In Deepak Mishra and another v Rashmi Bothra [2026] SGHC(A) 17, the Appellate Division of the High Court (“Court“) considered: (i) whether the trial judge (“Judge“) had erred by finding that only certain identified transactions under a running account (“Running Account“) were illegal and unenforceable in connection with letter of credit discounting trades (“LC Discount Trades“); and (ii) whether those illegal transactions were sufficiently material to taint the entire Running Account with illegality, thereby rendering it wholly unenforceable.
Facts
From 2011, the Appellants and the Respondent started having business dealings with each other in their personal names and using corporate entities which they beneficially owned and/or controlled and/or instructed payment to. These business dealings led to the formation of the Running Account between the Appellants and the Respondent. In the proceedings below, the Appellants claimed US$54,752,064 allegedly owed to them by the Respondent under the Running Account, whilst the Respondent counterclaimed for US$137,112,023 allegedly owed to her under the same.
It emerged that the Running Account had been used to conduct the LC Discount Trades. The Judge found that: (i) the LC Discount Trades had an illegal object of defrauding the relevant banks into believing that the sales of goods to third parties were genuine, and into issuing and discounting letters of credit (“LCs“) on that basis; (ii) 15 of the payments in the Running Account were related to the illegal LC Discount Trades and were thus unenforceable on grounds of illegality, although the Running Account itself remained enforceable; and (iii) there was insufficient evidence that the remaining ten payments in the Running Account were made in connection with the illegal LC Discount Trades. The Judge also allowed the Respondent’s counterclaim in part and entered judgment for the Respondent. For more information on the Judge’s decision, please refer to our September 2025 Legal Update titled “Illegality and its Impact on Running Accounts in Complex Commercial Relationships”.
In their appeal against the Judge’s decision, the Appellants advanced two principal submissions:
- The Judge should have found all 25 payments which the Appellants had contended were related to the LC Discount Trades (not just 15 of them) to be illegal. The Judge had drawn an adverse inference against the Respondent in respect of the 15 illegal payments, which the Appellants contended should instead have been drawn in respect of all 25 payments.
- Even if only the 15 payments were found to be illegal, the Running Account was a single, indivisible contractual mechanism, and the 15 illegal payments were sufficiently material to taint the entire Running Account and render it unenforceable.
The Court dismissed the Appellants’ appeal.
Whether the remaining ten payments should also have been found to be unenforceable on grounds of illegality
The Court held that the high threshold for appellate intervention had not been met, as the Judge’s findings were not plainly wrong or manifestly against the weight of the evidence. The burden lay on the Appellants to prove that the ten remaining payments had been made in connection with the LC Discount Trades, and the Judge rightly found this burden unsatisfied.
Whether the entire Running Account was unenforceable because the illegal payments were sufficiently material to taint it with illegality
The Court disagreed with the Appellants’ contention that the Judge erred in law in this regard. The key question was how the court should determine the enforceability of a running account comprising some illegal transactions, i.e. whether the court should: (i) determine the validity of each individual transaction; or (ii) instead focus on the effect of the illegal transactions on the single, indivisible liability at the end. The Judge rightly held that the latter approach, advocated for by the Appellants, was unsupported as a matter of law. While the Appellants relied on three cases to support their proposed approach, they were unable to point to any authority demonstrating how illegality impacts a running account, and their three cases merely provided general descriptions regarding the nature of running accounts or addressed how transactions in running accounts should be treated in specific contexts.
Even on the facts, the Appellants had not demonstrated why the 15 illegal payments would constitute a material taint on the Running Account, offering only a bare assertion that the quantum was not de minimis, without being able to articulate where the de minimis line should be drawn. Further, the 15 illegal payments were in a distinct category from the other transactions in the Running Account, these other categories involved payments between different entities and did not even involve LCs, and it was thus not clear why these other payments would be tainted by the 15 illegal payments.
The Respondent was successfully represented by Vikram Nair, Ashwin Kumar Menon and Han Xin Yi from Rajah & Tann Singapore.
If you have any queries on the above, please reach out to our team set out on this page.
For regional commercial and corporate disputes, please see Rajah & Tann Asia’s Dispute Resolution Practice for more information.
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