Tci Exim Private Limited vs EXPORT CREDIT GUARANTEE CORPORATION OF INDIA LTD

CONSUMER Forum is a social benevolent legislation but it is not possible that every plea in the consumer''s complaint must be allowed. The complainant has tried to tilt at the wind mills, i.e., to contend against imaginary opponent. Will it ring the bell?.

TCI Exim Pvt. Ltd., the complainant, transacts the business of export of readymade garments and fabrics. Its factory is situated at 10, Rambagh, Old Rohtak Road, Delhi. Previously it was situated at Okhla Industrial Area, Phase -I, New Delhi. By virtue of Letter of Credit dated 07.12.1999, received by the complainant from Tridev Garments Industries Pvt. Ltd., Nepal, OP4, the complainant supplied fabrics from Delhi to Kathmandu, in accordance with the following shipments. JUDGEMENT_79_LAWS(NCD)12_2014.htm As the above LC was going to expire, the same was amended by the issuing bank and subsequent shipments were made on that basis. Details of shipment made by complainant to India/Nepal border, is as follows : - JUDGEMENT_79_LAWS(NCD)12_12014.htm Copies of relevant shipping documents detailed above were placed on record as Annexure B (Colly).

THE Shipping documents were sent back to the Bank for approval by the complainant through its Bank, i.e., Canara Bank, OP2 and Nepal -Bangladesh Bank, OP3, which was the Bank of the Buyers. The export of the goods was made on the basis of a letter dated 07.12.1999 for USD 79500 which was subsequently amended to USD 84267.15. The validity period of said LC commenced on 07.12.1999 and was extended premium till 01.02.2000 vide its amendment dated 08.02.2000. Copy of the letter of credit has been annexed as Annexure C. The complainant had obtained policy dated 17.11.1999 from Export Credit Guarantee Corporation of India Ltd. (ECGC), OP1, against any loss which the complainant may sustain by reason of any risk involved in the export of goods from India. The premium was accordingly paid. The maximum liability of the ECGC, OP1 was ? 40.00 lakhs, every year. The complainant was to submit declaration of shipments and due date of their submission was on, before 15th of each succeeding month. The said policy was backed by a supplement policy, covered with additional risk and an endorsement in respect of clause 21 of the policy. OP1 also approved a credit limit on Nepal -Bangladesh Bank of the amount of ? 35 lakhs against LC vide letter reference dated 10.01.2000, marked as Annexure D -3, which has been placed on record, along with complaint.

THE complainant, in respect of goods exported as ''Part'' A, received the Bank''s acceptance of documents in four parts in USD 49964.50 from the Nepal -Bangladesh Bank Ltd., through its Bank, namely, Canara Bank, New Delhi. However, the document acceptance in respect of goods mentioned in Part -B, for the amount of USD 34302.64 was not received even though copies of the documents were sent to the Buyer for obtaining delivery order from Nepal -Bangladesh Bank Ltd. since LR was issued in the name of LC, issuing Bank. However, the Buyer''s Bank did not take delivery of the goods of Part - B as the Buyer Tridev Garments Industrial Private Ltd. was not able to give Bank Guarantee to the Transporter / Customs Department at Nepal Bangladesh border even after 25 days had passed since the goods were delivered at the border.

IN the result, the goods had to be called back after expiry of LC, by the complainant at its own cost and the same are lying at the warehouse of the complainant /OP. The goods had to be brought back to Delhi -Gurgaon from Nepal by Pasupathi Transport, Nepal. Copy of the said letter has been placed on record as Annexure E, with the complaint.

