Delhi High Court

Indusind Bank vs Export Credit Guarantee ... on 15 September, 2016

           *IN THE HIGH COURT OF DELHI AT NEW DELHI

%                                   Date of decision: 15th September, 2016

+      W.P.(C) 5659/2014 & CM No.14015/2014 (for interim directions)

       INDUSIND BANK                                        ..... Petitioner
                    Through:           Mr. P.K. Mallick, Ms. Soma Mallick
                                       and Mr. Sebat Kumar Deuria, Advs.

                                Versus

    EXPORT CREDIT GUARANTEE
    CORPORATION OF INDIA LTD.                ..... Respondent

Through: Mr. Ravinder Agarwal and Mr. Girish Pande, Advs.

CORAM:-

HON'BLE MR. JUSTICE RAJIV SAHAI ENDLAW

1. This petition under Article 226 of the Constitution of India i) impugns

the orders dated 4th July, 2013, 31st December, 2013 and 21st April, 2014 of

the respondent Export Credit Guarantee Corporation of India Ltd. (ECGC)

rejecting the claim of the petitioner in respect of Packing Credit Export

Credit Guarantee (PCECG) No.0500100361; and, (ii) seeks mandamus to

the respondent ECGC to make payment to the petitioner in respect of the

claim dated 4th December, 2012 in respect of the said PCECG.

2. The petition came up before this Court first on 3rd September, 2014

when notice thereof was issued. Counter affidavit has been filed by the

respondent ECGC to which rejoinder has been filed by the petitioner. The

counsels for the parties were heard on 17th May, 2016 and judgment

reserved.

3. It is the case of the petitioner i) that the petitioner is a scheduled bank;

ii) that the respondent ECGC is a public corporation owned by the

Government of India and a State within the meaning of Article 12 of the

Constitution of India; iii) that the petitioner was approached by Surya

Vinayak Industries Ltd. (SVIL) seeking packing credit facilities for export

of protein meals, mainly to South-Asian countries; iv) that the lending to

SVIL was to be done through a consortium of which the petitioner was

member bank; v) the petitioner approached the respondent ECGC for

issuance of PCECG against packing credit facilities to be extended to SVIL

and PCECG No.0500100361 dated 12th November, 2009 for an amount of

Rs.25 crores for the period from 13th August, 2009 to 31st August, 2010 was

issued by respondent ECGC subject to payment of premium as mentioned

in the schedule attached to the guarantee; vi) the petitioner on the basis of

the said guarantee extended packing credit facilities to SVIL; vii) that the

respondent ECGC vide its letter dated 18th March, 2011 renewed the

guarantee for the period from 1st September, 2010 to 31st August, 2011 and

the amount of the guarantee was increased from Rs.25 crores to Rs.40

crores; viii) that as per the schedule the maximum liability of respondent

ECGC on guarantee amount of Rs.40 crores was to be of

Rs.26,66,66,666.67p; ix) that though in the renewed guarantee additional

term to the effect that advance premium equivalent to one month's premium

is to be deposited on the basis of highest amount outstanding / limit

sanctioned was added but the respondent ECGC contrary to its normal

practice did not highlight the same in the communication dated 18 th March,

2011 and thus the same remained to be noticed by the petitioner; x) that the

respondent ECGC vide its letter dated 8th November, 2011 renewed the

guarantee for the period from 1st September, 2011 to 31st August, 2012; xi)

that on 31st July, 2012, there was a default by SVIL to the extent of

Rs.26,59,22,771.81p; xii) that the petitioner vide its letter dated 31st July,

2012 raised claim on respondent ECGC invoking the guarantee; xiii) that the

respondent ECGC from time to time sought clarifications and other

documents from the petitioner and which were furnished by the petitioner;

xiv) that on 4th December, 2012 the petitioner lodged Packing Credit

Guarantee Claim Form with the respondent ECGC; xv) that the exporter was

indebted to the petitioner to the extent of Rs.26,59,22,771.81p; xvi)that the

respondent ECGC from time to time sought further clarifications, inspection

of documents, all of which were furnished / given; xvii) that the respondent

ECGC vide its letter dated 1st July, 2013 rejected the petitioner‟s claim on

the ground of delayed payment of premium; xviii) that however the

respondent ECGC vide its letter dated 4th July, 2013 asked the petitioner to

ignore the letter dated 1st July, 2013 and informed the petitioner that its

claim had been found to be inadmissible on the ground of non-payment of

premium on time and consequently rejected; and, xix) that the petitioner

represented but the said representations were also rejected by the respondent

ECGC vide its order dated 31st December, 2013 and 21st April, 2014.

