Delhi High Court
The Export Credit Guarantee ... vs M/S. International Electric Co. on 17 August, 2011
Author: Valmiki J. Mehta
Bench: Valmiki J.Mehta
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ RFA No.284/1991
% 17th August, 2011
THE EXPORT CREDIT GUARANTEE CORPORATION OF INDIA LIMITED
...... Appellant
Through: Mr. R.R. Kumar, Advocate with
Mr. Bharat Sagar, Advocate.
VERSUS
M/S. INTERNATIONAL ELECTRIC CO. ...... Respondent
Through: None.
CORAM:
HON'BLE MR. JUSTICE VALMIKI J.MEHTA
1. Whether the Reporters of local papers may be
allowed to see the judgment?
2. To be referred to the Reporter or not? Yes
3. Whether the judgment should be reported in the Digest? Yes
VALMIKI J. MEHTA, J (ORAL)
1. The challenge by means of this Regular First Appeal under Section 96 of Code of Civil Procedure, 1908 (CPC), is to the impugned judgment and decree dated 27.3.1991 by which the suit of the RFA No.284/1991 Page 1 of 10 respondent No.1/plaintiff was decreed against all the defendants, including defendant no.6, who is the appellant before this Court.
2. The facts of the case are that the respondent No.1/plaintiff shipped electric coils to Lagos, Nigeria, however the shipment was wrongly off loaded at Apapa Quaya, Nigeria instead of Lagos. The possession of goods was taken at the port of Apapa Quaya by means of fraudulent documents and consequently the buyer of the goods refused to pay the price of the goods. The respondent No.1 therefore filed a suit against the buyer, its agent, the insurance company and also the present appellant/Export Credit Guarantee Corporation Limited.
3. The defendant Nos.1 to 4 did not appear in the suit and hence were proceeded exparte. No evidence was led by defendant No.5/insurance company and therefore the suit was also decree against the insurance company. The suit was also decreed against the appellant/defendant No.6 by holding the issue No.8 against the appellant. Findings on this issue are contained in paras 10 and 11 of the impugned judgment and decree which read as under:-
"10. The burden to prove this issue was upon defendant No.6 and Sh. N.S.K. Rao appearing on behalf of defendant No.6 contended on behalf of defendant No.6 that defendant No.6 is not at all liable for any payment to the plaintiff and his further argument is that the defendant No.6 only insures the export risk and the defendant No.5 insures the commercial risk and only defendant No.5 liable for the loss of goods as the RFA No.284/1991 Page 2 of 10 defendant No.5 is responsible at the Highsee. Further argument of the ld. counsel for the defendant No.6 is that according to policy Ex.P8 as the claim with defendant No.6 as not lodged within two years and the plaintiff is not entitled for any claim from defendant No.6. On the other hand, this argument has been controverted by Sh. Ashok Kumar ld. counsel for the plaintiff that the claim was lodged with defendant No.6 immediately after the plaintiff came to know through its bank in India that the goods were not discharged at proper place and he further argued that this has also been admitted by Sh. N.S. K. Rao ld. counsel for the defendant No.6 that the claim has been made after a lapse of eleven months. Even assuming that the claim was lodged within eleven months even then the claim of the plaintiff is not hit by the policy of defendant No.6 Ex.P8 because according to this policy the claim could be lodged within 2 years from the date of loss and the claim has been property lodged with the defendant No.6. Ld. counsel for the defendant No.6 invited my attention at page 6 of the plaint para No.12 and contended that no date of loss is mentioned. Even if it is not mentioned the ld. counsel for the defendant No.6 has himself argued that the claim was lodged after a lapse of 11 months and according to the plaintiff the claim was lodged with the defendant No.6 after 10 or 15 days from the date the plaintiff came to know about this loss and if the date is not mentioned it does not make any difference and the claim was lodged well in time. Further arguments of the ld. counsel for deft. No.6 is that no date of complaint has been mentioned in the plaint. As I have already held that non-mentioning of the date of complaint or the date of loss is not much material for consideration. The only point is that whether a contract was subsisting at the time when the claim was lodged with defendant No.6 and this has been amply proved on the file. Ld. counsel for the plaintiff referred Ex.PW1/10 dated 30-3-73 and contended an additional premium of Rs.126/- was also paid to defendant No.6 and the moment this payment has been received by the defendant No.6 then the defendant No.6 cannot contend that there was no subsisting contract between the plaintiff and the defendant No.6. This argument of the ld. counsel for the plaintiff is accepted and when the loss occurred there was a subsisting policy between the parties and the defendant No.6 was RFA No.284/1991 Page 3 of 10 responsible for making the loss good to the plaintiff and it is amply clear that this has been admitted by the defendant No.6 Oriental Fire and General Insurance Co. Ltd. vide Ex.P1 and Ex.P2 that a claim has been lodged with the Co. and these letters bear the date 22nd Aug.74 and 26th Oct.74. Next contention of the ld. counsel for the defendant No.6 is that the plaintiff has not got the limit fixed by the defendant No.6 and the plaintiff is not entitled for any loss. On the other hand, ld. counsel for the plaintiff argued that the limit has been fixed by deft. No.6 vide Ex.P5 and Ex.P9 and this is clear from these documents. So this argument of ld. counsel for the defendant No.6 is also turned down. Ld. counsel for the plaintiff further argued by drawing my attention towards the statement of DW1 which are as under:-
"It is correct that the Co. deals with the losses and risks."
