By Steve Slater
LONDON, Sept 20 (Reuters) - India's Unitech must repay a $150 million loan to Deutsche Bank, but a smaller dispute can go to trial, a UK judge ruled on Friday, in a case which could set a precedent for whether a Libor interest-rate rigging scandal can invalidate some deals.
Deutsche Bank sued Indian property firm Unitech last year for the repayment of a loan made in 2007 by a consortium of lenders and also for repayment of $11 million owed for a related interest-rate swap.
The Indian firm counter-sued, saying the loan and swap deal were linked to Libor interest rates, which at the time were being manipulated by some banks.
In a ruling at London's High Court, Justice Teare said Unitech must repay the loan, adding that just because there was evidence the Libor rate had been manipulated did not make a loan void.
However, he said the terms of the swap agreement and its specific link to a Libor contract were more contentious and that issue should go to trial next year.
The court case is one of two in the UK that are seen as tests for whether the manipulation of Libor can invalidate some deals or if banks mis-sold products based on Libor, which is used to price millions of financial contracts around the world.
Barclays is being sued for up to 70 million pounds ($112 million) by Guardian Care Homes, a UK residential care home operator which alleges the bank mis-sold it interest rate hedging products that were based on Libor.
Barclays, UBS and Royal Bank of Scotland have been fined by U.S. and UK authorities for manipulating Libor, and Deutsche is among several other banks under investigation.
Deutsche Bank said in a statement: "The defendant's unfounded allegations about Libor are an attempt to delay payment and divert attention from its remaining unpaid debt on a swap agreement tied to the loan."
Richard Gwynne, Unitech's lawyer, declined to comment.
Britain's Court of Appeal is expected to make a ruling next month on whether Libor manipulation can be used in the cases against both Barclays and Deutsche Bank. Barclays' case against Guardian Care Homes has been delayed until April 2014 so the appeal decision can be heard.