4. It is the contention of the petitioner that the rejection by the

respondent ECGC of its claim under the guarantee is illegal because i) the

respondent ECGC accepted all premiums paid by the petitioner without any

demur or objection and therefore it must be deemed that the respondent

ECGC waived any objection to acceptance of premium on ground of delay;

and, ii) the policy was never cancelled on ground of delay in payment of

premium. Reliance is placed on United India Insurance Company Ltd. Vs.

Laxmamma (2012) 5 SCC 234.

5. The respondent ECGC has contested the petition pleading i) that the

extraordinary jurisdiction under Article 226 of the Constitution of India

cannot be invoked to recover money and the appropriate remedy for the

petitioner is to file suit for recovery; ii) that the dispute between the parties

entails disputed questions of fact which cannot be adjudicated in writ

jurisdiction; iii) that though the word „guarantee‟ has been mentioned in the

cover issued by the respondent ECGC but the same is an insurance cover

and the respondent ECGC has since effected the change in terminology; iv)

that the policy issued by the respondent ECGC to the petitioner clearly

stipulated that time was the essence of the contract and the petitioner

undertook to ensure strict compliance with the requirements of the clauses

pertaining to timely delivery of monthly statements and payments of the

premium; v) that no new condition was inserted while renewing the policy

vide letter dated 18th March, 2011; vi) that Clause 9 of the renewal letter

merely reiterated that the advance premium is required to be deposited with

respondent ECGC on the basis of highest amount outstanding / limit

sanctioned; vii) that the petitioner vide e-mail dated 18th October, 2011 also

was subsequently informed that the Export Credit Insurance for Bank

Schemes of respondent ECGC are covered by the Insurance Act, 1938 and

in terms of Section 64VB of the said Act it is mandatory on the part of the

insured to keep sufficient premium in advance with the insurer well before

the assumption of risk by the insurer and that "in absence of advance

premium no risk will be assumed to be covered even though premium

becomes payable on such risks"; viii) that the petitioner has also suppressed

from this Court the receipts issued by the respondent ECGC clearly

stipulating that it was merely an acknowledgment of money received and

created no liability on the respondent ECGC of any kind whatsoever nor

shall amount to or mean admission of any fact or circumstances or any

liability; ix) that the petitioner in response to the queries made by respondent

ECGC from time to time disclosed that credit facilities were granted to SVIL

against primary security of stock and book debts which valued around

Rs.2976 crores and that in addition to primary security, the petitioner also

held as collateral security immovable assets worth Rs.32.33 crores and that

the share of the petitioner in the consortium was 1.96% only; x) that thus the

petitioner holds security much more than sufficient to cover the losses

incurred by the petitioner on account of non-payment by its borrower; xi)

that the petitioner, without first minimizing the losses against the security

held, preferred the claim on the respondent ECGC which itself is also

contrary to Clause 4 of the policy; and, xii) that the acceptance of the

premium by the respondent ECGC is conditional subject to due compliance

with the terms and conditions of the policy document.

6. The rejoinder filed by the petitioner is merely a denial of the contents

of the counter affidavit and reiteration of the contents of the petition.

7. The petitioner has sought writ remedy for relief inter alia of recovery

of money for which normally a suit remedy or arbitration remedy is to be

invoked, relying upon ABL International Ltd. Vs. Export Credit Guarantee

Corporation of India Ltd. (2004) 3 SCC 553.