VIDE letter dated 06.07.2007, the OP1 wrote to the complainant to compensate the invoice value of the unpaid goods, worth USD 49964.50 equivalent to ? 21,07,162/ - in terms of the policy issued by OP1. Copy of the letter dated 06.07.200 has been placed on record as Annexure F. OP asked the complainant vide letter dated 21.07.2000 to ascertain the exact reason for cost payment, not to make further shipments and to explore the possibility of negotiations with the Buyer and to seek assistance of Chambers of Commerce of India (CCI). OP2 wrote to International Chamber of Commerce (ICC) on 19.09.2000 to intervene in the matter of cost payment by Nepal -Bangladesh Bank Ltd., OP3 which was replied by ICC on 15.11.2000, marked as Annexure ''H''. OP1 also wrote to Canara Bank, OP2, to let it know whether, any steps were taken to file a suit against LC as advised by ICC, vide copy of letter Annexure ''I''. Vide letter dated 08.08.2008, the complainant informed OP1 that there was no information from the Buyer explaining the reasons for non -payment of overdue bills and again requested that its loss, in respect of shipments for ? 21,60,172/ - may be paid. Copy of letter dated 08.08.2000 has been placed on record as Annexure - J.

OP 1 asked OP2 (Canara Bank) to inform similar type of names of the Directors of the complainant company with certain other companies in the limit notification as per details given in its enclosures. The Canara Bank wrote to the complainant on 29.05.2001 to confirm the position by affidavits. Accordingly, the complainant company furnished affidavits with the covering letter dated 18.06.2001 which was forwarded by Canara Bank, to OP1, on 04.08.2001. Vide letter dated 17.08.2001, OP1 wrote to the complainant that it had taken the matter with Indian Embassy and Nepal Bangladesh Bank Ltd., to ascertain the reason for non -payment by the said Bank. It was also stated that according to them, the payment was not made due to discrepancies found in the document and non -utilisation of full LC value. The letter,, dated 17.08.2001, written by OP1 to the complainant, is as follows : - JUDGEMENT_79_LAWS(NCD)12_22014.htm

IT is averred that the risk for refusal to pay the claim of the complainant as contained in OP1''s letter dated 17.08.2001 was extraneous to the terms and conditions of the policy and were unconnected to the contract between the OP1 and the complainant.

THE Nepal - Bangladesh Bank, OP3 had already accepted the export documents concerning the goods at Part ''A'', despite the discrepancies. This is evident from the letters dated 07.02.2000 to 26.02.2000 forwarded by OP3 to OP2, as per Annexure M (colly). Under these circumstances, there could have been no reason on the part of OP3 to decline payment on the ground of discrepancies in documents. OP3 did not inform the complainant or its banker that it has declined to make the payment on account of discrepancies in the export documents relating to goods at Part ''B''. This appears to be an afterthought on the part of OP1.

SO far as the question of non -utilisation of full L/C value is concerned, though the goods pertaining to Part ''B'' had been duly exported by the complainant, but the same could not cross Indian border due to fault on the part of the Buyer, OP4. Consequently, they were called back and as such there should be no grievance of OP3, in this ground. The last shipment from India was made on 18.01.2000 whereas, the L/C was to expire on 01.03.2000. The actual buyer, OP4, could not furnish the Bank Guarantee/ Demand Draft at the border for clearance, due to which the goods at Part ''B'' could not cross the border. As the goods in question remained at the Border, without having taken delivery, for inasmuch as 20 -25 days, the complainant found it prudent to call back the goods as the L/C had expired. If this calling of the goods was not done, the complainant had to put its claim for the same, amounting to USD 49964.50 + 34302.64 total USD 84267.14 with OP1. OP4''s inability to furnish Bank Guarantee to the Customs at Nepal Border, as per the requirement showed the ''deemed insolvency'' of the Buyer which was a risk covered by the policy issued by OP1 as Buyer''s condition was substantially equivalent in effect to the Buyer being declared bankrupt as defined in Clause 33 of the Policy read with Risk No.1 thereof.

