fraud.
5. Information Qualifier: Exclude forward-looking statements, opinions, market info.
6. Waiver: Ensure reservation of rights letter does not indefinitely preserve EoD - ask for prompt notice requirement.

6. Indian Context

Under Indian Contract Act, 1872 s.18 - Misrepresentation defined. Lender's remedy is both:

• Contractual EoD → acceleration under loan agreement
• Statutory → voidable contract, claim damages

SARFAESI Act s.13(2) - Once EoD triggered for misrepresentation, lender can issue demand notice and enforce security without court intervention, which is why this clause is most dangerous for borrowers.