8. Attention of the counsel for the petitioner however at the outset only

was invited to my judgment titled KLA India Public Ltd. Vs. Export Credit

Guarantee Corporation of India Ltd. (2011) 183 DLT 591 dismissing the

writ petition as not maintainable and with the liberty to the petitioner therein

to avail of alternative remedy. Attention of the counsel for the petitioner

was also invited to judgments of the Division Bench of this Court i)

Chakradar Auto Udyog Pvt. Ltd. Vs. Engineering Export Promotion

Council 2012 SCC Online Del 4736; ii) Steel Authority of India Ltd. Vs.

Punjab & Sind Bank 2012 SCC Online Del 6211; iii) Virender Sharma

Vs. Director, Enforcement Directorate MANU/DE/0546/2012; and, iv)

Santanu Sur Vs. GAIL India Ltd. 2014 SCC Online Del 4354 all, after

considering ABL International Ltd. supra and referring to the subsequent

dicta of the Supreme Court in Godavari Sugar Mills Ltd. Vs. State of

Maharashtra (2011) 2 SCC 439, holding writ remedy to be not available for

a monetary claim.

9. Attention of the counsel for the petitioner was also invited to the yet

subsequent dicta of the Supreme Court in Joshi Technologies International

Inc. Vs. Union of India (2015) 7 SCC 728 and following which I have in

Playwell Impex (P) Ltd. Vs. United India Insurance Company Ltd. 2015

SCC Online Del 12965 and in Twenty First Century Media Private Ltd. Vs.

New India Assurance Company Ltd. (2016) 230 DLT 195 (relying

additionally on order dated 18th March, 2015 of the Supreme Court in Civil

Appeal No.3053/2015 titled National Highways Authority of India Vs.

MEIL-EDB LLC (JV)) held insurance claims to be not enforceable by

invoking writ jurisdiction.

10. The counsel for the petitioner however contended that ABL

International Ltd. supra holds the field and the claim of the petitioner is

squarely covered thereunder and thus the writ petition is to be allowed.

Reliance was also placed on Laxmamma supra holding that where the

policy of insurance is issued by an authorized insurer on receipt of cheque

towards payment of premium and the said cheque is dishonoured, the

liability of the authorized insurer to indemnify the third parties in respect of

the liability which that policy covers subsists and it has to satisfy the award

of compensation by reason of Sections 147(5) and 149(1) of Motor Vehicles

Act, 1988 unless the policy of insurance is cancelled by the authorized

insurer and intimation of such cancellation has reached the insured before

the accident.

11. Per contra the counsel for the respondent ECGC in addition to the

pleas already contained in the counter affidavit relied on Export Credit

Guarantee Corporation of India Ltd. Vs. Garg Sons International (2014) 1

SCC 686 reiterating that while construing the terms of a contract of

insurance, the words used therein must be given paramount importance, and

it is not open for the Court to add, delete or substitute any words and that

since upon the issuance of an insurance policy, the insurer undertakes to

indemnify the loss suffered by the insured on account of risks covered by the

policy, its terms have to be strictly construed to determine the extent of the

liability of the insurer and holding that it is not permissible for the court to

substitute the terms of the contract itself, under the garb of construing terms

incorporated in the agreement of insurance and dismissing the claim of

insurance and on New India Assurance Co. Ltd. Vs. Rula (2000) 3 SCC 195

clarifying that in a contract of insurance under Chapter 11 of the Motor

Vehicles Act, 1988, a third party who is not a signatory or a party to the

contract of insurance but is, nevertheless, protected by such contract is not

concerned and does not come into the picture at all in the matter of payment

of premium and argued that the judgments of insurance under the Motor

Vehicles Act, 1988 cannot thus be applied to the present situation. Mention

was also made of the order dated 30th September, 2014 of a Coordinate

Bench of dismissal as withdrawn of a number of writ petitions being

W.P.(C) No.4207/2012 titled ENA International Vs. Export Credit

Guarantee Corporation of India, W.P.(C) No.7161/2013 titled M/s Gurveen

International Vs. Export Credit Guarantee Corporation of India, W.P.(C)