LEGAL notice, dated 01.10.2001 was sent by the complainant demanding remittance of the shipment of USD 49964.50 from OP1. OP1, vide its reply dated 22.10.2001, contended that in terms of supplement to policy, the shipments were covered for insolvency or default by the Opening Bank to pay within four months from the due date of payment, the amount due on the bills drawn in terms of the L/C. The OP1 also stated that the said cover was subject to the condition that the Corporation shall have no liability if such failure to pay is owing to the opening Bank''s claim and that it was justified in not making payment for whatever reasons, unless the complainant has established to the Corporation through appropriate legal proceedings, if so required by the Corporation, the liability of the Opening Bank to pay and that the Opening Bank was in default. In the reply it was also stated that L/C was opened subject to the condition that "the payment will be forwarded to the complainant, only upon utilization of full L/C Value and realization of full and final proceeds of the export documents against the principal base L/C No. L -174289 for USD 168535.80 issued by Republic National Bank of New York". The L/C was opened by the Opening Bank, without fulfillment of the terms and conditions embodied in L/C, the payment has not become due since the non -payment by the LC, opening Bank was not owing to insolvency of or default on the part of opening Bank, which is covered under the policy issued to complainant and hence no claim, had become payable by the Corporation to the complainant. Copies of the notice and reply have been placed on record.

IT is alleged that all these grounds were taken for the first time and are not covered by the policy. The question of fulfillment of the terms and conditions of the L/C issued by Republic National Bank of New York is not contained in the policy document. The said L/C cannot also have any bearing on the relations between the complainant and OP1. American Express Bank Ltd., Chennai, OP5 was Indian Banking representative of the Buyer''s Bank, i.e., OP3. It was also not contained in any document that the payment by OP1 is subject to utilization of full L/C value. The OP1 has set up a flimsy ground to get rid of this liability. The complaint was filed before this Commission, on 03.10.2002, with the following reliefs : - a) This complaint may kindly be allowed and the O.P. No.1 may be held to have shown deficiency in service in respect of Policy No. SCR 9954459 covering shipments of the complainant amounting to US$ 49964.50 = Rs.21,60,172/ -.

b) The O.P. No. 1 may kindly be directed to pay the sum of Rs. 21,60,172/ - along with interest @ 24% thereon from 6.7.2000 to 30.9.2002 amounting to Rs.11,66,492/ - together with pendent lite and future interest at same rate till actual payment.

c) The O.P. No.1 may be directed to pay to the complainant the sum of Rs.5 lacs towards compensation for causing mental agony and harassment to its Senior Executives apart from the amounts mentioned at paras (a) and (b) above.

d) The costs of the complaints may also be allowed in favour of the complainant and against O.P. No.1".

THE complainant took a Shipments Comprehensive Risks Policy, dated 17.11.1999 for the period 01.11.1999 to 31.10.2001. In terms of the policy, OP1 agreed to pay 90% of the loss. The shipments made by the insured were against irrevocable letters of credit and the same were subject to certain additional risks not insured under the principal policy. The above said policy covered risks of failure of the Buyer to pay the exporter / complainant for the goods delivered to and accepted by the Buyer, as set out in the policy condition in Clauses (iv) to (x). The risk in question did not come within the purview of the risks insured as contained in sub -clauses (iv) to (x)

ON 17.11.1999, the complainant insured shipments made against irrevocable letter of credit in respect of certain additional risks not insured under the principal policy. The additional risks insured under the supplement to the policy are as follows: - "Additional Risks Insured: - i) Insolvency, as hereinafter defined of the bank opening the irrevocable letters of credit (hereinafter called the Opening Bank) and

ii) Default by the opening bank to pay to the insured, within four months'' from the due date of payment, the amount due on the bill drawn by the insured in terms of the irrevocable letters of credit provided always that the corporation shall have no liability if failure to pay is owing to the opening bank''s claim that it is justified in not making payment for whatever reasons unless the insured has established to the satisfaction of the corporation, through appropriate legal proceedings if so required by the corporation, the liability of the opening bank and to pay and that the Opening Bank is in default".