and further "It is correct that there was no negligence of the plaintiff." and submitted that as the plaintiff is not at fault so the defendant No.6 is under a liability to accept the claim of the plaintiff.
Ld. counsel for defendant No.6 Shri N.S.K. Rao quoted extract from the Book of Export Trade by Schmittnoff's at page 334 which is as under:-
"If the collecting bank released the documents to the buyer contrary to instructions, e.g. by not insisting on payment or the acceptance of a term bill, the bank is liable in damages to the seller for breach of contract and for conversion of the documents."
I have gone through this Book and Shri N.S.K. Rao contended on the strength of this extract that the bank is liable and not defendant No.6. This argument of the ld. counsel for the defendant No.6 is also turned down on the ground that the seller has obtained an insurance policy to cover the risk of his goods and even if the bank is liable the defendant No.6 cannot escape its liability under the contract of insurance and the defendant No.6 is bound by the contract. Next argument of the ld. counsel for the deft. No.6 is that the bank has not been made a party so the bank should be held responsible. I have gone through the written statement of deft. No.6. This has not been mentioned in the pleading of deft. No.6 so this argument RFA No.284/1991 Page 4 of 10 is not available to the ld. counsel for deft. No.6 and this argument is turned down.
11. In view of my above discussion this issue is decided in favour of the plaintiff and against the defendant No.6, and defendant No.6 is held liable to compensate the plaintiff for the loss of goods."
4. Learned counsel for the appellant argued that the appellant was not liable inasmuch as the basic object of the policy was to insure a credit i.e. insure a payment which had become due to the seller. In the present case, goods never reached the buyer and since goods were released by the fraudulent documents at another port there did not arise a credit in favour of the seller in the first place. It is argued that loss of the type in question is a commercial risk which is covered by a commercial insurance policy and which is issued by an insurance company viz. defendant No.5 in the case. It is argued that the concerned sub-clauses of the relevant clause of the insurance policy issued by the appellant makes it more than clear that the appellant only insured the export credit and since the export credit did not come into existence in the present case, inasmuch as there was no debt which was due to the seller/respondent No.1 inasmuch as the buyer never received the goods and thus never became a debtor for a credit to come into existence. Counsel for the appellant relies upon the following clause pertaining to RFA No.284/1991 Page 5 of 10 risks insured in the insurance policy Ex.P8 issued by the appellant and which read as under:-
"Risks Insured: (i) the insolvency of the buyer as hereinafter defined, or
(ii) the failure of the buyer to pay to the Exporter within six months after the due date of payment the gross invoice of goods delivered to and accepted by the buyer, or
(iii) the failure or refusal on the part of the buyer, being a buyer for whom the Corporation has agreed a Credit Limit in writing, to accept goods which have already been exported from India, where any such failure or refusal is not excused by and does not arise from or in connection with any breach of condition or warranty on the part of the Exporter or from any other cause within his control; and provided also that the Corporation is satisfied that no good purpose would be served by the institution of legal proceedings against the buyer in respect of his said failure or refusal, or
(iv) the operation of a Law or of an Order, Decree or Regulation having the force of law, which in circumstances outside the control of the Exporter and/or of the buyer, prevents, restricts or controls the transfer of payment from the buyer's country to India, or
(v) the occurrence of war between the buyer's country and India, or
(vi) the occurrence of war hostilities, civil war, rebellion, insurrection, or other disturbance in the buyer's country or
(vii) the imposition of any Law or of an Order, Decree or Regulation having the force of law, which in circumstances, outside the control of the Exporter and/or the buyer, prevents the import of the goods into the buyer's country or
(viii) the cancellation in circumstances outside the control of the Exporter and/or the buyer, of a previously issued and currently valid authority to import the goods, or
(ix) the incurring in respect of goods shipped from India of any additional handling, transport or insurance charges which are occasioned by interruption or diversion of voyage outside India and which it is impracticable to recover from the buyer, or RFA No.284/1991 Page 6 of 10
(x) any other cause not being inherent in the nature of the goods and not being within the control of the Exporter and/or of the buyer which arises from an event occurring outside India, or Where the Corporation state in writing in respect of any contract that they are satisfied that the buyer under that contract is an overseas government and elect in writing that sub-clause (xi) below shall apply either unconditionally or upon such conditions as the Corporation shall think fit,
(xi) the failure or refusal on the part of the buyer to fulfil the terms of the contract, such failures or refusal not arising from any breach of contract or warranty on the part of the Exporter nor from any other cause within the control of the Exporter.
