Rang Udyog vs EXPORT CREDIT GUARANTEE CORPORATION OF INDIA LTD

THE complainant, a registered partnership firm who had obtained a Shipments (Comprehensive Risks) Policy of insurance from the opposite party. Export Credit Guarantee Corporation of India Ltd., valid for a period of two years from 1.2.1990/ had exported synthetic organic dye to one M/s. Taru''s International in USA (referred to herein as buyer) for which the said buyer was to make payment within 120days from B/1 date. However the buyer failed to honour his commitment for certain consignments even after extension of time the total amount involved being US $190040 -00.

THE complainant notified this to the opposite party for payment under the policy and submitted the claim form on 23.10.1991 The complainant contended that for numerous unexplained reasons as also ostensibly due to receipt of a letter dated 30.7.1991 by the opposite party from the buyer, the opposite party did not make payment although it informed the opposite party through several letters and personal meetings that the contents of the buyer''s letter were absolutely false, malicious and concocted to delay his liability and were thoroughly irrelevant for the claim. The complainant alleged that as a result of the delay in settling the claim by the opposite party, it had been forced into making huge payments of interest and penal interest to its Bankers; on its part, it had shown due diligence to see that the loss for the opposite party was minimised and had also filed a suit and attachment proceedings against the buyer in a Court in USA. It was further pointed out that although according to Clause 15 of the policy, payment was to be made immediately on loss ascertainment, the opposite party refused to make payment for a long period of two years and that in April, 1993 when the payment of Rs. 33,01,109/ - was made through cheque dated 31.3.1993 against a Bank guarantee/ there was absolutely no change in circumstances and that the judgment of the Court in USA was delivered subsequent to the date of the aforesaid payment. It was the complainant''s contention that the opposite party -Corporation was in a position to demand the said Bank guarantee even earlier and make the payment. The complainant also alleged that it was forced to sign and acknowledge the receipt of the payment in full and final discharge of the opposite parties liability. In the result, the complainant prayed for the following reliefs for gross deficiency of service on the part of the opposite party : (1) Rs. 15,91,779 -00 for interest including penal interest, (ii) Rs. 14,35,527/ - for legal expenses and other fees and expenses incurred by the complainant ''for minimising the loss to the opposite party, (iii) Rs. 11,68,337/ - for loss because of non -payment of the claim in time due to which the complainant was required to pay his Banker at the devalued rate, (iv) Rs. 10 lakhs as damages for business losses, (v) Rs. 2,50,000/ - for mental suffering and agony, (vi) Rs. 1 lakh for expenses incurred in visiting Bombay and various other offices of the opposite party for the purpose of the claim, (vii) Rs. 2,80,000/ - for expenses in visiting USA for Court proceedings there, (viii) any other reliefs deemed fit, and (ix) costs. In their reply, the opposite party have stated that the policy offered to indemnify the complainant upto 90% of the losses suffered by it owing to any of the risks specified therein, one of the risks being the risk of loss owing to protracted default by me buyer. The opposite party have referred to the letter dated 30.7.1991 received by them from the buyer levelling very serious allegations against the complainant and claiming that he was justified in withholding payment of the contract price or the gross invoice value of the said goods and that he is excused from performing his obligations under the contract. The opposite party received one more letter dated 7.9.1991 from the buyer reinforcing his earlier contention. It was the opposite parties case that the information furnished and/or allegations made in these two letters established beyond any reasonable doubt that the buyer had disputed his liability to pay the in voice value and that prima facie there were unresolved disputes between the buyer and the complainant and that therefore, the complainant''s claim squarely fell under the purview of proviso (d) to the risks specified in the policy, viz. : "Provided always that the Corporation shall not be liable for loss which arises due to the failure or the refusal on the part of the buyer to accept the goods and/or due to the claim of the buyer that he is justified in withholding payment of the contract price or the gross invoice value of the said goods or any part thereof and/or due to his claim that he is excused from performing his obligations under the contract, unless the exporter has for the amount of his loss obtained by legal proceedings in a competent Court of law in the country of the buyer, a final judgment enforceable against him."

According to the opposite party they were not liable for payment of any loss under the polity unless the complainant had obtained a final judgment enforceable against the buyer, obtained by legal proceedings in a competent Court of law in the buyer''s country. The complainant satisfied the requirements of the formalities in terms of proviso (d) to the ''Risk insured'' by submitting on 22.4.1993 a copy of the judgment obtained by it against the buyer from the Court in USA. This was a pre -requirement for ascertaining the loss payable by the opposite party under the policy. However, with a view to assist the complainant, the opposite party paid to it on 6.4.1993 the amount equivalent to the likely amount of loss that would be eventually payable subject to the condition that the complainant provided a Bank guarantee for a like amount. After this payment and with the submission of a copy of the final judgment of the Court in USA by the complainant, there was nothing more due from the opposite party to the complainant as this represented 90% of the gross invoice value of the shipment in terms of the policy condition. The complainant had also acknowledged full discharge of the opposite parties liability through its letter of 6.4.1993.

WE have heard the submissions on both sides and carefully gone through the available records including the written submissions filed by the Counsel for complainant in supplementation of his oral arguments. We find force in the submissions of the opposite party -Corporation that since the two letters to them from the buyer clearly conveyed the existence of prima facie dispute between the complainant and the buyer,, the opposite party cannot be called upon to fulfil their contractual obligation before the conditions in the relevant provisions of the policy were complied with to their satisfaction. The fact that the opposite party made the payment a few days before the receipt of the verdict of the Court in USA does not become a basis for demanding that the said payment could have been made earlier. One of the contentions of the complainant was that the opposite party never invoked Clause (d) at any stage prior to filing of its complaint. We do not find any bar on the opposite party relying on this proviso which is very much a part of the policy contract. The complainant was given opportunity to explain its position when the opposite party forwarded to it in August, 1991 a copy of the buyer''s letter dated 30.7.1991 for comments. Though the complainant furnished replies/ clarification on several dates, it was only its letter dated 27.12.1992 which provided a detailed reply covering all the allegations made by the buyer. Thereafter the opposite party took three months to finalise and make the payment. In the facts and circumstances of the case, it is evident that there was no delay and hence no deficiency in service on the part of the opposite party in settling the claim of the complainant. The complainant, therefore, stands dismissed on this count without prejudice to the right of the complainant to seek redress through civil proceedings, if so advised. No costs.