THE complainant had obtained conditional letters of credit from the buyer. The said Letter of credit was issued by Nepal -Bangladesh Bank and the beneficiary was the complainant. The expiry date of LC was 15.01.2000 and was for the amount of USD 79500.06. On enquiry, it transpired that the L/C was subject to the following condition : - "payment will be forwarded to you upon utilisation of full L/C value and realisation of full and final proceeds of the export documents against the principal base L/C bearing No. L -174289 for USD 168535.80 issued by the Republic National Bank of New York, USA, and that the Bank had received 8 import documents amounting to USD 84267.14 from the Canara Bank, New Delhi, India and had delivered it to the buyer M/s. Tridev Garment Industries Pvt. Ltd. That the said buyer had made Export Shipment for USD 88,919.82 and had sent the same under collection basis which was returned unpaid quoting various discrepancies. The Nepal Bangladesh Bank Ltd., further informed that they had informed the Canara Bank, New Delhi, that they would remit the proceeds as and when the terms and conditions embodied in the L/C were fulfilled".

THE following shipments were effected by the complainant: JUDGEMENT_79_LAWS(NCD)12_32014.htm

ACCORDING to OP1, Nepal -Bangladesh Bank Ltd., further informed that they had informed the Canara Bank, New Delhi, India, that they were remitting the proceeds as and when the terms and conditions embodied in the L/C were fulfilled. Under these circumstances, the OP1 repudiated the claim made by the complainant vide letter dated 17.08.2001. The non -payment by the LC Opening Bank was not owing to insolvency of or default on the part of the Opening Bank which are risks covered under the policy and hence no claim is payable to the complainant. The fact that the Nepal -Bangladesh Bank Ltd., had accepted the export documents despite discrepancies does not help the complainant''s case. It is averred that there is no risk covered under the policy in the event of non -payment by LC Opening Bank, was owing to its claim, it was not liable to pay.

THE counsel for the complainant vehemently argued that in this case the Buyer has failed to pay and the Opening Bank has defaulted, thus, the OP1 is liable under the above said policy. The policy in question did not contain any stipulation that it has nexus with or is subject to the terms of letter of credit issued by the Opening Bank. The policies are independent of and irrespective of letter of credit issued by the Opening Bank. This position was made amply clear in the letter dated 05.07.2001 of the Opening Bank which is reproduced here, as under : - "Please note that we are not concerned about the insurance cover extended by ECGC of India Ltd., as it was not called by our LC No. L -504599223". It will be seen that so far as Part '' goods are concerned, the Opening Bank had accepted the discrepancies in the complainant''s documents as is evident from the emails, sent by the Opening Bank to Canara Bank, in the following words, mentioned in each and every email. "Despite our discrepancies, we are able to get the complainant''s acceptance and we shall remit the proceeds as per the LC terms".

THE complainant has also utilized the L/C value in respect of goods at Part ''A'' and Part ''B'' by actually exporting the goods from Delhi to Nepal Border. It cannot, therefore, be said that the exporter did not avail full LC value. It was also pointed out that, moreover, utilization of full LC value was not a stipulation of the said policies issued by OP1. So far as Part ''B'' goods are concerned, the ''Duty -draw -back'' applications were submitted.

THE default on the part of the buyer or the opening Bank in making payment to the complainant in respect of the exported goods is a risk covered under the above policies issued by O.P.1 and is not subject to any term of the L/C. No exclusion clause in this respect is contained in the policies. It was submitted that the O.P1 cannot abdicate its liability under the policy on the frivolous and flimsy ground of alleged non -compliance of the conditions of the L/C which, at any rate, is not true.

THE O.P 1 has been delaying the case on one pretext or the other. It took the following five positions at five different times: "a) By letter dated 21/7/2000 O.P. asked the Complainant to ascertain the exact reasons for non -payment.

b) By letter dated 28/2/2001 O.P.1 asked Canara Bank to let it know, whether, any steps have been taken to file a suit against L/C Opening Bank.

c) By letter dated 21/5/2001 O.P. asked Canara Bank to verify directors of the Complainant company with certain other companies to check on violation of limit notification.

d) By letter dated 17/8/2001 O.P. advises Complainant that it had taken up the matter with the Indian Embassy and Opening Bank to ascertain the reasons for non -payment. Without producing any document from Opening Bank, the reasons for non -payment was stated to be discrepancies in documents and nonutilization of full L/C value.