No.7162/2013 titled M/s Gurveen International Vs. Export Credit Guarantee

Corporation of India, W.P.(C) No.1542/2014 titled M/s Gurveen

International Vs. Export Credit Guarantee Corporation of India, W.P.(C)

No.1543/2014 titled M/s Paylees International Vs. Export Credit Guarantee

Corporation of India, W.P.(C) No.2046/2014 titled M/s Payless International

Vs. Export Credit Guarantee Corporation of India, W.P.(C) No.2047/2014

titled M/s Payless International Vs. Export Credit Guarantee Corporation of

India, W.P.(C) No.2048/2014 titled M/s Payless International Vs. Export

Credit Guarantee Corporation of India, W.P.(C) No.2474/2014 titled M/s

GNJ Impex Vs. Export Credit Guarantee Corporation of India, W.P.(C)

No.2478/2014 titled GNJ Impex Vs. Export Credit Guarantee Corporation of

India, W.P.(C) No.2481/2014 titled GNJ Impex Vs. Export Credit Guarantee

Corporation of India and W.P.(C) No.3651/2014 titled M/s ENA

International Vs. Export Credit Guarantee Corporation of India filed against

the respondent ECGC.

12. The counsel for the petitioner to get over the test laid down in Joshi

Technologies International Inc. supra of a writ petition without a public

law element involved being not maintainable also contended that without the

insurance provided by the respondent ECGC, banks will hesitate to grant

export credit, thereby effecting the exports. It was also argued that as on date

of the risk all premium had been paid. It was further argued that if the

petitioner is relegated to the suit remedy, the whole export credit system will

collapse.

13. I have considered the rival contentions. Not only am I of the view

that for the reasons stated in my judgments aforementioned holding that a

writ remedy is not the appropriate remedy for the claim under a policy of

insurance but also tend to agree with the counsel for the respondent that the

questions which arise for adjudication on the respective pleas of the parties

as noted hereinabove cannot be adjudicated without evidence and which

cannot be conveniently taken in writ jurisdiction. Before the petitioner can

be held to be entitled to the claim under the policy, it will have to be

adjudicated a) whether the petitioner was in default of the clauses to remit

the advance premium; b) whether the petitioner was in default of submitting

monthly declarations with due premium; c) what is the effect of the

acceptance of the premium and declaration though delayed by the

respondent ECGC; and d) whether the acceptance by the respondent ECGC

of the delayed premium and declaration waives the default of the petitioner.

14. I may in this regard notice that the receipts issued by the respondent

ECGC of delayed premium contained the following endorsement:

"N.B.:- This receipt is only an acknowledgment of Cash / Cheque received. It creates no liability on the Corporation of any Kind whatsoever, nor shall this receipt amount to or mean admission of any fact or circumstances or any liability under any Credit Insurance Cover issued by the Corporation to any person making the payment or concerned therewith or therein."

and Section 64VB supra is as under:

"64VB. No risk to be assumed unless premium is received in advance.--

(1) No insurer shall assume any risk in India in respect of any insurance business on which premium is not ordinarily payable outside India unless and until the premium payable is received by him or is guaranteed to be paid by such person in such manner and within such time as may be prescribed or unless and until deposit of such amount as may be prescribed, is made in advance in the prescribed manner.

(2) For the purposes of this section, in the case of risks for which premium can be ascertained in advance, the risk may be assumed not earlier than the date on which the premium has been paid in cash or by cheque to the insurer. Explanation.--Where the premium is tendered by postal money order or cheque sent by post, the risk may be assumed on the date on which the money order is booked or the cheque is posted, as the case may be.

(3) Any refund of premium which may become due to an insured on account of the cancellation of a policy or alteration in its terms and conditions or otherwise shall be paid by the insurer directly to the insured by a crossed or order cheque or by postal money order and a proper receipt shall be obtained by the insurer from the insured, and such refund shall in no case be credited to the account of the agent.

(4) Where an insurance agent collects a premium on a policy of insurance on behalf of an insurer, he shall deposit with, or despatch by post to, the insurer, the premium so collected in full without deduction of his commission within twenty-four hours of the collection excluding bank and postal holidays.