PROVIDED ALWAYS that the Corporation shall not be liable for loss:
(a) in respect of any risk which at the date when the shipment is made can be insured with the Government or any of its organizations other than the Corporation or can normally be insured with commercial insurers;
(b) which arises from the insolvency of any agent of the Exporter or the insolvency of a collecting bank or from any act or default on the part of such agent or collecting bank;
(c ) which arises from any failure or liability to obtain any authority necessary under the regulations of the buyer's country in force at the date of shipment to import the goods and/or to pay for them as contracted and invoiced, and/or to convert at the official rate of exchange the relative currency into Indian Rupee or other currency permitted by the 2 nd Schedule to Government Notification No.6(8-EF 11/52) dated 22nd April 1952 or any modification thereof in force from time to time;
(d) which arises due to the failure or 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 by reason of any payment, credit, set-off or counter-claim and/or due to his claim that for any other reason he is excused from performing his obligations under the contract, unless, except where the Corporation agrees in writing to the contrary, the Exporter has for the amount of his RFA No.284/1991 Page 7 of 10 loss obtained by legal proceedings in a competent Court of Law in the country of the buyer, a final judgment enforceable against him;
(e) unless a claim for the loss is made by the Exporter to the Corporation in writing in the form prescribed by within two years from the date of shipment.
(f) (i) arising from the prevention of or delay in the transfer of any payment from an overseas country of sums due under any contract of insurance effected by the Exporter;
(ii) whatsoever where the buyer has effected any insurance and an event insured against has occurred and the Exporter has not received payment of insurance moneys in Indian Rupees;
(iii) whatsoever where an event occurs which would normally be insured against with commercial insurers but against the risk of which a contract of Insurance for a sufficient sum has not been effected by either the Exporter or the buyer and is not then in force.
UNLESS such liability is previously agreed to and accepted by the Corporation in writing:
(g) which arises from prevention of or delay in the transfer of payment from the buyer's country until the buyer has made an irrevocable deposit for transfer to the Exporter, on such terms and in such Bank as are approved by the Corporation in writing, of a sum in the currency of the buyer's country equal to the amount due for payment under the contract, unless the buyer is prohibited from making such a deposit by any Law, or by any Order, Decree or Regulation having the force of law, of the buyer's country."
Great stress is laid upon sub clause (ii) of the aforesaid clause which states that the insurance policy is basically for failure of the buyer to pay the exporter within six months after the "due date of the payment". It is argued that due date of the payment would have only come into existence if the buyer in Nigeria had received the goods. It is also argued that whatever doubt remains as to the fact that the subject RFA No.284/1991 Page 8 of 10 policy was not a commercial insurance policy, becomes clear from proviso (a) of the aforesaid risks insured clause Ex.P8 and which makes it clear that risk on loss of the type in quesion is not the subject matter of the policy issued by the appellant. Further proviso (b) of the aforesaid clause also removes any liability upon the appellant where the goods are lost on account of the default of the collecting bank or the seller/exporter's agent.
5. In my opinion, the arguments as raised by the counsel for the appellant are well founded and the appeal deserves to be allowed. By its very name, "Export Credit Guarantee Corporation", the appellant only insures export credit. This is different than a commercial risk which is insured by an insurance company with respect to loss of the goods. In the present case, admittedly, the goods have been lost as the same were wrongly delivered and it is not as if the liability of the buyer i.e. a debit/credit in favour of the seller came into existence. It is only if a credit comes into existence, then, such credit is insured if there is failure of the buyer in not paying within six months after due date of the payment. I also agree that sub clauses in the clause of the risks insured of the policy Ex.P8 have to be read alongwith its intendment as is clear from a reading of the clause as a whole that it is not a commercial risk which was insured by the insurance policy. Also, in terms of proviso (b) RFA No.284/1991 Page 9 of 10 since in the present case the goods have been lost on account of the act of the agent of the seller/respondent No.1/plaintiff and consequently there cannot be any liability imposed upon the appellant/corporation.
6. A reference to the impugned judgment and decree shows that the trial Court has wholly misinterpreted the terms of the policy issued by the appellant. The trial Court has created confusion between a commercial risk policy which is covered by an insurance policy and an export credit guarantee policy of the nature/type which is issued by the appellant/ corporation.
7. In view of the above, the appeal is accepted. The impugned judgment and decree qua the appellant is set aside. The suit of the respondent No.1 against the appellant would stand dismissed. The appellant is entitled to withdraw the amount deposited in this Court. Decree sheet be prepared. Trial Court record be sent back.
AUGUST 17, 2011 VALMIKI J. MEHTA, J.
Ne
RFA No.284/1991 Page 10 of 10