On the contrary, Opening Bank has accepted the documents and thus O.P. has been falsified. e) In reply to legal notice, O.P. by its reply dt. 22/10/01 stated that it was not liable under the Policies if Opening Bank''s failure to pay is owing to its claim that it was justified in not making payment for whatever reasons unless complainant has established to the satisfaction of the Corporation through appropriate legal proceedings, if so required by the Corporation the liability of the Opening bank to pay and that the Opening bank was in default. It also mentioned that conditions of L/C were not fulfilled and as such default of opening Bank was outside the Policies".

IT was submitted that under the shipments and Comprehensive Risks Policy, both the political and commercial risks are covered and there is no exclusion of default risk and insolvency risk, where shipments are made under a letter of credit, as wrongly submitted by the O.P.

IT was contended that in (1996) 6 SCC428, the Hon''ble Supreme Court has held that even insurer''s statutory Exclusion clause has to be made a part and parcel of the Policy in order that the same be relied upon to avoid liability. This will also be against the main purpose doctrine. It must be borne in mind that OPs 2 to 5 were deleted from the array of parties, subsequently, vide order of this Commission, dated 22.10.2003.

AS a matter of fact, the case of the complainant bristles with flaws. Nothing comes of nothing. The Policy/ Agreement is of paramount importance. The terms and conditions of the Agreement will always get preponderance over the extraneous pleas. The namby pamby pleas are to be swept under the carpet. Without violation of any terms and conditions enshrined in the policy, it will be difficult to fix on the amenability over the OP1.

THE liability of the OP comes into play when the Buyer fails to pay the price for the goods delivered to him and accepted by the Buyer. The Commission cannot assume in absence of any evidence that the Buyer or the Opening Bank comes within the definition of insolvency. All these assumptions appear to be all wet. Moreover, the facts of this case are peculiar and different. This is not a case where the goods were delivered and accepted by the Buyer or the Buyer had refused to make the payment.

THE shipments made by the insurer were against the irrevocable letters of credit and the same do not come under the purview of SCR (Shipments Comprehensive Risks) policy. The complainant took cover against the risk of insolvency of the bank opening the irrevocable letters of credit. It is difficult to fathom, whether, the refusal of payment by the foreign buyer on the ground of non -compliance of condition of L/C is covered under the Shipments Comprehensive Risks Policy. The OP1 can take care of the interest of the Seller, i.e., the Indian Exporter. By no stretch of imagination, the OP1 can be held liable for the financial position of the buyer. It is for the Seller to choose the Buyer who is financially sound enough to make the payments, in time. The complainant did not pay any premium to cover Buyer Risks thereon.

IT must be understood that payment under L/C is subject to the conditions of L/C, the Opening Bank, as per the terms and conditions of the L/C, is not liable to make the payment. The conditions in L/C and the conditions set out in the Policies are entirely different. The complainant has failed to show to our satisfaction that the above said loss is covered under the risk as contained in sub clauses (iv) to (x) of the Policy. The Non -payment under the L/C is not a covered risk.

THE record also reveals that the OP made frantic efforts in support of the complainant. Even the Embassy of India at, Kathmandu was also involved. In the letter written by the Embassy, the conditions of the L/C were reiterated. It must also be borne in mind that all the goods were called back and were lying in the warehouse of the complainant. The complainant has not given the actual loss suffered by it. We can assume that it must have spent some amount on the L/C, expenses for bringing the goods to and fro but it has not given the account for the same.

SO far as OP1 is concerned, no deficiency can be attributed to it. The complainant has tried to make the bricks without straw. The complainant does not have any bone to pluck with the OP No.1. The complaint is, therefore, dismissed. No order as to costs.