Case Note & Summary
The case involves a dispute between the Export Credit Guarantee Corporation of India Ltd. (ECGC), the appellant, and M.S. Creations, the first respondent, an exporter. The first respondent obtained a Shipments (Comprehensive Risk) Policy from ECGC valid from 27 July 2000 to 31 July 2002. In October 2001, the first respondent received a purchase order from a buyer in Ivory Coast, SICOREP, for handloom goods worth about Rs 64 lakhs. ECGC approved the shipment coverage subject to payment terms of 90 days DA (Documents against Acceptance). The first respondent made two shipments in November 2001 and January 2002. The buyer's bank was originally Credit Lyonnais, but at the buyer's request, the bank was changed to BHCI with ECGC's approval. BHCI released the documents without receiving acceptance from the buyer, and no payment was made. The first respondent's bank, PNB, made a claim under its own WTPSG Policy, and ECGC made a provisional payment of Rs 6 lakhs to PNB. The first respondent submitted claims to ECGC for the overdue amounts, but ECGC rejected the claim on 3 October 2002 due to the first respondent's failure to produce required documents and the applicability of an exclusion clause. The exclusion clause (proviso (b) to Clause (xii)) stated that ECGC shall not be liable for loss arising from any act or default on the part of a collecting bank. The first respondent filed a consumer complaint before the Haryana State Consumer Disputes Redressal Commission, which allowed the complaint and directed ECGC to pay 90% of the claim. The National Commission affirmed this order. ECGC appealed to the Supreme Court. The Supreme Court allowed the appeal, holding that BHCI's act of releasing documents without acceptance and later stating it could not accept the shipment for payment constituted an act or default on the part of the collecting bank, bringing the loss within the exclusion clause. The court also held that the provisional payment to PNB under a separate policy did not amount to an admission of liability under the Shipments Policy. Consequently, the orders of the State Commission and National Commission were set aside, and the complaint was dismissed.
Headnote
A) Insurance Law - Exclusion Clause - Collecting Bank Default - Shipments (Comprehensive Risk) Policy, proviso (b) to Clause (xii) - The respondent exporter obtained a policy covering shipment risks. The buyer's bank (BHCI) released documents without acceptance and later stated it could not accept the shipment for payment. The court held that this constituted an act or default on the part of the collecting bank, squarely falling within the exclusion clause, and thus the appellant insurer was not liable. (Paras 18-24) B) Insurance Law - Admission of Liability - Separate Policies - Shipments Policy and Whole Turn Over Post Shipment Export Credit Guarantee (WTPSG) Policy - The appellant made a provisional payment to the respondent's bank under the WTPSG Policy. The court held that this payment under a separate policy issued to the bank does not amount to an admission of liability under the Shipments Policy issued to the exporter. (Paras 16, 24) C) Consumer Protection - Consumer Dispute - Insurance Claim - The respondent's claim was rejected by the insurer due to failure to produce required documents and applicability of exclusion clause. The State Commission and National Commission had allowed the complaint, but the Supreme Court reversed, holding that the exclusion clause applied and the insurer was not liable. (Paras 2-3, 24)
Issue of Consideration
Whether the exclusion clause (proviso (b) to Clause (xii)) of the Shipments Policy, which excludes liability for loss arising from any act or default on the part of a collecting bank, applies to the facts of the case, thereby disentitling the respondent from claiming under the policy.
Final Decision
The Supreme Court allowed the appeal, set aside the orders of the State Commission and National Commission, and dismissed the consumer complaint. The court held that the exclusion clause applied as the loss arose from the act or default of the collecting bank BHCI, and the provisional payment to PNB under a separate policy did not constitute an admission of liability.
Law Points
- Insurance law
- Exclusion clause
- Collecting bank default
- Consumer protection
- Export credit guarantee
